SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Current Report Pursuant to Section 13 or 15(d) of
The Securities Act of 1934
Date of Report (Date of earliest event reported) September 22, 1995
Jordan Industries, Inc.
(Exact name of registrant as specified in its charter)
Illinois 33-24317 36-3598114
(State or other (Commission (I.R.S. Employer
Jurisdiction File Number Identification No.
ArborLake Centre, Suite 550
1751 Lake Cook Road, Deerfield, IL 60015
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (708) 945-5591
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PAGE 2
Item 2. Acquisition or Disposition of Assets
The following section amends, in its entirety, Item 2 of Form 8-K
previously filed on September 26, 1995.
On September 22, 1995, Jordan Industries, Inc. ("the Company"),
through its newly-formed subsidiary, M-K Holdings, Inc., bought all of
the common stock of Merkle-Korff Industries, Inc., Mercury Industries,
Inc. and Elmco Industries, Inc. ("Merkle-Korff"), manufacturers of
fractional horsepower motors and gear motors. M-K Holdings, Inc. and
Merkle-Korff were designated as non-restricted subsidiaries for
purposes of the Company's indentures relating to its Senior Notes and
Senior Subordinated Discount Debentures.
The purchase price of $107,406, including costs incurred directly
related to the transaction, was preliminarily allocated to working
capital of $8,995, property, plant and equipment of $335, non-compete
agreements of $500, other assets of $34, and resulted in an excess
purchase price over net identifiable assets of $97,542.
Item 7. Financial Statements and Exhibits
The following sections (a) and (b) amend, in their entirety, sections
(a) and (b) of Item 7 of Form 8-K previously filed on September 26,
1995.
(a) Financial Statements
See Exhibit 28(a) of Item 7(c).
(b) Pro Forma Financial Information
The following unaudited pro forma condensed consolidated statements of
operations are based on the historical statements of operations of the
Company, adjusted to give effect to the following transactions: (a)
the acquisition in 1995 of Merkle-Korff, and (b) certain recurring
administrative costs and taxes of the Company, and the depreciation of
the preliminary purchase price allocated to the fair value of net
assets acquired. The pro forma condensed consolidated statements of
operations for the year ended December 31, 1994 and for the six months
ended June 30, 1995 were derived from the audited historical
statements of operations for the year ended December 31, 1994 and the
unaudited historical statements of operations for the six months ended
June 30, 1995, adjusted to give effect to such transactions as if they
occurred as of the beginning of each period.
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PAGE 3
The pro forma adjustments included in the pro forma condensed
consolidated statements of operations are based upon available
information and certain assumptions that management believes are
reasonable. With respect to the pro forma acquisition adjustments
described in the notes accompanying the pro forma condensed
consolidated statement of operations, the allocation of the purchase
price of Merkle-Korff is preliminary and subject to final
determination by the Company's management. The unaudited pro forma
condensed consolidated statements of operations do not purport to
represent what the Company's results of operations would actually have
been had the transactions in fact occurred as of the beginning of each
period presented. In addition, the unaudited pro forma condensed
consolidated statements of operations do not purport to project the
Company's results of operations for any future date or period.
The pro forma condensed consolidated statements of operations should
be read in connection with the Company's audited consolidated
financial statements which are included in the Company's Annual Report
filed on Form 10-K for the year ended December 31, 1994 and the
Company's unaudited interim condensed consolidated financial
statements included in the Company's Form 10-Q for the quarter ended
June 30, 1995.
(c) Exhibits
28(a) Merkle-Korff Industries, Inc., Mercury Industries, Inc., and
Elmco Industries, Inc. combined audited financial statements
for the year's ended December 31, 1994, 1993 and 1992.
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PAGE 4
JORDAN INDUSTRIES, INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
JUNE 30, 1995
($ in millions)
Pro Forma Pro
Historical Adjustments Forma
ASSETS
Current assets:
Cash and cash equivalents $ 22.6 $(22.6) $ 0
Accounts receivable, net 60.2 6.8 67.0
Inventories 93.9 5.2 99.1
Prepaid expenses and other
current assets 7.5 .3 7.8
Total Current Assets 184.2 (10.3) 173.9
Property, plant and equipment,
net 78.6 .3 78.9
Note receivable from affiliate 24.6 - 24.6
Goodwill, net 87.1 97.5 184.6
Other assets 37.5 .6 38.1
Total Assets 412.0 88.1 500.1
LIABILITIES AND NET CAPITAL DEFICIENCY
Current liabilities:
Accounts payable 51.6 3.5 55.1
Accrued liabilities 23.7 .4 24.1
Advance deposits 2.3 - 2.3
Current portion of long-term debt 2.6 - 2.6
Total Current Liabilities 80.2 3.9 84.1
Long-term debt 392.9 83.9 476.8
Other non-current liabilities 2.0 - 2.0
Deferred income taxes 4.9 - 4.9
Minority interest 1.5 .3 1.8
Net capital deficiency (69.5) - (69.5)
Total Liabilities and Net
Capital Deficiency $412.0 $88.1 $500.1
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PAGE 5
JORDAN INDUSTRIES, INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1994
($ in millions)
Pro Forma Pro
Historical Adjustments Forma
Net Sales $424.4 $49.3 $473.7
Cost of sales (excluding
depreciation) 262.7 31.3 294.0
Selling, general & admin-
istrative expenses 97.4 2.9 100.3
Operating income before
depreciation and
amortization of goodwill
and other intangibles 64.3 15.1 79.4
Depreciation 10.6 .3 10.9
Amortization of goodwill
and other intangibles 8.5 3.4 11.9
Management fees and other 2.2 .4 2.6
Operating income 43.0 11.0 54.0
Interest expense 40.9 7.4 48.3
Other (income) and
expenses (1.4) 1.7 .3
Gain on sale of partial
interest in a subsidiary (24.2) - (24.2)
Income before income taxes
and minority interest 27.7 1.9 29.6
Provision for income taxes 1.3 .2 1.5
Income before minority
interest 26.4 1.7 28.1
Minority interest 2.6 .5 3.1
Net income $ 23.8 $ 1.2 $ 25.0
See notes to Unaudited Pro Forma Condensed Consolidated Statements of
Operations.
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PAGE 6
JORDAN INDUSTRIES, INC.
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1995
($ in millions)
Pro Forma Pro
Historical Adjustments Forma
Net Sales $219.6 $26.6 $246.2
Cost of sales (excluding
depreciation) 136.4 17.6 154.0
Selling, general & admin-
istrative expenses 55.8 1.5 57.3
Operating income before
depreciation and
amortization of goodwill
and other intangibles 27.4 7.5 34.9
Depreciation 5.8 .1 5.9
Amortization of goodwill
and other intangibles 3.5 1.7 5.2
Management fees and other 1.3 .2 1.5
Operating income 16.8 5.5 22.3
Interest expense 21.3 3.7 25.0
Other (income) and
expenses (0.9) .8 (.1)
Income (loss) before
income taxes and minority
interest (3.6) 1.0 (2.6)
Provision for income taxes .1 .1 .2
Income (loss) before minority
interest (3.7) .9 (2.8)
Minority interest (.9) .2 (.7)
Net (loss) $ (2.8) $ .7 $ (2.1)
See notes to Unaudited Pro Forma Condensed Consolidated Statements of
Operations.
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PAGE 7
JORDAN INDUSTRIES, INC.
NOTES TO PRO FORMA CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
($ in millions)
1. The pro forma condensed consolidated statements of operations
include an adjustment for the amortization of the preliminary
purchase price allocated to the fair value of net assets acquired
as follows:
For the For the
Year Ended Six Months
December 31, Ended June 30,
1994 1995
Amortization-goodwill 3.3 1.6
Amortization-intangibles .1 .1
2. The pro forma condensed consolidated statements of operations
also include the following adjustments:
For the For the
Year Ended Six Months
December 31, Ended June 30,
1994 1995
Incremental interest
expense 7.4 3.7
Elimination of interest
income 1.5 .7
Incremental bank fees .2 .1
Additional fees under
management consulting
agreement .4 .2
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PAGE 8
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.
November 3, 1995 By Thomas C. Spielberger
Vice President, Controller
and Principal Accounting
Officer
Combined Financial Statements
Merkle-Korff Industries, Inc.,
Mercury Industries, Inc. and
Elmco Industries, Inc.
Years ended December 31, 1994, 1993, and 1992
with Report of Independent Auditors
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Merkle-Korff Industries, Inc.,
Mercury Industries, Inc. and
Elmco Industries, Inc.
Combined Financial Statements
Years ended December 31, 1994, 1993, and 1992
Contents
Report of Independent Auditors 1
Combined Financial Statements
Combined Balance Sheets 2
Combined Statements of Income and Retained Earnings 3
Combined Statements of Cash Flows 4
Notes to Combined Financial Statements 5
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Report of Independent Auditors
The Boards of Directors
Merkle-Korff Industries, Inc.,
Mercury Industries, Inc. and
Elmco Industries, Inc.
We have audited the accompanying combined balance sheets of Merkle-Korff
Industries, Inc., Mercury Industries, Inc. and Elmco Industries, Inc. as of
DecemberE31, 1994, 1993, 1992, and 1991, and the related combined statements
of income and retained earnings and cash flows for the years ended
DecemberE31, 1994, 1993, and 1992. These financial statements are the
responsibility of the CompaniesO management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of Merkle-Korff
Industries, Inc., Mercury Industries, Inc. and Elmco Industries, Inc. as of
DecemberE31, 1994, 1993, 1992, and 1991, and the combined results of their
operations and their cash flows for the years ended DecemberE31, 1994, 1993,
and 1992 in conformity with generally accepted accounting principles.
ERNST & YOUNG LLP
August 11, 1995
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Merkle-Korff Industries, Inc.,
Mercury Industries, Inc. and
Elmco Industries, Inc.
Combined Balance Sheets
December 31
1994 1993 1992 1991
Assets
Current assets:
Cash $ 69,574 $ 66,447 $ 76,468 $ 90,283
Short-term investments 5,539,994 4,750,728 5,760,651 5,797,990
Accounts receivable 5,877,107 4,922,635 4,274,989 3,581,993
Inventories 4,529,148 4,018,012 3,955,378 4,158,711
Prepaid expenses and
other 139,034 56,674 103,027 85,151
Notes receivable 11,415 35,557 47,987 47,624
Total current assets 16,166,272 13,850,053 14,218,500 13,761,752
Property and equipment -
Net 482,766 616,200 683,505 765,042
Other assets:
Notes receivable 57,083 9,122 40,080 88,067
Due from related parties 1,231,426 1,117,884 995,211 874,827
Deposit 1,014,845 827,722 692,657 688,174
$18,952,392 $16,420,981 $16,629,953 $16,177,862
Liabilities and
stockholders' equity
Current liabilities:
Outstanding checks in
excess of bank
balance $ 56,857 $ 366,637 $ 688,484 $ -
Accounts payable 3,086,278 2,068,716 2,529,810 2,800,216
Accrued expenses and
other 1,476,899 1,470,228 1,355,055 1,427,855
Total current liabilities 4,620,034 3,905,581 4,573,349 4,228,071
Stockholders' equity:
Common stock 2,248,325 2,248,325 2,248,325 2,248,325
Retained earnings 12,084,033 10,267,075 9,808,279 9,701,466
14,332,358 12,515,400 12,056,604 11,949,791
$18,952,392 $16,420,981 $16,629,953 $16,177,862
See accompanying notes.
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Merkle-Korff Industries, Inc.,
Mercury Industries, Inc. and
Elmco Industries, Inc.
Combined Statements of Income and Retained Earnings
Year ended December 31
1994 1993 1992
Net sales $49,340,321 $43,766,171 $39,800,651
Cost of sales 31,564,365 27,706,529 26,231,839
Gross profit 17,775,956 16,059,642 13,568,812
Selling, general, and
administrative expenses 5,466,521 7,512,421 6,327,791
Operating income 12,309,435 8,547,221 7,241,021
Other income (expense):
Interest income 231,089 172,186 259,702
Other (448,639) (454,117) (456,265)
Income before income taxes 12,091,885 8,265,290 7,044,458
State income taxes 170,529 143,255 115,810
Net income 11,921,356 8,122,035 6,928,648
Retained earnings -
Beginning of period 10,267,075 9,808,279 9,701,466
Dividends paid (10,104,398) (7,663,239) (6,821,835)
Retained earnings -
End of period $12,084,033 $10,267,075 $ 9,808,279
See accompanying notes.
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Merkle-Korff Industries, Inc.,
Mercury Industries, Inc. and
Elmco Industries, Inc.
Combined Statements of Cash Flows
Year ended December 31
1994 1993 1992
Cash flows from operating
activities
Net income $11,921,356 $8,122,035 $6,928,648
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and amortization 323,657 334,584 340,859
Provision for bad debts - 72,455 14,386
Changes in operating assets and
liabilities:
Accounts receivable (954,472) (720,101) (707,382)
Inventories (511,136) (62,634) 203,333
Prepaid expenses and other (82,360) 46,353 (17,876)
Deposits (187,123) (135,065) (4,483)
Outstanding checks in excess
of bank balance (309,780) (321,847) 688,484
Accounts payable 1,017,562 (461,094) (270,406)
Accrued expenses and other 6,671 115,173 (72,800)
Net cash provided by operating
activities 11,224,375 6,989,859 7,102,763
Cash flows from investing activities
Purchases of property and
equipment (190,223) (267,279) (259,322)
(Increase) decrease in short-term
investments (789,266) 1,009,923 37,339
(Increase) decrease in notes
receivable (23,819) 43,388 47,624
(Increase) in due from related
parties (113,542) (122,673) (120,384)
Net cash (used in) provided by
investing activities (1,116,850) 663,359 (294,743)
Cash flows from financing activities
Dividends paid (10,104,398) (7,663,239) (6,821,835)
Net cash (used in) financing
activities (10,104,398) (7,663,239) (6,821,835)
Increase (decrease) in cash 3,127 (10,021) (13,815)
Cash at beginning of period 66,447 76,468 90,283
Cash at end of period $ 69,574 $ 66,447 $ 76,468
Supplemental disclosures of
cash flow information
Cash paid during the period for:
Income taxes $ 171,000 $ 143,000 $ 116,000
See accompanying notes.
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Merkle-Korff Industries, Inc.,
Mercury Industries, Inc. and
Elmco Industries, Inc.
Notes to Combined Financial Statements
December 31, 1994
1. Description of Business and Summary of
Significant Accounting Policies
Description of Business
Merkle-Korff Industries, Inc. (Merkle-Korff), Mercury Industries, Inc.
(Mercury), and Elmco Industries, Inc. (Elmco), collectively referred to as the
OCompanies,O are owned by an individual and trusts, the beneficiaries of which
are related to the individual. Merkle-Korff manufactures and sells
reversible, permanent split-capacitor, shaded-pole, and DC sub-fractional
horsepower motors and gearmotors primarily to customers located throughout the
United States. Mercury and Elmco manufacture various electromechanical
products and components exclusively for Merkle-Korff.
Short-Term Investments
Short-term investments consist of U.S. Treasury bills and are carried at cost,
which approximates market.
Inventories
Inventories are stated at the lower of cost or market. Cost is determined by
the first in, first out (FIFO) method.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation
determined using either straight-line or accelerated methods over the
estimated useful lives of the assets. Leasehold improvements are amortized
using the straight-line method over the life of the leasehold improvement.
Research and Development Costs
Research and development costs related to both present and future products are
charged to expense when incurred.
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Merkle-Korff Industries, Inc.
Mercury Industries, Inc. and
Elmco Industries, Inc.
Notes to Combined Financial Statements (continued)
1. Description of Business and Summary of
Significant Accounting Policies (continued)
Income Taxes
The Companies elected to be taxed as S corporations under applicable
provisions of the Internal Revenue Code and, therefore, are generally not
liable for federal and certain state income taxes, as the income of the
Companies is included in the taxable income of its stockholders.
Financial Instruments
Cash and trade receivables may subject the Companies to credit risk. The
Companies hold cash at highly rated financial institutions which are federally
insured up to prescribed limits. Cash balances may exceed the federally
insured limits at any given time.
During 1994, 1993, and 1992, the three largest customers accounted for 35%,
36%, and 39% of sales, respectively. At DecemberE31, 1994, 1993, 1992, and
1991, the three largest customers accounted for approximately 29%, 36%, 42%,
and 39% of trade accounts receivable, respectively. The Companies closely
monitor the credit quality of their customers and credit losses have been
insignificant on an historical basis.
2. Related Party Transactions
Merkle-Korff leases its plants, warehouse, and offices under a net lease from
affiliated entities. Rent expenses, including real estate taxes attributable
to these leases, amounted to $361,962, $361,967, and $342,023 for 1994, 1993,
and 1992, respectively. Future annual minimum rental payments required under
this lease amount to $303,480 for 1995 and 1996.
Mercury leases its plant under a net lease from a corporation which is an
affiliated entity. Rent expenses, including real estate taxes attributable to
this lease, amounted to $194,419, $196,638, and $191,380 for 1994, 1993, and
1992, respectively. Annual future minimum rental payments required under this
lease amount to $174,600 for 1995 and 1996.
<PAGE>
Merkle-Korff Industries, Inc.
Mercury Industries, Inc. and
Elmco Industries, Inc.
Notes to Combined Financial Statements (continued)
2. Related Party Transactions (continued)
Elmco leases its plant under a net lease from a corporation which is an
affiliated entity. Occupancy expense, including real estate taxes
attributable to this lease, amounted to $334,938, $314,702, and $306,083 for
1994, 1993, and 1992, respectively. Future minimum rental payments required
under this lease amount to $254,040 for 1995 and 1996.
The amounts shown as due from related parties principally include amounts due
from related trusts and individuals under certain insurance agreements entered
into for the benefit of certain officers of the Companies. The Companies are
entitled to be reimbursed by the trusts for the lesser of all premiums paid
relating to these policies or their cash surrender values upon either payment
of the face value of the policies or termination of the policies for any
reason. As of DecemberE31, 1994, 1993, 1992, and 1991, these amounts were
secured by the cash surrender value of the related life insurance policies.
The Companies contributed $450,000 to a foundation controlled by a related
party during each of the years ended DecemberE31, 1994, 1993, and 1992.
Transactions and accounts existing between the Companies have been eliminated
in the combined financial statements.
3. Inventories
Inventories consist of the following:
December 31
1994 1993 1992 1991
Raw materials $2,796,630 $3,025,458 $2,943,729 $2,906,563
Work-in-process 764,058 300,422 295,229 263,642
Finished goods 968,460 692,132 716,420 988,506
$4,529,148 $4,018,012 $3,955,378 $4,158,711
<PAGE>
Merkle-Korff Industries, Inc.
Mercury Industries, Inc. and
Elmco Industries, Inc.
Notes to Combined Financial Statements (continued)
4. Property and Equipment
Property and equipment consist of the following:
December 31
1994 1993 1992 1991
Machinery and equipment $4,088,405 $4,189,542 $4,068,472 $3,997,697
Dies and tooling 1,687,477 1,596,059 1,491,460 1,395,622
Furniture and fixtures 834,661 866,460 824,849 815,744
Vehicles 205,304 185,982 185,982 132,245
Leasehold improvements 740,135 740,135 740,135 740,135
7,555,982 7,578,178 7,310,898 7,081,443
Less: Accumulated depre-
ciation and amortization (7,073,216)(6,961,978)(6,627,393)(6,316,401)
$ 482,766 $ 616,200 $ 683,505 $ 765,042
5. Notes Receivable
Notes receivable consist
of the following:
December 31
1994 1993 1992 1991
10% unsecured note receivable $ - 23,579 36,667 49,391
8% note receivable secured by
land - 4,600 18,400 36,800
9.75% note receivable due in
monthly installments of $1,466
including interest through
November 1999 68,498 - - -
8% note receivable from an
officer due in quarterly
installments of $4,125 plus
interest - 16,500 33,000 49,500
Total notes receivable 68,498 44,679 88,067 135,691
Less: Current portion (11,415) (35,557) (47,987)(47,624)
$ 57,083 $ 9,122 40,080 88,067
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Merkle-Korff Industries, Inc.
Mercury Industries, Inc. and
Elmco Industries, Inc.
Notes to Combined Financial Statements (continued)
6. Common Stock
Common stock consists of the following:
December 31
1994 1993 1992 1991
Merkle-Korff Industries, Inc.
Common stock; no par value;
1,000,000 shares authorized;
803,250 shares issued and
outstanding $2,222,325 $2,222,325 $2,222,325 $2,222,325
Mercury Industries, Inc.
Common stock; no par value;
2,500 shares authorized;
1,000 shares issued and
outstanding 25,000 25,000 25,000 25,000
Elmco Industries, Inc.
Common stock; $10 par value;
100,000 shares authorized;
100 shares issued and out-
standing 1,000 1,000 1,000 1,000
$2,248,325 $2,248,325 $2,248,325 $2,248,325
7. Profit-Sharing Plans
Merkle-Korff maintains a profit-sharing plan with a 401(k) provision. The
plan covers all eligible employees with specified years of service and
attainment of minimum age requirements. The CompanyOs voluntary contribution
to the plan was $97,667, $106,170, and $106,469 for 1994, 1993, and 1992,
respectively.
Mercury maintains a profit-sharing plan with a 401(k) provision. The plan
covers all eligible employees with specified years of service and attainment
of minimum age requirements. The CompanyOs voluntary contribution to the plan
was $98,765, $99,047, and $102,320 for 1994, 1993, and 1992, respectively.
