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, 1996 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:
(847) 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
10, 1996: 93,501.0004.
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PAGE 2
JORDAN INDUSTRIES, INC.
INDEX
Part I. Page No.
Financial Information
Condensed Consolidated Balance Sheets
at March 31, 1996, and December 31, 1995 3
Condensed Consolidated Statements of Operations
for the Three Months Ended March 31, 1996
and 1995 4
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 1996
and 1995 5
Notes to Condensed Consolidated Financial
Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II.
Other Information 13
Signatures 14
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PAGE 3
JORDAN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(ALL DOLLAR AMOUNTS IN THOUSANDS)
March 31, December 31,
1996 1995
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 11,109 $ 41,253
Accounts receivable, net 68,626 72,324
Inventories 96,551 84,259
Prepaid expenses and other current assets 9,953 7,566
Total Current Assets 186,239 205,402
Property, plant and equipment, net 100,751 91,422
Investments in and advances to affiliates 25,003 23,087
Goodwill, net 189,575 180,315
Other assets 46,201 32,158
Total Assets $547,769 $532,384
LIABILITIES AND NET CAPITAL DEFICIENCY
Current Liabilities:
Notes payable - lines of credit $ 27,414 $ 16,239
Accounts payable 40,021 49,086
Accrued liabilities 21,466 26,867
Advance deposits 4,139 1,830
Current portion of long-term debt 11,351 11,705
Total Current Liabilities 104,391 105,727
Long-term debt 517,821 497,977
Other non-current liabilities 2,481 2,402
Minority interest - 757
Net Capital Deficiency:
Common stock 1 1
Additional paid-in capital 2,972 2,972
Accumulated deficit (79,897) (77,452)
Total Net Capital Deficiency (76,924) (74,479)
Total Liabilities and Net Capital
Deficiency $547,769 $532,384
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,
1996 1995
Net sales $120,743 $100,151
Cost of sales, excluding depreciation 74,103 62,227
Selling, general and administrative
expenses 30,013 27,131
Depreciation 4,064 2,818
Amortization of goodwill and other
intangibles 2,409 1,737
Management fees and other 1,023 634
Operating income 9,131 5,604
Other (income) and expenses:
Interest expense 13,990 10,533
Interest income (684) (477)
Total other expenses 13,306 10,056
Loss before income taxes and
minority interest (4,175) (4,452)
Benefit for income taxes (1,115) (194)
Loss before minority interest (3,060) (4,258)
Minority interest (776) (542)
Net loss $ (2,284)$ (3,716)
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)
THREE MONTHS ENDED
March 31,
1996 1995
Cash flows from operating activities:
Net loss $ (2,284) $ (3,716)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 7,261 4,920
Provision for (benefit from) deferred
income taxes (1,115) 264
Minority interest (776) (542)
Non-cash interest 2,884 2,573
Changes in operating assets and
liabilities net of effects from
acquisitions:
Increase in current assets (148) (7,130)
Decrease in current liabilities (16,471) (17,107)
Increase in non-current assets (3,856) (1,525)
Net cash used in operating activities (14,505) (22,263)
Cash flows from investing activities:
Capital expenditures (3,523) (5,622)
Notes receivable from affiliate (1,916) (655)
Acquisitions of minority interests and other (81) (3,949)
Acquisition of subsidiaries (38,200) -
Net cash used in investing activities (43,720) (10,226)
Cash flows from financing activities:
Proceeds from lines of credit, net 6,973 -
Proceeds from revolving credit facilities, net 4,200 -
Proceeds from debt issuance - MK Holdings, Inc. 20,000 -
Repayment of long-term debt (3,394) (483)
Other 302 339
Net cash provided by (used in) financing
activities 28,081 (144)
Net decrease in cash and cash equivalents (30,144) (32,633)
Cash and cash equivalents at beginning of
period 41,253 56,386
Cash and cash equivalents at end of period $ 11,109 $ 23,753
Cash paid during the period for:
Interest $ 17,103 $ 14,737
Income Taxes, net $ 903 $ 881
Non-cash investing activities:
Capital leases $ - $ 1,386
See accompanying notes to condensed consolidated financial statements.
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PAGE 6
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, 1995, which are included in the
Company's Annual Report filed on Form 10-K for such year (the "1995 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,
1996 1995
Raw materials $24,515 $24,251
Work-in-process 13,364 5,968
Finished goods 58,672 54,040
$96,551 $84,259
C. Note Receivable from affiliates and investment in affiliate
At March 31, 1996, 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 $8,781.
On May 15, 1995, the Company purchased from a third party $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 also acquired 151.28 shares of Common Stock on 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 were
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 participation,
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 March 31, 1996 and
1995, are as follows:
March 31, March 31,
1996 1995
Deferred tax liabilities
Tax over book depreciation $ 7,485 $ 7,293
Other 1,540 1,495
Total deferred tax liabilities 9,025 8,788
Deferred tax assets
NOL carryforwards 21,174 20,541
Accrued interest on discount debentures 9,167 5,435
Other 2,004 4,267
Total deferred tax assets 32,345 30,243
Valuation allowance for deferred
tax assets (21,466) (26,197)
Net deferred tax assets 10,879 4,046
Net deferred tax (assets)
liabilities $(1,854) $ 4,742
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PAGE 8
JORDAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
E. Acquisition of Subsidiaries
On January 23, 1996, the Company purchased the net assets of Johnson
Components, Inc. ("Johnson"), a manufacturer of RF coaxial connectors and
electronic hardware. The purchase price of $16,500, including costs incurred
directly related to the transaction, was allocated to working capital of
$1,634, property, plant and equipment of $3,330, and non-compete agreements of
$1,050, and resulted in an excess purchase price over net identifiable assets
of $10,486. The acquisition was financed with cash.
On March 8, 1996, Merkle-Korff acquired the net assets of Barber-Colman Motors
("Colman Motor Products", formerly "Barber-Colman"), a division of Barber-Colman
Company, which was wholly-owned by Siebe, plc. This division consisted
of Colman OEM and Colman motor products, wholly-owned subsidiaries of Barber-
Colman Company, and the motors division of Barber-Colman Company, collectively,
Colman Motor Products ("CMP"). It is a vertically integrated manufacturer of
sub fractional horsepower AC/DC motors and gear motors with applications in
such products as vending machines, copiers, printers, ATM machines, currency
changers, X-ray machines, peristaltic pumps, HVAC actuators, and other
products.
The purchase price of $21,700, which included costs incurred directly related
to the transaction, was allocated to working capital of $5,111, property, plant
and equipment of $6,541, non-compete agreements of $1,000, and resulted in an
excess purchase price over net identifiable assets of $9,048. The acquisition
was financed with $21,700 of new and existing credit facilities.
On May 1, 1996, the Company through its non-restricted subsidiary, SPL
Holdings, Inc., acquired the net assets of Seaboard Folding Box Corporation
("Seaboard"), a manufacturer of printed folding cartons and boxes, insert
packaging, and blister pack cards.
The purchase price of $27,500, including costs incurred directly related to the
transaction, has not been allocated at this time. The acquisition was financed
with cash of $2,000 from the Company, a $1,500 subordinated seller note, a new
$13,000 term loan, and $11,000 from the existing SPL Holdings, Inc. revolving
credit facility.
SPL Holdings, Inc. is 83.3% owned by the Company and 16.7% owned by certain
affiliates of the Company, including partners and affiliates of The Jordan
Company, including Mr. Jordan, Mr. Quinn, Mr. Zalaznick, and Mr. Boucher.
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PAGE 9
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
QUARTER ENDED MARCH 31,
1996 1995
Net Sales:
Specialty Printing & Labeling $ 16,944 $15,376
Motors and Gears 28,087 9,811
Telecommunications Products 24,463 19,793
Welcome Home 12,483 12,137
Consumer and Industrial Products 38,766 43,034
Total $120,743 $100,151
Operating Income (a):
Specialty Printing & Labeling $ (751) $ (382)
Motors and Gears 6,776 2,268
Telecommunications Products 5,060 3,939
Welcome Home (3,030) (2,377)
Consumer and Industrial Products 5,288 5,831
Total $ 13,343 $ 9,279
Operating Margins (b):
Specialty Printing & Labeling (4.4)% (2.5)%
Motors and Gears 24.1 23.1
Telecommunications Products 20.7 19.9
Welcome Home (24.3) (19.6)
Consumer and Industrial Products 13.6 13.6
Consolidated 11.1 9.3
(a) Before corporate overhead of $4,212 and $3,675 for the three months ended
March 31, 1996 and 1995, respectively.
(b) Operating margin is operating income divided by net sales.
The following discussion should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations
contained in the 1995 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, 1996 and 1995. This discussion reviews the foregoing segment
data and certain of the consolidated financial data for the Company.
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PAGE 10
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Specialty Printing and Labeling. As of March 31, 1996, the Specialty
Printing and Labeling group consisted of SPAI, Valmark, and Pamco.
Net sales increased $1.6 million or 10.2%. Operating income decreased $.4
million or 96.6%. The increase in sales was due to increased sales of
shielding devices and membrane switches at Valmark, $1.2 million and $.3
million, respectively, increased label sales at Pamco, $.2 million, and
increased sales of ad-specialty products at SPAI, $.3 million, partially offset
by a decrease in calendar sales at SPAI, $.3 million. Operating margin
decreased to negative 4.4% from negative 2.5% due primarily to increased
medical insurance costs at SPAI.
Motors and Gears. As of March 31, 1996, the Motors and Gears group
consisted of Imperial, Scott, Gear, Merkle-Korff, and Colman Motor Products.
Net sales increased $18.3 million or 186.3% . Operating income increased $4.5
million or 198.8%. The increase in sales was due to the acquisition of Merkle-
Korff in September 1995 which added $14.3 million to the segment's net sales
and $3.5 million to operating income, and the acquisition of Colman Motor
Products in March 1996 which added $1.9 million to the segments net sales and
$.3 million to operating income. In addition, sales of motors at Imperial
increased $2.0 million. Operating margin increased to 24.1% from 23.1% due to
higher sales volumes and manufacturing efficiencies.
Telecommunications Products. As of March 31, 1996, the
Telecommunications Products group consisted of AIM, Cambridge, Johnson
Components and Dura-Line.
Net sales increased $4.7 million or 23.6%. Operating income increased $1.1
million or 28.4%. The sales increase was due to increased Innerduct sales at
Dura-Line, $1.4 million, and the acquisition of Johnson Components in January
1996, which added $3.5 million to the segment's net sales and $.7 million to
operating income. The sales increase was partially offset by lower connector
sales at Cambridge, $.2 million. Operating margin increased to 20.7% from
19.9%.
Welcome Home.
Net sales increased $.3 million or 2.9%. Operating income decreased $.7
million or 27.5%. The increase in net sales was due to 21 net additional
stores in 1996. The decrease in operating income was due to having the expense
of 21 additional stores in the slowest quarter of the year. The above items
also negatively impacted operating margin which dropped to negative 24.3% from
negative 19.6%.
Consumer and Industrial Products. As of March 31, 1996, the Consumer and
Industrial Products group consisted of DACCO, Sate-Lite, Riverside, Parsons,
Hudson, and Beemak.
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PAGE 11
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net sales decreased $4.3 million or 9.9%. Operating income decreased $.5
million or 9.3%. The sales decrease was due to lower scrap sales at DACCO,
$.5 million, lower foreign and domestic bicycle sales at Sate-Lite, $.3
million, decreased sales of God's Word Bibles, religious books and tapes, and
contract distribution services at Riverside, $2.5 million, $.7 million, and
$1.0 million, respectively, locks at Hudson, $.4 million, and POGs and
fabricated products at Beemak, $.5 million and $.5 million, respectively.
These decreases were partially offset by increases in rebuilt converter and
soft parts sales at DACCO, $1.4 million and $.4 million, respectively, and
increased molding sales at Beemak, $.2 million. Operating margin was unchanged
at 13.6%.
Consolidated Results: (See Condensed Consolidated Statements of
Operations.) First quarter operating income increased $3.5 million or 62.9%
compared to 1995 due to higher sales figures primarily attained by the
acquisitions of Merkle-Korff, Johnson Components and Colman Motor Products.
First quarter interest expense increased from $10.5 million to $14.0 million
due to higher debt levels at M&G Holdings and SPL. First quarter interest
income increased from $.5 million to $.7 million, due to higher cash balances.
Primarily as a result of higher operating income, higher interest income,
partially offset by higher interest expense, the Company incurred a net loss
of $2.3 million in the first quarter of 1996 as compared to a net loss of $3.7
million in 1995.
Liquidity and Capital Resources. The Company had $81.8 million of
working capital at March 31, 1996, compared to $99.7 million at the end of
1995. The decrease in working capital was due to lower cash balances, lower
accounts receivable, higher notes payable, and higher advanced deposits, offset
by higher inventory, prepaids and other current assets, and lower accounts
payable and accrued expenses.
The company's net cash used in operating activities for the three months ended
March 31, 1996 decreased $7.8 million versus the same period in 1995. This
decrease was due to a lower net loss, $1.4 million, a lower increase in current
assets, $7.0 million, a lower decrease in current liabilities, $.6 million, and
higher depreciation and amortization, $2.3 million. These decreases were
partially offset by a higher benefit for deferred taxes, $1.3 million, a higher
increase in non-current assets, $2.3 million, and higher minority interest, $.2
million.
The net cash used in investing activities for the three months ended March 31,
1996, increased $33.5 million versus the same period in 1995. this increase
was due to two acquisitions, $38.2 million, and higher advances to affiliates,
$1.3 million, partially offset by lower capital expenditures, $2.1 million, and
a decrease in acquisitions of minority interest of $3.9 million.
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PAGE 12
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The net cash provided by financing activities for the three months ended March
31, 1996 increased $28.2 million versus the same period in 1995. This increase
was due to increased proceeds from lines of credit, $7.0 million, increased
proceeds from revolving credit facilities, $4.2 million, and increased proceeds
from a debt issuance, $20.0 million, partially offset by higher repayments of
long-term debt $2.9 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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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.
May 10, 1996 By:
Thomas C. Spielberger
Vice President, Controller
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 11,109
<SECURITIES> 0
<RECEIVABLES> 66,969
<ALLOWANCES> (1,343)
<INVENTORY> 96,551
<CURRENT-ASSETS> 186,239
<PP&E> 178,788
<DEPRECIATION> (78,037)
<TOTAL-ASSETS> 547,769
<CURRENT-LIABILITIES> 104,391
<BONDS> 376,989
0
0
<COMMON> 1
<OTHER-SE> (76,925)
<TOTAL-LIABILITY-AND-EQUITY> 547,769
<SALES> 120,743
<TOTAL-REVENUES> 120,743
<CGS> 74,103
<TOTAL-COSTS> 74,103
<OTHER-EXPENSES> 37,509
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,990
<INCOME-PRETAX> (4,175)
<INCOME-TAX> (1,115)
<INCOME-CONTINUING> (2,284)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,284)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
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