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, 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
August 14, 1996: 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, 1996, and December 31, 1995 3
Condensed Consolidated Statements of Operations
for the Second Quarter and Six Months Ended
June 30, 1996 and 1995 4
Condensed Consolidated Statements of Cash Flows
for the Six Months Ended June 30, 1996
and 1995 5
Notes to Condensed Consolidated Financial
Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Part II.
Other Information 15
Signatures 16
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PAGE 3
JORDAN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(ALL DOLLAR AMOUNTS IN THOUSANDS)
June 30, December 31,
1996 1995
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 12,445 $ 41,253
Accounts receivable - net 76,058 72,324
Inventories 107,082 84,259
Prepaid expenses and other current
assets 9,539 7,566
Total Current Assets 205,124 205,402
Property, plant and equipment - net 108,780 91,422
Notes receivable from affiliates 28,350 23,087
Goodwill - net 222,013 180,315
Other assets 47,230 32,158
Total Assets $611,497 $532,384
LIABILITIES AND NET CAPITAL DEFICIENCY
Current Liabilities:
Notes payable - line of credit $ 54,320 $ 16,239
Accounts payable 48,481 49,086
Accrued liabilities 34,390 26,867
Advance deposits 2,514 1,830
Current portion of long-term debt 14,050 11,705
Total Current Liabilities 153,755 105,727
Long-term debt 531,978 497,977
Other non-current liabilities 5,769 3,159
Net Capital Deficiency:
Common stock 1 1
Additional paid-in capital 2,972 2,972
Accumulated deficit (82,978) (77,452)
Total Net Capital Deficiency (80,005) (74,479)
Total Liabilities and Net Capital
Deficiency $611,497 $532,384
See accompanying notes to condensed consolidated financial statements.
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PAGE 4
JORDAN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
SIX MONTHS ENDED
SECOND QUARTER June 30,
1996 1995 1996 1995
Net sales $146,478 $119,451 $267,220 $219,602
Cost of sales, excluding
depreciation 89,950 74,150 164,053 136,377
Selling, general and administra-
tive expenses 34,730 28,676 64,743 55,807
Depreciation 4,596 2,987 8,660 5,805
Amortization of goodwill and other
intangibles 2,748 1,823 5,156 3,560
Management fees and other 1,380 667 2,403 1,301
Operating income 13,074 11,148 22,205 16,752
Other (income) and expenses:
Interest expense 14,985 10,722 28,975 21,255
Interest income (660) (394) (1,344) (871)
Total other expenses 14,325 10,328 27,631 20,384
Income (loss) before income taxes
and minority interest (1,251) 820 (5,426) (3,632)
Provision (benefit) for income taxes 2,359 277 1,244 83
Income (loss) before minority
interest (3,610) 543 (6,670) (3,715)
Minority interest (310) (358) (1,086) (900)
Net Income (Loss) $ (3,300) $ 901 $(5,584)$ (2,815)
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,
1996 1995
Cash flows from operating activities:
Net loss $(5,584) $(2,815)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 15,341 10,133
(Benefit from) provision for deferred
income taxes (1,143) 461
Minority interest (1,086) (900)
Non-cash interest 5,822 5,194
Changes in operating assets and
liabilities net of effects from
acquisitions:
Increase in current assets (3,723) (20,821)
Decrease in current liabilities (2,796) (4,077)
Increase in non-current assets (5,111) (3,412)
Increase in non-current liabilities 429 -
Net cash provided by (used in) operating
activities 2,149 (16,237)
Cash flows from investing activities:
Capital expenditures (9,612) (5,467)
Note receivable from affiliates (5,264) (16,717)
Acquisition of subsidiaries (82,450) -
Cash acquired in purchase of subsidiaries 1,390 -
Acquisitions of minority interests and other (144) (5,853)
Investment in Fannie May Holdings - (1,571)
Other 2 318
Net cash used in investing activities (96,078) (29,290)
Cash flows from financing activities:
Repayment of long-term debt (5,958) (1,094)
Proceeds from revolving credit facilities, net 38,079 12,803
Proceeds from debt issuance - MK Holdings, Inc. 20,000 -
Proceeds from debt issuance - SPL Holdings,Inc. 13,000 -
Net cash provided by financing activities 65,121 11,709
Net decrease in cash and cash equivalents (28,808) (33,818)
Cash and cash equivalents at beginning of period 41,253 56,386
Cash and cash equivalents at end of period $12,445 $22,568
Cash paid during the period for:
Interest $20,984 $15,134
Income taxes, net $ 1,471 $ 929
Non-cash investing activities:
Capital leases $ 344 $ 7,944
Seller notes issued in acquisitions $ 3,000 $ -
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:
June 30, December 31,
1996 1995
Raw materials $ 25,817 $24,251
Work in process 13,519 5,968
Finished goods 67,746 54,040
$107,082 $84,259
C. Notes receivable from affiliates and investment in affiliate
At June 30, 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 $12,128. On July 29, 1996, the Company
acquired the stock of Cape Craftsmen, Inc. ("Cape Craftsmen") in exchange for
the $12,128 of notes receivable from Cape Craftsmen. Because the Company and
Cape Craftsmen have common ownership, the stock of Cape Craftsmen will be
recorded at the historical basis of the underlying assets.
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") at face value for $9,071.
The Company also acquired 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 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
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PAGE 7
JORDAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
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.
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.
On July 29, 1996, Mr. Jordan purchased $2,000 of the Fannie May Subordinated
Notes from the Company at face value plus accrued interest.
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, 1996 and December 31, 1995 are as follows:
June 30, Dec. 31,
1996 1995
Deferred tax liabilities
Tax over book depreciation $ 7,692 $ 7,368
Other 1,928 1,447
Total deferred tax liabilities 9,620 8,815
Deferred tax assets
NOL carryforwards 21,874 20,060
Accrued interest on discount debentures 10,147 8,187
Other 2,748 2,774
Total deferred tax assets 34,769 31,021
Valuation allowance for deferred
tax assets (23,266) (21,466)
Net deferred tax assets 11,503 9,555
Net deferred tax assets $(1,883) $ (740)
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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, owned by a non-restricted subsidiary, M-K
Holdings, Inc., 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"). CMP 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.
M-K Holdings, Inc. is 87.6% owned by the Company and 12.4% owned by
affiliates of the Company, including partners and affiliates of the Jordan
Company, including Mr. Jordan, Mr. Quinn, Mr. Zalaznick, and Mr. Boucher.
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, was allocated to working capital of $6,465, property, plant
and equipment of $5,455, non-compete agreements of $1,000, and resulted in
an excess purchase price over net identifiable assets of $14,580. 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.
PAGE 9
JORDAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
On June 25, 1996, the Company purchased the stock of Diversified Wire and
Cable, Inc. ("Diversified"), a provider and value added reseller of wire,
cable and custom cable assemblies.
The purchase price of $22,950, including costs incurred directly related to
the transaction, was allocated to working capital of $2,738, property, plant
and equipment of $500, non-compete agreements of $500, and resulted in an
excess purchase price over net identifiable assets of $19,212. The
acquisition was financed with cash and a $1,500 subordinated seller note.
The purchase price includes a contingent purchase price payment of $3,200
over the next four years if certain levels of EBIT (as defined) are achieved.
On August 1, 1996, the Company purchased the net assets of Viewsonics, Inc.
and Shanghai Viewsonics Electric Co., Ltd. ("Viewsonics"), a designer and
manufacturer of cable TV electronic network components and electronic
security components.
The purchase price of $20,000, including costs incurred directly related to
the transaction, has not been allocated at this time. The acquisition was
financed with cash. The purchase price includes a contingent purchase price
payment of $5,000 over the next two years if certain levels of EBIT (as
defined) are achieved.
On August 5, 1996, the Company purchased the stock of Vitelec Electronics,
Limited ("Vitelec"), a United Kingdom based importer, packager, and master
distributor of over 400 RF connectors sold to commercial and consumer
electronic markets.
The purchase price of $15,500, including costs incurred directly related to
the transaction, has not been allocated at this time. The acquisition was
financed with cash. The purchase price includes a contingent purchase price
payment of $1,500 payable in years five through ten if certain levels of EBIT
(as defined) are achieved.
F. Revolving Credit Facility
On July 31, 1996, the Company amended and restated its revolving credit
facility with the First National Bank of Boston ("FNBB") and other banks,
increasing the facility amount from $50 million to $85 million. The
facility, which matures on June 29, 1999, will be used for working capital
and acquisitions over the term of the loan.
<PAGE>
PAGE 10
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 1995 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, 1996 and 1995. Acquisitions are
included from the date of acquisition. This discussion reviews the foregoing
segment data and certain of the consolidated financial data for the Company.
SIX MONTHS ENDED
SECOND QUARTER June 30,
1996 1995 1996 1995
Net Sales:
Specialty Printing and Labeling $ 28,735 $24,576 $ 45,679 $ 39,952
Motors and Gears 31,491 9,678 59,578 19,489
Telecommunications Products 27,126 24,342 51,589 44,136
Welcome Home 18,736 17,997 31,219 30,134
Consumer and Industrial Products 40,390 42,858 79,155 85,891
Total $146,478 $119,451 $267,220 $219,602
Operating Income (a):
Specialty Printing and Labeling $ 2,799 $ 2,859 $ 2,048 $ 2,477
Motors and Gears 7,035 2,537 13,811 4,805
Telecommunications Products 4,888 4,127 9,947 8,066
Welcome Home (1,884) (1,047) (4,914) (3,424)
Consumer and Industrial Products 5,134 6,804 10,422 12,634
Total $ 17,972 $15,280 $31,314 $ 24,558
Operating Margins (b):
Specialty Printing and Labeling 9.7% 11.6% 4.5% 6.2%
Motors and Gears 22.3 26.2 23.2 24.7
Telecommunications Products 18.0 17.0 19.3 18.3
Welcome Home (10.1) (5.8) (15.7) (11.4)
Consumer and Industrial Products 12.7 15.9 13.2 14.7
Total 12.3 12.8 11.7 11.2
(a) Before corporate overhead of $4,898 and $4,132 for the second quarter
ended June 30, 1996 and 1995, respectively and $9,109 and $7,806 for
the six months ended June 30, 1996 and 1995, respectively.
(b) Operating margin is operating income divided by net sales.
<PAGE>
PAGE 11
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Specialty Printing and Labeling. As of June 30, 1996, the Specialty Printing
and Labeling group consisted of SPAI, Valmark, Pamco, and Seaboard.
For the second quarter and first six months of 1996, net sales increased $4.2
million or 16.9% and $5.7 million or 14.3%, respectively, over the same
periods in 1995. The increase in sales is primarily due to the acquisition
of Seaboard on May 1, 1996. For the quarter, Seaboard sales of $4.8 million
were partially offset by decreased sales of shielding devices at Valmark, $.5
million, and decreased label sales at Pamco, $.1 million. For the six months
ended June 30, 1996, Seaboard sales of $4.8 million were supplemented by
increased sales of shielding devices and membrane switches at Valmark, $.5
million and $.2 million, respectively.
For the second quarter and first six months of 1996, operating income
decreased $.1 million or 2.1% and $.4 million or 17.3%, respectively, over
the same periods in 1995. Operating margins decreased from 11.6% to 9.7% in
the second quarter and from 6.2% to 4.5% in the first six months over the
same periods in the prior year. The decrease in operating income for the
quarter is due to decreases at SPAI, $.3 million, Valmark, $.3 million, and
Pamco, $.3 million, partially offset by the purchase of Seaboard, which
contributed $.8 million. The year-to-date decrease is due to decreases at
SPAI, $.7 million, Valmark, $.3 million, and Pamco, $.2 million, partially
offset by Seaboard, $.8 million. Operating income and operating margins
decreased due to increased medical insurance costs at SPAI, increased
production costs at Valmark due to an additional facility, and increased
selling expenses at Pamco.
Motors and Gears. As of June 30, 1996, the Motors and Gears group consisted
of Imperial, Scott, Gear, Merkle-Korff, and Colman Motor Products.
For the second quarter and first six months of 1996, net sales increased
$21.8 million or 225.4% and $40.1 million or 205.7%, respectively, over the
same periods last year. The increase in sales is driven by the acquisition
of Merkle-Korff in September 1995, which added $14.9 million and $29.2
million in net sales in the second quarter and first six months,
respectively, as well as the purchase of Colman Motor Products in March 1996,
which contributed $5.6 million and $7.4 million in net sales in the second
quarter and first six months, respectively. Further contributing to the
second quarter sales increase was increased volume of permanent magnet motors
at Imperial, $1.6 million, partially offset by a decline in planetary gear
sales at Gear, $.3 million. In addition to the acquisitions in 1996 and late
1995, the increase in net sales for the six months ended June 30, 1996 is due
to increased sales of permanent magnet and elevator motors at Imperial, $3.4
million and $.3 million, respectively, increased motor sales at Scott, $.4
million and increased aluminum gear sales at Gear, $.1 million. The six
month sales increases were partially offset by decreased sales of planetary
gears at Gear, $.7 million.
For the second quarter and first six months of 1996, operating income
increased $4.5 million or 177.3% and $9.0 million or 187.4%, respectively,
over the same period last year. Operating margins decreased from 26.2% to
22.3% for the quarter and from 24.7% to 23.2% for the six months,
respectively.
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PAGE 12
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The increase in operating income for the second quarter is driven by the
acquisitions of Merkle-Korff and Colman Motor Products, which contributed
$3.9 million and $.5 million, respectively. As in the second quarter, the
increase in operating income for the six months ended June 30, 1996 is due
to Merkle-Korff and Colman Motor Products, which contributed $7.4 million and
$.8 million, respectively. Adding to the effect of the acquisitions were
increased operating income at Imperial, $.8 million, and Scott, $.2 million,
partially offset by a decline at Gear, $.2 million. Operating margins
decreased primarily due to increased amortization expense associated with the
Merkle-Korff acquisition.
Telecommunication Products. As of June 30, 1996, the Telecommunications
Products group consisted of Dura-Line, AIM, Cambridge, Johnson, and
Diversified. The results of operations of Diversified, which was acquired
on June 24, 1996, are not presented herein.
For the second quarter and first six months of 1996, net sales increased $2.8
million or 11.4% and $7.5 million or 16.9%, respectively, over the same
periods last year. The second quarter sales increase is due to the January
1996 acquisition of Johnson Components, which added $4.8 million to the
group's net sales, and increased connector sales at AIM, $.3 million,
partially offset by decreased sales of Innerduct at Dura-Line, $2.0 million,
and decreased sales of connectors at Cambridge, $.2 million. For the six
months ended June 30, 1996, Johnson Components added $8.3 million to the
group's sales. Coupled with the Johnson Components acquisition are increased
connector sales at AIM, $.4 million. These increases are partially offset
by decreased sales of connectors at Cambridge, $.4 million, and decreased
Innerduct sales at Dura-Line, $.6 million.
For the second quarter and first six months of 1996, operating income
increased $.8 million or 18.4% and $1.9 million or 23.3%, respectively, over
the same periods last year. Operating margins increased from 17.0% to 18.0%
and 18.3% to 19.3% for the quarter and six month period, respectively. For
the quarter, the increase in operating income is attributable to the
acquisition of Johnson Components, which added $.9 million to the group's
operating income, and increased operating income at AIM and Cambridge, $.3
million and $.1 million, respectively, all of which are partially offset by
a decrease at Dura-Line, $.5 million. For the six months ended June 30,
1996, the increase in operating income is due to Johnson Components, $1.6
million, and increases at Dura-Line, $.1 million, AIM, $.1 million, and
Cambridge, $.1 million. Improved margins are due to decreases in material
costs at Dura-Line and decreased amortization at Cambridge.
Welcome Home. For the second quarter and first six months of 1996, net sales
increased $.7 million or 4.1% and $1.1 million or 3.6%, respectively, over
the same periods last year. Operating income decreased $.8 million or 79.9%
and $1.5 million or 43.5%, respectively. Operating margins decreased from
(5.8%) to (10.1%) for the second quarter and (11.4%) to (15.7%) for the six
months ended June 30, 1996, respectively. The increase in sales is
<PAGE>
PAGE 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
due to having an additional week included in the second quarter in Welcome
Home's fiscal calendar. The decrease in operating income and decline in
operating margins is primarily due to having the expenses of an additional
twelve stores in 1996 versus 1995 during the slowest half of the year.
Consumer and Industrial Products. As of June 30, 1996, the Consumer and
Industrial Products group consisted of DACCO, Sate-Lite, Riverside, Parsons,
Hudson, and Beemak.
For the second quarter and first six months of 1996, net sales decreased $2.5
million or 5.8% and $6.7 million or 7.8%, respectively, over the same periods
in the prior year. Contributing to the second quarter sales decrease are
lower scrap sales at DACCO, $.4 million, lower bible and children's book
sales and contract distribution sales at Riverside, $.5 million and $.9
million, respectively, decreased wafer lock sales at Hudson, $.8 million, and
decreased POG sales at Beemak, $1.5 million. Partially offsetting these
decreases are increased sales of rebuilt converters and soft parts at DACCO,
$1.2 million and $.3 million, respectively. Driving the six month sales
decrease are lower scrap sales at DACCO, $1.0 million, decreased bicycle and
truck reflector sales at Sate-Lite, $.6 million, lower bibles and books and
contract distribution services sales at Riverside $3.3 million and $1.8
million, respectively, decreased wafer lock sales at Hudson, $1.0 million,
and lower POG sales at Beemak, $2.4 million. Partially offsetting these
sales declines are increased sales of rebuilt converters and other rebuilt
parts at DACCO, $2.6 million and $.9 million, respectively.
For the second quarter and first six months of 1996, operating income
decreased $1.7 million or 24.5% and $2.2 million or 17.5%, respectively, over
the same periods last year. Operating margins decreased from 15.9% to 12.7%
and 14.7% to 13.2%, respectively, over the same periods. The decline in
operating margins is primarily due to lower sales at Riverside and Hudson.
Consolidated Results: (See Condensed Consolidated Statements of Operations.)
Operating income increased $5.5 million or 32.6% for the first six months due
to increased sales primarily stemming from the acquisitions of Merkle-Korff
and Colman Motors products in the Motors and Gears group, Johnson Components
in the Telecommunications Products group, and Seaboard in the Specialty
Printing and Labeling group. Six month interest expense increased from $21.3
million to $29.0 million due to higher debt levels from the acquisitions.
Six month interest income increased from $.9 million to $1.3 million due to
higher cash balances during the period. The Company incurred a net loss of
$5.6 million in the first six months of 1996, as compared to a net loss of
$2.8 million for the same period in 1995.
<PAGE>
PAGE 14
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources. The Company had $51.4 million of working
capital at June 30, 1996, compared to $99.7 million at the end of 1995. The
decrease in working capital was due to lower cash balances, higher notes
payable, higher accrued liabilities, higher advance deposits, and higher
current portion of long-term debt, partially offset by higher accounts
receivable, higher inventory, higher prepaid expenses, and lower accounts
payable.
The Company's net cash provided by operating activities for the six months
ended June 30, 1996 increased $18.4 million versus the same period in 1995.
This increase was due to higher depreciation and amortization expense, $5.2
million, higher non-cash interest, $.6 million, a lower increase in current
assets, $17.1 million, and a higher increase in non-current liabilities, $.4
million. Partially offsetting these changes are a benefit from deferred
income taxes, $1.6 million, a higher increase in non-current assets, $1.7
million, and a lower decrease in current liabilities, $1.3 million.
The net cash used in investing activities for the six months ended June 30,
1996, increased $66.8 million versus the same period in 1995. This increase
was due to the four acquisitions, $82.5 million, higher capital expenditures,
$4.1 million, and a decrease in cash provided by other investing activities,
$.3 million. These increases were partially offset by lower notes receivable
from affiliates, $11.4 million, lower acquisitions of minority interest and
other, $5.7 million, cash acquired in the purchase of subsidiaries, $1.4
million, and a lower investment in Fannie May Holdings, $1.6 million.
The net cash provided by financing activities for the six months ended June
30, 1996 increased $53.4 million versus the same period in 1995. This
increase was due to an increase in the proceeds from revolving credit
facilities, $25.3 million, the issuance of debt by MK Holdings, $20.0
million, and the issuance of debt by SPL Holdings, $13.0 million, partially
offset by higher debt payments of $4.9 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.
<PAGE>
PAGE 15
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<PAGE>
PAGE 16
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 14, 1996 By: /s/ Thomas C. Spielberger
Thomas C. Spielberger
Vice President, Controller
and Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 12,445
<SECURITIES> 0
<RECEIVABLES> 77,525
<ALLOWANCES> (1,467)
<INVENTORY> 107,082
<CURRENT-ASSETS> 205,124
<PP&E> 191,698
<DEPRECIATION> (82,918)
<TOTAL-ASSETS> 611,497
<CURRENT-LIABILITIES> 153,755
<BONDS> 379,927
0
0
<COMMON> 1
<OTHER-SE> (80,006)
<TOTAL-LIABILITY-AND-EQUITY> 611,497
<SALES> 267,220
<TOTAL-REVENUES> 267,220
<CGS> 164,053
<TOTAL-COSTS> 164,053
<OTHER-EXPENSES> 80,962
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 28,975
<INCOME-PRETAX> (5,426)
<INCOME-TAX> 1,244
<INCOME-CONTINUING> (5,584)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,584)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
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