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, 1997 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 14,
1997: 95,001.0004.
PAGE 2
JORDAN INDUSTRIES, INC.
INDEX
Part I. Page No.
Financial Information
Condensed Consolidated Balance Sheets
at March 31, 1997, and December 31, 1996 3
Condensed Consolidated Statements of Operations
for the Three Months Ended March 31, 1997
and 1996 4
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 1997
and 1996 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
<PAGE>
PAGE 3
JORDAN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(ALL DOLLAR AMOUNTS IN THOUSANDS)
March 31, December 31,
1997 1996
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 30,522 $ 32,797
Accounts receivable, net 87,647 89,301
Inventories 98,898 108,132
Prepaid expenses and other current assets 11,569 9,703
Total Current Assets 228,636 239,933
Property, plant and equipment, net 102,821 111,040
Investments in and advances to affiliates 17,956 14,222
Goodwill, net 267,606 266,436
Other assets 48,575 50,254
Total Assets $665,594 $681,885
LIABILITIES AND NET CAPITAL DEFICIENCY
Current Liabilities:
Notes payable - lines of credit $ - $ 856
Accounts payable 42,666 47,036
Accrued liabilities 46,605 57,910
Advance deposits 4,825 1,900
Current portion of long-term debt 8,464 8,752
Total Current Liabilities 102,560 116,454
Long-term debt 692,819 687,936
Other non-current liabilities 4,236 3,572
Deferred income taxes 1,897 1,444
Minority interest 1,799 885
Net Capital Deficiency:
Common stock 1 1
Additional paid-in capital 2,556 4,432
Note receivable from officer (1,460) (1,460)
Accumulated deficit (138,814) (131,379)
Total Net Capital Deficiency (137,717) (128,406)
Total Liabilities and Net Capital
Deficiency $665,594 $681,885
See accompanying notes to condensed consolidated financial statements.
PAGE 4
JORDAN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
THREE MONTHS ENDED
March 31,
1997 1996
Net sales $151,543 $120,743
Cost of sales, excluding depreciation 95,693 74,103
Selling, general and administrative
expenses 33,095 30,013
Depreciation 4,377 4,064
Amortization of goodwill and other
intangibles 3,251 2,409
Management fees and other 1,152 1,023
Operating income 13,975 9,131
Other (income) and expenses:
Interest expense 18,576 13,990
Interest income (713) (684)
Other 263 -
Total other expenses 18,126 13,306
Loss before income taxes, minority
interest, equity in investee and
extraordinary items (4,151) (4,175)
Provision (benefit) for income taxes 277 (1,115)
Loss before minority interest, equity in
investee, and extraordinary items (4,428) (3,060)
Minority interest 388 (776)
Equity in investee 785 -
Loss before extraordinary item (5,601) (2,284)
Extraordinary item, net of tax 319 -
Net loss $ (5,920)$ (2,284)
See accompanying notes to condensed consolidated financial statements.
<PAGE>
PAGE 5
JORDAN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
THREE MONTHS ENDED
March 31,
1997 1996
Cash flows from operating activities:
Net loss $ (5,920) $ (2,284)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization 7,614 7,261
Provision for (benefit from) deferred
income taxes 453 (1,115)
Amortization of deferred financing fees 1,046 -
Minority interest 388 (776)
Non-cash interest 3,233 2,884
Equity in investee 785 -
Extraordinary item 319 -
Changes in operating assets and
liabilities net of effects from
acquisitions:
Increase in current assets (6,978) (148)
Decrease in current liabilities (3,597) (16,471)
Increase in non-current assets (1,404) (3,856)
Increase in non-current liabilities 663 -
Net cash used in operating activities (3,398) (14,505)
Cash flows from investing activities:
Capital expenditures (3,429) (3,523)
Advances to affiliates (1,133) (1,916)
Acquisitions of minority interests and other - (81)
Acquisition of subsidiaries (4,100) (38,200)
Net cash used in investing activities (8,662) (43,720)
Cash flows from financing activities:
Proceeds from revolving credit facilities, net 13,500 11,173
Proceeds from debt issuance - MK Holdings, Inc. - 20,000
Repayment of long-term debt (2,821) (3,394)
Other (639) 302
Net cash provided by financing activities 10,040 28,081
Foreign currency translation (255) -
Net decrease in cash and cash equivalents (2,275) (30,144)
Cash and cash equivalents at beginning of
period 32,797 41,253
Cash and cash equivalents at end of period $ 30,522 $ 11,109
Cash paid during the period for:
Interest $ 15,813 $ 17,103
Income Taxes, net $ 1,138 $ 903
Non-cash investing activities:
Capital leases $ 918 $ -
See accompanying notes to condensed consolidated financial statements.
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, 1996, which are included in the
Company's Annual Report filed on Form 10-K for such year (the "1996 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,
1997 1996
Raw materials $29,591 $ 26,682
Work-in-process 12,180 12,274
Finished goods 57,127 69,176
$98,898 $108,132
C. Notes and other receivables from affiliates and investment in affiliate
On January 21, 1997, Welcome Home filed for Chapter 11 bankruptcy protection
(see Note F). As a result of the Chapter 11 filing, the Company no longer
consolidates Welcome Home in its financial statements as of January 21, 1997,
the date of the filing. Receivables from Welcome Home owed to the Company or
its subsidiaries were $3,734 as of March 31, 1997.
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 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.
PAGE 7
JORDAN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars 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. Its products are
marketed under both the "Fannie May Candy" and "Fanny Farmer Candy" names.
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 March 31, 1997 and
1996, are as follows:
March 31, December 31,
1997 1996
Deferred tax liabilities
Tax over book depreciation $ 7,187 $ 7,346
Basis in subsidiary 798 798
Lifo reserve 147 147
Intercompany tax gain 2,500 2,500
Other 691 311
Total deferred tax liabilities 11,323 11,102
Deferred tax assets
NOL carryforwards 29,100 28,900
Accrued interest on discount debentures 13,362 12,262
Stock Appreciation Rights Agreements 3,162 3,162
Pension obligation 162 174
Vacation accrual 417 591
Uniform capitalization of inventory 586 472
Allowance for doubtful accounts 1,219 1,020
Capital lease obligations 296 343
Tax asset basis over book basis at
subsidiary 2,500 2,500
Other 167 248
Total deferred tax assets 50,971 49,672
Valuation allowance for deferred
tax assets (41,545) (40,014)
Net deferred tax assets 9,426 9,658
Net deferred tax
liabilities $ 1,897 $ 1,444
PAGE 8
JORDAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
E. Acquisition of Subsidiaries
On January 8, 1997, Beemak purchased the net assets of Arnon-Caine, Inc. ("ACI")
a designer and distributor of modular storage systems primarily for sale to
wholesale home centers and hardware stores. ACI subcontracts its production to
third party injection molders located primarily in Southern California, which
use materials and machines similar to those used by Beemak. By early 1998,
Beemak will serve as ACI's primary supplier. The Company believes that the
integration of ACI into Beemak's operations will provide for future manufactur-
ing cost savings as well as synergistic marketing efforts.
The purchase price of $4,600, including costs incurred directly related to the
acquisition, was allocated to working capital of $300, property, plant and
equipment of $82, and excess purchase price over net identifiable assets of
$4,218. The acquisition was financed with cash.
F. Welcome Home Chapter 11 Filing
On January 21, 1997, Welcome Home filed a voluntary petition for relief under
Chapter 11 ("Chapter 11") of title 11 of the United States code in the United
States Bankruptcy Court for the Southern District of New York ("Bankruptcy
Court"). In Chapter 11, Welcome Home will continue to manage its affairs and
operate its business as a debtor-in-possession while it develops a reorganiza-
tion plan that will restructure its operations and allow it to emerge from
Chapter 11. As a debtor-in-possession in Chapter 11, Welcome Home may not engage
in transactions outside of the ordinary course of business without approval of
the Bankruptcy Court.
Subsequent to the filing, Welcome Home reached an agreement with Fleet Capital
Corporation to provide secured debtor-in-possession financing in the form of a
credit facility. The credit facility provides for borrowings dependent upon
Welcome Home's level of inventory with maximum borrowings of $12,750. The
agreement grants a security interest in substantially all assets. Advances
under the facility bear interest at the prime rate plus 1.5%. The agreement
will terminate on March 31, 1998.
As a result of Welcome Home's Chapter 11 filing, the Company no longer has the
ability to control the operations and financial affairs of Welcome Home.
Accordingly, the Company no longer consolidates Welcome Home in its financial
statements as of January 21, 1997, the date of the filing. For the period ended
January 21, 1997, the Company recorded a net loss of $1,195 related to Welcome
Home.
Cape Craftsmen, a consolidated subsidiary of the Company, would also be
adversely affected by a liquidation of Welcome Home. Currently 68% of Cape's
sales are to Welcome Home. Net assets included in the consolidated financial
statements are $3,800 which includes an $1,800 receivable from Welcome Home.
G. Subsequent Event
On April 2, 1997, the Company privately placed approximately $214,000 aggregate
principal amount of 11.75% Series A Senior Subordinated Discount Debentures due
2009 (the "Series A Debentures"), at 56.52% of such principal amount. The
Series
PAGE 9
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
A Debentures are eligible for resale under Rule 144A of the Securities Act of
1933, as amended (the "Securities Act"). The Company placed the Series A
Debentures to refinance substantially all of the $133,075 aggregate principal
amount of its 11.75% Senior Subordinated Discount Debentures due 2005. In
addition, the Company filed a registration statement under the Securities Act in
connection with an offer to exchange 11.75% Series B Senior Subordinated
Discount Debentures due 2009 for its Series A Debentures.
H. Payment of Stock Appreciation Rights
In March 1992, a subsidiary of the Company entered into an agreement with its
minority shareholders whereby the shareholders would exchange their common
stock, which amounted to a 24% interest, for 7% cumulative preferred stock,
covenants not to compete, and stock appreciation rights agreements. The total
consideration paid for this minority interest was $12,381.
Additionally, the former shareholders were granted stock appreciation rights
exercisable in full or in part on the occurrence of the disposition by merger or
otherwise, in one or more transactions of (a) more than 50% of the voting power
and/or value of the capital stock of the subsidiary or (b) all or substantially
all the business or assets of the subsidiary. The value of the stock
appreciation rights is based on the ultimate sales price of the stock or assets
of the subsidiary, and is essentially 15% of the ultimate sales price, less
$15,625, of the stock or assets sold.
On April 10, 1997, the Company paid the former shareholders pursuant to an
agreement ("The Redemption Agreement"), as if the subsidiary was sold for
$110,000. The former shareholders received $9,438 in cash and a deferred
payment of $4,719 over five years at 8% interest. The Redemption Agreement
also requires that the $1,875 of remaining preferred stock be redeemed one
year from the date of the agreement.
If at any time prior to April 30, 1998, the Company has received offering
proceeds from the registration of any shares of common stock of the subsidiary
(the "IPO"), the Company will pay the former shareholders an additional $2,250.
If the Company has not received proceeds from the IPO, the former shareholders
will receive a special bonus of 25% of the subsidiary's 1997 gross profit (as
defined) in excess of $30,000.
As consideration for the signing of the Redemption Agreement, the former
shareholders will receive total non-compete payments of $352 payable over the
next thirteen months.
PAGE 10
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
QUARTER ENDED MARCH 31,
1997 1996
Net Sales:
Specialty Printing & Labeling $23,216 $16,944
Motors and Gears 31,519 28,087
Telecommunications Products 47,466 24,463
Welcome Home (c) 2,456 12,483
Consumer and Industrial Products 46,886 38,766
Total $151,543 $120,743
Operating Income (Loss) (a):
Specialty Printing & Labeling $ 377 $ (751)
Motors and Gears 7,093 6,776
Telecommunications Products 6,450 5,060
Welcome Home (c) (1,107) (3,030)
Consumer and Industrial Products 5,942 5,288
Total $ 18,755 $ 13,343
Operating Margins (b):
Specialty Printing & Labeling 1.6% (4.4)%
Motors and Gears 22.5 24.1
Telecommunications Products 13.6 20.7
Welcome Home (45.1) (24.3)
Consumer and Industrial Products 12.7 13.6
Consolidated (a) 12.4 11.1
(a) Before corporate overhead of $4,780 and $4,212 for the three months ended
March 31, 1997 and 1996, respectively.
(b) Operating margin is operating income divided by net sales.
(c) For the period from January 1, 1997 to January 21, 1997, the date of the
Chapter 11 filing. See Footnote F.
The following discussion should be read in conjunction with Management's
Discussion and Analysis of Financial Condition and Results of Operations
contained in the 1996 10-K and the financial statements and the related notes
thereto which are included elsewhere in this quarterly report.
<PAGE>
PAGE 11
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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, 1997 and 1996. This discussion reviews the foregoing segment data and
certain of the consolidated financial data for the Company.
Specialty Printing and Labeling. As of March 31, 1997, the Specialty
Printing and Labeling group consisted of SPAI, Valmark, Pamco, and Seaboard.
Net sales increased $6.3 million or 37.0%. The increase is due to the
acquisition of Seaboard in May 1996, $6.8 million, and higher sales of
rollstock, membrane switches, and screenprint at Valmark, $.7 million.
Partially offsetting these increases are lower sales of shielding devices at
Valmark, $.8 million, lower label sales at Pamco, $.1 million, and decreased
sales of calendars and corporate recognition products at SPAI, $.2 million, and
$.1 million, respectively.
Operating income increased $1.1 million or 152.2%. The increase is due to the
acquisition of Seaboard, which contributed $1.2 million to operating income, and
higher operating income at SPAI, $.2 million. These increases were partially
offset by lower operating income at Valmark, $.1 million, and Pamco, $.2
million. The increase in operating income at SPAI is due to lower operating
costs, while the decreases at Pamco and Valmark are due to lower sales. The
consolidated operating margin improved to 1.6% from (4.3%) due primarily to the
acquisition of Seaboard.
Motors and Gears. As of March 31, 1997, the Motors and Gears group
consisted of Imperial, Scott, Gear, and Merkle-Korff. Effective January 1997,
Colman Motor Products became fully integrated into Merkle-Korff.
Net sales increased $3.4 million or 12.2%. The increase is due to increased
sales of sub-fractional motors at Merkle-Korff, $6.2 million, primarily the
result of the acquisition of Barber-Colman in March 1996, and higher sales of
gears and gear boxes at Gear, $.3 million. These sales increases were partially
offset by lower sales of fractional and integral motors at Imperial and Scott,
$3.1 million.
Operating income increased $.3 million or 4.7%. The increase in operating
income is due to higher operating income at Merkle-Korff, $1.2 million,
partially offset by lower operating income at Imperial and Scott, $.9 million.
The increase at Merkle-Korff is due primarily to the acquisition of Barber-
Colman, while the decrease at Imperial and Scott are attributed to the
absorption of fixed plant overhead over a lower sales level in the first quarter
of 1997. The consolidated operating margin decreased to 22.5% from 24.1%
primarily due to an inherent lower operating margin at Barber-Colman as well
as the absorption of plant overhead mentioned above.
PAGE 12
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Telecommunications Products. As of March 31, 1997, the Telecommunications
Products group consisted of Dura-Line, AIM, Cambridge, Johnson Components,
Diversified, Viewsonics, Vitelec, Bond, and Northern Technologies.
Net sales increased $23.0 million or 94%. The increase is primarily due to the
acquisition of Diversified, Viewsonics, Vitelec, Bond, and Northern, all of
which were acquired after the first quarter of 1996, and Johnson which was
acquired
near the end of January 1996. Combined, these acquisitions accounted for
approximately $21.3 million or 93% of the increase in sales. The balance of the
sales increase is due to higher international sales of Innerduct products at
Dura-Line, $2.2 million. These increases were partially offset by lower sales
of connector products at AIM and Cambridge, $.5 million.
Operating income increased $1.4 million or 28%. Of this increase, $2.7 million
related to the acquisitions, which are partially offset by lower operating
income at Dura-Line, $1.3 million. The decline at Dura-Line is due to start-up
expenses relating to the company's international expansion into Mexico, China
and India of approximately $.9 million, and higher selling and advertising costs
relating
to Retube, a substitute for copper piping in homes, $.3 million. Operating
income declined as a percent of sales from 20.7% to 13.6%. This decline is due
to lower inherent operating margins of the acquired businesses, which averaged
13.8%, and to lower domestic gross margin at Dura-Line due to an expanded
customer base of middle market providers.
Welcome Home. Net sales decreased $10.0 million or 80.3%, and operating
income increased $1.9 million or 61.7%. These fluctuations are the direct
result of Welcome Home's Chapter 11 bankruptcy filing on January 21, 1997. As
a result of the filing, the Company no longer has the ability to control the
operations and financial affairs of the Company. Accordingly, the results of
operations of Welcome Home from January 21, 1997, to March 31, 1997, are not
included in the consolidated results of the Company. See Note F.
Consumer and Industrial Products. As of March 31, 1997, the Consumer and
Industrial Products group consisted of DACCO, Sate-Lite, Riverside, Parsons,
Hudson, Beemak, Cape Craftsmen, and Paw Print.
Net sales increased $8.l million or 20.9%. The sales increase is due to the
acquisitions of Cape, $.9 million, and Paw Print, $4.3 million, as well as
higher
sales of titanium parts to Boeing at Parsons, $2.1 million, increased sales of
locks at Hudson, $.7 million, and higher sales of point of purchase displays at
Beemak due to the acquisition of Arnon-Caine, $.9 million. These sales
increases were partially offset by lower sales of rebuilt converters and soft
parts at DACCO, $.7 million.
Operating income increased $.7 million or 12.3%. The increase in operating
income is due to the acquisition of Paw Print, $.5 million, coupled with higher
operating results at Parsons, $.7 million, Hudson, $.6 million, and Beemak, $.2
million. These increases were partially offset by lower operating income at
PAGE 13
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DACCO, $.8 million, and Sate-Lite, $.4 million. The increase in operating
income at Parsons and Hudson is due to higher sales and an improved gross
margin. The decrease in operating income at DACCO is due to lower sales,
higher material prices, and higher selling costs, while the decrease at Sate-
Lite is due primarily to a lower gross margin and higher operating costs stem-
ming from increased market competition and higher compensation expense. The
consolidated operating margin decreased to 12.7% from 13.6% primarily due to
margin declines at DACCO and Sate-Lite, as well as increased depreciation and
amortization expense of $.4 million.
Consolidated Results: (See Condensed Consolidated Statements of
Operations.)
Consolidated net sales increased $30.8 million or 25.5%. The increase is
primarily due to the acquisitions of Seaboard in the Specialty Printing and
Labeling group, Johnson, Diversified, Viewsonics, Vitelec, Bond, and Northern
Technologies in the Telecommunications Products group, Barber-Colman (a division
of Merkle-Korff) in the Motors and Gears group, Cape Craftsmen, Paw
Print, and Arnon Caine (a subsidiary of Beemak) in the Consumer and Industrial
Products group, higher sales of titanium parts to Boeing at Parsons, higher
sales of subfractional motors at Merkle-Korff and higher sales of Innerduct at
Dura-Line. Partially offsetting the sales increases are lower sales of
fractional and integral motors at Imperial and Scott, lower sales at Welcome
Home due to the Chapter 11 bankruptcy filing (see Note F), and decreased sales
of rebuilt converters and soft parts at DACCO.
Consolidated operating income increased $4.9 million or 53.2%. The increase is
primarily due to the acquisitions noted above, higher sales and improved gross
margins at Parsons and Hudson, and a lower operating loss at Welcome Home (see
Note F). Partially offsetting these gains in operating income are lower
operating income at Dura-Line due to the international expansion, lower operat-
ing income at Imperial and Scott due to under-absorption of plant overhead, and
lower
operating income at DACCO due to decreased sales, higher material prices, and
higher selling costs and at Sate-Lite due to higher compensation expense and
lower gross margins as a result of increased market competition. The
consolidated operating margin improved to 9.2% from 7.6% primarily due to an
improvement in the Specialty Printing and Labeling group's operating income as
a percent of consolidated sales as well as a reduction in Welcome Home's
operating loss as a percent of consolidated sales.
Interest expense increased $4.6 million or 32.8% due to higher revolver
borrowings at corporate and outstanding senior debt at Motors and Gears, Inc.,
which was issued in the fourth quarter of 1996. Interest income remained
constant at $.7 million.
Liquidity and Capital Resources. The Company had $126.1 million of working
capital at March 31, 1997, compared to $123.5 million at the end of 1996. The
increase in working capital of $2.6 million or 2.1% is due to higher prepaids/
PAGE 14
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
other current assets, lower accounts payable, lower accrued liabilities, and
lower current portion of long-term debt. These working capital changes were
partially offset by lower cash balances, lower trade accounts receivable, lower
inventories, and higher advance deposits.
The Company's net cash used in operating activities decreased $11.1 million for
the three months ended March 31, 1997 as compared to the same period last year.
The decrease is due to higher depreciation and amortization, $.4 million, an
increase in the provision for income taxes, $1.6 million, a higher minority
interest, $1.2 million, higher non-cash interest, $.3 million, an extraordinary
item in 1997, $.3 million, equity in investee in 1997, $.8 million, a lower
decrease in current liabilities, $12.9 million, a lower increase in non-current
assets, $2.5 million, higher amortization of deferred financing fees, $1.0
million, and a higher increase in non-current liabilities, $.7 million.
Partially offsetting these operating cash flow changes are a higher net loss,
$3.6 million, and a higher increase in current assets, $6.8 million.
The net cash used in investing activities decreased $35.1 million for the three
months ended March 31, 1997, compared to the same period last year. The
decrease is due to lower capital expenditures, $.1 million, decreased advances
to affiliates, $.8 million, and lower acquisitions of subsidiaries, $34.1
million.
The net cash provided by financing activities decreased $18.0 million for the
three months ended March 31, 1997, as compared to the same period last year.
The decrease is due to lower proceeds from debt issuance, $20.0 million, and
a decrease in other, $.9 million. These changes are partially offset by higher
proceeds from credit facilities, $2.3 million, and lower repayment of long-term
debt, $.6 million.
None of the subsidiaries require significant amounts of capital spending to
sustain current operations or to achieve projected growth.<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.
May 14, 1997 By: /s/ Thomas C. Spielberger
Thomas C. Spielberger
Vice President, Controller
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 30,522
<SECURITIES> 0
<RECEIVABLES> 90,314
<ALLOWANCES> (2,666)
<INVENTORY> 98,898
<CURRENT-ASSETS> 228,636
<PP&E> 173,635
<DEPRECIATION> (70,814)
<TOTAL-ASSETS> 665,594
<CURRENT-LIABILITIES> 102,560
<BONDS> 559,325
0
0
<COMMON> 1
<OTHER-SE> (137,718)
<TOTAL-LIABILITY-AND-EQUITY> 665,594
<SALES> 151,543
<TOTAL-REVENUES> 151,543
<CGS> 95,693
<TOTAL-COSTS> 95,693
<OTHER-EXPENSES> 41,875
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,576
<INCOME-PRETAX> (4,151)
<INCOME-TAX> 277
<INCOME-CONTINUING> (5,601)
<DISCONTINUED> 0
<EXTRAORDINARY> 319
<CHANGES> 0
<NET-INCOME> (5,920)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
