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) March 22, 1999
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 Centere, Suite 550
1751 Lake Cook Road, Deerfield, IL 60015
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (847)945-5591
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Item 2. Acquisition or Deposition of Assets
The following section amends, in its entirety, Item 2 of Form 8-K
previously filed on April 1, 1999. All amounts in thousands.
On March 22, 1999, the Company purchased Alma Products ("Alma") for
$86,166 including costs related to the transaction. Alma is comprised of
three primary product lines: (i) high quality remanufactured torque
converters used to supply warranty replacements for automotive transmissions
originally sold to Ford, Chrysler, John Deere and Caterpillar, (ii) new and
remanufactured air conditioning compressors for original equipment
manufacturers including Ford, Chrysler and General Motors, and (iii) new and
re-manufactured clutch and disc assemblies used in standard transmissions sold
primarily to Ford. The purchase price of $86,166 is made up of cash of $84,077
and the assumption of a $2,089 long-term liability for retiree healthcare
benefits.
For the fiscal year ended December 31,1998, Alma had net sales of $73,608 and
EBITDA of $14,007.
The purchase price of $86,166 including costs incurred directly related
to the transaction, was preliminarily allocated to working capital of $18,422,
property, plant and equipment of $7,885, retiree healthcare benefit
obligations of ($2,089), and resulted in an excess purchase price over net
identifiable assets of $57,770.
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 April 1,1999.
(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 1999 of Alma Products, (b) the issuance of $ 155,000 Senior
Notes at 10 3/8% (net proceeds after initial purchase discount $(149,761) and
(c) the repayment of $50,000 of outstanding borrowings on the Company's
revolving credit facility. The pro forma condensed consolidated statements of
operations for the year ended December 31, 1998 were derived from the audited
historical statements of operations for the year ended December 31,1998,
adjusted to give effect to such transactions as if they occurred as of the
beginning of the period.
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The pro forma adjustments included in the pro forma condensed consolidated
balance sheet and statement of operations are based upon the available
information and certain assumptions that management believes are reasonable.
With respect to the pro forma acquisition adjustments described in the notes
accompanying the condensed consolidated balance sheet and statement of
operations, the allocation of the purchase price of Alma Products is
preliminary, and subject to final determination by the Company's management.
The unaudited pro forma condensed consolidated statement of operations does
not purport to represent what the Company's results of operations would
actually have been had the transaction in fact occurred as of the beginning of
the period presented. In addition, the unaudited pro forma condensed
consolidated statement of operations does not purport to project the Company's
results of operations for any future date or period.
The pro forma condensed consolidated balance sheet and statement of operations
should be read in conjunction with the Company's audited consolidated
financial statements which are included in the Company's Annual Report filed
on Form 10-K for the year ended December 31, 1998.
(C) Exhibits
28 (a)Alma Products audited financial statements for the years ended December
31, 1998, 1997 and 1996.
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JORDAN INDUSTRIES, INC
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
($ IN MILLIONS)
ASSETS Pro Forma
Pro
Historical Adjustments Forma
Current assets:
Cash and cash equivalents $23.0 $2.0 $25.0
Accounts receivable, net 160.6 9.6 70.2
Inventories 139.7 12.8 152.5
Prepaid expense and other
current assets 17.7 1.1 18.8
Total Current Asset 341.0 25.5 366.5
Property, plant and equipment, net 139.6 7.9 147.5
Note receivable from affiliate 1.7 - 1.7
Goodwill, net 491.5 65.5 557.0
Other assets 70.1 13.6 83.7
Total Assets $1,043.9 $112.5 $1,156.4
LIABILITIES AND NET CAPITAL DEFICIENCY
Current liabilities:
Accounts payable $70.8 $6.6 $77.4
Accrued liabilities 69.5 4.0 73.5
Advance deposits 5.6 - 5.6
Current portion of long-term debt 6.1 - 6.1
Total Current Liabilities 152.0 10.6 162.6
Long-term debt 1,059.4 99.8 1,159.2
Other non-current liabilities 12.8 2.1 14.9
Deferred income taxes 1.4 - 1.4
Minority interest 0.8 - 0.8
Preferred stock 25.6 - 25.6
Net capital deficiency (208.1) - (208.1)
Total Liabilities and
Net Capital Deficiency $1,043.9 $112.5 $1,156.4
See notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet and
Statement of Operations.
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JORDAN INDUSTRIES, INC
UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
($ in millions)
Pro Forma Pro
Historical Adjustments Forma
Net Sales $ 943.6 $ 73.6 $1,017.2
Cost of sales (excluding
depreciation 601.4 56.0 657.4
Selling, general &
administrative expenses 193.4 3.6 197.0
Operating income before
depreciation and amortization
of goodwill and other
intangibles 148.8 14.0 162.8
Depreciation 23.2 1.2 24.4
Amortization of goodwill
and other intangibles 21.9 1.6 23.5
Advisory fees and other 12.0 - 12.0
Operating income 91.7 11.2 102.9
Interest expense 109.7 13.9 123.6
Interest Income (2.2) - (2.2)
Other (income) and expense 6.7 - 6.7
Loss before income taxes,
minority interest and
extraordinary items (22.5) (2.7)
(25.2)
Provision for income taxes 8.2 0.2 8.4
Loss before minority interest
and extraordinary items (30.7) (2.9) (33.6)
Minority Interest 0.7 - 0.7
Extraordinary items 0.2 - 0.2
Net loss $(31.6) $(2.9) $(34.5)
See notes to Unaudited Pro Forma Condensed Consolidated Balance Sheet and
Statement of Operations.
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JORDAN INDUSTRIES, INC.
NOTES TO PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS
($ in millions)
1.The pro forma condensed consolidated balance sheet includes adjustments for
the assets acquired and liabilities assumed in connection with the acquisition
of Alma Products. The proforma adjustments also include an adjustment to
goodwill of $65.5 million for the excess of purchase price over net assets
acquired.
2.The pro forma condensed consolidated balance sheet includes an adjustment
for the issuance of 10 3/8% senior notes and the repayment of outstanding
borrowings under the Company's revolving credit facility as follows:
As of December 31,
1998
Net proceeds from note 149.8
issuance
Repayment of borrowings (50.0)
under revolving credit
facility
3.The pro forma condensed consolidated statements of operations include an
adjustment for the amortization of the preliminary purchase price
allocated to the fair value net assets acquired as follows:
For the
Year Ended
December 31,
1998
Amortization -goodwill 1.7
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JORDAN INDUSTRIES, INC.
NOTES TO PRO FORMA CONDENSED
CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS
($ in millions)
4.The pro forma condensed consolidated statements of operations also
include the following adjustments:
For the
Year Ended
December 31,
1998
Incremental interest expense 16.1
Elimination of interest
expense related to revolving
credit facility 3.8
Additional amortization of
deferred financing fees 1.6
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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.
April 30, 1999 By /s/ Thomas C. Spielberger
Senior Vice President and
Principal Accounting Officer
ALMA PRODUCTS
STATEMENTS OF NET ASSETS AS OF DECEMBER 31, 1998 AND 1997
AND RESULTS OF OPERATIONS FOR THE THREE YEARS ENDED DECEMBER 31, 1998
TOGETHER WITH REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
<PAGE>
Report of Independent Public Accountants
To the Shareholders of
ALMA Piston Company:
We have audited the accompanying statements of net assets of ALMA PRODUCTS,
(as defined in Note 1), as of December 31, 1998 and 1997 and the related
statements of income and cash flows for the three years in the period ended
December 31, 1998. These financial statements are the responsibility of the
Company's 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 audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Alma Products as of December
31, 1998 and 1997, and the results of its operations and its cash flows for
the three years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.
/s/: Arthur Andersen LLP
Detroit, Michigan,
March 22, 1999
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ALMA PRODUCTS
STATEMENTS OF NET ASSETS
AS OF DECEMBER 31, 1998 AND 1997
ASSETS 1998 1997
CURRENT ASSETS:
Receivables:
Trade receivables, less allowance
for doubtful accounts of $10,000
and $5,800, respectively $ 9,056,300 $ 9,719,400
Other receivables 508,800 116,700
Inventories (Note 1) 12,789,500 11,111,200
Prepaids and other 1,053,200 957,500
Total current assets 23,407,800 21,904,800
PROPERTY, PLANT AND EQUIPMENT, at cost:
Land and improvements 731,400 662,500
Buildings and improvements 7,238,500 7,218,600
Machinery and equipment 17,412,700 16,625,700
Construction in progress 43,700 23,200
25,426,300 24,530,000
Less accumulated depreciation (17,501,200) (16,459,300)
Total property, plant and equipment 7,925,100 8,070,700
$31,332,900 $29,975,500
LIABILITIES AND NET ASSETS
CURRENT LIABILITIES:
Accounts payable $6,586,000 $4,124,200
Accrued liabilities (Note 4) 2,449,200 2,305,100
Total current liabilities 9,035,200 6,429,300
LONG TERM LIABILITIES:
Accrued post-retirement benefits
and other 2,705,500 2,286,400
CONTINGENCIES (Note 7)
NET ASSETS 19,592,200 21,259,800
$31,332,900 $29,975,500
The accompanying notes to financial statements are an integral part of these
statements.
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ALMA PRODUCTS
STATEMENTS OF INCOME
FOR THE THREE YEARS ENDED DECEMBER 31, 1998
1998 1997 1996
NET SALES $73,607,900 $61,899,300 $64,696,000
COST OF SALES 57,061,100 48,466,700 51,770,200
Gross margin 16,546,800 13,432,600 12,925,800
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 4,531,900 3,329,800 3,461,500
Operating profit 12,014,900 10,102,800 9,464,300
OTHER INCOME, NET 43,100 16,600 66,800
Income before provision for state
taxes 12,058,000 10,119,400 9,531,100
PROVISION FOR STATE TAXES 179,500 181,200 311,600
NET INCOME $11,878,500 $9,938,200 $9,219,500
The accompanying notes to financial statements are an integral part of these
statements.
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ALMA PRODUCTS
STATEMENT OF CASH FLOWS
FOR THE THREE YEARS ENDED DECEMBER 31, 1998
1998 1997 1996
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income $11,878,500 $ 9,938,200 $ 9,219,500
Adjustments to reconcile net
income to net cash provided
by operating activities -
Depreciation 1,217,400 1,200,000 1,164,900
Gain (loss) on sale of property 45,600 58,000 (2,200)
Decrease (increase) in -
Receivables 271,000 3,599,200 (2,934,600)
Inventories (1,678,300) 2,336,400 2,368,800
Prepaids and other (69,500) (150,300) (451,500)
Increase (decrease) in -
Accounts payable 2,461,800 (712,200) (2,942,800)
Accrued liabilities 144,100 (1,117,400) 658,600
Accrued taxes (26,200) - -
Accrued post-retirement benefits
and other 419,100 138,500 175,000
Net cash provided by operating
activities 14,663,500 15,290,400 7,255,700
CASH FLOWS FOR INVESTING ACTIVITIES:
Capital expenditures (1,131,100) (1,094,500) (1,223,100)
Proceeds from sale of property 13,700 97,900 2,200
Net cash used in investing
activities (1,117,400) (996,600) (1,220,900)
CASH USED FOR FINANCING ACTIVITIES -
Net transfers to parent (13,546,100) (14,293,800) (6,034,800)
NET CHANGE IN CASH AND CASH EQUIVALENTS - - -
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR - - -
CASH AND CASH EQUIVALENTS AT END OF YEAR $ - $ - $ -
The accompanying notes to financial statements are an integral part of these
statements.
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ALMA PISTON COMPANY
NOTES TO FINANCIAL STATEMENTS
(1) SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES
Basis of Presentation
Alma Products (the Company), located in Alma, Michigan, is an operating
division of Alma Piston Company (the Parent). The accompanying financial
statements have been derived from the historical statements of the Parent.
The Company has received certain administrative and operational support from
the Parent. Management has allocated its estimate of the costs of these
services to the Company.
The Company primarily manufactures original equipment automotive parts and
service replacement automotive products. The Company manufactures three
primary product lines: (i) high quality re-manufactured torque converters used
to supply warranty replacements for automatic transmissions, (ii)
re-manufactured and new air conditioning compressors for original equipment
manufacturers, and (iii) new and re-manufactured clutch and disc assemblies
used in standard transmissions. The Company sells primarily to domestic
automobile manufactures.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Inventories
Inventories are valued at the lower of cost or market. Cost includes
material, labor and manufacturing overhead. Approximately 76%, 71%, and 67%,
of inventories as of December 31, 1998, 1997, and 1996, respectively, are
valued using the last-in, first-out (LIFO) method of inventory valuation.
This method assigns the costs of the latest inventory purchases to cost of
sales.
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ALMA PRODUCTS
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
The components of inventories are as follows:
1998 1997
Materials $11,415,700 $10,323,100
Finished goods 3,859,200 3,155,100
Total inventories at FIFO 15,274,900 13,478,200
Less - Reserve to reduce FIFO inventories
To LIFO value (2,485,400) (2,367,000)
Total inventories at LIFO $12,789,500 $11,111,200
Property, Plant and Equipment
The Company provides for depreciation of property, plant and equipment based
upon the acquisition cost and the estimated service lives of depreciable
assets. For financial reporting purposes, depreciation is computed using the
straight-line method. Estimated useful lives are as follows:
Years
Land and improvements 15-40
Buildings and improvements 15-40
Machinery and equipment 5-12
(2)EMPLOYEE BENEFIT PLANS AND POST-RETIREMENT BENEFITS
The Company has two defined benefit pension plans which cover substantially
all employees. The Company's policy is generally to fund the maximum tax
deductible amounts allowable under the Employee Retirement Income Security Act
of 1974.
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ALMA PRODUCTS
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
The following table sets forth the funded status of the pension plans as of
December 31,:
Change in Benefit Obligation 1998 1997
Benefit obligation at beginning of year $12,769,500 $10,521,100
Service cost 508,000 465,300
Interest cost 853,300 800,000
Actuarial (gain)/loss (65,400) 1,482,900
Benefits paid (1,018,500) (499,800)
Benefit obligation at end of year 13,046,900 12,769,500
Change in Plan Assets
Fair value of plan assets at beginning of year 13,065,400 11,461,700
Actual return on assets 1,509,300 1,673,200
Contributions received - 430,800
Benefits paid (1,018,500) (500,300)
Fair value of plan assets at end of year 13,556,200 13,065,400
Funded status 509,400 295,900
Unrecognized net actuarial loss 85,300 656,200
Unrecognized prior service cost 276,800 299,000
Unrecognized net transition asset (1,032,100) (1,135,300)
Prepaid (accrued) benefit cost $ (160,600) $ 115,800
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ALMA PRODUCTS
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Net periodic pension expense included the following components for the year
ended December 31:
1998 1997
Components of net periodic benefit cost-
Service cost $ 508,000 $ 465,300
Interest cost853,300800,000
Expected return on plan assets (1,003,800) (846,800)
Amortization of unrecognized
transition asset (102,900) (103,200)
Amortization of prior service cost 22,200 22,200
Net periodic benefit cost 276,800 337,500
Net periodic pension expense included the following components for the year
ended December 31, 1996:
Service cost (benefits earned during the year) $385,300
Interest cost on projected benefit obligation 700,700
Return on plan assets (826,500)
Net amortization and deferral (88,900)
Net periodic pension expense $170,600
The following assumptions were used in determining the actuarial present value
of the projected benefit obligations as of December 31,:
1998 1997 1996
Discount rate 7.0% 7.5% 7.5%
Rate of increase in future compensation levels 4.5% 4.5% 4.5%
Expected long-term rate of return on plan
assets 8.0% 7.5% 7.5%
The Company also has a profit sharing plan. The profit sharing plan for
salaried employees receives annual contributions equal to at least two percent
of the Company's profits (as defined in the plan document).
The Company's contributions under the plan were approximately $373,900,
$369,600, and $399,900 for the years ended December 31, 1998, 1997, and 1996,
respectively.
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ALMA PRODUCTS
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
Post-Retirement Benefits
The Company provides health care and life insurance benefits for certain
retired employees and their dependents. Employees become eligible to
participate after completing retirement at age 62 and 20 years of service with
benefits ceasing upon attainment of age 65.
The following table sets forth the accumulated post-retirement benefit
obligation as of December 31:
1998 1997
Change in benefit obligation -
Benefit obligation at beginning of year $2,117,500 $1,839,400
Service cost 103,600 94,000
Interest cost 144,000 142,200
Actuarial (gain) loss (114,800) 147,200
Benefits paid (99,200) (105,300)
Benefit obligation at end of year $2,151,100 $2,117,500
Net periodic benefit cost included the following components for the year ended
December 31:
1998 1997 1996
Components of net periodic benefit cost -
Service cost $103,600 $ 94,000 $123,000
Interest cost 144,000 142,200 140,000
Net periodic benefit cost $247,600 $236,200 $263,000
The following table reconciles the status of the accumulated post-retirement
benefits obligation as reflected on the statement of net assets as of December
31,:
1998 1997
Active employees $1,939,800 $1,899,800
Retirees and eligible spouses 211,200 217,700
Unfunded status $2,151,000 $2,117,500
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ALMA PRODUCTS
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
The following measurement assumptions were used for measurement purposes:
1998 1997 1996
Discount rate 7.0% 7.0% 7.5%
Health care cost rate 7.1% 7.4% 8.0%
Prescription coverage cost rate 8.5% 9.0% 10.0%
The rates were assumed to gradually decrease to 5% by the year 2005 and remain
at that level thereafter. The health care cost trend rate assumption has a
significant effect on the amounts reported.
To illustrate, increasing the assumed health care cost trend rate by one
percentage point would increase the accumulated post retirement benefits
obligation as of December 31, 1998 and 1997 by $280,000 and $284,000,
respectively, and the aggregate of the service and interest cost components of
net post retirement benefits cost for each of the three years then ended
December 31, 1998 by $36,000, $34,800, and $43,800, respectively.
(3) INCOME TAXES
The shareholders of the Parent have elected, under the provision of Subchapter
S of the Internal Revenue Code, to have the income of the Company included in
the taxable income of the shareholders. As a result, the Company and Parent
are not liable for Federal or certain State income taxes unless the S
Corporation election is subsequently revoked. Accordingly, no provision for
Federal income taxes is included in the accompanying financial statements.
The accompanying statement of income reflects a provision for Michigan Single
Business tax and Michigan Intangible tax.
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ALMA PRODUCTS
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
(4) ACCRUED LIABILITIES
Accrued liabilities consists of the following as of December 31:
1998 1997
Payroll, payroll taxes and
fringe benefits $1,377,000 $ 894,000
Warranties 192,400 259,800
Workers' compensation 271,400 363,700
Environmental 410,000 425,000
Other accrued liabilities 198,400 362,600
$2,449,200 $2,305,100
(5) TRANSACTIONS WITH RELATED PARTIES
The Company had sales of approximately $337,100, $1,302,200 and $3,639,000
during 1998, 1997 and 1996 to GPD, Inc., an affiliated company. The Company
also had a net payable with GPD, Inc. of approximately $54,600 as of December
31, 1998 and net receivables of $15,700 in 1997.
(6) SIGNIFICANT CUSTOMERS
The Company had two customers, which individually accounted for 10% or more of
net sales, with net sales of approximately $20,596,900 and $12,579,900,
respectively, in 1998, and $23,917,600 and $7,772,900, respectively, in 1997.
The Company also had receivables from these two customers amounting to
$2,361,100 and $2,387,929, respectively, at December 31, 1998 and $4,060,300
and $2,112,100, respectively at December 31, 1997. In 1996, the Company had
one customer, which individually accounted for 10% or more of net sales, with
net sales of approximately, $36,650,000.
<PAGE>
ALMA PRODUCTS
NOTES TO FINANCIAL STATEMENTS
(CONTINUED)
(7)CONTINGENCIES
Environmental Matters
The Company has received notices from the Michigan Department of Natural
Resources and the U.S. Environmental Protection Agency in connection with
environmental contamination at sites located in Michigan. As of December 31,
1998 and 1997 the Company has accrued approximately $410,000 and $425,000,
respectively, for costs yet to be incurred in connection with the clean-up of
the sites. While the Company believes it has made adequate provision for
these costs, changes in future cost estimates may nevertheless occur. In the
opinion of management, based upon its experience with these sites to date, the
outcome of these matters will not have a material adverse effect on the
Company's financial statements.
(8) OFFICER EMPLOYMENT CONTRACT AND RETIREMENT BENEFITS
The Company entered into an employment agreement with one of its officers on
December 20, 1997. The agreement provides for employment through December 31,
1998 as well as for pension and healthcare benefits continuing after the end
of the employment contract. The present value of these benefits as of
December 31, 1998 is estimated at $616,000 and is included in accrued
post-retirement benefits and other in the accompanying balance sheet.
(9)SALE OF ALMA PRODUCT'S DIVISION
On March 22, 1999, Alma Piston Company sold the net operating assets of the
Alma Product's Division to Jordan Industries, Inc., for $84 million in cash
and the assumption of approximately $2 million in long term liabilities,
subject to certain future possible adjustments provided for in the related
contract.
