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 September 30, 1999 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 November
12, 1999: 98,501.0004.
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JORDAN INDUSTRIES, INC.
INDEX
Part I. Page No.
Financial Information
Condensed Consolidated Balance Sheets 3
at September 30, 1999, (Unaudited) and December 31, 1998
Condensed Consolidated Statements of Operations
for the Three Months Ended September 30, 1999 and 1998
And the Nine Months Ended September 30, 1999 and 1998 4
(Unaudited)
Condensed Consolidated Statements of Cash Flows
for the Nine Months Ended September 30, 1999 and 1998 5
(Unaudited)
Notes to Condensed Consolidated Financial Statements 6
(Unaudited)
Management's Discussion and Analysis of 15
Financial Condition and Results of Operations
Part II.
Other Information 24
Signatures 25
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JORDAN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(ALL DOLLAR AMOUNTS IN THOUSANDS)
September 30, December 31,
1999 1998
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 22,345 $ 23,008
Accounts receivable, net 217,810 160,586
Inventories 175,787 139,720
Prepaid expenses and other current assets 26,009 17,724
Total Current Assets 441,951 341,038
Property, plant and equipment, net 152,350 139,578
Investments in affiliates 9,008 9,008
Goodwill, net 578,997 491,510
Other assets 89,501 62,754
Total Assets $1,271,807 $1,043,888
LIABILITIES AND NET CAPITAL DEFICIENCY
Current Liabilities:
Notes payable $ 3,140 $ 737
Accounts payable 84,354 70,798
Accrued liabilities 75,933 68,722
Advance deposits 5,700 5,580
Current portion of long-term debt 6,243 6,136
Total Current Liabilities 175,370 151,973
Long-term debt 1,271,543 1,059,419
Other non-current liabilities 12,513 12,762
Deferred income taxes 1,444 1,444
Minority interest 2,867 785
Preferred stock 28,839 25,649
Net Capital Deficiency:
Common stock $.01 par value: 100,000 shares 1 1
authorized and 98,501.0004 shares outstanding
Additional paid-in capital 2,116 2,116
Accumulated other comprehensive (loss) income (3,960) 2,038
Accumulated deficit (218,926) (212,299)
Total Net Capital Deficiency (220,769) (208,144)
Total Liabilities and Net Capital
Deficiency $1,271,807 $ 1,043,888
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 NINE MONTHS ENDED
September 30, September 30,
1999 1998 1999 1998
Net sales $311,544 $248,567 $858,532 $701,785
Cost of sales, excluding
depreciation 202,671 158,251 553,463 446,407
Selling, general and administra-
tive expenses, excluding deprecia-
tion 56,921 49,443 158,928 138,758
Depreciation 7,992 6,370 22,919 17,596
Amortization of goodwill and other
intangibles 6,316 5,379 18,126 15,810
Management fees and other 2,001 1,446 4,758 5,514
Operating income 35,643 27,678 100,338 77,700
Other (income) expenses:
Interest expense 34,390 27,869 94,933 81,428
Interest income (297) (323) (897) (1,755)
Other (13) 397 236 5,445
Total other expenses, net 34,080 27,943 94,272 85,118
Income (loss) before income taxes,
minority interest,
and extraordinary items 1,563 (265) 6,066 (7,418)
Provision for income taxes 2,956 1,933 7,127 3,494
Loss before minority
interest, and extraordinary items (1,393) (2,198) (1,061) (10,912)
Minority interest 962 491 2,318 710
Loss before extraordinary
items (2,355) (2,689) (3,379) (11,622)
Extraordinary items - 179 - 179
Net loss $(2,355) $( 2,868) $(3,379)$(11,801)
See accompanying notes to condensed consolidated financial statements.
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JORDAN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
NINE MONTHS ENDED
September 30,
1999 1998
Cash flows from operating activities:
Net loss $ (3,379) $(11,801)
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities:
Depreciation and amortization 41,045 33,406
Amortization of deferred financing fees 3,940 3,421
Minority interest 2,083 710
Non-cash interest 22,135 19,661
Loss on sale of subsidiary 65 5,368
Extraordinary item - 179
Changes in operating assets and
liabilities net of effects from
acquisitions:
Increase in current assets (53,764) (46,364)
Increase in current liabilities 6,388 18,108
Increase in non-current assets (16,276) (9,314)
Decrease in non-current liabilities (2,337) (2,970)
Net cash (used in) provided
by operating activities (100) 10,404
Cash flows from investing activities:
Net proceeds from sale of a subsidiary - 13,500
Capital expenditures, net (12,476) (17,181)
Acquisition of subsidiaries (145,476) (118,071)
Additional purchase price payments and
SAR payments (9,135) (10,390)
Net cash acquired in purchase of subsidiaries 1,975 2,240
Other (357) 10
Net cash used in investing activities (165,469) (129,892)
Cash flows from financing activities:
Proceeds from revolving credit facilities, net 35,000 99,500
Repayment of long-term debt (4,991) (8,246)
Repayment of senior notes - (3,400)
Repayment of subordinated seller note (1,500) -
Proceeds from debt issuance - Jordan
Industries, Inc. 149,761 -
Payment of financing costs (12,858) -
Payment of premium and consulting fee - (179)
Other borrowing 2,240 1,687
Net cash provided by financing activities 167,652 89,362
Foreign currency translation (2,746) (608)
Net (decrease) increase in cash equivalents from
beginning of period (663) (30,734)
Cash and cash equivalents at beginning of period 23,008 52,500
Cash and cash equivalents at end of period $ 22,345 $ 21,766
See accompanying notes to condensed consolidated financial statements.
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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 and are of a normal recurring nature, 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, 1998, which are included in the Company's Annual Report filed
on Form 10-K for such year (the "1998 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:
September 30, December 31,
1999 1998
Raw materials $ 79,888 $ 59,350
Work-in-process 22,792 17,098
Finished goods 73,107 63,272
$175,787 $139,720
C. 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 income tax purposes. Significant components of the
Company's deferred tax liabilities and assets as of September 30,1999 and
December 31, 1998, are as follows:
September 30, December 31,
1999 1998
Deferred tax liabilities
Intangibles $ 5,122 $ 6,966
Tax over book depreciation 6,972 8,016
Basis in subsidiary 798 798
Intercompany tax gain 14,435 14,435
Other 511 600
Total deferred tax liabilities $ 27,838 $ 30,815
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JORDAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Deferred tax assets September 30, September 30,
1999 1998
NOL carryforwards $ 33,011 $ 50,806
Accrued interest on discount debentures 13,510 13,510
Stock Appreciation Rights Agreements 2,072 2,264
Pension obligation 541 601
Vacation accrual 1,212 1,109
Uniform capitalization of inventory 1,988 2,147
Investment in partnership 282 282
Allowance for doubtful accounts 1,361 1,257
Foreign NOL's 2,977 3,230
Deferred financing fees 690 742
Intangibles 1,911 1,573
Tax asset basis over book basis at
subsidiary 14,435 14,435
Other 1,612 2,755
Total deferred tax assets 75,602 94,711
Valuation allowance for deferred
tax assets (49,208) (65,340)
Net deferred tax assets 26,394 29,371
Net deferred tax liabilities $ 1,444 $ 1,444
D. Comprehensive Income
Total comprehensive loss for the quarters ended September 30, 1999 and 1998,
and the nine months ended September 30, 1999 and 1998 is as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
Net loss $ (2,355) $ (2,868) $ (3,379) $(11,801)
Foreign currency translation 1,180 1,314 (5,998) (673)
Comprehensive loss $ (1,175) $ (1,554) $ (9,377) $(12,474)
E. Sale of Subsidiaries
On March 19, 1999 the Company sold its assets in the Consolidated Plumbing
Industries ("CPI") division of Dura-Line for $3,389. There was no material
gain or loss associated with the sale. CPI's product is used to replace
copper water pipe in homes.
On July 9, 1998, Jordan Telecommunication Products, Inc. ("JTP") sold its
stock of Diversified Wire and Cable for $15,000. Including expenses related
to the sale, the Company recorded a loss of $6,171. The proceeds from the
sale were used to pay $1,500 in subordinated seller notes to the original
owners of Diversified and $13,500 to pay down JTP's revolving credit facility.
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PAGE 8
JORDAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
F. Acquisition and Formation of Subsidiaries
On August 24, 1999, the Company purchased 80% of the stock of GDI Services,
Inc. ("GDI") for total consideration of $20,000. GDI is an information
technology company that provides consulting services in the areas of
business-to-business e-commerce and large mission critical client-server
software application development. The acquisition was financed with
borrowings on the Company's revolving credit facility and a $5,000
subordinated seller note. The purchase price has been preliminarily
allocated to working capital of $700, property,
plant and equipment of $250 and other non-current assets of $6, and resulted
in an excess purchase price over identifiable assets of $19,044.
On July 30, 1999, the Company purchased Tele-Flow, Inc. ("Tele-Flow") for
$3,400. Tele-Flow is a manufacturer of polystyrene plastic injection molded
heating, ventilation and air conditioning ("HVAC") registers and air
diffusers and flexible air ducts. The purchase price was allocated to
working capital of $232, property, plant and equipment of $1,811 and
noncurrent liabilities of ($185), resulting in an excess purchase price over
identifiable assets of $1,542.
On July 1, 1999, the Company acquired Supreme Die Cutting, Inc. ("Supreme").
Supreme is a manufacturer of folding cartons and specialty paperboard
products. The purchase price of $514 including costs directly related to
the transaction, was allocated to inventory of $50 and property, plant and
equipment of $450 and resulted in an excess purchase price over identifiable
assets of $14.
On April 2, 1999, the Company purchased the net assets of Protech Systems,
Inc. ("Protech") for $12,500. Protech is an information technology
consulting company that provides software application development and
customization. The purchase price has been preliminarily allocated to
working capital of $2,095, property and equipment of $213, and non-current
liabilities of $(641), resulting in an excess purchase price over
identifiable assets of $10,833. The acquisition was financed with cash from
the Company's credit line and $500 subordinated seller note.
On March 31, 1999, JTP, through a newly created subsidiary Integral Holdings,
Inc. ("Integral Holdings"), a subsidiary of Dura-Line Corporation, purchased
the assets of Integral Corporation ("Integral"). Integral is a manufacturer
of high- density polyethylene conduit for the installation and protection of
cables used in the electrical, telecommunications, and cable TV industries.
Integral has locations in Dallas, Texas; England; and Malaysia. The purchase
price of $20,296 which includes estimated related transaction costs, has been
preliminarily allocated to working capital of $7,992, property, plant, and
equipment of $8,174, non-current assets of $5,073 ($4,100 in non-compete
agreements) and non-current liabilities of ($943). The acquisition was
financed with four-month promissory notes for $10,653, which have already
been paid, and borrowings from JTP's revolving credit line.
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PAGE 9
JORDAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
On March 22, 1999, the Company purchased Alma Products ("Alma") for $86,166
including costs directly 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 remanufactured 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. The purchase
price was allocated to working capital of $18,722, 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 $61,648.
The acquisition of Alma was financed with a $155,000 "tack-on" bond offering
at 10 % coupon. The bonds were sold at 96.62% of par and mature on August 1,
2007. The net cash to the Company was $149,761. The Company used the
proceeds from the offering to purchase Alma and to repay outstanding
borrowings on its revolving credit facility.
On February 18, 1999, JTP, through Northern Technologies Holdings, Inc.,
purchased the net assets of High Mountain Communications, Inc. ("HMC"). HMC
provides cellular and PCS site maintenance services. The purchase price of
$537, which includes estimated transaction costs, has been preliminarily
allocated to working capital of $8, property, plant and equipment of $127,
and non-current assets of $25, resulting in an excess purchase price over
identifiable assets of $377.
On January 20, 1998, JTP through a newly created subsidiary K&S Sheet Metal
Holdings ("K&S Holdings"), a subsidiary of 80% owned Bond Technologies,
purchased the stock of K&S Sheet Metal ("K&S"). K&S is a manufacturer of
precision metal enclosers for electronic original equipment manufacturers.
The purchase price of $15,930, including costs incurred directly related to
the transaction, has been allocated to working capital of $2,666, property,
plant and equipment of $1,002, non-compete agreements of $1,545 and other
assets of $91 resulting
in an excess purchase price over net identifiable assets of $10,626. The
acquisition was financed with $14,430 of borrowings from JTP's revolving
credit line and $1,500 of subordinated seller notes.
On February 9, 1998, the Company completed the formation of Jordan Specialty
Plastics, Inc. ("JSP"). JSP was formed as a Restricted Subsidiary under the
Company's Indenture. The Company sold the stock of Beemak and Sate-Lite to
JSP for $11,500 of Preferred Stock, which will accrete at plus or minus 97.5%
of the cumulative JSP net income or net loss, as the case may be, through the
earlier of an Early Redemption Event (as defined) or the end of year five.
The Company will also keep its intercompany notes with Beemak ($9.8 million at
January 31, 1998) and Sate-Lite ($1.2 million at January 31, 1998).
The Company has sold these subsidiaries in order to establish them as more
independent, stand-alone, industry-focused companies, and to allow the
Company's stockholders and employees to invest directly in JSP.
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PAGE 10
JORDAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
On February 11, 1998, JSP purchased all of the common stock of Deflecto
Corporation ("Deflecto"). Deflecto designs, manufactures and markets plastic
injection molded products such as office supplies, hardware products and
house- ware products. The purchase price of $43,000, including costs directly
related
to the transaction, was allocated to working capital of $8,598, property,
plant, and equipment of $6,346, other long-term assets and liabilities of
($1,942), and resulted in an excess purchase price over net identifiable
assets of $29,998. The acquisition was financed with cash from the Company's
credit line and a $5,000 subordinated seller note.
On February 26, 1998, JSP purchased all of the net assets of Rolite Plastics,
Inc.("Rolite"). Rolite is a manufacturer of extruded vinyl chairmats for the
office products industry. The purchase price of $6,000, including costs
directly related to the transaction, was allocated to working capital of
$483, property, plant, and equipment of $754, and resulted in an excess
purchase price over net identifiable assets of $4,763. The acquisition was
financed with cash and a $900 subordinated seller note.
On May 15, 1998, Motors and Gears Industries, Inc. ("Motors and Gears")
acquired all of the outstanding stock of Advanced D.C. Motors, Inc. and its
affiliated corporations (collectively "ADC") for $58,901. The purchase
price, including costs incurred directly related to the transaction, was
allocated to working capital of $9,345, property and equipment of $4,088,
covenants not-to-compete of
$662, and other long-term assets and liabilities of ($51), and resulted in an
excess purchase price over net identifiable assets of $44,857. ADC designs and
manufactures special purpose, custom designed motors for use in electric lift
trucks, power sweepers, electric utility vehicles, golf carts, electric
boats, and other niche products. ADC also designs and manufactures its own
production equipment as well as electric motor components known as commutators.
On July 14, 1998, JTP, through its 70% owned subsidiary, TSI, purchased the
net assets of Opto-Tech Industries, Inc. ("Opto-Tech"). Opto-Tech assembles
and sells radio frequency interference products, attenuators and message
waiting indicators to Regional Bell Operating Companies, independent phone
operators and distributors of telecommunications products. The purchase
price of $6,632, including costs incurred directly related to the
transaction, has been allocated to working capital of $261, property, plant
and equipment of
42, and non-current assets of $100, resulting in an excess purchase price
over net identifiable assets of $6,229. The acquisition was financed with
$5,382 of borrowings from JTP's revolving credit line and $1,250 of
subordinated seller notes.
On December 31, 1998, Motors and Gears, through its wholly-owned subsidiary
Imperial, acquired all of the outstanding stock of Euclid Universal
Corporation ("Euclid") for $2,100. The purchase price, including costs
incurred directly related to the transaction, was allocated to working
capital of $772, property and equipment of $953, and other non-current
assets and liabilities of ($498), resulting in an excess purchase price over
net identifiable assets of $873. Euclid designs and manufactures speed
reducers, custom gearing, right angle
gearboxes and transaxles for use in a wide array of industries including
material
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PAGE 11
JORDAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
handling, healthcare, and floor care. Euclid has strong technical expertise
in the areas of worm, spur and helical gearing.
Acquisitions of the Company have been financed primarily through the use of
the revolving lines of credit and the issuance of Senior Debt. These
acquisitions have been accounted for using the purchase method of accounting.
Accordingly, the operating results of each of these acquisitions have been
included in the consolidated operating results of the Company since the date
of their acquisition.
Unaudited pro forma information with respect to the Company as if the 1999
and 1998 acquisitions had occurred on January 1, 1998 is as follows:
Nine Months Ended
September 30,
1999 1998
Net sales $892,417 $825,978
Net income before taxes 13,328 10,123
Net (loss) $ (7,486)$ (1,148)
G. 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 continued to manage its affairs and
operate it business as a debtor-in-possession while it developed a
reorganization plan that restructured its operations and allowed it to emerge
from Chapter 11.
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 October 29,2003.
As a result of Welcome Home's Chapter 11 filing, the Company no longer had
the ability to control the operations and financial affairs of Welcome Home.
Accordingly, the Company no longer consolidated Welcome Home in its financial
statements from January 21, 1997, the date of the filing. In July 1999,
Welcome Home emerged from bankruptcy with the Company owning approximately
85% of the outstanding common stock of Welcome Home. Although the Company
owns the majority of Welcome Home's common stock, Welcome Home's operating
results since
its emergence from bankruptcy have been excluded from the Company's
consolidated financial statements.
For the third quarter and first nine months of 1999, Cape Craftsmen ("Cape"),
a consolidated subsidiary of the Company, had sales to Welcome Home of $5,798
and $11,834, representing 66.7% and 59.8%, respectively, of Cape's total
third quarter and first nine month sales. The Company's receivable
outstanding related to these sales was $4,794 on September 30, 1999.
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PAGE 12
JORDAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
H. Payment of Stock Appreciation Rights
JTP granted Stock Appreciation Rights ("SARs") to the sellers of Engineered
Endeavors. The agreement calls for payments to be made to the participants
upon exercise of the SARs, such exercise being a one-time election during
the calendar years 2003 through and including 2008. The amount payable to
the participants is
based upon a specific formula, the basis of which is the average EBIT (as
defined) for the two calendar years preceding the exercise date. A different
formula applies if Engineered Endeavors is sold before December 31, 2008.
When exercised, the SARs are payable one-forth on or before September 30th of
the year of exercise, and the remaining three-fourths payable in three equal
annual installments.
In April 1997, Dura-Line entered into an agreement to purchase the former
owners' interest in a SAR for $15,417, consisting of $9,438 in cash and
deferred payments payable in annual installments with remaining payments due
as follows:
March 31, 2000 $1,189
March 31, 2001 1,284
March 31, 2002 1,386
$3,859
As such, at September 30, 1999, the Company has recorded $1,189 in accrued
expenses and other current liabilities and $2,670 in other non-current
liabilities. Dura-Line also purchased the former owners' 7% cumulative
preferred stock on March 9, 1998 at a price of $1,875.
In connection with the Company's acquisitions of AIM and Cambridge in 1989,
the seller of these companies was granted SARs. In 1997, the Company entered
into an agreement to purchase and redeem the Estate's and Decedent's interest
in the SAR for $3,111 in cash and a deferred payment, including interest at
9% per annum, of $3,391 which was paid on May 2, 1998.
I. Additional Purchase Price Agreements
The Company has a contingent purchase price agreement relating to its
acquisition of Deflecto in 1998. The plan is based on Deflecto achieving
certain earnings before interest and taxes and is payable on April 30, 2008.
If Deflecto is sold prior to April 30, 2008, the plan is payable 120 days
after the transaction.
The terms of the Company's Advanced DC purchase price agreement provides for
additional consideration of up to $5,600 to be paid if the acquired entity's
results of operations exceed certain targeted levels. Targeted levels are
set substantially above the historical experience of the acquired entity at
the time of acquisition. Subject to the terms and conditions of the
agreement, the Company will make payments to the sellers on or before April
1st immediately following the respective fiscal year during which each such
contingent payment
is earned. The contingent payments apply to operations of fiscal years 1998
and 1999. The Company made a payment of $3,151 related to this agreement to
the previous shareholders of Advanced DC in March 1999.
<PAGE>
PAGE 13
JORDAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
The Company had a contingent purchase price agreement relating to its
acquisition of Viewsonics in 1996. The plan is based on Viewsonics achieving
certain earnings before interest and taxes during the years ended July 31,
1997 and 1998,
respectively. On January 2, 1998, the Company paid $1,388 for the plan year
ended July 31, 1997. On September 30, 1999, the Company had accrued $1,325
for the final plan year ended July 31, 1998. On October 1, 1999, the Company
made the final payment of $1,325.
The Company has a contingent purchase price agreement relating to its
acquisition of Motion Control on December 18, 1997. The terms of the
Company's Motion
Control acquisition agreement provides for additional consideration to be
paid if the acquired entity's results of operations exceed certain targeted
levels. Targeted levels are set substantially above the historical experience
of the acquired entity at the time of acquisition. The agreement becomes
exercisable in 2003 and payments, if any, under the contingent agreement
will be placed in a trust and paid out in cash in equal annual installments
over a four year period.
The Company has an agreement with the previous owners of K&S to make additional
purchase price payments if certain earnings levels are met for the plan years
ended December 31, 1998 through December 31, 2004. There was no accrual
recorded related to this agreement at December 31, 1998 or September 30, 1999.
The Company had agreements with the previous owners of TSI to make additional
purchase price payments and bonus payments if certain earnings levels were met
during the year ended October 31, 1998. At December 31, 1998, approximately
$5,600 was accrued related to these agreements. These payments were made in
full in March 1999.
J. Preferred Stock
In May 1997, Motors and Gears Holdings, Inc., a majority owned subsidiary of
the Company, issued $1,500 of senior, non-voting 8.0% cumulative preferred
stock to its minority shareholders.
On July 25, 1997 JTP issued and sold twenty-five thousand units, each
consisting of (i) $1 aggregate liquidation preference of 13.25% Senior
Exchangeable Preferred Stock due August 1, 2009 ("JTP Senior Preferred
Stock"), and (ii) one share of JTP Common Stock.
Holders of the JTP Senior Preferred Stock are entitled to receive dividends
at a rate of 13.25% per annum of the liquidation preference. All dividends
are cumulative, whether or not earned or declared, and are payable on
February 1, May 1, August 1, and November 1 of each year. On or before
August 1, 2002, JTP may, at its option, pay dividends in cash or in
additional shares of JTP Senior Preferred Stock having an aggregate
liquidation preference equal to the amount of such dividends. After August
1, 2002, dividends may be paid only in
cash. The JTP Senior Preferred Stock has no voting rights and is mandatorily
redeemable on August 1, 2009.
<PAGE>
PAGE 14
JORDAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
On February 1, 1999, the Company issued 985.0173 shares of Senior Preferred
Stock as payment of dividends through that date. On May 1, 1999, the Company
issued 984.7213 shares of Senior Preferred Stock as payment of dividends
through that date. On August 1, 1999, the Company issued 1050.8012 shares of
Senior Preferred Stock as payment of dividends through that date. On
November 1, 1999, the Company issued 1,085.8951 shares of Senior Preferred
Stock as payment of dividends through that date.
As of September 30, 1999, there were 32,514.495 shares of JTP Senior
Preferred Stock outstanding with a liquidation value of $33,185.
K. Foreign Exchange Instruments and Risk Management
The Company enters into foreign currency forward exchange contracts to hedge
transactions and firm commitments that are denominated in foreign currencies
(primarily in the Czech Koruna) and not to engage in currency speculation.
The Company primarily utilizes forward exchange contracts with a duration of
one year or less. Gains or losses on hedges of transaction exposures are
included in income in the period in which the exchange rates change. Gains
and losses on contracts which hedge specific foreign currency denominated
commitments, primarily
royalty payments from the Company's Czech operations, are deferred and
recognized in the basis of the transactions underlying the commitments.
Forward exchange contracts generally require the Company to exchange U.S.
dollars for foreign currencies at maturity, at rates that are agreed to at
inception of the contracts. If the counterparts to the exchange contracts
(primarily highly rated financial institutions) do not fulfill their
obligations to deliver the contracted currencies, the Company could be at
risk for any currency related fluctuation.
The Company has $0 and $2,255 notional amount of foreign currency forward
exchange contracts outstanding at September 30, 1999 and 1998, respectively.
L. Business Segment Information
See Part 1 "Financial Information" - "Management's Discussion and Analysis
of Financial Condition and Results of Operations" for the Company's business
segment disclosures. There have been no changes from the Company's December 31,
1998 consolidated financial statements with respect to segmentation or the
measurement of segment profit or loss.
M. Subsequent Events
On November 9, 1999, the Company sold all of the net assets of Parsons
Precision Products ("Parsons") for $22,000. Parsons is a manufacturer of
titanium hot- formed products for the aerospace industry. The gain on the
sale of Parsons will be recognized in the fourth quarter of 1999.
<PAGE>
PAGE 15
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
(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 1998 10-K and the financial statements and the related notes
thereto.
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 quarters and nine
months ended September 30, 1999 and 1998. This discussion reviews the following
segment data and certain of the consolidated financial data for the Company.
THREE MONTHS ENDED NINE MONTHS ENDED
September 30 September 30,
1999 1998 1999 1998
Net Sales:
Specialty Printing and Labeling $ 28,184 $ 29,461 $ 80,733 $ 84,907
Jordan Specialty Plastics 24,142 20,066 64,140 52,894
Motors and Gears 78,579 78,038 232,973 208,304
Telecommunications Products 115,940 78,231 303,900 232,441
Consumer and Industrial Products 64,699 42,771 176,786 123,239
Total $311,544 $248,567 $ 858,532 $ 701,785
Operating Income:
Specialty Printing and Labeling $ 969 $ 1,362 $ 4,180 $ 4,915
Jordan Specialty Plastics 1,339 1,532 2,802 5,393
Motors and Gears 13,086 12,814 39,721 33,843
Telecommunications Products 14,200 8,600 36,134 23,722
Consumer and Industrial Products 7,067 4,071 20,624 12,415
Total(a) $ 36,661 $ 28,379 $ 103,461 $ 80,288
Operating Margins (b):
Specialty Printing and Labeling 3.4% 4.6% 5.2% 5.8%
Jordan Specialty Plastics 5.5 7.6 4.4 10.2
Motors and Gears 16.7 16.4 17.0 16.2
Telecommunications Products 12.2 11.0 11.9 10.2
Consumer and Industrial Products(c) 10.9 9.5 11.7 10.1
Consolidated (a) 11.8 11.4 12.1 11.4
(a) The total does not include corporate overhead of $1,018 and $701 for the
three months ended September 30, 1999 and 1998, respectively, and $3,123 and
$2,588 for the nine months ended September 30, 1999 and 1998, respectively.
(b) Operating margin is operating income divided by net sales.
<PAGE>
PAGE 16
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Specialty Printing and Labeling. As of September 30, 1999, the Specialty
Printing and Labeling group consisted of SPAI, Valmark, Pamco, and Seaboard.
Net sales for the third quarter of 1999 decreased $1.3 million or 4.3% compared
to the third quarter of 1998. Sales of calendars and ad specialty products at
SPAI decreased by $1.0 million and $0.5 million, respectively and sales of
folding boxes at Seaboard decreased by $0.5 million. Partially offsetting
these decreases were increased sales of labels at Pamco, $0.1 million and
increased sales of screen print products at Valmark, $ 0.6 million. Net sales
for the nine months ended September 30, 1999 decreased $4.2 million, or 4.9%,
compared to the first nine months of 1998. Sales of folding boxes at Seaboard
decreased $3.9 million, sales of calendars and ad specialty products at SPAI
decreased by $1.3 million and $0.3 million, respectively, and sales of rollstock
at Valmark decreased $0.4 million. Partially offsetting these decreases were
increased sales of labels at Pamco, $0.7 million and increased sales of screen
print and membrane switches at Valmark, $0.7 million and $0.3 million,
respectively. The decrease in sales at Seaboard is due to a general slowdown
in the corrugated folding box industry and the decrease in calendar sales at
SPAI is partially due to rescheduling of production runs to more efficiently
utilize its labor pool. Increased sales at Pamco are due to Pamco effectively
diversifying its customer base and increased sales at Valmark are the result of
strategic inventory programs instituted for certain Valmark customers.
Operating income for the third quarter and first nine months of 1999 decreased
$0.4 million and $0.7 million, respectively. Operating margins also decreased
for the periods noted above to 3.4% from 4.6% for the third quarter and to 5.2%
from 5.8% for the nine month period. Both the drop in operating income and
operating margin are the result of lower sales as discussed above and lower
absorption of fixed overhead costs at the lower sales level.
<PAGE>
PAGE 17
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Jordan Specialty Plastics. As of September 30, 1999, the Jordan Specialty
Plastics group consisted of Beemak, Sate-Lite, Deflecto, Rolite and Tele-flow.
Rolite and Teleflow are reported in the consolidated results of Deflecto.
Net sales for the third quarter of 1999 increased $4.1 million or 20.3% compared
to the third quarter of 1998. Net sales at Sate Lite increased $1.0 million due
to increased sales of triangles, colorants and custom molding. Sales at
Deflecto increased $3.3 million, which was partially due to their acquisition
of
Tele-Flow in the third quarter. Tele-flow added $1.4 million in net sales from
its acquisition date to the end of the quarter. The remaining sales increase at
Deflecto is attributable to higher hardware sales. Partially offsetting these
increased sales were lower sales of molded products at Beemak, $0.2 million.
Net sales for the nine months ended September 1999 increased $11.2 million or
21.3% compared to the first nine months of 1998. Increases at Deflecto
accounted for $10.6 million of the total increase for the nine month period,
and of that increase, $9.3 million is due to the benefit of a full nine
months of operations of Deflecto and Rolite (acquired in February 1998) and two
months of operations of Tele-Flow (acquired in July 1999). The remaining
increase is due to higher sales of hardware products. Net sales at Sate
Lite increased $1.6 million due to higher sales of colorants and custom molded
products. Partially offsetting these increases were decreased sales of molded
and fabricated products at Beemak, $0.7 million and $0.3 million, respectively.
Operating income decreased $0.2 million in the third quarter of 1999 as compared
to the same period in 1998 and decreased $2.6 million in the first nine months
of 1999 compared to the first nine months of 1998. These decreases are
due to increased operating expenses incurred at Sate-Lite related
to the expansion of manufacturing operations into China and a decrease in office
products sales at Deflecto, which is Deflecto's highest margin product line.
Operating margins decreased to 5.6% from 7.6% for the third quarter and
decreased to 4.4% from 10.2% for the nine month period when compared to the
prior year, due to the reasons mentioned above.
Motors and Gears. As of September 30, 1999, the Motors and Gears group
consisted of Imperial, Gear, Merkle-Korff, FIR, ED&C, Motion Control and
Advanced DC.
Net sales for the third quarter of 1999 increased approximately 1%
over last year to $78.6 million. Net sales for the first nine months of 1999
grew to $233.0 million, an increase of 12% or $24.7 million over 1998. The
strong sales growth for the first nine months was primarily driven by two
acquisitions in 1998, (Advanced DC and Euclid, a subsidiary of Imperial) which
accounted for $22.5 million of the growth. Subfractional motor sales decreased
14% or $3.8 million in the third quarter as compared to 1998, primarily due to
weakness in the vending markets. Significant difficulties in international
markets of a major beverage company are the primary reason for this decline.
<PAGE>
PAGE 18
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Subfractional motor sales for the first nine months decreased 3% or $2.2
million, once again, driven by the weakness in the vending market described
above. Sales of fractional/integral products, including 1998 acquisitions,
increased 3% or $0.9 million in the third quarter and 27% or $22.4 million for
the first nine months compared with last year. The growth for
fractional/integral products in the third quarter was driven by
strong performance in material handling, elevator, and floor care markets
offset partially by a weak European market and an unfavorable Euro exchange
rate. Fractional/integral product sales growth for the first nine months was
driven primarily by the 1998 acquisitions and to a lesser extent, the strong
performance in the material handling, elevator, and floor care markets. Sales
of electronic motion control systems increased $3.5 million and $4.5 million
in the third quarter and first nine months of 1999, respectively, over the
same periods for 1998. These increases in the electronic motion control
systems sales were mainly attributed to continued strength in the elevator
modernization market.
Operating income for the third quarter of 1999 increased slightly to $13.1
million, and for the first nine months increased 17% to $39.7 million, over the
same periods for 1998. The increase in operating income was primarily the
result of the increased sales described above, coupled with improved operating
margins on subfractional and fractional/integral motor sales.
Operating margins increased from 16.4% to 16.7% for the three months ended
September 30, 1998 and 1999, respectively, and from 16.2% to 17.0% for the nine
months ended September 30, 1998 and 1999, respectively.
Telecommunication Products. As of September 30, 1999, the Telecommunication
Products group consisted of Dura-Line, Connectors, Viewsonics, Bond, Northern,
LoDan, EEI, and TSI.
Net sales for the third quarter and nine months ended September 30, 1999
increased $37.7 million, or 48.2%, and $71.5 million, or 30.7%, respectively,
over the same periods in 1998. The increased is primarily due to strong demand
for Innerduct at Dura-Line, the acquisition of Integral on March 31, 1999,
increased demand for datanetworking cables at LoDan, and higher demand for
central office data cables at TSI. TSI has also realized higher sales due to
the introduction of its new fiber optic cable assemblies product. Diversified
Wire and Cable, which was sold in July 1998, accounted for $16.1 million of net
sales in the nine months ended September 30, 1998.
Operating income for the third quarter and nine months ended September 30, 1999
increased $5.6 million, or 65.1%, and $12.4 million, or 52.3%, respectively,
over the same periods in 1998. The increase is primarily due to the higher
sales at Dura-Line, LoDan, and TSI, as mentioned above, as well as the
completion of the reorganization of the Electronic Connectors and
Components business unit during the third quarter of 1999. Operating income
margins have increased from 10.2% for the nine months ended September 30, 1998
to 11.9% for the nine months ended September 30, 1999, due to higher sales and
<PAGE>
PAGE 19
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
greater absorption of fixed overhead. Partially offsetting these improvements
were increased start-up costs at both Dura-Line and Engineered Endeavors, who
have invested operating expenses in the start-up of their operations in Brazil
during the nine months ended September 30, 1999.
Consumer and Industrial Products. As of September 30, 1999, the Consumer
and Industrial Products group consisted of Dacco, Riverside, Parsons, Cape,
Cho-Pat, Alma, Protech, and GDI.
Net sales increased $21.9 million or 51.3% in the third quarter of 1999 as
compared to the third quarter of 1998. The largest portion of this increase is
attributable to the acquisition of Alma Products, which added $18.8 million of
net sales in the 1999 period. Other increases in net sales are the result of
the acquisitions of Protech and GDI, which added $2.0 million and $1.0 million
respectively to 1999 third quarter sales. Sales of torque converters at Dacco
increased $0.7 million, sales of titanium hot formed products at Parsons
increased $0.3 million and sales of home accessories at Cape increased $1.9
million compared to the same period in the prior year. Partially offsetting
these increases were decreased sales of Bibles and Bible accessories at
Riverside, $1.4 million, and lower sales of plastic pipe at Dura-Line Retube,
$1.4 million, due to the sale of the company. Net sales for the first nine
months of 1999 increased $53.5 million or 43.5% over the first nine months of
1998. Of that increase, $46.3 million, $4.3 million and $1.0 million are
attributable to the 1999 acquisitions of Alma, Protech and GDI, respectively.
Other sales increases included higher sales of torque converters at Dacco, $3.2
million and increased sales of home accessories at Cape, $3.0 million.
Partially offsetting these increases were decreased sales of Bibles and Bible
accessories at Riverside, $1.5 million, lower sales of titanium hot formed
products at Parsons,$0.3 million and lower sales of water pipe at Dura-Line
Retube, $2.5 million, due to the sale of the company.
Operating income increased $3.0 million or 73.6% for the third quarter of 1999
versus the same period in 1998, and $8.2 million or 66.1% for the nine month
periods. This increase was primarily due to the acquisition of Alma, Protech
and GDI, which added $2.9 million and $7.5 million in operating income to the
third quarter and nine month periods in the current year.
Operating margins for the third quarter increased to 10.9% from 9.5% in 1998
and to 11.7% from 10.1% for the nine month period. Margins were positively
affected by the acquisitions of Alma and Protech who each have operating margins
higher than the group average, higher sales at Dacco which resulted in higher
absorption of overhead and increased sales of Cape's highest margin product,
home accessories.
<PAGE>
PAGE 20
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Consolidated Results: (See Condensed Consolidated Statements of Operations.)
Consolidated net sales for the third quarter and the first nine months of 1999
increased $63.0 million, or 25.3%, and $156.7 million or 22.3% respectively,
compared to the same periods in 1998. The increases are primarily due to the
1999 acquisitions of Integral in Telecommunication Products, Alma, Protech
and Garg in Consumer and Industrial Products and Tele-Flow in Jordan Specialty
Plastics. In addition, sales increased due to the benefit of a full nine months
of sales from the 1998 acquisitions of Deflecto and Rolite in Jordan Specialty
Plastics and Advanced DC and Euclid in Motors and Gears. Sales also increased
due to strong demand for Innerduct, data networking cables, and central office
cables in Telecommunications Products, torque converters and home accessories in
Consumer and Industrial Products, hardware products and custom molding in Jordan
Specialty Plastics and electronic motion control systems in Motors and Gears.
Partially offsetting these increases were lower sales of corrugated folding
boxes, calendars and ad specialties in Specialty Printing and Labeling,
decreased sales of Bibles and Bible accessories in Consumer and Industrial
Products and lower sales of subfractional motors in Motors and Gears. In
addition, sales decreased due to the divestiture of Diversified Wire and Cable
in Telecommunications Products and Dura-Line Retube in Consumer and Industrial
Products.
Consolidated operating income for the third quarter and first nine months
increased $8.0 million or 28.8% and $22.6 million or 29.1% respectively,
compared to the same periods in 1998. The increases are primarily due to the
1999 and 1998 acquisitions as discussed above. In addition, operating income
increased due to higher absorption of fixed overhead in Telecommunication
Products, increased sales of high gross margin product in Consumer and
Industrial Products and improved operating margins on subfractional and
fractional/integral motor sales at Motors and Gears. Partially offsetting these
increases were decreased operating income due to increased expenses incurred for
facility expansion and lower sales of high margin product in Jordan Specialty
Plastics, and increased start-up costs for Brazilian operations in
Telecommunication Products. In addition, operating income decreased due to
the divestitures mentioned above.
The effective tax rate in 1999 is higher than 1998 due to the increase in
taxes at the foreign subsidiaries.
<PAGE>
PAGE 21
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Liquidity and Capital Resources.
In general, the Company requires liquidity for working capital, capital
expenditures, interest, taxes, debt repayment and its acquisition strategy.
Of primary importance are the Company's working capital requirements, which
increase whenever the Company experiences strong incremental demand or
geographical expansion. The Company expects to satisfy its liquidity
requirements through a combination of funds generated from operating
activities and the funds available under its revolving credit facilities.
The Company had approximately $266.6 million of working capital at September
30, 1999 compared to approximately $189.1 million at the end of 1998. The
increase in working capital during the first three quarters of 1999 was
primarily due to higher receivables, inventory, and other current assets of
$57.2 million,$36.1 million, and $8.3 million, respectively. These increases
in working capital are partially offset by higher notes payable, accounts
payable and accrued expenses of $2.4 million, $13.6 million and $7.2 million,
respectively.
Operating activities. Net cash used in operating activities for the nine
months ended September 30, 1999 was $0.2 million compared to net cash provided
by operating activities of $10.4 million during the same period in 1998. The
decrease in cash is primarily due to increases in current and non-
current assets as compared to the same period in the prior year.
Investing activities. Net cash used in investing activities for the nine
months ended September 30, 1999 was $165.4 million compared to net cash used
in investing activities of $129.9 million during the same period in 1998. The
increase was primarily due to increased spending on acquisitions and the lack
of proceeds from a sale of subsidiary in the current year.
Financing activities. Net cash provided by financing activities for the nine
months ended September 30, 1999 was $167.7 million compared to net cash
provided by financing activities of $89.4 million during the same period in
1998. This increase is primarily due to the net proceeds of $149.8 million
from the Jordan Industries, Inc. senior debt issuance. Partially offsetting
this increase was the payment of financing costs resulting from this debt
issuance and lower net borrowings on the Company's revolving credit
facilities.
<PAGE>
PAGE 22
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
The Company expects its principal sources of liquidity to be from its
operating activities and funding from its revolving lines of credit. The
Company further expects that these sources will enable it to meet its long-
term cash requirements for working capital, capital expenditures, interest,
taxes, and debt repayment for at least the next twelve months.
Year 2000 Disclosure
Introduction. The Year 2000 issue is the result of computer programs being
written using two digits rather than four to define the applicable year. Any
of the Company's computer programs or hardware that have date-sensitive
software of embedded chips may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
State of Readiness. The Company has determined that it will be required to
modify or replace significant portions of its software and certain hardware
so that those systems will properly utilize dates beyond December 31, 1999.
The Company presently believes that with modifications or replacements of
existing software and certain hardware, the Year 2000 issue can be mitigated.
However, if such modifications and replacements are not made, or are not
completed timely, the Year 2000 issue could have a material impact on the
operations of the Company.
The Company's plan to resolve the Year 2000 issue involves the following four
phases: assessment, remediation, testing and implementation. The Company has
assembled an internal project team that assessed all systems that could be
significantly affected by the Year 2000 issue. Results of this assessment
indicated that some of the Company's significant information technology systems
could be affected. The assessment also indicated that software and hardware
(embedded chips) used in production and manufacturing systems (hereafter also
referred to as operating equipment) may also be at risk. In addition, based on
a review of its product lines, the Company has determined that most of the
products it has sold and will continue to sell do not require remediation to be
Year 2000 compliant. Accordingly, the Company does not believe that the Year
2000 issue presents a material exposure as it relates to the Company's products.
The internal project team has contacted each of the Company's significant
customers and suppliers and received the status of their Year 2000 compliance
programs. The Company has received responses from its significant suppliers and
continues to monitor their compliance. Non-compliant vendors have been
replaced.
For its information technology exposures, to date the Company has completed a
majority of the remediation phase and expects to complete software
modification and replacement no later than November 30, 1999. Once software
is modified or replaced for a system, the Company begins testing and
implementation. The testing and implementation phases for all significant
systems are expected to be completed by November 30, 1999. The four phases
of the Company's Year 2000 program in relation to operating equipment is on
going and expected to be completed by November 30, 1999.
<PAGE>
PAGE 23
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Cost. The Company has utilized both internal and external resources to modify
or replace, test, and implement the software and operating equipment for Year
2000 modifications. The total cost of the Year 2000 project is estimated at
$4.75 million and is being funded through operating cash flows and capital
leases. To date, the Company has incurred approximately $4.70 million
related to all phases of the Year 2000 project. The majority of these costs
have been capitalized as they relate to new software and equipment.
Risks. Management of the Company believes it has an effective program in
place to resolve the Year 2000 issue in a timely manner. As noted above, the
Company has not yet completed all necessary phases of the Year 2000 program.
In the event that the Company does not complete any additional phases, the
Company could be materially adversely affected. In addition, disruptions in
the economy generally resulting from the Year 2000 issue could also
materially adversely affect the Company. The amount of potential liability
and lost revenue cannot be reasonably estimated at this time.
Contingency Plan. The Company is in the process of developing a contingency
plan in the event it does not complete all phases of the Year 2000 program.
<PAGE>
PAGE 24
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
Form 8K/A filed on May2, 1999 for the purchase
of Alma Products.
27. EDGAR Financial Data Schedule
<PAGE>
PAGE 25
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JORDAN INDUSTRIES, INC.
November 12, 1999 By: /s/ Thomas C. Spielberger
Thomas C. Spielberger
Senior Vice President,
Finance and Accounting
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 22,345
<SECURITIES> 0
<RECEIVABLES> 224,218
<ALLOWANCES> (6,408)
<INVENTORY> 175,787
<CURRENT-ASSETS> 441,951
<PP&E> 313,494
<DEPRECIATION> (161,144)
<TOTAL-ASSETS> 1,271,807
<CURRENT-LIABILITIES> 175,370
<BONDS> 1,002,428
28,839
0
<COMMON> 1
<OTHER-SE> (220,770)
<TOTAL-LIABILITY-AND-EQUITY> 1,271,807
<SALES> 858,532
<TOTAL-REVENUES> 858,532
<CGS> 553,463
<TOTAL-COSTS> 553,463
<OTHER-EXPENSES> 158,928
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 94,933
<INCOME-PRETAX> 6,066
<INCOME-TAX> 7,127
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<DISCONTINUED> 0
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