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, 2000 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 9, 2000: 98,501.0004.
<PAGE>
2
JORDAN INDUSTRIES, INC.
INDEX
Part I. Page No.
------- --------
Financial Information 3
Condensed Consolidated Balance Sheets
at September 30, 2000, and December 31, 1999 3
Condensed Consolidated Statements of Operations for
the Three Months Ended September 30, 2000 and 1999
and the Nine Months Ended September 30, 2000 and 1999 4
Condensed Consolidated Statements of Cash Flows for
the Nine Months Ended September 30, 2000 and 1999 5
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 13
Part II.
--------
Other Information 21
Signatures 22
<PAGE>
3
JORDAN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(ALL DOLLAR AMOUNTS IN THOUSANDS)
September 30, December 31,
2000 1999
-------------- ------------
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 15,299 $ 20,417
Accounts receivable, net 146,816 139,269
Inventories 140,835 130,747
Net assets of discontinued operations
held for sale - 267,616
Prepaid expenses and other current assets 11,907 10,392
---------- ------------
Total Current Assets 314,857 568,441
Property, plant and equipment, net 109,049 108,114
Investments in and advances to affiliates 36,353 25,337
Goodwill, net 365,803 404,359
Deferred income taxes 15,851 15,851
Other assets 45,714 44,238
---------- ------------
Total Assets $887,627 $ 1,166,340
========== ============
LIABILITIES AND NET CAPITAL DEFICIENCY
Current Liabilities:
Accounts payable $ 60,054 $ 60,345
Accrued liabilities 65,531 60,184
Taxes payable 3,285 3,115
Advance deposits 2,208 1,651
Current portion of long-term debt 11,946 424,520
---------- ------------
Total Current Liabilities $143,024 549,815
Long-term debt 800,385 843,211
Other non-current liabilities 10,029 9,897
Minority interest 560 406
Preferred stock 1,960 1,846
Net Capital Deficiency: Common stock
$.01 par value: 100,000 shares
authorized and 98,501.0004 shares
outstanding 1 1
Additional paid-in capital 2,116 2,116
Accumulated other comprehensive loss (12,121) (5,740)
Accumulated deficit (58,327) (235,212)
---------- ------------
Total Net Capital Deficiency (68,331) (238,835)
---------- ------------
Total Liabilities and Net Capital
Deficiency $887,627 $1,166,340
========== ============
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 NINE MONTHS ENDED
September 30, September 30,
-------------------- -------------------
2000 1999 2000 1999
------ ------ ------ ------
Net sales $203,798 $192,605 $ 601,999 $ 549,390
Cost of sales, excluding
depreciation 130,604 125,815 382,792 356,064
Selling, general and
administrative expenses,
excluding depreciation 42,742 36,524 127,084 102,761
Depreciation 5,903 5,541 17,195 16,064
Amortization of goodwill
and other intangibles 4,092 3,924 12,331 11,472
Goodwill impairment 14,636 - 14,636 -
Management fees and other 65 709 557 2,351
--------- -------- --------- --------
Operating income 5,756 20,092 47,404 60,678
Other (income) expenses:
Interest expense 23,340 23,213 69,292 63,648
Interest income (600) (212) (1,960) (710)
Other 969 464 1,571 (86)
--------- -------- --------- --------
Total other expenses, net 23,709 23,465 68,903 62,852
--------- -------- --------- --------
Loss from continuing
operations before income
taxes, minority interest
and extraordinary items (17,953) (3,373) (21,499) (2,174)
Provision (benefit)for
income taxes 1,178 (460) (310) 6,489
--------- -------- --------- --------
Loss from continuing operations
before minority interest and
extraordinary items
(19,131) (2,913) (21,189) (8,663)
Minority interest (164) (76) 503 89
--------- -------- -------- --------
Loss from continuing
operations (18,967) (2,837) (21,692) (8,752)
Discontinued operations, net of
taxes 131 (289) (198,690) (5,373)
--------- -------- --------- --------
(Loss) income before
extraordinary items (19,098) (2,548) 176,998 (3,379)
Extraordinary items - (193) - -
--------- -------- --------- ---------
Net (loss) income $ (19,098) $(2,355) $ 176,998 $(3,379)
========= ======== ========= =========
See accompanying notes to condensed consolidated financial statements.
<PAGE>
5
JORDAN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
NINE MONTHS ENDED
September 30,
---------------------
2000 1999
------ ------
Cash flows from operating activities:
Net income (loss) $ 176,998 $ (3,379)
Adjustments to reconcile net income (loss)
to net cash used in operating activities:
Depreciation and amortization 43,967 41,045
Amortization of deferred financing fees 3,800 3,940
Minority interest 154 2,083
Non-cash interest 14,830 22,135
Loss on sale of subsidiary - 65
Gain on sale of discontinued operations (198,690) -
Changes in operating assets and liabilities
Net of effects from acquisitions:
Increase in current assets (23,396) (53,764)
(Decrease) increase in current liabilities (28,427) 6,388
Increase in non-current assets (19,616) (16,276)
Increase (decrease) in non-current liabilities 133 (2,337)
--------- --------
Net cash used in operating activities (30,247) (100)
Cash flows from investing activities:
Proceeds from sale of discontinued operations 141,953 -
Capital expenditures, net (11,223) (12,476)
Acquisitions of subsidiaries (38,873) (145,476)
Additional purchase price payments and SAR payments (3,593) (9,135)
Net cash acquired in purchase of subsidiaries 1,680 1,975
Other 28 (357)
-------- --------
Net cash provided by (used in) investing
activities 89,972 (165,469)
Cash flows from financing activities:
(Repayment) proceeds of revolving credit
facilities, net (58,993) 35,000
Repayment of long-term debt (3,075) (4,991)
Repayment of subordinated seller note - (1,500)
Proceeds from debt issuance - Jordan
Industries, Inc. - 149,761
Payment of financing costs - (12,858)
Other borrowing - 2,240
-------- --------
Net cash (used in) provided by financing (62,068) 167,652
activities
Foreign currency translation (2,775) (2,746)
-------- --------
Net decrease in cash and cash equivalents (5,118) (663)
Cash and cash equivalents at beginning of period 20,417 23,008
-------- --------
Cash and cash equivalents at end of period $ 15,299 $ 22,345
======== ========
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 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, 1999, which are included in the Company's Annual
Report filed on Form 10-K for such year (the "1999 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,
2000 1999
------------ ------------
Raw materials $ 54,442 $ 50,484
Work-in-process 18,417 16,335
Finished goods 67,976 63,928
-------- --------
$140,835 $130,747
======== ========
C. Comprehensive Income
Total comprehensive (loss) income for the quarters and nine months ended
September 30, 2000 and 1999 is as follows:
Three Months ended Nine Months Ended
September 30, 2000 September 30,
-------------------- -----------------
2000 1999 2000 1999
-------- -------- ------- ------
Net (loss) income $(19,098) $(2,355) $176,998 $(3,379)
Foreign currency translation 847 1,180 (6,381) (5,998)
-------- ------- --------- -------
Comprehensive (loss) income $(18,251) $(1,175) $170,617 $(9,377)
========= ======== ======== ========
D. Sales of Subsidiaries
On April 27, 2000, the Company sold Bellevue Data Communications, Inc.
("Bellevue") to a related party for $4,117. Bellevue specializes in
providing internet and information technologies to enhance its customers'
markets, information assets and productivity. No significant gain or loss
was recorded as a result of the sale.
On November 9, 1999, the Company sold 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 Company recorded a gain
of $10,037 associated with the sale.
On March 19, 1999 the Company sold its assets in the Consolidated Plumbing
Industries ("CPI" or "Retube") division of Dura-Line for $3,389. There was
<PAGE>
7
JORDAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
no gain or loss associated with the sale. CPI's product is used to replace
copper water pipe in homes.
E. Acquisition and Formation of Subsidiaries
On June 2, 2000, the Company purchased Instachange Displays Limited and
Pique Display Systems, Inc. (collectively "IDL") for approximately $12,635.
IDL is Canada's leading manufacturer and distributor of point-of-purchase
display and retail merchandising products. The acquisition was financed
with $10,146 of cash and a $2,489 subordinated seller note. The purchase
price has been preliminarily allocated to working capital of $1,629, and
property, plant and equipment of $1,315, and resulted in an excess purchase
price over net identifiable assets of $9,691. IDL is a division of
Deflecto.
On March 14, 2000, the Company purchased Online Environs, Inc. ("Online
Environs"), an international internet business solutions developer and
consultant, for $4,124. The acquisition was financed with $2,624 in cash
and a $1,500 subordinated seller note. Online Environs' digital
communications solutions are designed to help clients increase sales,
improve communications, and create and enhance business identities over the
internet, commonly known as eBusiness. The purchase price has been
preliminarily allocated to working capital of $259, property, plant and
equipment of $194 and long-term liabilities of $(43) and resulted in an
excess purchase price over net identifiable assets of $3,714.
In December 1999, Motors & Gears, through its wholly owned subsidiary FIR,
acquired certain net assets of the L'Europea Electric Hoist division
("L'Europea") from Pramac Industriale for approximately $5,200. L'Europea
hoists are electric pulleys and elevators used for lifting applications
mainly found at construction sites. As FIR's operations are included for
periods ending two months prior to the Company's year-end and interim
periods, the effects of this transaction are not included in the Company's
results until 2000. The purchase price has been preliminarily allocated to
working capital of approximately $1,200 and resulted in an excess purchase
price over net identifiable assets of $4,000.
On December 20, 1999, the Company purchased the stock of Yearntree, Ltd.
("Yearntree") for $3,603. Yearntree is a manufacturer of injection molded
office products in the United Kingdom. The purchase was financed with cash
of $2,946 and assumed debt of $657. The purchase price has been allocated
to working capital of $1,117 and property, plant and equipment of $1,845,
and resulted in an excess purchase price over net identifiable assets of
$641. Yearntree is a division of Deflecto.
On October 29, 1999, the Company completed the formation of Jordan Auto
Aftermarket, Inc. ("JAAI"). JAAI was formed as a Restricted Subsidiary
under the Company's Indenture. The Company sold the stock of DACCO and Alma
(see below) to JAAI for $73,000 of JAAI Preferred Stock, which accretes at
plus or minus 97.5% of the cumulative JAAI 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, (unless redemption is prohibited by a JAAI or
Company debt covenant). The Company will also keep its intercompany note
with DACCO ($17.0 million at October 29, 1999). 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 JAAI.
<PAGE>
8
JORDAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
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 net identifiable assets of $1,542. Tele-Flow is a division of
Deflecto.
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
net identifiable assets of $14. Supreme is a division of Seaboard.
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
$88,084 consists of cash of $85,995 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
$9,455, retiree healthcare benefit obligations of ($2,089), and resulted in
an excess purchase price over net identifiable assets of $59,907.
The acquisition of Alma was financed with a $155,000 "tack-on" bond
offering at a 103/8% 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.
Acquisitions of the Company have been financed primarily through the use of
the revolving lines of credit, the issuance of Senior Debt, and seller
notes. 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 2000
and 1999 acquisitions and divestitures had occurred on January 1, 1999 is
as follows:
Nine Months Ended
September 30,
------------------------
2000 1999
-------- -------
Net sales $ 612,759 $ 598,773
Net loss before taxes (18,396) (4,699)
Net loss from continuing operations $ (19,255) $ (2,428)
<PAGE>
9
JORDAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
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 continued to manage its
affairs and operate its business as a debtor-in-possession. The results of
Welcome Home were not consolidated with the Company's results for the
period between January 21, 1997 and July 21, 1999 as the Company no longer
had the ability to control the operations and financial affairs of the
Company. On July 21, 1999, Welcome Home emerged from bankruptcy, whereupon
the Company now owns 100% of the outstanding common stock of Welcome Home,
for consideration paid to creditors of approximately $2,274. The results of
Welcome Home are consolidated with the Company's results from the day of
the emergence, as the Company has regained operational and financial
control of Welcome Home.
G. Discontinued Operations
On July 25, 1997, the Company recapitalized its investment in Jordan
Telecommunication Products, Inc. ("JTP") and JTP acquired the Company's
telecommunications and data communications products business from the
Company for total consideration of approximately $294,027, consisting of
$264,027 in cash, $10,000 of assumed indebtedness and preferred stock, and
the issuance to the Company of $20,000 aggregate liquidation preference of
JTP Junior Preferred Stock. The Company's stockholders and affiliates and
JTP management invested in and acquired the JTP common stock. As a result
of the recapitalization, certain of the Company's affiliates and JTP
management owned substantially all of the JTP common stock. The Company's
investment in JTP was represented solely by the JTP Junior Preferred Stock.
The JTP Junior Preferred Stock represented 95% of JTP's stockholder voting
rights and accreted 95% of JTP's net income or loss. The Company had
obtained an independent opinion as to the fairness, from a financial point
of view, of the recapitalization to the Company and its public bondholders.
On January 18, 2000, the Company's affiliates sold the common stock of JTP
to a third party and the Company sold its interest in the preferred stock
for $54,100. The Company also received $6,535 for reimbursement of
expenses, $12,000 for the buyout of the management services agreements, and
$3,900 for an advisory and indemnity fee. The Company has recognized a gain
on the sale of its interests in JTP of $187,053 in the first nine months of
2000, net of taxes of approximately $28,000.
For the period from January 1, 2000 to January 18, 2000 and the year ended
December 31, 1999, JTP's net sales were $20,724 and $431,310, respectively.
The losses on discontinued operations related to JTP in the Company's
Statements of Operations for the period from January 1, 2000 to January 18,
2000 and the year ended December 31, 1999 included income tax expense of
$406 and $9,269, respectively.
On June 22, 2000, the Company's affiliates sold the common stock of Capita,
which included the subsidiaries Protech, Aurora, Garg, and Raba, to a third
party and the Company sold its interest in the preferred stock for $10,000
in marketable securities. The Company also received $60,750 in marketable
securities for its intercompany notes and $2,000 in cash for the buyout of
<PAGE>
10
JORDAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
the management services agreements. The marketable securities were sold for
cash of $70,750 in August 2000. The Company has recognized a gain on the
sale of its interests in Capita of $11,637 in the first nine months of
2000, net of taxes of $7,000.
For the period from January 1, 2000 to June 22, 2000 and the year ended
December 31, 1999, Capita's net sales were $17,225 and $10,207,
respectively. The losses on discontinued operations related to Capita in
the Company's Statements of Operations for the period from January 1, 2000
to June 22, 2000 and the year ended December 31, 1999, included income tax
expenses of $0 and $(80), respectively.
The following table summarizes the Company's discontinued operations:
Three months ended Nine Months Ended
September 30, September 30,
------------------ ------------------
2000 1999 2000 1999
------ ------ ------ ------
(Income) loss from discontinued
operations before income taxes $ - $(3,703) $ 9,190 $(6,010)
Provision for income taxes - 3,414 406 637
----- ------- ------- -------
Net (income) loss from discontinued
operations - (289) 9,596 (5,373)
Loss (gain) on disposal of
discontinued operations 131 - (243,286) -
Provision for income taxes - - 35,000 -
----- ------- -------- -------
Discontinued operations, net of taxes $ 131 $ (289) $(198,690) $(5,373)
===== ======= ======== =======
H. Additional Purchase Price Agreements
The Company has a deferred purchase price agreement relating to its
acquisition of Yearntree in December 1999. The agreement is based on
Yearntree achieving certain agreed upon cumulative net income before
interest and taxes for the 24 months beginning January 1, 2000 and ending
December 31, 2001. The agreement is payable 30 days after the receipt of
the December 31, 2001 audited financial statements.
The Company also has a deferred purchase price agreement relating to its
acquisition of Teleflow in July 1999. The agreement is based upon Teleflow
achieving certain agreed upon earnings before interest, taxes,
depreciation, and amortization for each year through the year ended
December 31, 2002. On April 21, 2000, the Company paid $500 related to this
agreement.
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 Motors and Gears Advanced DC purchase price agreement
provides for additional consideration to be paid if the acquired entity's
results of operations exceed certain targeted levels. Targeted levels were
set substantially above the historical experience of the acquired entity at
the time of acquisition. The contingent payments apply to operations of
fiscal years 1998 and 1999. Motors and Gears made payments to the previous
shareholders of Advanced DC of $3,200 in March 1999 and $3,100 in March
2000 related to this agreement.
<PAGE>
11
JORDAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Motors and Gears 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 provide 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.
I. Related Party Transaction
In April 2000, the Company, through Motors and Gears, invested an
additional $5,059 in Class A Preferred Stock of JZ International, Ltd. This
increases the Company's investment in JZ International to $12,344 at
September 30, 2000. JZ International's Chief Executive Officer is David W.
Zalaznick, and its stockholders include Messrs. Jordan, Quinn, Zalaznick
and Boucher, who are the Company's directors and stockholders, as well as
other partners, principals and associates. JZ International is a merchant
bank located in London, England that is focused on making European and
other international investments.
J. 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, 1999 consolidated financial statements with respect to
segmentation or the measurement of segment profit or loss.
K. Goodwill Impairment
The Company evaluates its long-lived assets, including goodwill, on an
ongoing basis. Long-lived assets are reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of the
related asset may not be recoverable. Recoverability of assets to be held
and used is measured by a comparison of the carrying amount of the asset to
future undiscounted cash flows expected to be generated by the asset. If
the asset is determined to be impaired, the impairment recognized is
measured by the amount by which the carrying value of the asset exceeds its
fair value.
During the nine months ended September 30, 2000, Motors and Gears recorded
a non-cash impairment loss of $14,636 associated with the write-down of
goodwill relating to one of its businesses, ED&C. This write-down of
goodwill is not deductible for income tax purposes. Significant adverse
changes in ED&C's business environment as well as historical, current and
projected cash flow losses led management to evaluate the operations of
ED&C. As a result of this evaluation, management concluded that ED&C's
goodwill was impaired, and accordingly, it has been written down to zero,
Motors and Gears' best estimate of its fair value as determined using
expected future cash flows. Considerable management judgment is necessary
to determine fair value. Accordingly, actual results could vary
significantly from these estimates.
<PAGE>
12
JORDAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
L.Income taxes
The provision (benefit) for income taxes differs from the amount of income
tax provision (benefit) computed by applying the United States federal
income tax rate to income (loss) from continuing operations before income
taxes, minority interest, and extraordinary items. A reconciliation of the
differences is as follows:
Nine Months ended
September 30, 2000
------------------
Computed statutory tax benefit $ (7,525)
Increase (decrease) resulting from:
Goodwill write-off 5,123
Amortization of goodwill 1,025
Disallowed meals and entertainment 220
State and local tax and other 847
--------
Benefit from income taxes $ (310)
========
M. Subsequent Events
On October 10, 2000, the Company purchased Internet Services of Michigan,
Inc. ("ISMI") for $1,500. The acquisition was financed with cash. ISMI is
an internet service provider with approximately 9,500 customers located in
Michigan. The purchase price has not been allocated at this time.
On October 23, 2000, the Company purchased Flavorsource, Inc.
("Flavorsource") for $9,000. The acquisition was financed with $7,750 of
cash and a $1,250 subordinated seller note. Flavorsource is a developer and
compounder of flavors for use in beverages of all kinds, including coffee,
tea, juices, bar mixes, sodas, and cordials as well as in nutritional
foods, bakery products and ice cream and dairy products. The purchase price
has not been allocated at this time.
<PAGE>
13
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 1999 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, 2000 and 1999. 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,
---------------------- ------------------
2000 1999 2000 1999
---- ------ ----- ------
Net Sales:
Specialty Printing and Labeling $ 31,345 $28,184 $87,261 $80,733
Jordan Specialty Plastics 25,985 24,142 73,451 64,140
Jordan Auto Aftermarket 33,265 36,179 109,433 98,754
Motors and Gears 82,131 78,579 244,378 232,973
Consumer and Industrial Products 31,072 25,521 87,476 72,790
-------- -------- ------- -------
Total $203,798 $192,605 $601,999 $549,390
======== ======== ======== ========
Operating Income (Loss):
Specialty Printing and Labeling $2,008 $ 969 $ 6,029 $ 4,180
Jordan Specialty Plastics 1,526 1,338 4,329 2,801
Jordan Auto Aftermarket 3,853 5,406 14,255 15,677
Motors and Gears (1,335) 13,086 25,715 39,721
Consumer and Industrial Products 873 1,503 948 4,461
-------- -------- ------- -------
Total(a) $6,925 $22,302 $51,276 $66,840
======== ======== ======= =======
Operating Margin(b)
Specialty Printing and Labeling 6.4% 3.4% 6.9% 5.2%
Jordan Specialty Plastics 5.9% 5.5% 5.9% 4.4%
Jordan Auto Aftermarket 11.6% 14.9% 13.0% 15.9%
Motors and Gears (1.6%) 16.7% 10.5% 17.1%
Consumer and Industrial Products 2.8% 5.9% 1.1% 6.1%
Total(a) 3.4% 11.6% 8.5% 12.2%
----------------------
(a) The total does not include corporate overhead of $1,169 and $2,210 for
the three months ended September 30, 2000 and 1999, respectively and $3,872
and $6,162 for the nine months ended September 30, 2000 and 1999,
respectively.
(b) Operating margin is operating income divided by net sales.
<PAGE>
14
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, 2000, the
Specialty Printing and Labeling group ("SPL") consisted of SPAI, Valmark,
Pamco, and Seaboard.
Net sales for the third quarter of 2000 increased $3.2 million, or 11.2%,
over the same period in 1999. This increase was due to higher sales of
calendars and ad specialties at SPAI, $2.0 million and $0.3 million,
respectively, increased sales of screen printed products and membrane
switches at Valmark, $0.6 million and $0.2 million, respectively, and
higher sales of labels at Pamco, $0.5 million. Partially offsetting these
increases were decreased sales of rollstock at Valmark, $0.2 million, and
lower sales of folding boxes at Seaboard, $0.2 million. Net sales for the
first nine months of 2000 increased $6.5 million, or 8.1%, over the same
period in 1999. This increase was due to higher sales of school annuals and
ad specialties at SPAI, $0.3 million and $1.6 million, respectively,
increased sales of screen printed products, membrane switches, and
rollstock at Valmark, $2.7 million, $0.4 million, and $0.1 million,
respectively, higher sales of labels at Pamco, $0.9 million, and increased
sales of folding boxes at Seaboard, $1.0 million. Partially offsetting
these increases were decreased sales of calendars at SPAI, $0.5 million.
The decrease in sales of calendars at SPAI during the first nine months of
2000 is primarily due to SPAI's decision to outsource production.
Production and shipments will increase in the fourth quarter of 2000, as
they did in the third quarter. The increase in sales at Valmark is
primarily the result of Valmark's successful initiative to provide Apple
Computer with the product identification labels for its new computer
products.
Operating income for the third quarter of 2000 increased $1.0 million, or
107.2%, compared with the same period in 1999. This increase was due to
higher operating income at SPAI and Valmark, $0.8 million and $0.4 million,
respectively, partially offset by lower operating income at Pamco and
Seaboard, $0.1 million each. The third quarter decrease at Pamco was due to
additional expenses incurred for the start up of a new facility in
Pennsylvania. The lower third quarter operating income at Seaboard was due
to the lower sales mentioned above. For the first nine months of 2000,
operating income increased $1.8 million, or 44.2%, over the same period in
1999. This nine month increase over 1999 was due to higher operating income
at SPAI and Valmark, $0.9 million and $1.0 million, respectively. Partially
offsetting these increases was decreased operating income at Pamco, $0.1
million. The increased operating income can be attributed to the higher
sales mentioned above, as well as more efficient monitoring of production,
inventory levels, and operating expenses.
Operating margin for the third quarter of 2000 increased 3.0% over the same
period in 1999, from 3.4% to 6.4%, and operating margin for the first nine
months of 2000 increased 1.7% over 1999, from 5.2% to 6.9%. Operating
margin increased primarily due to higher sales levels and more efficient
production monitoring, partially offset by new facility start up expenses
at Pamco.
Jordan Specialty Plastics. As of September 30, 2000, the Jordan
Specialty Plastics group ("JSP") consisted of Beemak, Sate-Lite, and Deflecto.
Net sales for the third quarter of 2000 increased $1.8 million, or 7.6%
over the same period in 1999. This increase was primarily due to the
acquisitions of Teleflow, Yearntree, and IDL (all subsidiaries of Deflecto)
in July and December of 1999 and June of 2000, respectively. Teleflow,
<PAGE>
15
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Yearntree and IDL contributed net sales in the third quarter of 2000 of
$2.5 million, $1.1 million, and $2.0 million, respectively, compared to net
sales of $1.4 million at Teleflow in the third quarter of 1999. In
addition, sales of thermoplastic colorants increased at Sate Lite, $0.2
million, sales of hardware increased at Deflecto, $0.5 million, and sales
of chairmats increased at Rolite (a subsidiary of Deflecto), $0.5 million.
Partially offsetting these increases were decreased sales of plastic
injection molded product at Sate Lite and Beemak, $0.5 million each, and
lower sales of office products at Deflecto's Indianapolis facility, $2.6
million. Net sales for the first nine months of 2000 increased $9.3
million, or 14.5%, over the same period in 1999. Teleflow, Yearntree and
IDL contributed net sales in the first nine months of 2000 of $7.3 million,
$3.7 million, and $2.6 million, respectively, compared to net sales of $1.4
million at Teleflow in the first nine months of 1999. In addition, sales of
thermoplastic colorants increased at Sate Lite, $1.1 million and sales of
hardware increased at Deflecto, $1.2 million. Partially offsetting these
increases were decreased sales of plastic injection molded product at Sate
Lite and Beemak, $1.6 million and $0.7 million, respectively, and decreased
sales of office products and other plastic products at Deflecto's
Indianapolis facility, $2.9 million. The decreased sales of plastic
injection molded products at Sate Lite were primarily due to a slowdown in
the truck market while the decreased office products sales at Deflecto were
primarily due to increased rebates owed to Deflecto's largest customers.
Operating income for the third quarter of 2000 increased $0.2 million, or
14.1%, over the same period in 1999. This increase was primarily due to
higher operating income at Deflecto, $0.4 million, resulting from the
acquisitions of Teleflow, Yearntree, and IDL mentioned above. In addition,
operating income increased at Sate Lite, $0.2 million, due to increased
operating efficiencies and sales in Sate Lite's China facility. Partially
offsetting these increases was decreased operating income at Beemak, $0.4
million, due to a shift in product mix to more fabricated product which is
lower margin product. For the first nine months of 2000, operating income
increased $1.5 million, or 54.6%, over the same period in 1999. The primary
reason for the increase was higher operating income at Deflecto, $1.6
million, due to the acquisitions discussed above. Operating income also
increased at Sate Lite, $0.3 million, while operating income at Beemak
decreased $0.4 million.
Operating margin for the third quarter of 2000 increased 0.4% over the same
period in 1999, from 5.5% to 5.9%, while operating income for the first
nine months of 2000 increased 1.5% over 1999, from 4.4% to 5.9%. The
increased operating margin was primarily due to the Deflecto acquisitions
and the increased operating efficiencies at Sate Lite.
Jordan Auto Aftermarket. As of September 30, 2000, the Jordan Auto
Aftermarket group ("JAAI") consisted of Dacco and Alma.
Net sales for the third quarter of 2000 decreased $2.9 million, or 8.1%,
compared with the same period in 1999. Net sales decreased due to lower
sales of torque converters at Dacco, $1.2 million, and decreased sales of
clutches and discs and air compressors at Alma, $0.4 million and $1.7
million, respectively. Partially offsetting these decreases were higher
sales of torque converters at Alma, $0.4 million. For the first nine months
of 2000, net sales increased $10.7 million, or 10.8%, over the same period
in 1999. The primary reason for this increase was the acquisition of Alma
<PAGE>
16
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
in March 1999. Alma contributed net sales in the first nine months of 2000
of $59.2 million compared with $46.3 million in the first nine months of
1999. Partially offsetting this increase were lower sales of torque
converters at Dacco, $2.2 million. Sales of torque converters at Dacco and
air compressors at Alma were primarily effected by the lack of extreme
temperatures experienced so far in 2000. Transmissions burn out faster in
inclement weather or very hot temperatures, and air conditioning units are
only used when the temperature exceeds a certain level.
Operating income for the third quarter of 2000 decreased $1.6 million, or
28.7%, compared with the same period in 1999. Operating income decreased at
Dacco and Alma, $1.2 million and $0.7 million, respectively, due to the
decreased sales mentioned above. In addition, third quarter operating
income was positively effected by a decrease in corporate expenses, $0.3
million. For the first nine months of 2000, operating income decreased $1.4
million, or 9.1%, compared with the same period in 1999. This decrease was
primarily due to lower operating income at Dacco, $2.2 million, and the
addition of corporate expenses, $0.4 million. Partially offsetting these
decreases was increased operating income at Alma, $1.2 million, primarily
due to the acquisition of the company in March 1999.
Operating margin for the third quarter of 2000 decreased 3.3% over the same
period in 1999, from 14.9% to 11.6%, and operating income for the first
nine months of 2000 decreased 2.9% compared with 1999, from 15.9% to 13.0%.
This decreased operating margin is primarily due to the lower sales levels
discussed above.
Motors and Gears. As of September 30, 2000, 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 2000 increased $3.6 million, or 4.5%,
over the same period in 1999. This increase was due to continued strength
in the controls segment of the business. Net sales in the controls segment
increased 9.9% in the third quarter mainly due to continued strength in the
elevator modernization market. In addition, net sales in the third quarter
increased due to a 2.7% increase in the motors segment. The growth in the
motors segment was led by robust demand for DC products used in material
handling and golf cart applications, as well as by strong growth in Europe
stemming from the acquisition of the L'Europea hoist product line.
Partially offsetting this increase in the motors segment was decreased
sales of subfractional motors driven primarily by continued weakness in the
bottle and can vending market. Net sales for the first nine months of 2000
increased $11.4 million, or 4.9%, over the same period in 1999. This
increase was primarily due to higher sales in the controls segment, 22.0%,
and increased sales of fractional/integral motors, 5%. Partially offsetting
these increases were lower sales of subfractional motors, 6%.
Operating income for the third quarter of 2000 decreased $14.4 million, or
110.2%, compared with the same period in 1999. This decrease is primarily
due to the goodwill impairment of $14.6 million at ED&C (see note K).
Excluding the effect of the goodwill impairment, operating income for the
third quarter of 2000 increased $0.2 million, or 1.6%, over the same period
in 1999. Operating income for the first nine months of 2000 decreased $14.0
million, or 35.3%, compared with the same period in 1999. This was also
primarily due to the goodwill impairment discussed above. Excluding the
<PAGE>
17
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
effect of this, operating income for the first nine months of 2000
increased $0.6 million, or 1.6%, compared with the same period in 1999.
Operating margin for the third quarter of 2000 decreased to (1.6)% from
16.7% in the same period in 1999 and operating margin for the first nine
months of 2000 decreased to 10.5% from 17.1% in the same period in 1999.
These decreases were due to the goodwill impairment mentioned above.
Consumer and Industrial Products. As of September 30, 2000, the
Consumer and Industrial Products group consisted of Riverside, Cape, Welcome
Home, Cho-Pat, and Online Environs.
Net sales for the third quarter of 2000 increased $5.6 million, or 21.8%,
over the same period in 1999. Sales increased primarily due to the
reconsolidation of Welcome Home resulting from its emergence from
bankruptcy in July 1999 (see note F). Welcome Home contributed net sales of
$13.4 million in the third quarter of 2000. Sales also increased due to the
acquisition of Online Environs in March 2000. Online contributed net sales
of $0.9 million in the third quarter of 2000. In addition, sales of Bibles
and Bible accessories increased at Riverside, $0.5 million, and sales of
orthopedic supports increased at Cho-Pat, $0.1 million. Partially
offsetting these increases were lower sales at Parsons, $3.2 million, due
to the divestiture of that company in November 1999. Sales also decreased
due to lower sales of books and other gift items at Riverside, $1.1
million. Although sales at Cape decreased $5.0 million, the decrease was
mainly due to the reconsolidation of Welcome Home and the resulting
elimination of intercompany sales from Cape to Welcome Home. Sales from
Cape to third parties increased $0.7 million in the third quarter of 2000
due to improved products and additional customers.
Net sales for the first nine months of 2000 increased $14.7 million, or
20.2%, over the same period in 1999. This increase was also primarily due
to the reconsolidation of Welcome Home and the acquisition of Online
Environs. Welcome Home and Online Environs contributed net sales in the
first nine months of 2000 of $34.3 million and $2.7 million, respectively.
In addition, sales of Bibles and Bible accessories at Riverside increased
$1.2 million, and sales of orthopedic supports at Cho-Pat increased $0.3
million. Partially offsetting these increases were lower sales at Dura Line
Retube and Parsons, $1.2 million and $9.9 million, respectively, due to the
divestitures of those companies in March and November 1999, respectively.
In addition, sales of books and other gift items at Riverside decreased
$2.9 million. Sales at Cape decreased $9.8 million, but this was due to the
reconsolidation of Welcome Home, as mentioned above. Sales from Cape to
third parties increased $2.0 million in the first nine months of 2000.
Operating income for the third quarter of 2000 decreased $0.6 million, or
41.9%, compared with the same period in 1999. This decrease was primarily
due to lower operating income at Welcome Home, $0.2 million, due to its
reconsolidation, as mentioned above, as well as decreased operating income
at Parsons, $0.7 million, due to its divestiture in November 1999. In
addition, operating income decreased due to an operating loss at Online
Environs, $0.4 million. Partially offsetting these decreases was increased
operating income at Riverside, $0.7 million. Operating income decreased at
Online Environs due to a slowdown in website design stemming from cash
constraints experienced by many dot.com companies. For the first nine
months of 2000, operating income decreased $3.5 million, or 78.8%, compared
with the same period in 1999. This was also primarily due to the
<PAGE>
18
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
reconsolidation of Welcome Home. Welcome Home recorded operating losses of
$2.6 million in the first nine months of 2000. This was a typical nine
months for Welcome Home as it is a seasonal business with the vast majority
of its operating income realized in the fourth quarter. In addition,
operating income for the nine months decreased $2.2 million due to the
divestiture of Parsons. Partially offsetting these decreases was increased
operating income at Riverside, Cho-Pat, and Online Environs, $0.9 million,
$0.1 million, and $0.3 million, respectively.
Operating margin for the third quarter of 2000 decreased 3.1% compared with
1999, from 5.9% to 2.8% and operating margin for the first nine months of
1999 decreased 5.0% compared with 1999, from 6.1% to 1.1%. These decreases
were primarily due to the reconsolidation of Welcome Home and the
divestiture of Parsons.
Consolidated Results: (See Condensed Consolidated Statement of Operations).
Consolidated net sales for the third quarter of 2000 increased $11.2
million, or 5.8%, over the same period in 1999. This increase was primarily
due to the acquisitions of Teleflow, Yearntree, and IDL in the Jordan
Specialty Plastics group, and Online Environs in the Consumer and
Industrial Products group. Net sales also increased due to the
reconsolidation of Welcome Home resulting from its emergence from
bankruptcy in July 1999. In addition, third quarter sales increased due to
higher sales of calendars and ad specialties at SPAI, screen printed
product at Valmark, labels at Pamco, thermoplastic colorants at Sate Lite,
hardware products and chairmats at Deflecto, controls and
fractional/integral motors at Motors and Gears, Bibles and Bible
accessories at Riverside, and home accessories at Cape. Partially
offsetting these increases were lower sales of plastic injection molded
products at Sate Lite and Beemak, office products at Deflecto, torque
converters at Dacco, air compressors at Alma, subfractional motors at
Motors and Gears, and lower sales of books and other gift items at
Riverside. Sales also decreased due to the divestiture of Parsons in
November 1999.
For the first nine months of 2000, consolidated net sales increased $52.6
million, or 9.6%, over the same period in 1999. This increase was also
primarily due to the acquisitions mentioned above as well as to the
acquisition of Alma in March 1999. The reconsolidation of Welcome Home also
contributed to the increase in net sales for the first nine months of 2000.
In addition, sales increased due to higher sales of ad specialties at SPAI,
screen printed products at Valmark, folding boxes at Seaboard,
thermoplastic colorants at Sate Lite, hardware products at Deflecto,
controls and fractional/integral motors at Motors and Gears, Bibles and
Bible accessories at Riverside, and orthopedic supports at Cho-Pat.
Partially offsetting these increases were lower sales of calendars at SPAI,
plastic injection molded products at Sate Lite and Beemak, office products
at Deflecto, torque converters at Dacco, subfractional motors at Motors and
Gears, and books and other gift items at Riverside. Sales also decreased
due to the sales of Dura Line Retube and Parsons, as mentioned above.
Consolidated operating income for the third quarter of 2000 decreased $14.3
million, or 71.4%, compared with the same period in 1999. This decrease was
primarily due to the goodwill impairment at ED&C (see note K). In addition,
operating income decreased primarily due to lower operating income at
<PAGE>
19
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Beemak stemming from a shift in product mix to slightly lower margin
product, decreased operating income at Jordan Auto Aftermarket due to
decreased sales levels, and lower operating income at Welcome Home due to
its reconsolidation and the seasonality of its business. Partially
offsetting these decreases was increased operating income at SPAI stemming
from more efficient production, higher operating income at Valmark
resulting from increased sales of higher margin product and increased
operating income at Sate Lite due to increased operating efficiencies in
the China facility. Consolidated operating income for the first nine months
of 2000 decreased $13.3 million, or 21.9%, compared with the same period in
1999. This decrease is also primarily due to the goodwill impairment
discussed above. In addition, operating income decreased at Beemak, Dacco,
and Welcome Home. Operating income in the third quarter and first nine
months of 2000 was also negatively effected by the divestitures of Dura
Line Retube and Parsons, as discussed above.
Consolidated operating margin for the third quarter of 2000 decreased to
2.8% from 10.4% in the third quarter of 1999 and consolidated operating
margin for the first nine months decreased to 7.9% from 11.0% in the first
nine months of 1999. These decreases were due to the reasons mentioned
above.
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 $171.8 million of working capital from
continuing operations at September 30, 2000 compared to approximately
$160.3 million at the end of 1999. The increase in working capital during
the first nine months of 2000 was primarily due to higher accounts
receivables and inventories of $7.5 million and $10.1 million,
respectively. These increases in working capital are partially offset
by higher accrued liabilities and advanced deposits of $5.3 million and
$0.6 million, respectively.
Operating activities. Net cash used in operating activities for the nine
months ended September 30, 2000 was $30.2 million compared to net cash used
in operating activities of $0.1 million during the same period in 1999. The
increase in cash used is primarily due to decreases in current liabilities
and increases in non-current assets as compared to the same period in the
prior year, partially offset by a smaller increase in current assets as
compared to the prior year.
Investing activities. Net cash provided by investing activities for the
nine months ended September 30, 2000 was $90.0 million compared to net cash
used in investing activities of $165.5 million during the same period in
1999. The increase was primarily due to decreased spending on acquisitions
and the proceeds from the sale of discontinued operations in the current
year.
Financing activities. Net cash used in financing activities for the nine
months ended September 30, 2000 was $62.1 million compared to net cash
<PAGE>
20
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
provided by financing activities of $167.7 million during the same period
in 1999. This decrease is primarily due to the net proceeds of $149.8
million from the Jordan Industries, Inc. senior debt issuance in the prior
year. In addition, the Company had net revolver repayments of $59.0 million
in the current year as compared to net revolver borrowings of $35.0 million
in the prior year.
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.
The Company is party to various credit agreements under which the Company
is able to borrow up to $160.0 million to fund acquisitions, provide
working capital and for other general corporate purposes. The credit
agreements mature at various dates through 2002. The agreements are secured
by a first priority security interest in substantially all of the Company's
assets. As of September 30, 2000, the Company had approximately $134.2
million of available funds under these arrangements.
In addition, Welcome Home, a subsidiary of the Company, has a Security
Agreement with Fleet, which provides for maximum borrowings of $15.0
million. The agreement is secured by essentially all the assets of Welcome
Home and expires October 29, 2003. As of November 9, 2000, Welcome Home had
approximately $6.7 million of available funds under this agreement.
Quantitative And Qualitative Disclosures About Market Risks
The Company's debt obligations are primarily fixed-rate in nature and, as
such, are not sensitive to changes in interest rates. At September 30,
2000, the Company had $24.3 million of variable rate debt outstanding. A
one percentage point increase in interest would increase the annual amount
of interest paid by approximately $0.2 million. The Company does not
believe that its market risk financial instruments on September 30, 2000
would have a material effect on future operations or cash flows.
The Company is exposed to market risk from changes in foreign currency
exchange rates, including fluctuations in the functional currency of
foreign operations. The functional currency of operations outside the
United States is the respective local currency. Foreign currency
translation effects are included in accumulated other comprehensive income
in shareholder's equity.
<PAGE>
21
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
--------------------------------
27. EDGAR Financial Data Schedule
<PAGE>
22
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 9, 2000 By: /s/ Thomas C. Spielberger
---------------------------
Thomas C. Spielberger
Senior Vice President,
Finance and Accounting
