SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended June 30, 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
August 11, 2000: 98,501.0004.
1
<PAGE>
JORDAN INDUSTRIES, INC.
INDEX
Part I. Page No.
------- --------
Financial Information 3
Condensed Consolidated Balance Sheets
at June 30, 2000, and December 31, 1999 3
Condensed Consolidated Statements of Operations for the
Three Months Ended June 30, 2000 and 1999 and the Six
Months Ended June 30, 2000 and 1999 4
Condensed Consolidated Statements of Cash Flows for
the Six Months Ended June 30, 2000 and 1999 5
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 12
Part II.
Other Information 20
Signatures 21
2
<PAGE>
JORDAN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(ALL DOLLAR AMOUNTS IN THOUSANDS)
June 30, December 31,
2000 1999
---------- ------------
(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents $ 19,812 $ 20,417
Marketable securities 70,750 -
Accounts receivable, net 142,331 139,269
Inventories 141,339 130,747
Net assets of discontinued operations
held for sale - 267,616
Prepaid expenses and other current assets 9,501 10,392
---------- -----------
Total Current Assets 383,733 568,441
Property, plant and equipment, net 104,542 108,114
Investments in and advances to affiliates 33,617 25,337
Goodwill, net 382,962 404,359
Deferred income taxes 15,851 15,851
Other assets 45,521 44,238
---------- -----------
Total Assets $ 966,226 $ 1,166,340
========== ===========
LIABILITIES AND NET CAPITAL DEFICIENCY
Current Liabilities:
Accounts payable $ 59,207 $ 60,345
Accrued liabilities 70,292 60,184
Taxes payable 18,497 3,115
Advance deposits 2,713 1,651
Current portion of long-term debt 11,322 424,520
---------- -----------
Total Current Liabilities 162,031 549,815
Long-term debt 842,595 843,211
Other non-current liabilities 8,997 9,897
Minority interest 724 406
Preferred stock 1,921 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 (12,968) (5,740)
Accumulated deficit (39,191) (235,212)
---------- ------------
Total Net Capital Deficiency (50,042) (238,835)
---------- ------------
Total Liabilities and Net Capital
Deficiency $ 966,226 $ 1,166,340
========== ===========
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
JORDAN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
THREE MONTHS ENDED SIX MONTHS ENDED
June 30, June 30,
----------------------- -------------------
2000 1999 2000 1999
-------- ------- --------- ------
<S> <C> <C> <C> <C>
Net sales $ 207,083 $ 193,175 $398,201 $356,785
Cost of sales, excluding
depreciation 129,809 124,806 252,188 230,249
Selling, general and
administrative expenses,
excluding depreciation 42,549 33,471 84,342 66,237
Depreciation 5,718 5,453 11,292 10,523
Amortization of goodwill and
other intangibles 4,165 3,991 8,239 7,548
Management fees and other 198 924 492 1,642
-------- -------- --------- -------
Operating income 24,644 24,530 41,648 40,586
Other (income) expenses:
Interest expense 23,564 21,778 45,952 40,435
Interest income (1,085) (303) (1,360) (498)
Other 608 (1,111) 602 (550)
-------- --------- --------- --------
Total other expenses, net 23,087 20,364 45,194 39,387
-------- --------- -------- --------
Income (loss) from continuing
operations before income taxes,
minority interest
and extraordinary items 1,557 4,166 (3,546) 1,199
Provision (benefit) for income
taxes 363 6,625 (1,488) 6,949
-------- --------- -------- --------
Income (loss) from continuing
operations before minority
interest and extraordinary items 1,194 (2,459) (2,058) (5,750)
Minority interest 642 118 667 165
-------- -------- --------- --------
Income (loss) from continuing
operations 552 (2,577) (2,725) (5,915)
Income/gain on discontinued
operations, net of taxes (8,798) (10,420) (198,821) (5,084)
-------- --------- ---------- --------
Income (loss) before extraordinary
items 9,350 7,843 196,096 (831)
-------- --------- ---------- --------
Extraordinary items - - - 193
-------- --------- ---------- --------
Net income (loss) $ 9,350 $ 7,843 $ 196,096 $(1,024)
======== ========= =========== ========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
4
<PAGE>
JORDAN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
SIX MONTHS ENDED
June 30,
------------------------
2000 1999
---------- ---------
Cash flows from operating activities:
Net income (loss) $ 196,096 $(1,024)
Adjustments to reconcile net income (loss) to net
cash (used in) provided by operating activities:
Depreciation and amortization 19,409 26,737
Amortization of deferred financing fees 2,533 2,681
Minority interest 318 940
Non-cash interest 9,452 14,581
Gain on sale of discontinued operations (198,821) -
Changes in operating assets and liabilities
net of effects from acquisitions:
Increase in current assets (13,763) (27,404)
(Decrease) increase in current liabilities (8,772) 10,837
Increase in non-current assets (15,757) (5,607)
Decrease in non-current liabilities (899) (2,318)
---------- ---------
Net cash (used in) provided by operating
activities (10,204) 19,423
Cash flows from investing activities:
Proceeds from sale of discontinued operations 69,150 -
Capital expenditures, net (7,410) (7,803)
Acquisition of subsidiaries (39,882) (109,003)
Additional purchase price payments and SAR payments (3,093) (8,735)
Net cash acquired in purchase of subsidiaries 1,680 1,971
Other 27 (526)
--------- ---------
Net cash provided by (used in) investing
activities 20,472 (124,096)
Cash flows from financing activities:
Repayment of revolving credit facilities, net (6,043) (17,500)
Repayment of long-term debt (2,254) (5,619)
Proceeds from debt issuance - Jordan
Industries, Inc. - 149,761
Payment of financing costs - (12,475)
Other borrowing - 540
--------- ---------
Net cash (used in) provided by financing activities (8,297) 114,707
Foreign currency translation (2,576) (2,883)
---------- ---------
Net (decrease) increase in cash and cash equivalents (605) 7,151
Cash and cash equivalents at beginning of period 20,417 23,008
--------- ---------
Cash and cash equivalents at end of period $ 19,812 $ 30,159
========= =========
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
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:
June 30, December 31,
2000 1999
-------- ------------
Raw materials $ 54,204 $ 50,484
Work-in-process 16,567 16,335
Finished goods 70,568 63,928
-------- --------
$141,339 $130,747
======== ========
C. Comprehensive Income
Total comprehensive income (loss) for the quarters and six months ended
June 30, 2000 and 1999 is as follows:
Three Months ended Six Months Ended
June 30, 2000 June 30,
------------------ ----------------------
2000 1999 2000 1999
-------- -------- --------- ---------
Net income (loss) $ 9,350 $7,843 $ 196,096 $ (1,024)
Foreign currency translation (4,034) (4,213) (7,228) (7,178)
------ ------ --------- --------
Comprehensive income (loss) $ 5,316 $3,630 $ 188,868 $ (8,202)
======= ====== ========= ========
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.
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
no gain
6
<PAGE>
JORDAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
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"). 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 $4,475. The acquisition was financed with $2,975 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 $83, property, plant and
equipment of $195 and long-term liabilities of $(43) and resulted in an
excess purchase price over net identifiable assets of $4,240.
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.
7
<PAGE>
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 10 3/8% 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 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 2000
and 1999 acquisitions had occurred on January 1, 1999 is as follows:
Six Months Ended
June 30,
--------------------------
2000 1999
-------- --------
Net sales $ 402,537 $ 391,075
Net loss before taxes (2,566) (3,589)
Net loss from continuing operations $ (1,685) $ (5,301)
8
<PAGE>
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
of $187,184 in the first six months of 2000, net of taxes of approximately
$28,000.
For the six months ended June 30, 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 six months ended June 30, 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
the management services agreements. The marketable securities will be sold
for cash of $70,750 in August
9
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JORDAN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
2000. The Company has recognized a gain of $11,637 in the second quarter of
2000, net of taxes of $7,000.
For the six months ended June 30, 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 six month period ended June 30, 2000 and the year ended
December 31, 1999, included income tax expenses of $0 and $(80),
respectively.
The following table summarizes the operating results of discontinued
operations:
<TABLE>
<CAPTION>
Three months ended Six Months Ended
June 30, June 30,
----------------------- ---------------------
2000 1999 2000 1999
-------- -------- -------- ------
<S> <C> <C> <C> <C>
Loss/(income) from discontinued
operations $ 2,224 $ (5,043) $ 9,190 $ (2,307)
Tax on loss/(income) from discontinued
operations - (5,377) 406 (2,777)
------- --------- --------- -------
Net loss/(income) from discontinued
operations 2,224 (10,420) 9,596 (5,084)
(Gain) on disposal of discontinued
operations (18,022) - (243,417) -
Tax on (gain) on disposal of discontinued
operations 7,000 - 35,000 -
------- -------- --------- -------
Income/gain on discontinued operations,
net of tax $(8,798) $(10,420) $(198,821) $ (5,084)
======= ======== ========= =========
</TABLE>
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.
10
<PAGE>
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 June
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.
11
<PAGE>
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 six months ended June 30, 2000 and 1999. This discussion reviews the
following segment data and certain of the consolidated financial data for
the Company.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- -------------------------
2000 1999 2000 1999
------ ------ ------ -------
<S> <C> <C> <C> <C>
Net Sales:
Specialty Printing and Labeling $ 31,849 $ 31,737 $ 55,916 $ 52,549
Jordan Specialty Plastics 24,149 20,428 47,466 39,998
Jordan Auto Aftermarket 38,721 40,951 76,168 62,575
Motors and Gears 82,586 77,903 162,247 154,394
Consumer and Industrial Products 29,778 22,156 56,404 47,269
--------- --------- --------- ---------
Total $ 207,083 $ 193,175 $ 398,201 $ 356,785
========= ========= ========= =========
Operating Income:
Specialty Printing and Labeling $ 3,956 $ 4,022 $ 4,021 $ 3,211
Jordan Specialty Plastics 1,580 789 2,803 1,463
Jordan Auto Aftermarket 5,233 6,287 10,402 10,271
Motors and Gears 14,012 13,581 27,050 26,635
Consumer and Industrial Products 1,071 1,621 75 2,958
-------- -------- -------- --------
Total(a) $ 25,852 $ 26,300 $ 44,351 $ 44,538
======== ======== ======== ========
Operating Margin(b)
Specialty Printing and Labeling 12.4% 12.7% 7.2% 6.1%
Jordan Specialty Plastics 6.5% 3.9% 5.9% 3.7%
Jordan Auto Aftermarket 13.5% 15.4% 13.7% 16.4%
Motors and Gears 17.0% 17.4% 16.7% 17.3%
Consumer and Industrial Products 3.6% 7.3% 0.1% 6.3%
Total(a) 12.5% 13.6% 11.1% 12.5%
------------------------
(a) The total does not include corporate overhead of $1,208 and $1,770 for
the three months ended June 30, 2000 and 1999, respectively and $2,703 and
$3,952 for the six months ended June 30, 2000 and 1999, respectively.
(b) Operating margin is operating income divided by net sales.
</TABLE>
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
Specialty Printing and Labeling. As of June 30, 2000, the Specialty
Printing and Labeling group ("SPL") consisted of SPAI, Valmark, Pamco, and
Seaboard.
Net sales for the second quarter of 2000 increased $0.1 million, or 0.4%,
over the same period in 1999. This increase was due to higher sales of
school annuals and ad specialties at SPAI, $0.4 million and $0.2 million,
respectively, higher sales of screen printed products and rollstock at
Valmark, $0.9 million and $0.1 million, respectively, and increased sales
of folding boxes at Seaboard, $0.8 million. Partially offsetting these
increases were decreased sales of calendars at SPAI, $2.3 million. Net
sales for the first six months of 2000 increased $3.4 million, or 6.4%,
over the same period in 1999. This increase was due to higher sales of
school annuals and ad specialties at SPAI, $0.4 million and $1.4 million,
respectively, increased sales of screen printed products, membrane switches
and roll stock at Valmark, $2.0 million, $0.2 million, and $0.3 million,
respectively, higher sales of labels at Pamco, $0.4 million, and increased
sales of folding boxes at Seaboard $1.3 million. Partially offsetting these
increases were decreased sales of calendars at SPAI, $2.5 million, and
lower sales of shrouds at Valmark, $0.1 million. The decrease in sales of
calendars at SPAI is primarily due to a slowdown in calendar shipments
stemming from SPAI's decision to outsource production. Production and
shipments will increase significantly in the second half of 2000, as
evidenced by the increase in the calendar backlog at June 30, 2000. 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 it's new computer products.
Operating income for the second quarter of 2000 decreased $0.1 million, or
1.6%, compared with the same period in 1999. This decrease was due to lower
operating income at SPAI and Pamco, $0.1 million and $0.3 million,
respectively, partially offset by higher operating income at Valmark and
Seaboard, $0.2 million and $0.1 million, respectively. The second quarter
decrease at Pamco was due to additional expenses incurred for the start up
of a new facility in Pennsylvania. For the first six months of 2000,
operating income increased $0.8 million, or 25.2%, over the same period in
1999. This six month increase over 1999 was due to higher operating income
at SPAI, Valmark and Seaboard, $0.1 million, $0.5 million, and $0.2
million, respectively. These increases 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 second quarter of 2000 remained consistent with
the same period in 1999, while the operating margin for the first six
months of 2000 increased 1.1% over 1999, from 6.1% in 1999 to 7.2% in 2000.
Operating margin increased due to the reasons mentioned above.
Jordan Specialty Plastics. As of June 30, 2000, the Jordan Specialty
Plastics group ("JSP") consisted of Beemak, Sate-Lite, and Deflecto.
Net sales for the second quarter of 2000 increased $3.7 million, or 18.2%,
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,
Yearntree and IDL contributed net sales in the second quarter of 2000 of
$2.3 million, $1.3 million, and $0.6 million, respectively. In addition,
sales of thermoplastic colorants increased at Sate Lite, $0.4 million.
Partially offsetting these increases were decreased sales
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
of miscellaneous plastic injection molded products at Sate Lite and Beemak,
$0.8 million and $0.1 million, respectively. Net sales for the first six
months of 2000 increased $7.5 million, or 18.7%, over the same period in
1999. This increase was also primarily due to the acquisitions mentioned
above. Teleflow, Yearntree, and IDL contributed net sales in the first half
of 2000 of $4.8 million, $2.5 million, and $0.6 million, respectively. In
addition, sales of thermoplastic colorants at Sate Lite increased $0.9
million. Partially offsetting these increases were lower sales of plastic
injection molded products at Sate Lite and Beemak, $1.1 million and $0.2
million, respectively.
Operating income for the second quarter of 2000 increased $0.8 million, or
100.3%, over the same period in 1999. This increase was partially due to
higher operating income at Deflecto, $0.5 million, resulting from the
acquisitions of Teleflow, Yearntree, and IDL mentioned above. In addition,
operating income increased at Sate Lite and Beemak, $0.2 million and $0.1
million, respectively. For the first six months of 2000, operating income
increased $1.3 million, or 91.6%, over the same period in 1999. The primary
reason for the increase was higher operating income at Deflecto, $1.2
million, due to the acquisitions discussed above. Operating income at Sate
Lite also increased $0.1 million. The increase in operating income at Sate
Lite was due to higher overhead absorption in the China facility as
production efficiencies and sales continue to improve.
Operating income for the second quarter of 2000 increased 2.6%, from 3.9%
in 1999 to 6.5% in 2000, while operating income for the first six months of
2000 increased 2.2%, from 3.7% in 1999 to 5.9% in 2000. These increases are
due to the Deflecto acquisitions mentioned above as well as greater
efficiencies at Sate Lite.
Jordan Auto Aftermarket. As of June 30, 2000, the Jordan Auto
Aftermarket group ("JAAI") consisted of Dacco and Alma.
Net sales for the second quarter of 2000 decreased $2.2 million, or 5.5%,
compared with the same period in 1999. Net sales decreased due to lower
sales of torque converters at Dacco, $0.7 million, and decreased sales of
torque converters and air conditioning compressors at Alma, $0.8 million
and $0.7 million, respectively. For the first six months of 2000, net sales
increased $13.6 million, or 21.7%, over the same period in 1999. The
primary reason for this increase was the acquisition of Alma in March 1999.
Alma contributed net sales in the first half of 2000 of $42.2 million
compared with $27.5 million in the first half of 1999. Partially offsetting
this increase were decreased sales of torque converters at Dacco, $1.1
million. Sales of torque converters at Dacco and Alma and air compressors
at Alma were primarily affected 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 second quarter of 2000 decreased $1.1 million, or
16.8%, compared with the same period in 1999. Operating income decreased at
Dacco and Alma, $0.5 million and $0.2 million, respectively due to the
decreased sales mentioned above. In addition, second quarter operating
income was effected by the addition of corporate expenses, $0.4 million.
For the first six months of 2000, operating income increased $0.1 million,
or 1.3%, compared with the same period in 1999. This increase was primarily
due to the acquisition of Alma, as mentioned above. Alma contributed
operating income in the first half of 2000 of $6.1
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
million compared with $4.3 million in the first half of 1999. Partially
offsetting this increase, was decreased operating income at Dacco, $0.9
million, and the addition of corporate expenses, $0.8 million.
Operating margin for the second quarter of 2000 decreased 1.9%, from 15.4%
in 1999 to 13.5% in 2000, while operating income for the first six months
of 2000 decreased 2.7%, from 16.4% in 1999 to 13.7% in 2000. Operating
income decreased due to the reasons mentioned above.
Motors and Gears. As of June 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 second quarter of 2000 increased $4.7 million, or 6.0%,
over the same period in 1999. This increase was due to higher sales in the
controls segment, 23%, and higher sales of fractional/integral motors, 8%.
Partially offsetting these increases were lower sales of subfractional
motors, 7%. Net sales for the first six months of 2000 increased $7.9
million, or 5.1%, over the same period in 1999. This increase was due to
higher sales of controls, 29%, and fractional/integral motors, 3%.
Partially offsetting these increases were lower sales of subfractional
motors, 6%. The decrease in subfractional motor sales was driven primarily
by weakness in the bottle and can vending market. The growth in
fractional/integral motor sales was led by strong demand for AC products,
partially offset by a negative impact of foreign currency translation at
Motors and Gears' foreign operations.
Operating income for the second quarter of 2000 increased $0.4 million, or
3.2%, over the same period in 1999. Operating income increased due to
higher operating income in both the controls and motors segments, 18% and
1%, respectively. Operating income for the first six months of 2000
increased $0.4 million, or 1.6%, over the same period in 1999. This
increase was due to higher operating income in the controls segment, 31%,
partially offset by lower operating income in the motors segment, 1%. These
variances were primarily due to the sales variances described above.
Operating margin for the second quarter of 2000 decreased 0.4%, from 17.4%
in 1999 to 17.0% in 2000, while operating margin for the first six months
of 2000 decreased 0.6%, from 17.3% in 1999 to 16.7% in 2000. The decrease
in operating margin was largely due to the timing of certain corporate
expenses, partially offset by increased gross margins. Gross margins
improved due to product design changes, manufacturing process improvements,
and material cost savings.
Consumer and Industrial Products. As of June 30, 2000, the Consumer
and Industrial Products group consisted of Riverside, Cape, Welcome Home,
Cho-Pat, and Online Environs.
Net sales for the second quarter of 2000 increased $7.6 million, or 34.4%,
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
$11.7 million in the second quarter of 2000. Sales also increased due to
the acquisition of Online Environs in March 2000. Online contributed sales
of $1.8 million in the second quarter. In addition, sales of Bibles and
Bible accessories increased at Riverside, $0.4 million, and sales of
orthopedic supports increased at Cho-Pat, $0.1 million.
15
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
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, $0.9 million. Although sales at Cape appear to have decreased
$2.3 million, the decrease was 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 $1.0 million in the second
quarter of 2000 due to improved products and additional customers.
Net sales for the first six months of 2000 increased $9.1 million, or
19.3%, 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 half of 2000 of $20.9 million and $1.8 million, respectively. In
addition, sales of Bibles and Bible accessories at Riverside increased $0.6
million and sales of orthopedic supports at Cho-Pat increased $0.2 million.
Partially offsetting these increases were lower sales at Dura Line Retube
and Parsons, $1.2 million and $6.7 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
$1.7 million. Sales at Cape appear to have decreased $4.8 million, but this
was due to the reconsolidation of Welcome Home as mentioned above. Sales
from Cape to third parties increased $1.3 million.
Operating income for the second quarter of 2000 decreased $0.6 million, or
33.9%, compared with the same period in 1999. This decrease was primarily
due to lower operating income at Welcome Home, $0.7 million, due to its
reconsolidation, as mentioned above. In addition, operating income
decreased $0.8 million due to the divestiture of Parsons. Partially
offsetting these decreases was higher operating income at Online Environs,
$0.7 million, due to its acquisition in March 2000. Operating income also
increased at Cape and Cho-Pat, $0.1 million each, due to the higher sales
levels discussed above. For the first six months of 2000, operating income
decreased $2.9 million, or 97.5%, compared with the same period in 1999.
This was also primarily due to the reconsolidation of Welcome Home. Welcome
Home contributed operating income of $(2.4) million in the first half of
2000. This was a typical six 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 six months decreased
$1.5 million due to the divestiture of Parsons. Partially offsetting these
decreases was higher operating income at Online Environs, $0.7 million, due
to its acquisition, as well as higher operating income at Riverside and
Cho-Pat, $0.2 million and $0.1 million, respectively.
Operating margin for the second quarter of 2000 decreased 3.7%, from 7.3%
in 1999 to 3.6% in 2000, while operating margin for the first six months of
2000 decreased 6.2%, from 6.3% in 1999 to 0.1% in 2000. These decreases are
primarily the result of the reconsolidation of Welcome Home and the
divestiture of Parsons.
Consolidated Results: (See Condensed Consolidated Statement of Operations).
Consolidated net sales for the second quarter of 2000 increased $13.9
million, or 7.2%, 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
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
sales also increased due to the reconsolidation of Welcome Home resulting
from its emergence from bankruptcy in July 1999. In addition, second
quarter sales increased due to higher sales of school annuals and ad
specialties at SPAI, screen printed products at Valmark, folding boxes at
Seaboard, thermoplastic colorants at Sate Lite, controls and
fractional/integral motors at Motors and Gears, Bibles and Bible
accessories at Riverside, and home accessories at Cape. Partially
offsetting these higher sales were decreased sales of calendars at SPAI,
plastic injection molded products at Sate Lite, torque converters and air
conditioning compressors in the Jordan Auto Aftermarket group, and
subfractional motors at Motors and Gears. Sales also decreased due to the
divestitures of Dura Line Retube and Parsons in March and November 1999,
respectively.
For the first six months of 2000, consolidated net sales increased $41.4
million, or 11.6%, over the same period in 1999. This increase was also
primarily due to the acquisitions mentioned above as well as the
acquisition of Alma in March 1999. The reconsolidation of Welcome Home also
contributed to the increase in net sales for the first half of 2000. In
addition, sales increased due to higher sales of screen printed products
and roll stock at Valmark, labels at Pamco, folding boxes at Seaboard,
thermoplastic colorants at Sate Lite, 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, torque converters at Dacco, and subfractional motors at
Motors and Gears. Sales also decreased due to the sales of Dura Line Retube
and Parsons, as mentioned above.
Consolidated operating income for the second quarter of 2000 increased $0.1
million, or 0.5%, over the same period in 1999. This increase was due to
the acquisitions mentioned above as well as higher operating income at
Valmark, Seaboard, Sate Lite, Beemak, and the controls and motors segments
of Motors and Gears. Operating income also increased due to lower corporate
overhead. Partially offsetting these increases was decreased operating
income resulting from the divestitures and reconsolidation mentioned above,
as well as lower operating income at Pamco, Dacco, and Alma. For the first
six months of 2000, consolidated operating income increased $1.1 million,
or 2.6%, over the same period in 1999. This increase was primarily due to
the acquisitions discussed above and higher operating income at SPAI,
Valmark, Seaboard, Sate Lite, the controls segment of Motors and Gears,
Riverside, and Cho-Pat. In addition, operating income increased due to
lower corporate overhead. Partially offsetting these increases was lower
operating income resulting from the divestitures mentioned above as well as
decreased operating income at Dacco, the motors segment of Motors and
Gears, and Welcome Home. The decreased operating income at Dacco is
primarily due to the lack of extreme cold and hot weather experienced
throughout 2000 and the resulting lower sales volume, while the lower
operating income at Welcome Home is due to the seasonal nature of Welcome
Home's business.
Consolidated operating margin for the second quarter of 2000 decreased
0.8%, from 12.7% in 1999 to 11.9% in 2000, while consolidated operating
income for the first six months of 2000 decreased 0.9%, from 11.4% in 1999
to 10.5% in 2000. The decrease in operating margin is due to the reasons
mentioned above.
17
<PAGE>
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 $221.7 million of working capital from
continuing operations at June 30, 2000 compared to approximately $160.3
million at the end of 1999. The increase in working capital during the
first six months of 2000 was primarily due to higher marketable securities
and inventories of $70.1 million and $10.6 million, respectively. These
increases in working capital are partially offset by higher accrued
liabilities and taxes payable of $10.1 million and $15.4 million,
respectively.
Operating activities. Net cash used in operating activities for the six
months ended June 30, 2000 was $10.2 million compared to net cash provided
by operating activities of $19.4 million during the same period in 1999.
The decrease in cash is primarily due to 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 six
months ended June 30, 2000 was $20.5 million compared to net cash used in
investing activities of $124.1 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 six
months ended June 30, 2000 was $8.3 million compared to net cash provided
by financing activities of $114.7 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.
Partially offsetting this decrease was the payment of financing costs
resulting from this debt issuance 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 August 11, 2000, the Company had approximately $83.0 million
of available funds under these arrangements.
18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(UNAUDITED)
(ALL DOLLAR AMOUNTS IN THOUSANDS)
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 August 11, 2000, Welcome Home had
approximately $6.1 million of available funds under this agreement.
Impact of Year 2000
The Company experienced no significant disruptions in mission critical
information technology and non-information technology systems and believes
those systems successfully responded to the Year 2000 date change.
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 June 30, 2000, the
Company had $78.9 million of variable rate debt outstanding. A one
percentage point increase in interest would increase the annual amount of
interest paid by approximately $0.8 million. The Company does not believe
that its market risk financial instruments on June 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.
19
<PAGE>
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 May 2, 1999 for
the purchase of Alma Products.
27. EDGAR Financial Data Schedule
20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JORDAN INDUSTRIES, INC.
August 11, 2000 By: /s/ Thomas C. Spielberger
---------------------------
Thomas C. Spielberger
Senior Vice President,
Finance and Accounting
21
