- --------------------------------------------------------------------------------
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 the quarterly period ended March 31, 1997
Commission File No. 0-21830
---------------------
Johnstown America Industries, Inc.
(Exact name of registrant as specified in its charter)
Incorporated pursuant to the Laws of the State of Delaware
---------------------
Internal Revenue Service - Employer Identification No. 25-1672791
980 N. Michigan Avenue
Suite 1000
Chicago, IL 60611
(Address of principal executive offices)
(312) 280-8844
Registrant's telephone number, including area code
---------------------
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 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 90 days.
Yes [X] No [ ]
The total number of shares of the registrant's Common Stock, $.01 par value,
outstanding on March 12, 1997 was 9,755,062.
- --------------------------------------------------------------------------------
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Page
PART I FINANCIAL INFORMATION..................................... 3
Item 1 Condensed Consolidated Balance Sheets as
of March 31, 1997, and December 31, 1996.................. 4-5
Condensed Consolidated Statements of Income for
the Three Months Ended March 31, 1997 and 1996............ 6
Condensed Consolidated Statements of Cash Flows
for the Three Months Ended March 31, 1997 and 1996........ 7-8
Notes to Condensed Consolidated Financial Statements...... 9-20
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations............. 21-25
PART II OTHER INFORMATION ...................................... 26
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
In the opinion of the registrant's management, the unaudited condensed
consolidated financial statements included in this filing on Form 10-Q reflect
all adjustments (which consist of normal recurring adjustments) which are
considered necessary for a fair presentation of financial information for the
periods presented.
3
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1997 AND DECEMBER 31, 1996
March 31, December 31,
(In thousands) 1997 1996
------------ -----------
(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents............................ $ 4,823 $ 24,535
Accounts receivable, net............................. 64,874 49,346
Inventories.......................................... 41,643 49,589
Prepaid expenses and other........................... 19,300 19,360
--------- ---------
Total current assets............................... 130,640 142,830
Property, plant and equipment, net................... 121,395 123,859
Leasing business assets, net......................... 40,596 23,255
Restricted cash...................................... 578 578
Deferred financing costs, net........................ 12,791 13,450
Intangible assets, net............................... 249,562 251,311
-------- --------
Total assets....................................... $ 555,562 $ 555,283
======== ========
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
AS OF MARCH 31, 1997 AND DECEMBER 31, 1996
March 31, December 31,
(In thousands) 1997 1996
------------ -----------
(Unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable..................................... $ 36,485 $ 43,325
Accrued expenses and other payables.................. 51,689 55,050
Current maturities of long-term debt and capital lease 18,076 17,236
--------- --------
Total current liabilities.......................... 106,250 115,611
Long-term debt and capital lease, less current maturities 168,715 173,763
JAIX Leasing debt, Less current maturities............ 29,630 13,176
Senior subordinated notes............................. 100,000 100,000
Deferred income taxes................................. 28,903 29,214
Other long-term liabilities........................... 60,419 59,982
Shareholders' Equity:
Preferred stock, par $.01, 20,000 shares
authorized, none outstanding........................ -- --
Common stock, par $.01, 201,000 shares
authorized, 9,755 and 9,754 issued and outstanding
as of March 31, 1997 and December 31, 1996,
respectively........................................ 98 98
Paid-in capital...................................... 55,049 55,049
Retained earnings.................................... 6,528 8,420
Employee receivables for stock purchases............. (30) ( 30)
-------- --------
Total shareholders' equity ..................... 61,645 63,537
Total liabilities and shareholders' equity $ 555,562 $ 555,283
======== ========
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(Unaudited)
(In thousands, except per share data)
Three Months Ended
March 31,
1997 1996
Net manufacturing sales............. $ 114,344 $ 151,318
Leasing revenue..................... 1,378 1,021
---------- ----------
Total revenue...................... 115,722 152,339
Cost of sales - manufacturing....... 95,878 128,797
Cost of leasing..................... 829 331
---------- ----------
Gross profit....................... 19,015 23,211
Selling, general and administrative
expenses........................... 10,752 12,202
Amortization expense................ 2,101 2,571
Gain on sale of leased freight cars. (262) --
----------- ------------
Operating income................... 6,424 8,438
Interest expense, net 8,270 8,176
Interest expense - leasing ........ 379 520
---------- ----------
Loss before income
taxes............................ (2,225) (258)
Provision (benefit) for income taxes (333) 470
---------- ----------
Net loss........................... $ (1,892) $ (728)
========= ==========
Net loss per common
and common equivalent
shares outstanding................. $ (0.19) $ (0.07)
========== =========
Weighted average common and
common equivalent shares .......... 9,774 9,765
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(Unaudited)
(In thousands) Three Months Ended
March 31,
1997 1996
OPERATING ACTIVITIES:
Net loss............................................. $ (1,892) $ (728)
Adjustments to reconcile net loss to net cash provided
by (used for) operating
activities:
Depreciation......................................... 3,817 3,816
Amortization......................................... 2,951 3,558
Gain on sale of leased freight cars.................. (262) --
Deferred tax (benefit) expense....................... (311) 396
Postretirement benefits.............................. 299 718
-------- -------
4,602 7,760
Changes in operating assets and liabilities:
Accounts receivable, net............................. (15,528) (8,909)
Inventories.......................................... 9,918 4,314
Accounts payable..................................... (6,840) (3,222)
Other assets and liabilities......................... (3,747) 5,234
-------- -------
Net cash provided by (used for) operating activities. (11,595) 5,177
-------- -------
INVESTING ACTIVITIES:
Capital expenditures................................. (1,172) (3,372)
Leasing business asset additions..................... (23,412) (15)
Decrease in restricted cash.......................... -- 448
Proceeds from sale of leased freight cars ........... 4,463 --
-------- -------
Net cash used for investing activities............... (20,121) (2,939)
-------- -------
See accompanying notes to condensed consolidated financial statements.
7
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(Unaudited)
(In thousands) Three Months Ended
March 31,
1997 1996
FINANCING ACTIVITIES:
Payments of term loans and capital lease............. $ (4,208) $ (4,203)
Net borrowings under JAIX Leasing loans.............. 16,454 3,437
Payment of deferred financing costs.................. (242) (287)
--------- ---------
Net cash provided by (used for) financing activities. 12,004 (1,053)
--------- ---------
Net increase (decrease) in cash and cash equivalents. (19,712) 1,185
CASH AND CASH EQUIVALENTS,
beginning of period................................. 24,535 11,639
--------- ---------
CASH AND CASH EQUIVALENTS,
end of period....................................... $ 4,823 $ 12,824
========= =========
SUPPLEMENTAL CASH FLOWS DISCLOSURE
Cash paid for interest................................ $ 10,996 $ 10,836
Cash paid for income taxes............................ 92 56
See accompanying notes to condensed consolidated financial statements.
8
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three Months Ended March 31, 1997
(Unaudited)
1. BASIS OF PRESENTATION
The financial statements presented herein and these notes are unaudited. Certain
information and footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations of the
Securities and Exchange Commission. Although the registrant believes that all
adjustments (which include only normal recurring adjustments) necessary for a
fair presentation have been made, interim periods are not necessarily indicative
of the results of operations for a full year. As such, these financial
statements should be read in conjunction with the financial statements and notes
thereto included by reference in the registrant's Form 10-K for the year ended
December 31, 1996.
The condensed consolidated financial statements include the accounts of
Johnstown America Industries, Inc. and its wholly owned subsidiaries (the
"Company"). All significant intercompany transactions and accounts have been
eliminated.
2. INVENTORIES
Inventories of the Company consist of the following (in thousands):
March 31, December 31,
1997 1996
Raw materials and purchased
components $ 8,981 $ 10,289
Work-in-progress and finished goods 32,662 39,300
--------- ---------
$ 41,643 $ 49,589
========= =========
9
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Three Months Ended March 31, 1997
(Unaudited)
3. DEBT
Long-term debt of the Company consists of the following (in thousands):
March 31, December 31,
1997 1996
---- ----
Revolving Loan $ -- $ --
Tranche A Term Loan 83,338 86,670
Tranche B Term Loan 95,837 96,670
--------- ---------
Total Senior Bank Facilities 179,175 183,340
Industrial Revenue Bonds 5,300 5,300
Capital lease 1,910 1,953
JAIX Leasing debt 30,036 13,582
--------- ----------
Total debt 216,421 204,175
Less:
Current maturities (18,076) (17,236)
Long-term portion of JAIX Leasing debt (29,630) (13,176)
--------- ----------
Long-term debt, excluding JAIX Leasing debt $ 168,715 $ 173,763
======== ==========
10
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Three Months Ended March 31, 1997
(Unaudited)
Senior Bank Facilities
The Company entered into a credit facility (the Senior Bank Facilities) on
August 23, 1995, in conjunction with the acquisition of Truck Components Inc.
(TCI) and the related transactions. The Revolving Loans portion of the Senior
Bank Facilities provides for up to $100 million of outstanding borrowings and
letters of credit, limited by the level of eligible accounts receivable and
inventories. As of March 31, 1997, availability under the Revolving Loans, after
consideration of outstanding letters of credit of $17.6 million, was $42.2
million.
At the Company's election, interest rates per annum applicable to the Revolving
Loans and Tranche A Term Loan are fluctuating rates of interest measured by
reference to either (a) an adjusted London inter-bank offered rate (LIBOR) plus
a borrowing margin or (b) an alternate base rate (ABR) plus a borrowing margin.
Such borrowing margins range between 1.50% and 2.50% for LIBOR loans and between
.50% and 1.50% for ABR loans, fluctuating within each range in 0.25% increments
based on the Company achieving certain financial results. Interest rates per
annum applicable to Tranche B Term Loan are either (a) LIBOR plus a margin of
3.00% or (b) ABR plus 2.00%. Additionally, various fees related to unused
commitments, letters of credit and administration of the facility are incurred
by the Company. Borrowings under the Senior Bank Facilities are guaranteed by
each of the Company's subsidiaries other than JAIX Leasing Company (the
Guarantor Subsidiaries) and are secured by the assets of the Company and the
Guarantor Subsidiaries, including the stock of the Guarantor Subsidiaries.
The term loans under the Senior Bank Facilities began amortizing quarterly on
March 31, 1996. The Tranche A Term Loan and the Revolving Loans mature on March
31, 2002 and the Tranche B Term Loan mature on March 31, 2003.
The Senior Bank Facilities contain various financial covenants including capital
expenditure limitations, minimum leverage and interest coverage ratios and
minimum net worth, and also restrict the Company from paying dividends,
repurchasing common stock and making other distributions in certain
circumstances.
11
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Three Months Ended March 31, 1997
(Unaudited)
JAIX Leasing Debt
On June 14, 1996, JAIX Leasing entered into a ten-year term loan which bears
interest at an average interest rate of 8.78%. At March 31, 1997, debt
outstanding under the facility was $30.0 million. The facility is secured by the
underlying leases and assets and contains various covenants.
Industrial Revenue Bonds
The Company, through its wholly owned subsidiary, Freight Car Services, Inc.,
issued the Industrial Revenue Bonds for $5.3 million which bear interest at a
variable rate (4.5% as of March 31, 1997) and can be redeemed by the Company at
any time. The bonds are secured by a letter of credit issued by Johnstown
America Industries, Inc. The bonds have no amortization and mature on December
1, 2010. The bonds are also subject to a weekly "put" provision by the holders
of the bonds. In the event that any or all of the bonds are put to the Company
under this provision, the Company would effectively refinance such bonds with
additional borrowings under the Revolving Loans portion of the Senior Bank
Facilities.
In connection with the Industrial Revenue Bonds, the Company has restricted cash
at March 31, 1997 of $0.6 million from the initial proceeds of $5.3 million. The
restricted cash is held in trust and will be used for additional improvements
and expansion of the Freight Car Services' Danville facility.
Interest Rate Contracts
The Company has entered into various interest rate contracts to fix a portion of
the cost of its variable rate Senior Bank Facilities. These contracts limit the
effect of market fluctuations on the interest cost of floating rate debt. The
notional principal amounts outstanding on the interest rate contracts covering
the current period is $140 million and the fixed rates of interest on these
contracts range from 5.98% to 6.32% plus the applicable borrowing margin. The
maturities on all contracts range from May 1997, through August 1998.
12
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Three Months Ended March 31, 1997
(Unaudited)
4. SENIOR SUBORDINATED NOTES
In conjunction with the acquisition of TCI, the Company issued $100 million of
Senior Subordinated Notes (the "Notes") which are due August 15, 2005 and have
an interest rate of 11.75% per annum and are guaranteed on a unsecured, senior
subordinated joint and several basis by each of the Guarantor Subsidiaries. The
Notes have customary restrictive covenants including restrictions on incurrence
of additional indebtedness, and payment of dividends and redemption of capital
stock. The Notes are subordinated to all indebtedness under the Senior Bank
Facilities and cross-default provisions do exist. Except in certain limited
circumstances, the Notes are not subject to optional redemption by the Company
prior to August 15, 2000, and thereafter are subject to optional redemption by
the Company at declining redemption premiums. Upon the occurrence of a change in
control (as defined), the Company is required to offer to repurchase the Notes
at a price equal to 101% of the principal amount thereof plus accrued interest.
5. ENVIRONMENTAL MATTERS
The Company's subsidiaries are currently involved in several matters relating to
the investigation and/or remediation of locations where the subsidiaries have
arranged for the disposal of foundry and other wastes. As of March 31, 1997, the
Company has an environmental reserve which management believes is adequate to
cover future expenditures. This reserve is based on current cost estimates and
does not reduce estimated expenditures to net present value, although the
Company's subsidiaries are not likely to incur costs for most of the reserved
matters until several years in the future. Any cash expenditures required by the
Company or its subsidiaries to comply with applicable environmental laws and/or
to pay for any remediation efforts will not be reduced or otherwise affected by
the existence of the environmental reserve. Due to the early stage of
investigation of many of the sites and potential remediations referred to above,
there are significant uncertainties as to waste quantities involved, the extent
and timing of the remediation which will be required, the range of acceptable
solutions, costs of remediation and the number of potentially responsible
parties contributing to such costs. Based on all of the information presently
available to it, the Company believes that the environmental reserve will be
adequate to cover its future costs related to the sites associated with the
environmental reserve, and that any additional costs will not have a material
adverse effect on the financial condition or results of operations of the
Company. However, the discovery of additional sites, the modification of
existing laws or regulations, the imposition of joint and several liability or
the uncertainties referred to above could result in such a material adverse
effect.
13
<PAGE>
JOHNSTOWN AMERICA INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
For the Three Months Ended March 31, 1997
(Unaudited)
6. GUARANTOR SUBSIDIARIES
The Notes and the obligations under the Senior Bank Facilities are fully and
unconditionally guaranteed on an unsecured, senior subordinated, joint and
several basis by each of the Guarantor Subsidiaries. The following condensed
consolidating financial data illustrates the composition of the Parent Company,
the Guarantor Subsidiaries, and JAIX Leasing as of and for certain dates and
periods. Separate complete financial statements of the respective Guarantor
Subsidiaries would not provide additional information which would be useful in
assessing the financial composition of the Guarantor Subsidiaries and thus, are
not presented.
Investments in subsidiaries are accounted for by the Parent Company on the
equity method for purposes of the supplemental consolidating presentation.
Earnings of subsidiaries are therefore reflected in the Parent Company's
investment accounts and earnings. The principle elimination entries eliminate
the Parent Company's investment in subsidiaries and intercompany balances and
transactions.
14
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Condensed Consolidating Balance Sheet
as of March 31, 1997
(In thousands)
(Unaudited)
Parent Guarantor
Company Subsidiaries JAIX Leasing Eliminations Consolidated
Cash and cash equivalents.......... $ 2,422 $ 163 $ 2,238 $ -- $ 4,823
Accounts receivable, net........... -- 64,874 -- -- 64,874
Inventories........................ -- 41,643 -- -- 41,643
Prepaid expenses and other......... 2,727 15,723 850 -- 19,300
------- --------- --------- -------- --------
Total current assets.......... 5,149 122,403 3,088 -- 130,640
Property, plant and equipment, net 5,598 120,639 36,079 (325) 161,991
Other assets....................... 108,145 250,514 622 (96,350) 262,931
------- -------- --------- -------- --------
Total assets.................. $118,892 $ 493,556 $ 39,789 $ (96,675) $ 555,562
======= ======== ========= ======== ========
Accounts payable................... $ 19 $ 36,404 $ 62 $ -- $ 36,485
Other current liabilities.......... 15,152 55,991 (1,251) (127) 69,765
------- -------- --------- -------- --------
Total current liabilities..... 15,171 92,395 (1,189) (127) 106,250
Noncurrent liabilities............. -- 85,842 3,480 -- 89,322
Long-term debt, less current
maturities and intercompany
advances (receivables) .......... 42,076 226,639 29,630 -- 298,345
Total shareholders' equity......... 61,645 88,680 7,868 (96,548) 61,645
------- -------- --------- -------- --------
Total liabilities and
shareholders' equity...... $118,892 $ 493,556 $ 39,789 $ (96,675) $ 555,562
======= ======== ========= ======== ========
15
<PAGE>
Condensed Consolidating Statement of Income
For the Three Months Ended March 31, 1997
(In thousands)
(Unaudited)
Parent Guarantor
Company Subsidiaries JAIX Leasing Eliminations Consolidated
Total revenue...................... $ 130 $ 114,343 $ 1,249 $ -- $ 115,722
Cost of sales...................... 30 95,878 799 -- 96,707
------- -------- ------- -------- --------
Gross profit..................... 100 18,465 450 -- 19,015
Selling, general, administrative...
and amortization expenses......... (40) 12,893 (262) -- 12,591
------- -------- ------- -------- --------
Operating income ............... 140 5,572 712 -- 6,424
Interest expense, net.............. 3,096 5,224 329 8,649
Equity losses of subsidiaries...... 156 -- -- (156) --
Provision (benefit) for income taxes (1,220) 722 165 -- (333)
------- -------- -------- -------- --------
Net income (loss)............... $ (1,892) $ (374) $ 218 $ 156 $ (1,892)
======= ======== ======== ======== ========
16
<PAGE>
Condensed Consolidating Statement of Cash Flows
For the Three Months Ended March 31, 1997
(In thousands)
(Unaudited)
Parent Guarantor
Company Subsidiaries JAIX Leasing Eliminations Consolidated
CASH FLOWS FROM
OPERATING ACTIVITIES.............. $ (3,156) $ (8,470) $ 31 $ -- $ (11,595)
CASH FLOWS FROM
INVESTING ACTIVITIES:
Capital expenditures............ (47) (1,125) -- -- (1,172)
Leasing business assets and
investments..................... 4 56 (23,472) -- (23,412)
Proceeds from sale of leased
freight cars.................... -- -- 4,463 -- 4,463
------- --------- --------- ------- --------
Cash used for investing activities. (43) (1,069) (19,009) -- (20,121)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Payments of term loans
and capital lease............... (4,165) (43) -- -- (4,208)
Net borrowings under
JAIX Leasing debt............... -- -- 16,454 -- 16,454
Intercompany advances............ (8,262) 8,262 -- -- --
Deferred financing costs paid.... (12) -- (230) -- (242)
------- --------- --------- ------- --------
Cash provided by (used for)
financing activities........... (12,439) 8,219 16,224 -- 12,004
Net increase (decrease) in cash
and cash equivalents.............. (15,638) (1,320) (2,754) -- (19,712)
CASH AND CASH
EQUIVALENTS,
beginning of period.............. 18,060 1,483 4,992 -- 24,535
------- --------- --------- ------- --------
CASH AND CASH
EQUIVALENTS,
end of period.................... $ 2,422 $ 163 $ 2,238 $ -- $ 4,823
======= ========= ========= ======= ========
17
<PAGE>
Condensed Consolidating Balance Sheet
as of December 31, 1996
(In thousands)
(Unaudited)
Parent Guarantor
Company Subsidiaries JAIX Leasing Eliminations Consolidated
Cash and cash equivalents.......... $ 18,060 $ 1,484 $ 4,991 $ -- $ 24,535
Accounts receivable, net........... 28 49,161 157 -- 49,346
Inventories........................ -- 49,589 -- -- 49,589
Prepaid expenses and other......... 2,979 16,008 373 -- 19,360
------- -------- --------- -------- -------
Total current assets.......... 21,067 116,242 5,521 -- 142,830
Property, plant and equipment, net 7,577 123,128 16,960 (551) 147,114
Other assets....................... 108,822 255,913 401 (99,797) 265,339
------- -------- ----------- -------- -------
Total assets.................. $137,466 $ 495,283 $ 22,882 $(100,348) $ 555,283
======= ======== ========= ======== ========
Accounts payable................... $ 201 $ 42,993 $ 131 $ -- $ 43,325
Other current liabilities.......... 18,390 55,835 (1,728) (211) 72,286
------- --------- --------- -------- --------
Total current liabilities..... 18,591 98,828 (1,597) (211) 115,611
Noncurrent liabilities............. -- 85,716 3,480 -- 89,196
Long-term debt, less current
maturities and intercompany
advances (receivables)........... 55,338 218,425 13,176 -- 286,939
Total shareholders' equity......... 63,537 92,314 7,823 (100,137) 63,537
------- --------- --------- -------- --------
Total liabilities and
shareholders' equity..... $137,466 $ 495,283 $ 22,882 $(100,348) $ 555,283
======= ======== ======= ======== ========
18
<PAGE>
Condensed Consolidating Statement of Income
For the Three Months Ended March 31, 1996
(In thousands)
(Unaudited)
Parent Guarantor
Company Subsidiaries JAIX Leasing Eliminations Consolidated
Total revenue...................... $ 6 $ 151,317 $ 1,016 $ -- $ 152,339
Cost of sales...................... (2) 128,796 334 -- 129,128
------- -------- -------- ------- --------
Gross profit .................... 8 22,521 682 -- 23,211
Selling, general, administrative
and amortization expenses......... 378 14,395 -- -- 14,773
------- -------- -------- ------- --------
Operating income (loss).......... (370) 8,126 682 -- 8,438
Interest expense, net.............. 2,697 5,498 501 8,696
Equity (earnings) of subsidiaries.. (1,194) -- -- 1,194 --
Provision (benefit) for income
taxes............................ (1,145) 1,546 69 -- 470
------- -------- -------- ------- --------
Net income (loss)................ $ (728) $ 1,082 $ 112 $ (1,194) $ (728)
======= ======== ======== ======== ========
19
<PAGE>
Condensed Consolidating Statement of Cash Flows
For the Three Months Ended March 31, 1996
(In thousands)
(Unaudited)
Parent Guarantor
Company Subsidiaries JAIX Leasing Eliminations Consolidated
CASH FLOWS FROM
OPERATING ACTIVITIES.............. $ (6,894) $ 11,475 $ 596 $ -- $ 5,177
CASH FLOWS FROM
INVESTING ACTIVITIES:
Capital expenditures ............ (14) (3,358) -- -- (3,372)
Leasing business assets
and investments................. -- -- (15) -- (15)
Changes in restricted cash....... -- 448 -- -- 448
-------- -------- -------- ------ -------
Cash used for investing activities. (14) (2,910) (15) -- (2,939)
CASH FLOWS FROM
FINANCING ACTIVITIES:
Payments of term loans and
capital leases.................. (4,165) (38) -- -- (4,203)
Net Borrowings under
JAIX Leasing debt............... -- -- 3,437 -- 3,437
Intercompany advances............ 8,410 (4,973) (3,437) -- --
Deferred financing costs paid.... (270) (14) (3) -- (287)
------- -------- -------- ------- -------
Cash provided by (used for)
financing activities.......... 3,975 (5,025) (3) -- (1,053)
Net increase (decrease) in cash
and cash equivalents.............. (2,933) 3,540 578 -- 1,185
CASH AND CASH
EQUIVALENTS,
beginning of period.............. 16,896 (6,156) 899 -- 11,639
------- -------- -------- ------- -------
CASH AND CASH
EQUIVALENTS,
end of period.................... $ 13,963 $ (2,616) $ 1,477 $ -- $ 12,824
======= ======== ======= ======= =======
</TABLE>
20
<PAGE>
Item 2.
Management's Discussion and Analysis of
Financial Condition and Results of Operations
For the Three Months Ended March 31, 1997
General
The Company's sales are affected to a significant degree by the freight car and
Class 8 truck markets. Both the freight car and the Class 8 truck markets are
subject to significant fluctuations due to economic conditions in these
particular markets, changes in the alternative methods of transportation and
other factors. There can be no assurance that fluctuations in such markets will
not have a material adverse effect on the results of operations or financial
condition of the Company.
Johnstown America Corporation (JAC) and Freight Car Services (FCS), the
Company's freight car manufacturing subsidiaries sales are driven principally by
the number and type of new and rebuilt freight cars delivered in any given
period. Due to the large size of customer orders, the specific time frame for
delivery of freight cars ordered and variations in the mix of cars ordered, the
number and type of cars produced in any given quarter may fluctuate greatly. As
a result, the Company's revenues and results of operations and cash flows from
operations may fluctuate as well.
Results of Operations
Three Months Ended March 31, 1997 and 1996
Total Revenue
Total revenue for the three months ended March 31, 1997 decreased 24.0% to
$115.7 million from $152.3 million in 1996. The revenue decrease of $36.6
million was due primarily to the decrease in freight car production (532 new and
rebuilt cars in 1997 vs 872 new and rebuilt cars in 1996) and a reduction in
shipments of freight car kits and parts. As of March 31, 1997, the Company's
backlog of new and rebuilt freight cars was 1,523 as compared to 1,299 new and
rebuilt freight cars on March 31, 1996.
Cost of Sales - Manufacturing and Gross Profits
Cost of Sales - Manufacturing for the three months ended March 31, 1997 as a
percent of manufacturing sales was 83.6%, compared to 85.1% in 1996. Related
gross profits were 16.4%
21
<PAGE>
and 14.9%, respectively. The improvement in gross profits resulted primarily
from increased relative sales from the truck components and iron castings
operations in the current quarter which have historically generated higher gross
profit margins than the freight car business. The aggregate gross profit
decreased $4.2 million and was a result of decreased sales and lower gross
margins in the freight car business.
Selling, General, Administrative and Amortization
Selling, general, and administrative expenses as a percentage of total revenue
was 9.3% and 8.0% for the three months of 1997 and 1996, respectively. The
increase in selling, general, and administrative expense as a percentage of
total revenue is related to the decline in total revenues of $36.6 million.
Actual selling, general and administrative expenses declined $1.5 million from
1996 levels. Amortization expense as a percentage of total revenue was 1.8% and
1.7% for the three months of 1997 and 1996, respectively.
Operating Income
Operating income was $6.4 million in the first quarter of 1997, compared to $8.4
million in the first quarter of 1996. The decrease in operating income was
primarily related to the decline in total revenues offset by higher gross profit
margins and lower selling, general and administrative expenses.
Other
Interest expense, net, was $8.6 million in the first quarter of 1997 compared to
$8.7 in the first quarter of 1996. Interest expense in 1997 and 1996 resulted
from borrowings under the Senior Bank Facilities and the issuance of the Notes
to finance the acquisition of TCI and the refinancing of its debt in August
1995, as well as from the JAIX Leasing loans which were used to finance the
addition of freight cars for the lease fleet.
Net loss and loss per share for the first quarter of 1997 were $(1.9) million
and $(0.19), respectively, compared to a net loss and loss per share of $(0.7)
million and $(0.07), respectively, for the first quarter of 1996.
22
<PAGE>
Liquidity and Capital Resources
For the three months ended March 31, 1997, the Company used cash from operations
of $11.6 million resulting from reduced net income and higher working capital
compared with providing net cash of $5.2 million for the first three months of
1996. The Company used $20.1 million of cash in investing activities, which was
primarily used to increase the size of its leasing fleet. Cash provided by
financing activities was $12.0 million for the first three months of 1997, due
to an increase in the JAIX Leasing Debt of $16.4 million, to fund the leasing
fleet additions offset in part by term loan principal payments of $4.2 million.
The Company's freight car sales are characterized by large order sizes, specific
customer delivery schedules and related vendor receipts and payment schedules,
all of which can combine to create significant fluctuations in working capital
accounts when comparing end of period balances. Such fluctuations tend to be of
short duration, and the Company considers this to be a normal part of its
operating cycle which does not significantly impact its financial flexibility
and liquidity.
As of March 31, 1997, there was $179 million of term loans outstanding under the
Senior Bank Facilities, $100 million of Notes outstanding, and no borrowings
under the $100 million revolving credit line under the Senior Bank Facilities.
Availability under the Revolving Loans, after consideration of outstanding
letters of credit of $17.6 million, was $42.2 million.
Interest payments on the Notes and interest and principal payments under the
Senior Bank Facilities represent significant liquidity requirements for the
Company. The Notes require semiannual interest payments of approximately $5.9
million. Borrowings under the Senior Bank Facilities bear interest at floating
rates and require interest payments on varying dates depending upon the interest
rate option selected by the Company. The term loans under the Senior Bank
Facilities require periodic principal payments through their maturities.
The Company formed a leasing business in 1994 to lease freight cars. This
leasing division was formed into a wholly owned subsidiary, JAIX Leasing, in
January 1995 and currently manages or has on lease 1,362 freight cars. In June
1996, JAIX Leasing Company entered into a term loan facility to finance its
freight car leasing activities and repay its existing credit facility. See
footnote 3 of the Condensed Consolidated Financial Statements for the three
months ended March 31, 1997, for a description of this loan. As of March 31,
1997, there was $30.0 million outstanding under this facility.
The Company believes that the cash flow generated from its operations, together
with amounts available under the Revolving Loans, should be sufficient to fund
its debt service requirements, working capital needs, anticipated capital
expenditures and other operating expenses (including expenditures required by
applicable environmental laws and regulations). The Company's future operating
performance and ability to service or refinance the Notes and to extend or
refinance the Senior Bank Facilities will be subject to future economic
conditions and to financial, business and other factors, many of which are
beyond the Company's control.
23
<PAGE>
As of March 31, 1997, the Company's balance sheet included cash of $4.8 million.
Environmental Matters
The Company's subsidiaries are currently involved in several matters relating to
the investigation and/or remediation of locations where the subsidiaries have
arranged for the disposal of foundry and other wastes. As of March 31, 1997, the
Company has an environmental reserve which management believes is adequate to
cover future expenditures. This reserve is based on current cost estimates and
does not reduce estimated expenditures to net present value, although the
Company's subsidiaries are not likely to incur costs for most of the reserved
matters until several years in the future. Any cash expenditures required by the
Company or its subsidiaries to comply with applicable environmental laws and/or
to pay for any remediation efforts will not be reduced or otherwise affected by
the existence of the environmental reserve. Due to the early stage of
investigation of many of the sites and potential remediations referred to above,
there are significant uncertainties as to waste quantities involved, the extent
and timing of the remediation which will be required, the range of acceptable
solutions, costs of remediation and the number of potentially responsible
parties contributing to such costs. Based on all of the information presently
available to it, the Company believes that the environmental reserve will be
adequate to cover its future costs related to the sites associated with the
environmental reserve, and that any additional costs will not have a material
adverse effect on the financial condition or results of operations of the
Company. However, the discovery of additional sites, the modification of
existing laws or regulations, the imposition of joint and several liability or
the uncertainties referred to above could result in such a material adverse
effect.
New Accounting Pronouncements
Statement of Financial Accounting Standard No. 123, "Earnings Per Share" was
issued in February, 1997 and will be adopted by the Company with retroactive
treatment in late 1997. This new pronouncement establishes revised methods for
computing and reporting earnings per share. The Company does not expect that the
adoption of this standard will materially impact previously reported earnings
per share, including the per share amount reported for the three months ended
March 31, 1997.
Forward-Looking Statements
The foregoing outlook contains forward-looking statements that are based on
current expectations and are subject to a number of risks and uncertainties.
Actual results could differ materially from current expectations due to a number
of factors, including general economic conditions; competitive factors and
pricing pressures; shifts in market demand, the performance and needs of
industries served by the Company's businesses; and the risks described from time
to time in the Company's Securities and Exchange Commission reports.
24
<PAGE>
Effects of Inflation
General price inflation has not had a material impact on the Company's results
of operations.
25
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The patent infringement lawsuit commenced by JAC in December 1992 against
Trinity Industries, Inc. ("Trinity") alleging infringements of JAC's patent for
its BethGon Coalporter(R) freight car was tried in 1996 with the trial court
entering an order upholding a jury verdict that the patent, though valid, was
not infringed by Trinity's Aluminator II freight car. In addition, JAC was not
held to be liable for any of the counterclaims alleged by Trinity. JAC
thereafter made motions to the trial court to set aside the verdict as not being
consistent with the facts or the law and enter judgment in favor JAC or,
alternatively, to order a new trial, which motions were denied. JAC has appealed
the case to the United States Court of Appeals for the Federal Circuit. JAC
argued the appeal on May 6, 1997 and expects the appeal to be decided in mid to
late 1997. Although the chances of success of the appeal cannot be predicted,
the Company continues to believe that the order entered by the trial court
upholding the jury's verdict and several prior orders are not consistent with
the facts or the law and that the trial court erred in applying the law in this
case. In any event, although neither the outcome of the action nor the effect of
such outcome can be predicted with certainty, in the opinion of management of
the Company, the outcome of the action will not have a material adverse effect
on the financial condition or results of operations of the Company.
The Company is involved in various lawsuits and warranty claims in the normal
course of business. In the opinion of management of the Company, the outcome of
these lawsuits and claims will not have a material adverse effect on the
financial condition or results of operations of the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None
(b) Reports
The Company filed the following reports on Form 8-K during the three months
ended March 31, 1997:
None
26
<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.
JOHNSTOWN AMERICA INDUSTRIES, INC.
By /s/ Andrew M. Weller
- --------------------------------------
Andrew M. Weller
Executive Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
Dated: May 9, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 4,823
<SECURITIES> 0
<RECEIVABLES> 66,849
<ALLOWANCES> 1,975
<INVENTORY> 41,643
<CURRENT-ASSETS> 130,640
<PP&E> 151,490
<DEPRECIATION> 30,095
<TOTAL-ASSETS> 555,562
<CURRENT-LIABILITIES> 106,248
<BONDS> 298,345
0
0
<COMMON> 98
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 555,562
<SALES> 114,344
<TOTAL-REVENUES> 115,722
<CGS> 95,878
<TOTAL-COSTS> 96,707
<OTHER-EXPENSES> 12,591
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,649
<INCOME-PRETAX> (2,225)
<INCOME-TAX> (333)
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,892)
<EPS-PRIMARY> (.19)
<EPS-DILUTED> (.19)
</TABLE>
