================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 8-K/A
Current Report
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): May 17, 1999
JACKSON PRODUCTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 333-53987 75-2470881
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
2997 Clarkson Road
Chesterfield, Missouri 63017
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 207-2700
Not Applicable
(Former name or former address, if changed since last report)
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<PAGE>
INFORMATION TO BE INCLUDED IN REPORT
Form 8-K of Jackson Products, Inc. dated and filed with the Securities
and Exchange Commission on May 17, 1999, is amended to include in Exhibit 99 the
financial statements of Morton Traffic Markings, a former division of Morton
International, Inc. Item 7 is hereby amended as follows:
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
The Company is filing the required financial statements in this report
on Form 8-K/A. Included hereto in Exhibit 99 are the financial statements for
the business acquired from Morton.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
JACKSON PRODUCTS, INC.
Date: August 2, 1999 By: /s/ Christopher T. Paule
----------------------------
Name: Christopher T. Paule
Title: Chief Financial Officer and
Secretary
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
99 Financial statements of Morton Traffic Markings
<PAGE>
MORTON TRAFFIC MARKINGS
(Formerly a division of Morton International Inc.)
Financial Statements
May 17, 1999 and June 30, 1998
(With Independent Auditors' Report Thereon)
<PAGE>
Independent Auditors' Report
The Board of Directors
Jackson Products, Inc.:
We have audited the accompanying balance sheets of Morton Traffic Markings
(formerly a division of Morton International, Inc.) (the Company) as of May 17,
1999 and June 30, 1998, and the related statements of operations and retained
earnings and cash flows for the period from July 1, 1998 through May 17, 1999
and each of the years ended June 30, 1998 and 1997. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Company as of May 17, 1999
and June 30, 1998, and the results of its operations and its cash flows for the
period from July 1, 1998 through May 17, 1999 and each of the years ended June
30, 1998 and 1997 in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Portland, Oregon
July 12, 1999
<PAGE>
MORTON TRAFFIC MARKINGS
(Formerly a division of Morton International, Inc.)
Balance Sheets
May 17, 1999 and June 30, 1998
(In thousands)
May 17, June 30,
Assets 1999 1998
------------ ------------
Current assets:
Accounts receivable, net of allowance for
doubtful accounts of $235 and $129 $ 7,667 8,929
Inventories 3,459 3,063
Prepaid expenses 23 --
Receivable from Parent 2,688 31
Deferred income taxes 443 302
------------ ------------
Total current assets 14,280 12,325
Property, plant and equipment, net 8,794 8,221
Intangibles, net of accumulated amortization
of $6,705 and $6,061 22,750 23,394
------------ ------------
$ 45,824 43,940
============ ============
Liabilities and Retained Earnings
Current liabilities:
Accounts payable $ 3,356 2,987
Accrued expenses 1,326 1,260
------------ ------------
Total current liabilities 4,682 4,247
Deferred income taxes 1,121 1,284
------------ ------------
Total liabilities 5,803 5,531
------------ ------------
Retained earnings 40,021 38,409
------------ ------------
$ 45,824 43,940
============ ============
See accompanying notes to financial statements.
2
<PAGE>
MORTON TRAFFIC MARKINGS
( Formerly a division of Morton International, Inc.)
Statements of Operations and Retained Earnings
Period from July 1, 1998 to May 17, 1999
and years ended June 30, 1998 and 1997
(In thousands)
July 1, 1998
to May 17, Years ended June 30,
1999 1998 1997
----------- ----------- -----------
Sales $ 30,991 36,754 35,485
Cost of sales 21,840 24,983 24,403
Selling, general, and administrative 6,029 6,464 5,695
----------- ----------- -----------
Operating income 3,122 5,307 5,387
Other expense (income) 42 (47) (74)
Gain on disposal of fixed assets (12) (207) (1)
----------- ----------- -----------
Income before income tax provision 3,092 5,561 5,462
Income tax expense 1,480 2,470 2,436
----------- ----------- -----------
Net income 1,612 3,091 3,026
Retained earnings, beginning of period 38,409 35,318 32,292
----------- ----------- -----------
Retained earnings, end of period $ 40,021 38,409 35,318
=========== =========== ===========
See accompanying notes to financial statements.
3
<PAGE>
MORTON TRAFFIC MARKINGS
(Formerly a division of Morton International, Inc.)
Statements of Cash Flows
Period from July 1, 1998 to May 17, 1999
and years ended June 30, 1998 and 1997
(In thousands)
<TABLE>
<CAPTION>
July 1, 1998
to May 17, Years ended June 30,
1999 1998 1997
--------------- --------------- ---------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 1,612 3,091 3,026
Adjustments to reconcile net income
to net cash provided by activities:
Depreciation and amortization 1,364 1,506 1,474
Write down of assets 23 -- --
Gain on disposal of fixed assets (12) (207) (1)
Changes in operating assets and liabilities:
Accounts receivable 1,262 -- (662)
Inventories (396) 147 414
Prepaid expenses (23) -- 3
Accounts payable 1,180 (653) 703
Accrued expenses 56 (130) 180
Receivable from Parent (2,657) (3,894) (4,100)
Deferred income taxes (304) 242 (75)
--------------- --------------- ---------------
Net cash provided by operating activities 2,105 102 962
--------------- --------------- ---------------
Cash flows from investing activities:
Capital expenditures (1,562) (791) (603)
Proceeds from sales of property, plant and equipment 294 431 2
--------------- --------------- ---------------
Net cash used in investing activities (1,268) (360) (601)
--------------- --------------- ---------------
Cash flows from financing activities:
Principal payments under capital leases (26) (75) (75)
Net change in bank overdraft (811) 333 (286)
--------------- --------------- ---------------
Net cash provided by (used in)
financing activities (837) 258 (361)
--------------- --------------- ---------------
Net increase (decrease) in cash -- -- --
Cash and cash equivalents at beginning of year -- -- --
--------------- --------------- ---------------
Cash and cash equivalents at end of year $ -- -- --
=============== =============== ===============
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
MORTON TRAFFIC MARKINGS
(Formerly a division of Morton International, Inc.)
Notes to Financial Statements
May 17, 1999 and June 30, 1998
(In thousands)
(1) Summary of Significant Accounting Policies
(a) Principles of Combination
The accompanying financial statements include the accounts of
Morton Traffic Markings (the Company), formerly a division of
Morton International, Inc. (the Parent). The accompanying
financial statements present the financial position, results of
operation and cash flows of the Company which is subject to an
acquisition by Jackson Products, Inc. (Jackson). Jackson acquired
all of the assets and assumed certain liabilities of the Company
as of May 17, 1999.
(b) Nature of Operations
The Company manufactures and distributes traffic coatings (paint)
and specialized coating application equipment in the western
United States. The coatings segment of the business has fluctuated
between 85% and 88% of the total sales of the Company in the last
three years. Remaining sales relate to assembly and sale of
application equipment, sale of parts and equipment services.
(c) Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
(d) Cash
Cash is subject to immediate delivery to the Parent company. All
cash requirements are funded by the Parent company.
(e) Revenue, Accounts Receivable and Concentration of Risk
The Company recognizes revenue upon shipment of merchandise to its
customers.
No single customer accounted for more than 10% of revenues for the
period from July 1, 1998 to May 17, 1999 or for the years ended
June 30, 1998 and 1997.
At May 17, 1999 and June 30, 1998, two customers accounted for
approximately 18% and 25% of net accounts receivable,
respectively.
(f) Inventories
Raw materials, containers/labels and purchased finished goods are
stated at a moving average cost, which approximates costs on a
first-in-first-out basis and is not in excess of market value.
Manufactured finished goods are stated at an amount approximating
cost of manufacturing, which is not in excess of net realizable
value.
5 (Continued)
<PAGE>
MORTON TRAFFIC MARKINGS
(Formerly a division of Morton International, Inc.)
Notes to Financial Statements
May 17, 1999 and June 30, 1998
(In thousands)
(g) Property, Plant and Equipment
Property, plant and equipment are capitalized at cost.
Depreciation is calculated using the straight-line method. The
average estimated lives utilized in calculating depreciation are
as follows: buildings and improvements, 25 - 40 years; machinery
and equipment, 10 - 15 years; transportation equipment, 5 - 10
years; and furniture and fixtures, 5 - 10 years. Expenditures for
maintenance and repairs are expensed. Leasehold improvements,
which are included in buildings and improvements, are depreciated
over the shorter of the term of the respective lease or the life
of the respective improvement.
When events or changes in circumstances indicate that assets may
be impaired, an evaluation is performed comparing the estimated
future undiscounted cash flows associated with the asset to the
assets carrying amount to determine if a write-down to market
value or discounted cash flow value is required.
(h) Goodwill
Goodwill, which represents the excess of acquisition cost over the
net assets acquired in business combinations, is amortized on the
straight-line method over 40 years. The Company periodically
re-evaluates the carrying value of its goodwill based on the
expected undiscounted cash flows over the remaining life of the
related goodwill.
(i) Income Taxes
The Company accounts for income taxes under the asset and
liability method. Accordingly, deferred tax assets and liabilities
are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
The provision for income taxes includes federal and state income
taxes currently payable and those deferred because of temporary
differences between the financial statements and tax basis of
assets and liabilities.
The Company files a federal income tax return with the Parent. The
income tax provision has been computed as if the Company were
filing a separate federal income tax return.
(j) Receivable from Parent
The Company's cash funding needs are handled by the Parent for
short-term investing purposes. Also, any charges between the
Company and the Parent or other affiliates including income taxes,
are recorded in intercompany accounts.
6 (Continued)
<PAGE>
MORTON TRAFFIC MARKINGS
(Formerly a division of Morton International, Inc.)
Notes to Financial Statements
May 17, 1999 and June 30, 1998
(In thousands)
(2) Income Taxes
The following are the components of the provision for income taxes for
the period from July 1, 1998 to May 17, 1999 and the years ended June 30,
1998 and 1997:
July 1, 1998
to May 17, Years ended June 30,
---------------------------------
1999 1998 1997
---------------- --------------- ---------------
U.S. Federal:
Current $ 1,438 1,808 2,045
Deferred (268) 214 (66)
State:
Current 346 420 466
Deferred (36) 28 (9)
---------------- --------------- ---------------
$ 1,480 2,470 2,436
================ =============== ===============
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled.
The components of deferred tax assets and liabilities are as follows as
of May 17, 1999 and June 30, 1998:
May 17, June 30,
1999 1998
--------------- --------------
Deferred tax assets:
Allowance for doubtful accounts $ 91 50
Inventory reserves 87 45
Accrued liabilities 250 190
Other 15 17
--------------- --------------
443 302
Deferred tax liabilities-depreciation (1,121) (1,284)
--------------- --------------
Net deferred tax liability $ (678) (982)
=============== ==============
7 (Continued)
<PAGE>
MORTON TRAFFIC MARKINGS
(Formerly a division of Morton International, Inc.)
Notes to Financial Statements
May 17, 1999 and June 30, 1998
(In thousands)
The following is a reconciliation of the difference between the U.S.
statutory income tax rate and the effective tax rate:
July 1, 1998
to May 17, Years ended June 30,
-------------------------
1999 1998 1997
------------ ----------- -----------
Income tax expense at U.S.
statutory rate (34%) $ 1,051 1,891 1,857
Effect of state income taxes, net
of federal benefit 139 250 245
Other, primarily permanent
items 290 329 334
------------ ----------- -----------
Income tax expense $ 1,480 2,470 2,436
============ =========== ===========
(3) Inventories
Inventories consist of the following:
May 17, June 30,
1999 1998
-------------------- --------------------
Raw materials $ 2,552 2,125
Work-in process 331 450
Finished goods 576 488
-------------------- --------------------
$ 3,459 3,063
==================== ====================
8 (Continued)
<PAGE>
MORTON TRAFFIC MARKINGS
(Formerly a division of Morton International, Inc.)
Notes to Financial Statements
May 17, 1999 and June 30, 1998
(In thousands)
(4) Property, Plant and Equipment
Property, plant and equipment consists of the following:
May 17, June 30,
1999 1998
------------------- -------------------
Land $ 1,692 1,692
Buildings 2,381 2,371
Totes 7,214 6,135
Machinery and equipment 781 848
Transportation equipment 868 898
Furniture and fixtures 272 294
Construction in progress 663 518
------------------- -------------------
13,871 12,756
Accumulated depreciation 5,077 4,535
------------------- -------------------
$ 8,794 8,221
=================== ===================
Depreciation charged to income was $720 for the period ended May 17, 1999
and $770 and $738 for the years ended June 30, 1998 and 1997,
respectively.
(5) Goodwill
Amortization of goodwill charged to income was $644 for the period ended
May 17, 1999 and $736 and $736 for the years ended June 30, 1998 and
1997, respectively.
(6) Accrued Expenses
Accrued expenses consist of the following:
May 17, June 30,
1999 1998
--------------- ---------------
Accrued employee compensation $ 734 781
Warranties 345 203
Other 247 276
--------------- ---------------
$ 1,326 1,260
=============== ===============
(7) Fair Value of Financial Instruments
The carrying amounts of accounts receivable, accounts payable, and
accrued expenses approximate fair value because of the short maturities
of these financial instruments.
9 (Continued)
<PAGE>
MORTON TRAFFIC MARKINGS
(Formerly a division of Morton International, Inc.)
Notes to Financial Statements
May 17, 1999 and June 30, 1998
(In thousands)
(8) Transactions with Parent
Certain of the Company's corporate administrative functions, including
certain accounting and data processing activities are provided by the
Parent. The costs of these administrative functions is allocated to the
Company in proportion to the budgeted revenues of each company.
Management believes this allocation method is reasonable, however, such
allocated costs may not necessarily be indicative of the costs of
obtaining such services if the Company operated on a stand alone basis.
These expenses amount to $537, $527 and $629 for the period ended May 17,
1999 and the fiscal years ended June 30, 1998 and 1997, respectively.
(9) 401(k)
All employees are eligible to participate in the 401(k) savings plan of
the Parent. Employees can contribute between -0-% and 14% of their gross
pay subject to statutory maximums. The Company matches 50% of the first
6% of each participating employee's contributions, also subject to
statutory maximums. Employer contributions vest over three years. The
401(k) plan expense amounted to $94, $77 and $97 for the period ended May
17, 1999 and the years ended June 30, 1998 and 1997, respectively.
(10) Commitments and Contingencies
The Company is involved in certain legal actions from time to time
related to the normal conduct of its business. Management believes that
liabilities, if any, resulting from litigation will not materially affect
the financial position or results of operations of the Company.
Future minimum lease payments under all operating leases with initial or
remaining noncancelable lease terms in excess of one year at May 17, 1999
are insignificant. Rent expense for the period ended May 17, 1999 and the
years ended June 30, 1998 and 1997 totaled $198, $207 and $171,
respectively.
The Company leases certain manufacturing and office equipment under
capital leases, which expire over the next year. At May 17, 1999 and June
30, 1998, the net book value of leased manufacturing and office equipment
included in property, plant and equipment was $55 and $200, respectively.
Future minimum lease payments under non-cancelable capital leases as of
May 17, 1999 are insignificant.
10
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
PRO FORMA BALANCE SHEET
At March 31, 1999
(Dollars in thousands, except share data)
<TABLE>
<CAPTION>
The TMT-Pathway Pro Forma Pro
Company Acquisition(1) Adjustments(2) Forma
------------- ------------- ------------- ----------
ASSETS
<S> <C> <C> <C> <C>
Current assets:
Cash $ 272 $ - $ - $ 272
Accounts receivable, net of
allowance for doubtful accounts of
$719 and $235 for The Company and
TMT-Pathway, respectively. 25,824 7,667 - 33,491
Inventories 33,469 3,459 134 37,062
Prepaid expenses 1,117 23 - 1,140
Receivable from Parent - 2,688 (2,688) -
Deferred income taxes - 443 (443) -
----------- ---------- ---------- ----------
Total current assets 60,682 14,280 (2,997) 71,965
Property, plant, and equipment, net 35,530 8,794 705 45,029
Intangibles 72,383 22,750 (1,660) 93,473
Deferred financing costs 7,043 - - 7,043
Other noncurrent assets 293 - - 293
----------- ---------- ---------- ----------
$ 175,931 $ 45,824 $ (3,952) $ 217,803
=========== ========== ========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 14,382 $ 3,356 $ - $ 17,738
Accrued and other liabilities 5,966 1,326 895 8,187
Accrued interest 5,714 - - 5,714
Accrued income taxes 1,075 - - 1,075
----------- ---------- ---------- ----------
Total current liabilities 27,137 4,682 895 32,714
----------- ---------- ---------- ----------
Long-term debt 196,244 - 36,295 232,539
Other noncurrent liabilities 3,074 - - 3,074
Deferred income taxes - 1,121 (1,121) -
Stockholders' deficit:
Class A Common Stock, $.01 par value;
100,000 shares authorized;
38,530 shares issued and
outstanding at March 31, 1999. - - - -
Class C common stock, $.01 par value;
15,000 shares authorized; 8,359
shares issued and outstanding
at March 31, 1999. - - - -
Additional paid-in capital 2,935 - - 2,935
Accumulated other comprehensive income (358) - - (358)
Loans due on common stock (329) - - (329)
(Accumulated deficit)/retained earnings (52,772) 40,021 (40,021) (52,772)
----------- ---------- ---------- ----------
Total stockholders' deficit (50,524) 40,021 (40,021) (50,524)
----------- ---------- ---------- ----------
$ 175,931 $ 45,824 $ (3,952) $ 217,803
=========== ========== ========== ==========
</TABLE>
(1) Derived from the balance sheet of TMT-Pathway as of May 17, 1999, prior
to giving effect to the TMT-Pathway Acquisition. The balance sheet as of
May 17, 1999 was not materially different than that as of March 31, 1999.
(2) Reflects the estimated purchase accounting adjustments related to the
TMT-Pathway Acquisition to allocate the purchase price to the respective
assets and liabilities based on market values, to include:
(i) the anticipated valuation of TMT-Pathway's inventory balance;
(ii) the elimination of TMT-Pathway's predecessor's Receivable from
Parent;
(iii) the elimiation of TMT-Pathway's predecessor's deferred income
taxes balance;
(iv) the anticipated valuation of TMT-Pathway's property, plant and
equipment;
(v) adjustment to intangibles resulting from the excess of the
TMT-Pathway purchase price over the allocated fair market values
of assets and liabilities;
(vi) accrued closing costs and transitional expenses associated with
the TMT-Pathway Acquisition;
(vii) the debt obtained to fund the TMT-Pathway Acquisition;
(viii) the elimination of TMT-Pathway's predecessor's deferred income
taxes balance;
(ix) the elimination of TMT-Pathway's predecessor's retained earnings
in accordance with purchase accounting requirements.
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
PRO FORMA STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 1999
(Dollars in thousands)
<TABLE>
<CAPTION>
The TMT-Pathway Pro Forma Pro
Company Acquisition(1) Adjustments(2) Forma
------------- ------------- ------------- ----------
<S> <C> <C> <C> <C>
Net sales $ 43,640 $ 5,440 $ - $ 49,080
Operating expenses:
Cost of sales 29,917 3,739 - 33,656
Selling, general, and administrative 8,035 1,639 - 9,674
Amortization of intangibles 2,965 184 872 4,021
------------- ------------- ------------- ----------
Total operating expenses 40,917 5,562 872 47,351
Operating income 2,723 (122) (872) 1,729
Other:
Interest expense, net (4,404) - (790) (5,194)
Amortization of deferred financing costs (375) - - (375)
Other (206) 33 - (173)
------------- ------------- ------------- ----------
Loss before income tax provision (2,262) (89) (1,662) (4,013)
Income tax expense 130 (43) 43 130
------------- ------------- ------------- ----------
Net loss $ (2,392) $ (46) $ (1,705) $ (4,143)
============= ============= ============= ==========
</TABLE>
(1) The TMT-Pathway Acquisition column represents results of operations for
TMT-Pathway for the period from January 1, 1999 through March 31, 1999.
All amounts are based upon unaudited financial statements.
(2) Gives effect to (i) an increase in amortization expense associated with
the excess of TMT-Pathway purchase price over the allocated fair market
value of the assets and liabilities. TMT-Pathway's intangibles are
amortized over a five year life; (ii) the increase in interest expense
associated with the average increase in net borrowings for the
TMT-Pathway Acquisition, and assumes a weighted average interest rate of
8.0% on the New Credit Facility and (iii) the reversal of income tax
expense (benefit) due to the utilization of net operating loss
carryforwards of the Company.
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
PRO FORMA STATEMENT OF OPERATIONS
For the Three Months Ended March 31, 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
The TMT-Pathway Pro Forma Pro
Company(1) Acquisition(1) Adjustments(2) Forma
------------- ------------- ------------- ----------
<S> <C> <C> <C> <C>
Net sales $ 31,106 $ 5,178 $ - $ 36,284
Operating expenses:
Cost of sales 21,849 3,564 - 25,413
Selling, general, and administrative 5,256 1,387 - 6,643
Amortization of intangibles 1,764 184 872 2,820
------------- ------------- ------------- ----------
Total operating expenses 28,869 5,135 872 34,876
Operating income 2,237 43 (872) 1,408
Other:
Interest expense, net (2,996) - (790) (3,786)
Amortization of deferred financing costs (309) - - (309)
Other (172) 21 - (151)
------------- ------------- ------------- ----------
Net income (loss) before income tax provision (1,240) 64 (1,662) (2,838)
Income tax expense 159 38 (38) 159
------------- ------------- ------------- ----------
Net income (loss) $ (1,399) $ 26 $ (1,624) $ (2,997)
============= ============= ============= ==========
</TABLE>
(1) The TMT-Pathway Acquisition column represents results of operations for
TMT-Pathway for the period from January 1, 1998 through March 31, 1998.
All amounts are based upon unaudited financial statements.
(2) Gives effect to (i) an increase in amortization expense associated with
the excess of TMT-Pathway purchase price over the allocated fair market
value of the assets and liabilities. TMT-Pathway's intangibles are
amortized over a five year life; (ii) the increase in interest expense
associated with the average increase in net borrowings for the
TMT-Pathway Acquisition, and assumes a weighted average interest rate of
8.0% on the New Credit Facility and (iii) the reversal of income tax
expense (benefit) due to the utilization of net operating loss
carryforwards of the Company.
<PAGE>
JACKSON PRODUCTS, INC. AND SUBSIDIARIES
PRO FORMA STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
The TMT-Pathway Pro Forma Pro
Company Acquisition(1) Adjustments(2) Forma
------------- ------------- ------------- ----------
<S> <C> <C> <C> <C>
Net sales $ 165,232 $ 35,363 $ - $ 200,595
Operating expenses:
Cost of sales 111,325 24,391 - 135,716
Selling, general, and administrative 27,566 5,070 - 32,636
Write down of assets 576 - - 576
Amortization of intangibles 9,654 736 3,476 13,866
------------- ------------- ------------- ----------
Total operating expenses 149,121 30,197 3,476 182,794
Operating income 16,111 5,166 (3,476) 17,801
Other:
Interest expense, net (15,803) - (3,160) (18,963)
Amortization of deferred financing costs (1,271) - - (1,271)
Other (643) 208 - (435)
------------- ------------- ------------- ----------
Net income (loss) before income tax provision
and extraordinary item (1,606) 5,374 (6,636) (2,868)
Income tax expense 224 2,413 (2,413) 224
Net income (loss) before extraordinary item (1,830) 2,961 (4,223) (3,092)
Extraordinary item:
Loss due to early extinguishment of
debts, net of tax (7,558) - - (7,558)
------------- ------------- ------------- ----------
Net income (loss) $ (9,388) $ 2,961 $ (4,223) $ (10,650)
============= ============= ============= ==========
</TABLE>
(1) The TMT-Pathway Acquisition column represents results of operations for
TMT-Pathway for the period from January 1, 1998 through December 31,
1998. All amounts are based upon unaudited financial statements.
(2) Gives effect to (i) an increase in amortization expense associated with
the excess of TMT-Pathway purchase price over the allocated fair market
value of the assets and liabilities. TMT-Pathway's intangibles are
amortized over a five year life; (ii) the increase in interest expense
associated with the average increase in net borrowings for the
TMT-Pathway Acquisition, and assumes a weighted average interest rate of
8.0% on the New Credit Facility and (iii) the reversal of income tax
expense (benefit) due to the utilization of net operating loss
carryforwards of the Company.
