United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to __________
Commission file number 33-75154
J.B. POINDEXTER & CO., INC.
(Exact name of registrant as specified in its charter)
Delaware 76-0312814
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1100 Louisiana
Suite 5400
Houston, Texas
77002
(Address of principal executive offices)
(Zip code)
(713) 655-9800
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
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
There were 3,059 shares of Common Stock, $.01 par value, of the registrant
outstanding as of November 14, 1996.
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<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
September 30,December 31,
ASSETS 1996 1995
------------ ----------
(Unaudited)
<S> <C> <C>
Current assets
Cash, including restricted cash .................. $ 654 $ 1,714
Accounts receivable, net of allowance for doubtful
accounts of $2,483 and $2,626, respectively . 36,763 33,848
Inventories, net ................................. 53,649 51,937
Deferred income taxes ............................ 3,375 3,417
Prepaid expenses and other ....................... 3,779 2,299
-------- --------
Total current assets ....................... 98,220 93,215
Property, plant and equipment, net ..................... 50,988 52,746
Goodwill, net .......................................... 21,778 22,860
Other assets ........................................... 11,572 11,973
-------- --------
Total assets ............................... $182,558 $180,794
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Short-term debt ................................... $ 930 $ 4,184
Current portion of long-term debt ................. 1,642 2,337
Borrowings under revolving credit facility ........ 24,281 24,288
Accounts payable .................................. 19,958 13,826
Accrued interest payable .......................... 5,183 1,899
Accrued income taxes .............................. -- 363
Other accrued liabilities ......................... 17,522 16,887
-------- --------
Total current liabilities ................... 69,516 63,784
Noncurrent liabilities
Long-term debt, less current portion .............. 103,479 104,543
Employee benefit obligations and other ............ 3,130 3,016
-------- --------
Total noncurrent liabilities ................ 106,609 107,559
Stockholder's equity
Common stock and paid-in capital .................. 16,486 16,486
Cumulative translation adjustment ................. 25 46
Accumulated deficit ............................... (10,078) (7,081)
-------- --------
Total stockholder's equity .................. 6,433 9,451
-------- --------
Total liabilities and stockholder's equity .. $182,558 $180,794
======== ========
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</FN>
</TABLE>
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<PAGE>
J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited-in thousands except share and per share amounts)
<TABLE>
<CAPTION>
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales .......................... $ 111,250 $ 113,095 $ 332,275 $ 349,711
Cost of sales ...................... 86,277 94,167 259,943 282,629
--------- --------- --------- ---------
Gross Profit ....................... 24,973 18,928 72,332 67,082
Selling, general and
administrative expense .......... 21,510 22,454 63,827 60,936
Other income ....................... (87) (784) (190) (938)
--------- --------- --------- ---------
Operating income (loss) ............ 3,550 (2,742) 8,695 7,084
Interest expense ................... 4,184 4,212 12,239 11,792
--------- --------- --------- ---------
Loss before income taxes
and extraordinary loss .......... (634) (6,954) (3,544) (4,708)
Income tax provision (benefit) ..... 101 (2,649) (807) (1,452)
--------- --------- --------- ---------
Loss before extraordinary loss ..... (735) (4,305) (2,737) (3,256)
Extraordinary loss on
refinancing of revolver debt,
net of income tax benefit of $135 -- -- 260 --
--------- --------- --------- ---------
Net loss ........................... $ (735) $ (4,305) $ (2,997) $ (3,256)
========= ========= ========= =========
Loss per share:
Loss before extraordinary loss .. $ (240) $ (1,407) $ (895) $ (1,064)
Extraordinary loss .............. -- -- 85 --
--------- --------- --------- ---------
Net loss ........................ $ (240) $ (1,407) $ (980) $ (1,064)
========= ========= ========= =========
Weighted average shares outstanding 3,059 3,059 3,059 3,059
========= ========= ========= =========
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</FN>
</TABLE>
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<PAGE>
J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited-In thousands)
<TABLE>
<CAPTION>
For the Nine Months
Ended September 30,
1996 1995
------ ------
<S> <C> <C>
Net loss ................................................... $ (2,997) $ (3,256)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization ........................... 9,017 7,577
Extraordinary loss on extinguishment of
revolver debt, net of tax ............................ 260 --
Gain on sale of equipment ............................... (159) (1,113)
Deferred federal income tax benefit ..................... (324) (476)
Increase (decrease) in
accrued pension liabilities .......................... (215) 90
Increase (decrease) in operating cash flows
resulting from changes in:
Accounts receivable ..................................... (2,955) (8,599)
Inventories ............................................. (1,712) (3,860)
Prepaid expenses and other .............................. (364) (118)
Accounts payable ........................................ 6,201 (7,198)
Accrued income taxes .................................... (1,304) (1,552)
Accrued expenses and other .............................. 4,448 3,433
-------- --------
Net cash provided by (used in)
operating activities .............................. 9,896 (15,072)
-------- --------
Cash flows used in investing activities:
Purchase of businesses, net of cash acquired ............ -- (10,145)
Proceeds from disposition of equipment .................. 365 1,692
Acquisition of property, plant and equipment ............ (5,630) (9,187)
Other ................................................... (49) (66)
-------- --------
Net cash used in investing activities ................ (5,314) (17,706)
-------- --------
Cash flows provided by financing activities:
Net proceeds (payment of) revolving
lines of credit and short-term debt .................. (3,257) 4,368
Net proceeds (payments) from
long-term obligations ................................ (1,714) 20,735
Refinancing costs ....................................... (671) --
-------- --------
Net cash provided by (used in)
financing activities ............................. (5,642) 25,103
-------- --------
Decrease in cash and cash equivalents ...................... (1,060) (7,675)
Cash and cash equivalents, beginning of period ............. 1,714 9,121
-------- --------
Cash and cash equivalents, end of period ................... $ 654 $ 1,446
======== ========
Supplemental information:
Cash paid for income taxes, net of refunds .............. $ 589 $ 437
======== ========
Cash paid for interest cost ............................. $ 8,290 $ 7,929
======== ========
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</FN>
</TABLE>
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<PAGE>
J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) Organization and Business. J.B. Poindexter & Co., Inc. (JBPCO) and its
subsidiaries (the Subsidiaries, and, together with JBPCO, the Company), operate
manufacturing and wholesale distribution businesses. Subsidiaries consist of
Morgan Trailer Mfg. Co., (Morgan), Truck Accessories Group, Inc., (TAG), Lowy
Group, Inc. (Lowy), EFP Corporation (EFP), and Magnetic Instruments Corp.
(Magnetic Instruments).
The Company incurred a net loss for the year-ended December 31, 1995, of
$8,536,000 and a net loss of $2,997,000 for the nine months ended September 30,
1996. Excluding an extraordinary loss, net of tax benefit, of $260,000 related
to the refinancing of the Company's revolving credit facility, the net loss was
$2,737,000 for the nine months ended September 30, 1996. Consolidated losses
were attributable to operating losses at the Truck Accessories Group, primarily
as a result of manufacturing problems associated with new product development,
design changes and the production and finishing processes. See Management's
Discussion and Analysis of Financial Condition and Results of Operations for
further discussion of TAG operations.
The consolidated financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, the
information furnished reflects all adjustments, consisting only of normal
recurring adjustments, which are necessary for a fair presentation of the
results of the interim periods. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. However, the Company believes that the disclosures are
adequate to make the information presented not misleading. These financial
statements should be read in conjunction with the audited consolidated financial
statements and notes thereto for the year ended December 31, 1995 filed with the
Securities and Exchange Commission on Form 10-K.
(2) Earnings Per Share. Primary earnings per share is calculated by dividing net
income (loss) by the weighted average number of shares outstanding during the
period. No common stock equivalents exist.
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<PAGE>
(3) Inventories. Consolidated net inventories consist of the following (in
thousands):
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------ ------------
<S> <C> <C>
FIFO Basis Inventory:
Raw Materials .......................... $15,830 $19,267
Work in Process ........................ 12,378 8,094
Finished Goods ......................... 12,875 13,588
------- -------
41,083 40,949
------- -------
LIFO Basis Inventory:
Raw Materials .......................... 2,671 2,245
Work in Process ........................ 1,728 1,529
Finished Goods ......................... 8,167 7,214
------- -------
12,566 10,988
------- -------
Total Inventory ............................... $53,649 $51,937
======= =======
</TABLE>
If the first-in, first-out method had been used for all inventory,
inventories would have approximated the reported value at September 30, 1996 and
would have been $352,000 greater than reported at December 31, 1995.
(4) Revolving Loan Agreement
On June 28, 1996, the Company entered into a new secured revolving loan
agreement (Revolving Loan Agreement) with a new lender providing for borrowings
by its Subsidiaries of up to $50,000,000. The arrangement allows the Company to
borrow funds and provides for the guarantee of letters of credit and certain
foreign exchange contracts, issued by the company's banks, up to the lesser of
$50,000,000 or a percentage of eligible accounts receivable and of eligible
inventory of the Subsidiaries. The Revolving Loan Agreement provides for
borrowings at variable rates of interest, based on either LIBOR (approximately
5.40 percent at November 5, 1996) or U.S. prime rate (8.25 percent at November
5, 1996), and expires June 28, 1999. Interest is payable monthly. The
Subsidiaries are guarantors of this indebtedness to which inventory and
receivables are pledged.
Effective June 28, 1996, the Company used proceeds of $24,321,000 from
the Revolving Loan Agreement to repay all indebtedness outstanding under the
Revolving Credit Agreement entered into on May 23, 1994. At September 30, 1996,
the Company had borrowings of $24,281,000, bank acceptances of $930,000 and
trade finance commitments of $5,511,000 outstanding pursuant to the Revolving
Loan Agreement. At September 30, 1996, the Company's unused available borrowings
under the Revolving Loan Agreement totaled approximately $19,200,000.
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<PAGE>
(5) Business Combinations
On June 29, 1995, the Truck Accessories Group, acquired substantially all
of the assets of two companies, 20th Century Fiberglass, Inc., (20th Century),
and Century Distributing, Inc., (Century Distributing) and effective June 30,
1995, the Truck Accessories Group acquired substantially all of the assets of
Brown Industries Ltd., Pro-More Industries Ltd., and Lo Rider Industries Inc.,
(Raider Industries).
The results of all businesses acquired have been included in the
consolidated financial statements from the dates of acquisition. In allocating
purchase price, the assets acquired and liabilities assumed were assigned and
recorded based on estimates of fair value.
The Company's consolidated results of operations on an unaudited pro
forma basis, as though the businesses acquired during fiscal year 1995 had been
acquired on January 1, 1995, are as follows (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
Nine Months Ended
September 30, 1995
(Unaudited)
<S> <C>
Pro forma net sales ................................... $ 373,410
Pro forma operating income ............................ 8,088
Pro forma loss before extraordinary loss .............. (2,981)
Pro forma net loss .................................... (2,981)
Pro forma loss per common and common equivalent share -
Loss before extraordinary loss ................... (975)
Net loss ......................................... (975)
</TABLE>
These pro forma results are presented for informational purposes only
and do not purport to show the actual results which would have occurred had the
business combinations been consummated on January 1, 1995, nor should they be
viewed as indicative of future results of operations.
(6) Contingencies.
Claims and Lawsuits. The Company is involved in certain claims and
lawsuits arising in the normal course of business. In the opinion of management,
the ultimate resolution of these matters will not have a material adverse effect
on the financial position or results of operations of the Company.
Concentration of Credit Risk. Morgan had two customers in 1996 and in
1995 (truck rental and leasing companies) accounting for approximately 23% and
55% of Morgan's net sales during the nine months ended September 30, 1996 and
1995, respectively, and 8% and 24% of consolidated net sales, respectively.
Environmental Matters. Morgan has been named as a potentially
responsible party ("PRP") with respect to its generation of hazardous materials
alleged to have been handled or disposed of at the Industrial Solvents and
Chemical Company state superfund site in Newberry Township, Pennsylvania, and
the Berks Associates Waste Recovery Federal Superfund site near Douglasville,
Pennsylvania. Under the
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<PAGE>
Comprehensive Environmental Response Compensation and Liability Act of 1980 and
the Pennsylvania Hazardous Sites Clean-Up Act, past and present site owners and
operators, transporters and waste generators are all potentially jointly and
severally responsible for clean up costs. However, typically, the generator
portion of the costs are allocated among generators, with each generator bearing
costs proportionate to the volume and nature of the wastes it disposed of at the
site. Although a precise estimate of liability cannot currently be made with
respect to these sites, based upon information known to Morgan, the agreements
Morgan is party to, the size of the waste sites, their years of operation, the
large number of past users and potentially responsible parties of some of the
sites, the alleged waste contribution by Morgan at some of these sites and the
nature of the substances alleged to be present at the waste sites, the Company
currently believes that Morgan's proportionate share, if any, of the ultimate
costs related to any necessary investigation and remedial work at those sites
will not have a material adverse effect on the Company.
NSSC has been listed as a potentially responsible party at one Federal
Superfund site. Although the extent of NSSC's liability, if any, is not known at
this time, management currently believes that NSSC's allocated share of the
ultimate costs related to any necessary investigation and remedial work at this
site will not have a material adverse effect on the Company. The Company is not
aware of any other significant pending environmental claims pertaining to NSSC.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
The Company operates in industries that are dependent on various factors
reflecting general economic conditions, including corporate profitability,
consumer spending patterns, sales of truck chassis and new pickup trucks, new
and remodeling construction activity and levels of oil and gas exploration
activity.
The Company acquired three new pickup cap manufacturing and light truck
accessory businesses at the end of June, 1995. The acquired businesses operate
within the Truck Accessories Group which consists of two operating divisions:
TAG Manufacturing Division and TAG Distribution Division.
Results of Operations
Consolidated Operating Results
Nine Months Ended September 30, 1996
Compared to Nine Months Ended September 30, 1995
Net sales decreased $17.4 million, or 5%, to $332.3 million for the nine
months ended September 30, 1996 compared to $349.7 million during 1995. The
decrease was due primarily to decreased demand for products at Morgan, whose net
sales decreased $41.1 million, which was partially offset by sales of $23.2
million from operations acquired during June, 1995 by the Truck Accessories
Group.
Cost of sales decreased 8% to $259.9 million for the nine months ended
September 30, 1996 compared to $282.6 million during 1995. Gross profit rose 8%
to $72.3 million (22% of net sales) compared to $67.1 million (19% of net sales)
for same period of 1995. The increase in gross profit as a percentage of net
sales is primarily due to an increase of 5%, from 14% to 19%, at the TAG
Manufacturing Division of the Truck Accessories Group as discussed below.
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<PAGE>
Selling, general and administrative expense increased 5% to $63.8
million (19% of net sales) for the nine months ended September 30, 1996 compared
to $60.9 million (17% of net sales) during 1995. The increase was due primarily
to increased costs associated with businesses acquired by the Truck Accessories
Group during June 1995. The increase as a percent of net sales was principally
due to certain fixed costs at Morgan relative to a lower level of sales.
Operating income increased 23% to $8.7 million (3% of net sales) for the
nine months ended September 30, 1996 compared to $7.1 million (2% of net sales)
in 1995, due primarily to a $3.4 million (51%) reduction in operating losses by
the Truck Accessories Group and $1.3 million (59%) increase in operating income
of Magnetic Instruments offset by a $3.3 million (37%) decrease in the operating
income of Morgan.
Interest expense increased to $12.2 million during the nine months ended
September 30, 1996 compared to $11.8 million during 1995 due to higher average
revolver balances as a result of funding the acquisitions made by TAG in June
1995.
Third Quarter 1996 Compared to Third Quarter 1995
Net sales for the quarter ended September 30, 1996 decreased $1.8
million or 2% to $111.3 million compared to $113.1 million for the same period
in 1995. The decrease was primarily a result of a $5.4 million decrease in sales
at Morgan which were partially offset by a $1.6 million increase at EFP and a
$1.1 million increase at Magnetic Instruments.
Cost of sales decreased 8% to $86.3 million during the quarter ended
September 30, 1996 compared to $94.2 million for the same period in 1995. Gross
profit increased 32% to $25.0 million during the quarter ended September 30,
1996 compared to $18.9 million during the prior year. Gross profit as a
percentage of net sales increased to 22% during the current quarter compared to
17% during 1995, primarily due to an increase of $2.3 million (74%) in gross
profit at the TAG Manufacturing Division of the Truck Accessories Group.
Selling, general and administrative expense decreased $0.9 million (4%)
to $21.5 million (19% of net sales) during the quarter ended September 30, 1996
compared to $22.5 million (20% of net sales) during the same period in the prior
year primarily due to a decrease at Morgan commensurate with its lower level of
sales.
During the quarter ended September 30, 1996, the Company recorded an
operating profit of $3.6 million (3% of net sales) compared to operating loss of
$2.7 million in 1995. The improvement in consolidated operating results was
principally due to a $4.3 million improvement in results by the Truck
Accessories Group, which includes approximately $0.6 million from operations
acquired in June 1995.
Morgan
Nine Months Ended September 30, 1996
Compared to Nine Months Ended September 30, 1995
Net sales decreased 27% to $113.0 million for the first nine months of
1996 compared to $154.1 million for the first nine months of 1995 as demand for
Morgan's commercial van bodies decreased
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<PAGE>
consistent with the cyclical downturn in truck sales overall. Shipments
decreased 31% during the 1996 period compared to 1995. Backlog decreased to
$28.7 million at September 30, 1996 compared to $39.4 million at December 31,
1995.
Cost of sales decreased 27% to $97.9 million for the nine months ended
September 30, 1996 compared to $134.0 million for the same period in 1995 in
line with the reduction in sales. Gross profit decreased 24% to $15.2 million
(13% of net sales) compared to $20.0 million (13% of net sales) during 1995.
Selling, general and administrative expense decreased 14% to $9.7
million (9% of net sales) for the first nine months of 1996 compared to $11.3
million (7% of net sales) for the same period of 1995. The increase in selling,
general and administrative expense as a percentage of net sales to 9% in 1996
from 7% 1995 was the result of certain fixed costs which did not decrease in
proportion to the reduction in net sales.
Morgan's operating income decreased $3.3 million, or 37%, to $5.5
million (5% of net sales) during the first nine months of 1996 compared to $8.7
million (6% of net sales) for the first nine months of 1995 due to the reduction
in net sales described above.
Third Quarter 1996 Compared to Third Quarter 1995
Net sales decreased 13% to $35.8 million for the third quarter of 1996
compared to $41.2 million for the third quarter of 1995, as demand for
commercial van bodies continued with the cyclical downturn in truck sales. As a
result of reduced demand, the number of units shipped decreased 16% during the
1996 period compared to the 1995 period.
Cost of sales decreased 17% to $30.8 million for the third quarter of
1996 compared to $37.0 million for the same period in 1995. Gross profit
increased 19% to $5.0 million (14% of net sales) during 1996 compared to $4.2
million (10% of net sales) during 1995. The improvement in gross profit as a
percent of sales was primarily due to product price increases effected late in
1995, as well as reduction in raw material costs as a percentage of sales.
Selling, general and administrative expense decreased 18% to $2.9
million (8% of net sales) for the third quarter of 1996 compared to $3.6 million
(9% of net sales) for the same period of 1995. The decrease to 8% of net sales
in 1996 from 9% in 1995 was the result of reductions in fixed costs which
exceeded the reductions in net sales.
Morgan's operating income increased to $2.0 million during the third
quarter of 1996 compared to $0.6 million for the third quarter of 1995. The
increase in operating income on lower sales volume was primarily due to
reductions in spending levels of selling, general and administrative expense and
lower raw material costs.
Truck Accessories Group (TAG)
TAG consists of two operating divisions: TAG Manufacturing Division
comprising Leer Manufacturing, Century Fiberglass and Raider Industries, the
last two of which were acquired during June 1995 and Gem Top. TAG Distribution
Division is composed of Leer Retail, a chain of 46 retail stores and National
Truck Accessories (NTA) which is a wholesale distributor of light truck and
sport utility vehicle
Truck Accessories Group (TAG)
TAG consists of two operating divisions: TAG Manufacturing Division
comprising Leer Manufacturing, Century Fiberglass and Raider Industries, the
last two of which were acquired during June 1995 and Gem Top. TAG Distribution
Division is composed of Leer Retail, a chain of 46 retail stores and National
Truck Accessories (NTA) which is a wholesale distributor of light truck and
sport utility vehicle
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<PAGE>
accessories. TAG operating results include three months and nine months of
results from the acquisitions of Raider and Century for 1995 and 1996,
respectively. The following operating results for each division exclude
intercompany sales. As used below, "retail sales" refers to sales by TAG's
company-owned stores.
Nine Months Ended September 30, 1996
Compared to Nine Months Ended September 30, 1995
Net sales increased 23% to $122.6 million for the first nine months of
1996 compared to $99.4 million for the first nine months of 1995. Excluding
operations acquired in June 1995, sales declined $12.9 million or 13%. TAG
Manufacturing Division revenues were $69.7 million for the nine months ended
September 30, 1996 compared to $54.1 in the same period of 1995, an increase of
$15.5 million or 29%. Approximately $27.2 million of TAG Manufacturing revenues
is attributable to Century and Raider, both acquired in late June of 1995. Net
sales at TAG Distribution increased by 17% to $52.9 million from $45.2 million
for the first nine months in 1996. Sales by Leer Retail increased 11% to $33.0
million and wholesale sales by NTA were $20.0 million, an increase of $4.4
million or 28% over the same period last year. Approximately $7.9 million of
NTA's revenues are attributable to Century Distribution, acquired in late June
1995.
During the first nine months of 1996, gross profit increased $8.7
million or 38% to $31.9 million (26% of net sales) compared to $23.2 million
(19% of net sales) for the comparable period in 1995. TAG Manufacturing Division
accounted for $6.0 million of that change, an increase of 63% while TAG
Distribution's gross profit increased by $2.7 million or 20%. As a percent of
sales, gross profit increased from 23% for the first nine months of 1995 to 26%
for the comparable period in 1996. Excluding results for the first six months of
1996 for operations acquired in June of 1995, gross profit increased by $3.0
million.
Selling, general and administrative expense increased 17% to $35.2
million (or 29% of net sales) for the first nine months of 1996 compared to
$30.0 million (or 30% of net sales) for the nine months of 1995. Excluding
operations acquired during June 1995, selling, general and administrative
expense increased $0.3 million.
TAG's operating loss decreased $3.4 million to an operating loss of $3.3
million for the first nine months of 1996 compared to an operating loss of $6.7
million for the first nine months of 1995. The Company continued to implement
improvement measures at its divisions. Steps taken by management to address
manufacturing problems included among others, redesigning certain products and
implementing additional quality control procedures.
Third Quarter 1996 Compared to Third Quarter 1995
Net sales increased 2% to $40.2 million for the third quarter of 1996
compared to $39.3 million for the third quarter of 1995. TAG Distribution sales
decreased 2% to $16.8 million during 1996 compared to $17.0 million during 1995.
Sales at Leer Retail increased 8% to $10.9 million in 1996 from $10.1 million in
1995. During the third quarter of 1996 Leer Retail closed two stores ending the
quarter with 46 operating stores. Continuing store sales, including 42 stores
which were in operation throughout the two comparative quarters, increased 11%
to $10.8 million in 1996 from $9.7 in 1995. Sales at NTA declined 15% to $5.9
million in 1996 from $6.9 million in the third quarter of 1995. TAG
Manufacturing sales of caps and accessories increased 5% to $23.5 million
compared to $22.3 million during 1995.
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<PAGE>
Gross profit increased 57% to $10.6 million (26% of net sales) for the
third quarter of 1996 compared to $6.8 million (17% of net sales) for the 1995
period. The increase in gross profit as a percent of net sales was primarily due
to improvements in manufacturing processes at Leer Manufacturing and
non-recurring charges during the third quarter of 1995 of approximately $1.5
million at Leer Manufacturing associated with the write down of certain
operating assets and increased reserves.
Selling, general and administrative expense decreased 5% to $12.0
million (or 30% of net sales) for the third quarter of 1996 compared to $12.5
million (or 32% of net sales) for the third quarter of 1995, Excluding
non-recurring charges of $0.7 million during 1995, expenses increased $0.2
million.
The Truck Accessories Group's operating results improved by $4.4 million
resulting in an operating loss of $1.4 million for the third quarter of 1996
compared to an operating loss of $5.8 million in the same period of 1995. The
improvement was primarily due to the improved gross profit margins within the
manufacturing operations and total non-recurring charges of $2.5 million
incurred during the third quarter of 1995 associated with increased warranty,
bad debt and inventory obsolescence reserves.
Lowy
Nine Months Ended September 30, 1996
Compared to Nine Months Ended September 30, 1995
Net sales declined 6% to $54.9 million for the first nine months of 1996
compared to $58.5 million for the first nine months of 1995. The decrease in
sales resulted primarily from a $1.7 million decline in purchases from a single
customer and a decline in wood flooring product sales.
Cost of sales decreased 6% to $39.6 million in line with the decline in
sales in the first nine months of 1996 from $42.2 million in 1995. Gross profit
decreased 6% to $15.3 million (28% of net sales) for the first nine months of
1996 compared to $16.3 million (28% of net sales) for the first nine months of
1995. The decrease in gross profit was due to lower sales.
Selling, general and administrative expense decreased to $12.2 million
(22% of net sales) for the first nine months of 1996 compared to $12.4 million
(21% on net sales) in 1995. The increase in the expense as a percent of net
sales was due to fixed costs not reduced with the reduction in sales.
Due to reduction in sales, Lowy Group's operating income decreased $0.8
million to $3.1 million (6% on net sales) for the first nine months of 1996
compared $3.9 million (7% on net sales) during the same period of 1995.
Third Quarter 1996 Compared to Third Quarter 1995
Net sales were flat at $20.4 million for the third quarter of 1996
compared to $20.5 million for the third quarter of 1995.
Cost of sales was $14.8 million for the third quarter of 1996, the same
as the third quarter of 1995. Gross profit was level at $5.6 million (28% of net
sales) for the third quarter of 1996 compared $5.7 million (28% of net sales) in
the same period of 1995.
-12-
<PAGE>
Selling, general and administrative expense during the third quarter of
1996 increased by $0.1 million to $4.1 million or 20% of sales primarily due to
an increase in sample cost.
Lowy Group's operating income decreased $0.2 million to $1.5 million for
the third quarter of 1996 compared to $1.7 million for the first nine months of
1995, primarily due to the increase in selling expense.
EFP
Nine Months Ended September 30, 1996
Compared to Nine Months Ended September 30, 1995
Net sales were $22.8 million for the first nine months of 1996 compared
to $23.0 during the same period of 1995. The loss of sales volume from the sale
of the beverage cooler product line, which was sold during the third quarter of
1995, and the loss of Styrocast(C) business from a large automotive customer
accounted for approximately $3.8 million of sales during 1995. The addition of
new business in packaging and custom shape product lines during 1996 compensated
for most of the loss of this business.
Cost of sales decreased 6% to $18.6 million (81% of net sales) during
the 1996 period compared to $19.7 million (86% of net sales) during 1995 due to
replacing certain higher labor content Styrocast(C) and beverage cooler business
with lower labor content new business and to lower raw material costs. Gross
profit increased $1.0 million to $4.3 million (19% of net sales) for the first
nine months of 1996 compared to $3.3 million (14% of net sales) for the third
quarter of 1995.
Selling, general and administrative expense decreased 7% to $2.7 million
(12% of net sales) for the first nine months of 1996 compared to $2.9 million
(13% of net sales) during the comparable period of 1995 due to overhead cost
reductions associated with discontinued business.
EFP's operating income increased 29% to $1.8 million (8% of net sales)
for the first nine months of 1996 compared to $1.4 million (6% of net sales) for
the first nine months of 1995, primarily as a result the reductions in the cost
of sales. During September 1995, EFP sold its Styropak(C) product line of
beverage coolers, the sale of which resulted in a gain of approximately $1.0
million; excluding this gain, operating income increased $1.4 million or 350%.
Third Quarter 1996 Compared to Third Quarter 1995
Net sales increased 23% to $8.5 million for the third quarter of 1996
compared to $6.9 million for the comparable period of 1995, primarily due to an
increase of $1.5 million in the packaging product line from new customers and
new product orders from existing customers.
Cost of sales increased 9%, on significantly higher increases in sales,
to $6.6 million during the 1996 period compared to $6.1 million during 1995
because of lower raw material costs and improved labor efficiencies. Gross
profit increased $1.0 million to $1.8 million (21% of net sales) for the third
quarter of 1996 compared to $0.8 million (11% of net sales) for the third
quarter of 1995. The increase in gross profit as a percentage of sales was due
to the lower cost of sales resulting from the change in product mix and volume.
-13-
<PAGE>
Selling, general and administrative expense increased 8% to $1.0 million
(12% of net sales) for the third quarter of 1996 compared to $0.9 million (13%
of net sales) during the comparable period of 1995, due primarily to increased
commissions related to new sales programs needed to offset reductions in revenue
from the sale of the beverage cooler line.
EFP's operating income during the third quarter of 1996 equaled the $0.9
million for the third quarter of 1995, which included a gain on the sale of the
beverage cooler product line in 1995 of $1.0 million.
Magnetic Instruments
Nine Months Ended September 30, 1996
Compared to Nine Months Ended September 30, 1995
Net sales increased 29% to $19.0 million for the first nine months of
1996 compared to $14.7 million during the comparable period in 1995. This
increase in net sales was due to increased demand for the company's services.
Cost of sales increased 27% to $13.2 million for the first nine months
of 1996 compared to $10.4 million for the first nine months of 1995. Gross
profit increased 33% to $5.7 million (30% of net sales) from $4.3 million (29%
of net sales) during the same period in 1995. The increase in gross profit as a
percentage of net sales was due to an improved absorption of fixed overhead
expenses.
Selling, general and administrative expense increased to $2.2 million
(12% of net sales) for the first nine months of 1996 compared to $2.0 million
(14% of net sales) for the first nine months of 1995. The increase was primarily
as a result of costs associated with an increased selling effort.
Operating income increased to $3.5 million for the first nine months of
1996 compared to $2.2 million for the first nine months of 1995, due to
increased revenue and greater efficiencies at a higher level of production.
Third Quarter 1996 Compared to Third Quarter 1995
Net sales increased 21% to $6.4 million for the third quarter of 1996
compared to $5.2 million during the comparable period in 1995. This increase in
net sales was due to increased demand from energy service companies, as well as
an expansion of the company's electronic assembly and testing business.
Cost of sales increased 17% to $4.4 million for the third quarter of
1996 compared to $3.7 million for the third quarter of 1995. Gross profit
increased 33% to $2.0 million (31% of net sales) compared to $1.5 million (28%
of net sales) during 1995.
Selling, general and administrative expense remained at $0.8 million for
the third quarter of 1996 which was the same as for the third quarter of 1995.
Due to the higher sales level, selling, general and administrative expense as a
percent of net sales fell to 13% in 1996 from 15% in 1995.
Operating income increased to $1.2 million (19% of net sales) for the
third quarter of 1996 compared to $0.6 million (12% of net sales) for the third
quarter of 1995, due to the increased gross profit resulting from increased
sales at higher levels of efficiency.
-14-
<PAGE>
Liquidity and Capital Resources
Effective June 28, 1996 the Company completed a refinancing of its
revolving credit facility. The new Revolving Loan Agreement provides for
borrowing up to $50.0 million, based on eligible collateral and contains no
financial performance covenants. On June 28, 1996, proceeds of $24.3 million
were used to repay all indebtedness under the previous facility.
The ability to borrow under the Revolving Loan Agreement depends on
certain advance rates applied to the value of accounts receivables and
inventory. At September 30, 1996 the Company had total borrowing capacity of
$50.0 million, the maximum credit allowed under the agreement, $24.3 million in
outstanding loans and $6.5 million used to secure letters of credit and finance
trade transactions, leaving unused available borrowing capacity of approximately
$19.2 million under the terms of the Revolving Loan Agreement.
Working capital declined 3% to approximately $28.7 million at September
30, 1996 compared to $29.4 million at December 31, 1995. The working capital
ratio declined to 1.4 at September 30, 1996 compared to 1.5 at December 31,
1995. Since December 31, 1995, accounts receivable increased approximately $3.0
million (9%) and inventory increased approximately $2.0 million (3%) in response
to a seasonal increase in operating activity. These increases were financed
primarily by an increase in accounts payable of approximately $6.1 million
(44%).
Operating activities during the nine months ended September 30, 1996
generated cash of $9.9 million compared to using cash of $15.0 million during
same period in 1995. During the first nine months of 1996, changes in purchasing
policies increased accounts payable at Morgan and seasonal increases in accounts
payable at Lowy offset cash used by losses at TAG. During 1995, losses at the
Truck Accessories Group and decreases in accounts payable balances at Morgan and
TAG were the primary uses of cash.
Capital expenditures of $5.6 million and $9.2 million during the nine
months ended September 30, 1996 and 1995, respectively, consisted primarily of
expenditures to maintain existing capacity.
The Company believes that it has adequate resources to meet its working
capital and capital expenditure requirements consistent with past trends and
practices. Management believes that its cash balances and the borrowing
availability under the Revolving Loan Agreement will satisfy the Company's cash
requirements for the foreseeable future given its anticipated additional capital
expenditure, working capital requirements and its known obligations. The Company
is in compliance with the terms the Revolving Loan Agreement.
-15-
<PAGE>
PART II. OTHER INFORMATION
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits. The following exhibits are filed herewith:
27.1 Financial Data Schedule
b. Reports on Form 8-K. The Company filed the following reports on
Form 8-K during the quarter for which this Form 10-Q is filed:
1) Form 8-K filed with the Commission on October 7, 1996, reporting
a change in the Company's certifying accountant (Item 4).
2) Form 8-K/A filed with the Commission on October 11, 1996, filed
Item 7, Exhibit (16), the letter of response from Arthur
Andersen LLP, the Company's former independent auditors.
-16-
<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.
J.B. POINDEXTER & CO., INC.
(Registrant)
Date: November 14, 1996 By: S. Magee
-----------------------------------------------
S. Magee, Chief Financial Officer and Treasurer
By: R. S. Whatley
-----------------------------------------------
R. S. Whatley, Chief Accounting Officer
-17-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1996 3RD
QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 654
<SECURITIES> 0
<RECEIVABLES> 39,246
<ALLOWANCES> 2,483
<INVENTORY> 53,649
<CURRENT-ASSETS> 98,220
<PP&E> 50,988
<DEPRECIATION> 0
<TOTAL-ASSETS> 182,558
<CURRENT-LIABILITIES> 69,516
<BONDS> 106,609
0
0
<COMMON> 16,486
<OTHER-SE> (10,053)
<TOTAL-LIABILITY-AND-EQUITY> 182,558
<SALES> 332,275
<TOTAL-REVENUES> 332,275
<CGS> 259,943
<TOTAL-COSTS> 259,943
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,239
<INCOME-PRETAX> (3,544)
<INCOME-TAX> (807)
<INCOME-CONTINUING> (2,737)
<DISCONTINUED> 0
<EXTRAORDINARY> 260
<CHANGES> 0
<NET-INCOME> (2,997)
<EPS-PRIMARY> (0.980)
<EPS-DILUTED> (0.980)
<FN>
OTHER EXPENSES ARE INCLUDED IN SELLING, GENERAL AND ADMINISTRATIVE ON
THE FINANCIAL STATEMENTS.
</FN>
</TABLE>
