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, 1997
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 7, 1997.
<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 1997 1996
------------- -------------
(Unaudited)
<S> <C> <C>
Current assets
Restricted cash ............................................................. $ 2,310 $ 2,607
Accounts receivable, net of allowance for doubtful accounts of
$1,864 and $1,863, respectively ....................................... 37,162 31,258
Inventories, net ............................................................ 59,100 48,612
Deferred income taxes ....................................................... 2,605 2,588
Prepaid expenses and other .................................................. 2,077 2,139
--------- ---------
Total current assets .................................................. 103,254 87,204
Property, plant and equipment, net ............................................... 49,390 51,097
Goodwill, net .................................................................... 20,897 21,773
Other assets ..................................................................... 12,291 13,407
--------- ---------
Total assets .......................................................... $ 185,832 $ 173,481
========= =========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities
Short-term debt ............................................................. $ 1,087 $ 917
Current portion of long-term debt ........................................... 1,207 1,885
Borrowings under revolving credit facility .................................. 36,278 28,238
Accounts payable ............................................................ 18,258 14,624
Accrued interest payable .................................................... 4,893 1,682
Accrued income taxes ........................................................ 269 372
Other accrued liabilities ..................................................... 16,649 17,120
--------- ---------
Total current liabilities ............................................. 78,641 64,838
--------- ---------
Noncurrent liabilities
Long-term debt, less current portion ........................................ 101,977 102,767
Employee benefit obligations and other ...................................... 3,311 2,846
--------- ---------
Total noncurrent liabilities .......................................... 105,288 105,613
--------- ---------
Commitments and contingencies
Stockholder's equity
Common stock and paid-in capital ............................................ 16,486 16,486
Cumulative translation adjustment ........................................... (71) 39
Accumulated deficit ......................................................... (14,512) (13,495)
--------- ---------
Total stockholder's equity ............................................ 1,903 3,030
--------- ---------
Total liabilities and stockholder's equity ............................ $ 185,832 $ 173,481
========= =========
<FN>
The accompanying notes are an integral part of these
consolidated financial statements.
</FN>
</TABLE>
- 2 -
<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,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales ................................... $ 105,733 $ 111,250 $ 336,061 $ 332,275
Cost of sales ............................... 83,528 86,277 262,933 259,943
--------- --------- --------- ---------
Gross Profit ................................ 22,205 24,973 73,128 72,332
Selling, general and administrative expense . 21,013 21,510 63,675 63,827
Other (income) expense ...................... 320 (87) (2,856) (190)
--------- --------- --------- ---------
Operating income ............................ 872 3,550 12,310 8,695
Interest expense ............................ 4,136 4,184 12,631 12,239
--------- --------- --------- ---------
Loss before income taxes
and extraordinary loss ................... (3,264) (634) (321) (3,544)
Income tax provision (benefit) .............. (824) 101 696 (807)
--------- --------- --------- ---------
Loss before extraordinary loss .............. (2,440) (735) (1,017) (2,737)
Extraordinary loss on refinancing of revolver
debt, net of income tax benefit of $135 .. -- -- -- 260
--------- --------- --------- ---------
Net loss .................................... $ (2,440) $ (735) $ (1,017) $ (2,997)
========= ========= ========= =========
Loss per share:
Loss before extraordinary loss ........... $ (798) $ (240) $ (332) $ (895)
Extraordinary loss ....................... -- -- -- 85
--------- --------- --------- ---------
Net loss ................................. $ (798) $ (240) $ (332) $ (980)
========= ========= ========= =========
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>
- 3 -
<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,
1997 1996
--------- ---------
<S> <C> <C>
Net loss .......................................................... $ (1,017) $ (2,997)
Adjustments to reconcile net loss to net cash provided by (used in)
operating activities
Depreciation and amortization ................................ 9,196 9,017
(Gain) loss on sale of equipment ............................. (2,639) 260
Extraordinary loss on extinguishment of debt ................. -- (159)
Deferred federal income tax provision ........................ 93 (324)
Other ........................................................ 282 (215)
Increase (decrease) in operating cash flows resulting from:
Accounts receivable .......................................... (5,872) (2,955)
Inventories .................................................. (10,490) (1,712)
Prepaid expenses and other ................................... 160 (364)
Accounts payable ............................................. 3,636 6,201
Accrued income taxes ......................................... (103) (1,304)
Accrued expenses and other ................................... 1,596 4,448
-------- --------
Net cash provided by (used in) operating activities ........ (5,158) 9,896
-------- --------
Cash flows used in investing activities:
Proceeds from disposition of property plant and equipment .... 3,560 365
Acquisition of property, plant and equipment ................. (5,805) (5,630)
Other ........................................................ 15 (49)
-------- --------
Net cash used in investing activities ..................... (2,229) (5,314)
-------- --------
Cash flows provided by (used in) financing activities:
Net proceeds (payments) of revolving lines of credit and
short-term debt ........................................... 8,425 (3,257)
Payments of long-term debt and capital leases ................ (1,335) (1,714)
Refinancing costs ............................................ -- (671)
-------- --------
Net cash provided by (used in) financing activities ....... 7,090 (5,642)
-------- --------
Decrease in restricted cash and cash equivalents .................. (297) (1060)
Restricted cash and cash equivalents, beginning of period ......... 2,607 1,714
-------- --------
Restricted cash and cash equivalents, end of period ............... $ 2,310 $ 654
======== ========
Supplemental information:
Cash paid for income taxes, net of refunds ................... $ 584 $ 589
======== ========
Cash paid for interest cost .................................. $ 7,935 $ 8,290
======== ========
<FN>
The accompanying notes are an integral part of these
consolidated financial statements.
</FN>
</TABLE>
- 4 -
<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. (MIC
Group). Effective May 6,1997 Magnetic Instruments filed an assumed name
certificate and began doing business as MIC Group or Manufacturing Innovations
Corp.
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. Operating results for
the three and nine month periods ended September 30,1997 are not necessarily
indicative of the results that may be expected for the year ended December
31,1997. These financial statements should be read in conjunction with the
audited consolidated financial statements and notes thereto for the year ended
December 31, 1996 filed with the Securities and Exchange Commission on Form
10-K.
(2) Earnings Per Share. In February 1997, the Financial Accounting Standards
Board issued Statement No. 128, Earnings per Share, which is required to be
adopted on December 31, 1997. Since the Company has no common stock equivalents
outstanding, this statement will not impact the earnings per share calculation.
(3) New Accounting Standards. In June 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 130 - "Reporting
Comprehensive Income" ("SFAS130") that establishes standards for the reporting
and display of comprehensive income in the financial statements. The Company
will adopt SFAS 130 in the first quarter of 1998. SFAS 130 is not expected to
have a significant impact on the Company's results of operations or financial
position.
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 131 - "Disclosure about Segments of an
Enterprise and Related Information" ("SFAS 131") which specifies the
presentation and disclosure requirements for operating segments in annual
financial statements and also requires certain segment information in interim
reports. The Company will adopt SFAS 131 in the first quarter of 1998. SFAS 131
is not expected to have an impact on the Company's results of operations or
financial position.
- 5 -
<PAGE>
(4) Inventories. Consolidated net inventories consist of the following (in
thousands):
September 30, December 31,
1997 1996
------------- ------------
FIFO Basis Inventory:
Raw Materials .................... $19,379 $13,231
Work in Process .................. 14,720 12,052
Finished Goods ................... 12,780 12,436
------- -------
46,879 37,719
------- -------
LIFO Basis Inventory:
Raw Materials .................... 3,066 2,041
Work in Process .................. 1,650 1,595
Finished Goods ................... 7,505 7,257
------- -------
12,221 10,893
------- -------
Total Inventory .......................... $59,100 $48,612
======= =======
If the first-in, first-out method had been used for all inventories,
inventories would have approximated the reported value at September 30, 1997 and
at December 31, 1996.
(5) Sale of Assets. Effective March 31,1997, Lowy Distribution sold its
warehouse facility near Minneapolis, Minnesota and realized a gain of $2.6
million which was included in Other Income and Expense for the nine months ended
September 30, 1997.
Effective June 30, 1997, Lowy Distribution sold and leased back a warehouse
facility in Ankeny, Iowa. Principally all of the gain realized on sale of $0.7
million will be amortized over the period of the lease on the property.
(6) Extraordinary Gain. Effective June 28,1996, the Company entered into a new
revolving loan agreement and wrote off certain capitalized financing costs
associated with the previous revolving loan agreement. The costs were recorded
as an extraordinary loss of $260,000, net of tax benefits, during the year ended
September 30,1996.
(7) Income Taxes. The provision for income taxes differs from amounts computed
based on the federal statutory rates primarily as the result of state income
taxes in jurisdictions where no benefits will be received for losses at certain
divisions and as the result of non-deductible goodwill amortization.
(8) 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. Two of Morgan's customers (three during 1996)
accounted for approximately 52% and 43% of Morgan's net sales during the nine
months ended September 30, 1997 and 1996, respectively, and 20% and 15% of
consolidated net sales, respectively.
- 6 -
<PAGE>
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 two Federal Superfund sites in Pennsylvania
and one in Kansas. Although a precise estimate of liability cannot currently be
made with respect to these sites, based upon information known to Morgan, the
Company currently believes that it'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.
(9) Subsequent Event. Effective October 31, 1997, Radco, a subsidiary of TAG,
acquired substantially all of the assets of Midwest Truck After Market Inc.,
(MTA). MTA, based in Tulsa Oklahoma, was a wholesale distributor of light truck
and vehicle accessories. Radco paid approximately $2.5 million as purchase price
for the assets, with approximately $2.1 million being paid in cash at closing
and $0.5 million being evidenced by a promissory note delivered by Radco at
closing. The note, which bears interest at the rate of 9% per annum, is payable
in 20 consecutive quarterly installments of principal and interest. The note
will be adjusted downward to $0.4 million after October 31,1997 because of post
closing adjustments.
Concurrently with the acquisition, Radco entered into a five year
non-compete agreement and a six month consulting agreement with the owner of MTA
pursuant to which the owner will be compensated for providing continuing
services to, and not competing with, Radco. Radco will pay the owner an
aggregate of $100,000 each year under the terms of the non-compete agreement.
Radco is a non guarantor of the Company's Senior Notes and is not a
Subsidiary Guarantor under the terms of the Company's Revolving Loan Agreement.
Concurrent with the acquisition of substantially all the assets of MTA, Radco
entered into a three year revolving credit agreement providing for borrowings of
up to $5.0 million. Radco used proceeds of approximately $1.7 million to finance
the acquisition of the MTA assets. The arrangement allows Radco to borrow funds
and provides for the guarantee of letters of credit up to the lessor of $5.0
million or an amount based on certain advance rates applied to the amounts of
eligible accounts receivable and inventory.
- 7 -
<PAGE>
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.
Effective July 1, 1997 the operations of Gem Top which manufactures and
distributes light truck caps, primarily to commercial customers, were
transferred from TAG to Morgan. The following historical financial results and
comparisons for Morgan and TAG have been restated to reflect the transfer of Gem
Top. Inter-company sales between Gem Top and TAG have been eliminated.
Results of Operations
Nine Months Ended September 30, 1997 Compared to Nine Months Ended
September 30, 1996
Net sales increased 1% to $336.1 million for the nine months ended
September 30, 1997 compared to $332.3 million during 1996. Sales at Morgan
increased 15% or $16.9 million which was offset by sales at TAG which decreased
13% or $16.0 million. The Company recorded sales increases at MIC Group of 15%
or $2.8 million and at EFP of 6% or $1.3 million. Sales at Lowy declined 2% or
$1.2 million.
Cost of sales increased 1% to $262.9 million for the nine months ended
September 30, 1997 compared to $259.9 million during 1996. Gross profit
increased 1% to $73.1 million (22% of net sales) for the first nine months of
1997 compared to $72.3 million (22% of net sales) for 1996.
Selling, general and administrative expense decreased less than one percent
to $63.7 million (19% of net sales) for the nine months ended September 30, 1997
compared to $63.8 million (19% of net sales) during 1996.
Operating income increased 42% to $12.3 million (4% of net sales) for the
nine months ended September 30, 1997 compared to operating income of $8.7
million (3% of net sales) in 1996. Operating income for the nine months ended
September 30, 1997 includes a $2.7 million gain on the sale of certain real
property by the Lowy Group.
Interest expense increased 3% to $12.6 million during the nine months ended
September 30, 1997 compared to $12.2 million during 1996. Average total
borrowings increased $4.1 million or 3% during the 1997 period compared to the
same period in 1996.
The Company's Loss before income taxes and extraordinary losses decreased
92% to $0.3 million for the nine months ended September 30,1997 compared to $3.5
million during the same period in 1996. The improvement was due primarily to the
gain on sale of property at Lowy and improved operating results at Morgan.
The provision for income tax of $0.7 million for the first nine months of
1997 consisted of state income taxes in jurisdictions where no benefits will be
received for losses at TAG.
- 8 -
<PAGE>
Third Quarter 1997 Compared to Third Quarter 1996
Net sales for the quarter ended September 30, 1997 decreased 7% to $105.7
million compared to $111.3 million for the same period in 1996. The decrease was
due primarily to a $5.5 million decline in sales at TAG. An increase in sales at
Morgan of 5% or $1.9 million was offset by an 8% or $1.6 million decrease at
Lowy Group.
Cost of sales decreased 3% to $83.5 million during the quarter ended
September 30, 1997 compared to $86.3 million for the same period in 1996. Gross
profits decreased $2.8 million to $22.2 million during the quarter ended
September 30, 1997 compared to $25.0 million during the prior year. Gross
profits as a percentage of net sales were 21% during the current quarter
compared to 23% during the same quarter in 1996.
Selling, general and administrative expense decreased $0.5 million or 2% to
$21.0 million during the quarter compared to $21.5 million for the same period
in the prior year. Selling, general and administrative expense as a percent of
sales remained at approximately 19% of sales.
Operating income decreased 75% to $0.9 million (1% of net sales) for the
third quarter of 1997 compared to $3.6 million (3% of net sales) in 1996.
Operating income increased slightly at EFP, but, decreased at Morgan, TAG, Lowy
Group and MIC Group.
Morgan
Nine Months Ended September 30, 1997 Compared to Nine Months Ended
September 30, 1996
Net sales, including Gem Top third party sales, increased 15% to $134.0
million for the first nine months of 1997 compared to sales of $117.1 million
for the first nine months of 1996 as demand for Morgan's commercial van bodies
increased. Shipments increased 25% during the 1997 period compared to 1996
including an 83% increase in consumer rental product shipments. Backlog at
September 30, 1997 was $37.9 million compared to $39.4 million at December 31,
1996 and $28.7 million at September 30, 1996.
Cost of sales increased 12% to $113.5 million for the first nine months of
1997 compared to $101.1 million for the same period in 1996. Gross profit
increased 28% to $20.5 million (15% of net sales) during 1997 compared to $16
million (14% of net sales) during 1996, primarily due to increased sales and
improved absorption of overhead costs.
Selling, general and administrative expense increased 8% to $11.5 million
(9% of net sales) for the first nine months of 1997 compared to $10.7 million
(9% of net sales) for the same period of 1996.
Morgan's operating income increased $3.8 million to $9.0 million during the
first nine months of 1997 compared to $5.2 million for the same period of 1996
due to the increase in gross margins and the improved absorption of overhead
costs.
- 9 -
<PAGE>
Third Quarter 1997 Compared to Third Quarter 1996
Net sales, including Gem Top third party sales, increased 5% to $38.4
million for the third quarter of 1997 compared to $36.6 million for the third
quarter of 1996, as demand for commercial van bodies increased. The number of
units shipped increased 9% during the 1997 period compared to 1996
Cost of sales increased 7% to $33.6 million for the third quarter of 1997
compared to $31.4 million for the same period in 1996. Gross profit decreased 8%
to $4.8 million (12% of net sales) during 1997 compared to $5.2 million (14% of
net sales) during 1996. The decline in gross profit as a percent of sales, in
the quarter just ended, was primarily due to increased labor costs because of
higher overtime requirements and the mix of products sold which had a higher
labor content.
Selling, general and administrative expense increased 11% to $3.7 million
(9% of net sales) for the third quarter of 1997 compared to $3.3 million (9% of
net sales) for the same period of 1996. General and Administrative costs
increased 30% or $0.4 million due to the costs associated with the hiring of
increased personnel.
Morgan's operating income decreased 41% to $1.1 million during the third
quarter of 1997 compared to $1.9 million for the third quarter of 1996. The
decrease in operating income was due primarily to higher labor costs and
increased general and administrative costs during the 1997 period.
Truck Accessories Group (TAG)
Nine Months Ended September 30, 1997 Compared to Nine Months Ended
September 30, 1996
Net sales, excluding Gem Top, decreased 13% to $102.5 million for the nine
months ended September 30, 1997 compared to $118.5 million for the same period
in 1996. TAG Manufacturing net third party sales decreased 5% to $62.5 million
for the nine months ended September 30, 1997 compared to $65.6 million during
1996. Net third party sales by Leer Manufacturing declined $6.4 million or 17%
which was partially offset by a $3.1 million or 38% increase at Raider. Sales at
Century increased approximately 1%.
Net third party sales at TAG Distribution decreased 24% to $40.1 million
for the nine months ended September 30, 1997 from $52.9 million for the first
nine months in 1996. At Leer Retail, sales decreased 17% to $27.4 million as
same store sales decreased approximately 11%, primarily due to lower cap sales.
Leer Retail has closed six stores since July 1996, which reduced sales
approximately $1.9 million during 1997, compared to 1996. Wholesale sales
decreased 37% or $7.3 million primarily due to softness in regional markets and
the loss of customers resulting from a reorganization of service areas late in
1996. Effective October 31, 1997 TAG acquired the assets of Midwest Truck After
Market Inc., a wholesale distributor of light truck accessories based in Tulsa
Oklahoma, for approximately $2.5 million. The acquisition provides the wholesale
operations of TAG Distribution with a presence in a geographical market not
previously served.
Gross profit during the first nine months of 1997 decreased $4.7 million or
15% to $26.4 million compared to $31.2 million during the 1996 period. Gross
profit was 26% of net sales during the 1997 period compared to 27% during the
1996 period. TAG Distribution gross profit decreased 19% to $13.2 million on
lower sales, however, as a percentage of sales gross profit increased to 33%
during 1997
- 10 -
<PAGE>
compared to 31% during 1996. TAG Manufacturing gross profit decreased 11% to
$13.2 million or 18% of sales compared to 19% of sales in the same quarter in
1996 The decrease during 1997 was primarily due to increased overhead expense
partially offset by lower labor costs.
Selling, general and administrative expense decreased 5% to $32.6 million
(or 32% of net sales) for the first nine months of 1997 compared to $34.2
million (or 29% of net sales) for the first nine months of 1996. The decrease
was due mostly to lower selling expenses at the retail operations as a result of
closed stores and lower delivery expense at the wholesale operations of TAG
Distribution.
TAG's operating loss increased $3.2 million to $6.1 million for the first
nine months of 1997 compared to $2.9 million for the first nine months of 1996.
The increased operating loss was due primarily to a $2.9 million increase in
operating losses at the Leer Manufacturing operations of TAG Manufacturing on
lower sales and the resulting decrease in absorption of overhead.
Effective October 1997 the operational structure of TAG was changed.
Manufacturing operations were reorganized into three regions: TAG West
comprising Raider Industries and the Leer West manufacturing plant; TAG Midwest
comprising 20th Century and the Leer Midwest plant and; TAG East comprising the
Leer East plant. TAG Distribution was reorganized into two distinct operations,
namely Leer Retail and NTA (wholesale). Additionally, effective October 1997,
Leer Retail closed two unprofitable stores and will close an additional four
stores prior to December 31,1997. The administrative functions of TAG were also
reorganized. The TAG Administration function in Houston will be eliminated by
December 1, 1997, and certain functions transferred to Elkhart Indiana. Certain
administrative functions of TAG Manufacturing will assume responsibility for all
TAG operations. Management is currently analyzing the financial impact of these
changes to determine the additional costs to be recognized in relation to the
closure of certain retail stores.
Third Quarter 1997 Compared to Third Quarter 1996
Net sales, excluding Gem Top, decreased 14% to $33.5 million for the third
quarter of 1997 compared to $39.0 million for the third quarter of 1996. Net
third party sales by the TAG Manufacturing Division decreased 12% to $20.0
million compared to $22.6 million during 1996. TAG Distribution Division sales
decreased 19% to $13.5 million during 1997 compared to $16.8 million during
1996. At Leer Retail, sales decreased 14%, as same store sales decreased
approximately 9%, primarily due to lower cap sales. Leer Retail operated four
fewer stores during the 1997 period compared to the third quarter of 1996.
Wholesale sales decreased 30% primarily due to softness in certain regional
markets and the loss of customers resulting from a reorganization of service
areas late in 1996.
Primarily due to lower sales at TAG Distribution and Leer Manufacturing,
TAG gross profit decreased 17% to $8.6 million (26% of net sales) for the third
quarter of 1997 compared to $10.3 million (27% of net sales) for the 1996
period.
Selling, general and administrative expense decreased 7% to $10.8 million
(or 32% of net sales) for the third quarter of 1997 compared to $11.6 million
(or 30% of net sales) for the third quarter of 1996. The increase as a percent
of sales was due to lower overhead absorption at Leer Manufacturing on lower
sales.
- 11 -
<PAGE>
TAG's operating loss increased $0.9 million to $2.2 million for the quarter
ended September 30, 1997, compared to $1.3 million during the quarter ended
September 30, 1996. TAG Manufacturing's operating loss increased $1.0 million
principally because of lower sales at Leer Manufacturing and the resultant
decrease in the absorption of overhead.
Lowy
Nine Months Ended September 30, 1997 Compared to Nine Months Ended
September 30, 1996
Net sales decreased 2% to $53.7 million for the first nine months of 1997
compared to $54.9 million for the first nine months of 1996. Third party sales
from the carpet manufacturing business increased 4% to $24.2 million and sales
from the floor covering distribution business declined 8% to $29.5 million
Cost of sales decreased 2% to $38.6 million for the first nine months of
1997 compared to $39.6 million for the same period in 1996. Gross profit
decreased 2% to $15.0 million (28% of net sales) for the first nine months of
1997 compared to $15.3 million (28% of net sales) for the 1996 period.
Selling, general and administrative expense decreased 2% to $11.9 million
(22% of net sales) for the first nine months of 1997 compared to $12.2 million
(22% of net sales) for the first nine months of 1996. The decrease was due
primarily to reduced costs associated with a reduction in sales personnel.
Lowy Distribution sold two locations during the period realizing a gain of
$2.7 million which was included in Other Income and Expense for the nine months
ended September 30, 1997. A warehouse facility near Minneapolis, Minnesota was
sold effective March 31, 1997 and the operations moved to new location during
the quarter ended June 30, 1997. Effective June 30, 1997, Lowy distribution sold
and leased back a warehouse facility in Ankeny, Iowa.
Lowy Group's operating income increased $2.7 million to $5.8 million for
the first nine months of 1997 compared to $2.7 million for the first nine months
of 1996, $2.7 million of the improvement was due to the gain realized on the
sale of certain properties.
Third Quarter 1997 Compared to Third Quarter 1996
Net sales decreased 8% to $18.8 million for the third quarter of 1997
compared to $20.4 million for the third quarter of 1996. The decrease in sales
resulted primarily from lower residential construction activity in Lowy's trade
area and a decrease in activity by a single, large commercial customer.
Cost of sales decreased 8% to $13.6 million for the third quarter of 1997
compared to $14.8 million for the third quarter of 1996. Gross profit decreased
9% to $5.2 million (27% of net sales) for the third quarter of 1997 versus $5.6
million (28% of net sales) for the third quarter of 1996. The decrease in gross
profit as a percent of net sales was primarily due to lower overhead absorption
on lower sales.
- 12 -
<PAGE>
Selling, general and administrative expense decreased slightly to $4.1
million during the third quarter of 1997 compared to $4.2 million during the
third quarter of 1996.
Lowy Group's operating income decreased $0.6 million to $0.9 million for
the third quarter of 1997 compared to $1.5 million during 1996, primarily
because of reduced overhead absorption on lower sales.
EFP
Nine Months Ended September 30, 1997 Compared to Nine Months Ended
September 30, 1996
Net sales increased 6% to $24.2 million for the first nine months of 1997
compared to $22.8 million for the comparable period of 1996, primarily due to
sales from the door core business started during 1996 and increased Styrocast(R)
sales.
Cost of sales increased 3% to $19.0 million during the 1997 period compared
to $18.6 million during 1996. Gross profit increased to $5.1 million (21% of net
sales) for the first nine months of 1997 compared to $4.4 million (19% of net
sales) for the first nine months of 1996. The increase in gross profit as a
percentage of sales was due to a change in product mix.
Selling, general and administrative expenses increased 14% to $3.0 million
(13% of net sales) for the first nine months of 1997 compared to $2.7 million
(12% of net sales) during the comparable period of 1996. The increase was
primarily due to greater selling expense on higher sales.
EFP's operating income increased to $2.1 million for the first nine months
of 1997 compared to $1.8 million for the first nine months of 1996, primarily
due to the improved absorption of overhead expenses and a change in product mix.
Third Quarter 1997 Compared to Third Quarter 1996
Net sales of $8.5 million for the third quarter of 1997 were consistent
with the comparable period of 1996.
Cost of sales of $6.6 million during the 1997 period approximated the $6.6
million during 1996. Gross profit increased 3% to $1.9 million (23% of net
sales) for the third quarter of 1997 compared to $1.8 million (22% of net sales)
for the third quarter of 1996.
Selling, general and administrative expense remained flat at $1.0 million
or 12% of net sales for the third quarter of 1997 and 1996.
EFP's operating income remained $0.9 million for the third quarter of 1997,
equal to the same period in 1996.
- 13 -
<PAGE>
MIC Group
Nine Months Ended September 30, 1997 Compared to Nine Months Ended
September 30, 1996
Net sales increased 15% to $21.8 million for the first nine months of 1997
compared to $19.0 million during the comparable period in 1996 as a result of
strong demand for oil field service related products.
Cost of sales increased 18% to $15.6 million for the first nine months of
1997 compared to $13.2 million for the first nine months of 1996. Gross profit
increased to $6.1 million (28% of net sales) for the first nine months of 1997
compared to $5.7 million (30% of net sales) for the first nine months of 1996.
The decrease in gross profit as a percent of sales was due primarily to
increased labor and overhead costs.
Selling, general and administrative expenses increased 9% to $2.4 million
(11% of net sales) for the first nine months of 1997 compared to $2.2 million
(12% of net sales) for the comparable period in 1996.
Operating income increased 6% to $3.7 million for the first nine months of
1997 compared to $3.5 million for the first nine months of 1996.
Third Quarter 1997 Compared to Third Quarter 1996
Net sales increased 4% to $6.6 million for the third quarter of 1997
compared to $6.4 million during the comparable period in 1996. This increase in
net sales was due to increased demand from energy service companies, MIC Group's
primary market.
Cost of sales increased 12% to $4.9 million for the third quarter of 1997
compared to $4.4 million for the third quarter of 1996. Gross profit decreased
14% to $1.7 million or 26% of net sales during 1997 compared to $2.0 million or
31% of net sales during the same period in 1996. The decrease in gross profit
was due to increased labor and overhead costs.
Selling, general and administrative expense decreased 2% to $0.8 million
for the third quarter of 1997 compared to the third quarter of 1996. Selling,
general and administrative expense as a percent of net sales was decreased to12%
during the third quarter of 1997 compared to 13% during the same period in 1996.
Operating income decreased to $1.0 million for the third quarter of 1997
compared to $1.2 million for the third quarter of 1996, primarily due to
increased labor costs.
- 14 -
<PAGE>
Liquidity and Capital Resources
Operating activities during the nine months ended September 30, 1997 used
cash of $4.9 million compared to generating cash of $9.9 million during the same
period in 1996 primarily due to increased investment in working capital.
Inventory at Morgan increased $9.0 million during the nine months ended
September 31,1997, in response to a 32% or $9.2 million increase in backlog at
September 30, 1997 compared to September 30, 1996. Working capital decreased
$2.2 million at September 30, 1997 compared to December 31,1996.
The ability to borrow under the Revolving Credit Agreement depends on the
amount of eligible collateral. The amount of eligible collateral depends on
certain advance rates applied to the value of accounts receivables and
inventory. At September 30, 1997 the Company had total borrowing capacity of
$50.0 million, of which $5.9 million was used to secure letters of credit and
finance trade transactions. Additionally, $36.1 million had been borrowed to
fund operations resulting in unused available borrowing capacity of $8.0
million. At November 5, 1997 the Company had unused available borrowing capacity
of $12.3 million under the terms of the Revolving Credit Agreement.
The Company realized proceeds of $3.6 million, from the sale of certain
warehouse facilities by Lowy, which will be used to fund operations. Capital
expenditures of $5.8 million increased 11% during the nine months ended
September 30,1997 compared to 1996. Capital expenditures relate primarily to the
maintenance of 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 of the Revolving Loan Agreement.
PART II. OTHER INFORMATION
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits. The following exhibits are filed herewith: None
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:
None
- 15 -
<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 7, 1997 By: S. Magee
-----------------------------------------------
S. Magee, Chief Financial Officer and Treasurer
By: R.S. Whatley
-----------------------------------------------
R. S. Whatley, Chief Accounting Officer
- 16 -
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE 1997 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-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 2,310
<SECURITIES> 0
<RECEIVABLES> 39,026
<ALLOWANCES> 1,864
<INVENTORY> 59,100
<CURRENT-ASSETS> 103,254
<PP&E> 49,390
<DEPRECIATION> 0
<TOTAL-ASSETS> 185,832
<CURRENT-LIABILITIES> 78,641
<BONDS> 105,288
0
0
<COMMON> 16,486
<OTHER-SE> (14,583)
<TOTAL-LIABILITY-AND-EQUITY> 185,832
<SALES> 336,061
<TOTAL-REVENUES> 336,061
<CGS> 262,933
<TOTAL-COSTS> 262,933
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,631
<INCOME-PRETAX> (321)
<INCOME-TAX> 696
<INCOME-CONTINUING> (1,017)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,017)
<EPS-PRIMARY> (0.332)
<EPS-DILUTED> (0.332)
<FN>
OTHER EXPENSES ARE INCLUDED IN SELLING, GENERAL AND ADMINISTRATIVE ON
THE FINANCIAL STATEMENTS.
</FN>
</TABLE>
