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 June 30, 1998
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 August 13, 1998.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1998 1997
----------- -----------
(Unaudited)
<S> <C> <C>
Current assets
Restricted cash ........................................... $ 1,733 $ 3,191
Accounts receivable, net of allowance for doubtful accounts
of $661 and $965, respectively ........................ 34,502 31,270
Inventories, net .......................................... 43,297 36,521
Deferred income taxes ..................................... 2,271 2,277
Prepaid expenses and other ................................ 376 1,005
--------- ---------
Total current assets .................................. 82,179 74,264
Property, plant and equipment, net ............................. 32,817 33,488
Net assets of discontinued operations .......................... 25,631 42,737
Goodwill, net .................................................. 3,249 3,322
Deferred income tax ............................................ 5,278 5,259
Other assets ................................................... 6,266 6,340
--------- ---------
Total assets .......................................... $ 155,420 $ 165,410
========= =========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities
Short-term debt ........................................... $ 2,111 $ 428
Current portion of long-term debt ......................... 1,100 1,279
Borrowings under revolving credit facility ................ 40,687 39,763
Accounts payable .......................................... 15,058 9,621
Accrued compensation and benefits ......................... 4,087 3,607
Accrued income taxes ...................................... 204 196
Other accrued liabilities ................................. 9,405 9,797
--------- ---------
Total current liabilities ............................. 72,652 64,691
--------- ---------
Noncurrent liabilities
Long-term debt, less current portion ...................... 101,590 102,191
Employee benefit obligations and other .................... 3,453 3,269
--------- ---------
Total noncurrent liabilities .......................... 105,043 105,460
--------- ---------
Commitments and contingencies
Stockholder's deficit
Common stock and paid-in-capital .......................... 16,486 16,486
Accumulated deficit ....................................... (38,761) (21,227)
--------- ---------
Total stockholder's deficit ........................... (22,275) (4,741)
--------- ---------
Total liabilities and stockholder's deficit ........... $ 155,420 $ 165,410
========= =========
<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 Six Months
Ended June 30, Ended June 30,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales .......................................... $ 92,522 $ 89,956 $ 172,154 $ 158,962
Cost of sales ...................................... 76,667 70,464 144,377 126,431
--------- --------- --------- ---------
Gross profit ....................................... 15,855 19,492 27,777 32,531
Selling, general and administrative expense ........ 11,372 10,145 21,673 20,031
Other income ....................................... (86) (358) (114) (3,021)
--------- --------- --------- ---------
Operating income ................................... 4,569 9,705 6,218 15,521
Interest expense ................................... 3,842 3,778 7,903 7,644
--------- --------- --------- ---------
Income (loss) from continuing operations, before
income taxes .................................. 727 5,927 (1,685) 7,877
Income tax provision ............................... 262 1,130 348 1,480
--------- --------- --------- ---------
Income (loss) from continuing operations ........... 465 4,797 (2,033) 6,397
Loss from discontinued operations, less
applicable taxes .............................. -- (1,766) (15,429) (4,975)
--------- --------- --------- ---------
Net income (loss) .................................. $ 465 $ 3,031 $ (17,462) $ 1,422
========= ========= ========= =========
Basic and diluted loss per share:
Income (loss) from continuing operations ...... $ 152 $ 1,568 $ (664) $ 2,091
Loss from discontinued operations ............. -- (577) (5,044) (1,626)
--------- --------- --------- ---------
Net income (loss) ............................. $ 152 $ 991 $ (5,708) $ 465
========= ========= ========= =========
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 Six Months
Ended June 30,
1998 1997
---------- ---------
<S> <C> <C>
Net income (loss) .............................................. $ (17,462) $ 1,422
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Non-cash provision for loss on sale of discontinued
operations ............................................ 14,385 --
Depreciation and amortization ............................. 5,655 6,148
Gain on sale of equipment ................................. (6) (2,945)
Deferred federal income tax provision ..................... (19) 870
Other ..................................................... (18) 282
Increase (decrease) in operating cash flows resulting from:
Accounts receivable ....................................... (6,252) (9,349)
Inventories ............................................... (7,191) (7,633)
Prepaid expenses and other ................................ 316 (138)
Accounts payable .......................................... 8,149 8,185
Accrued income taxes ...................................... 11 129
Accrued expenses and other ................................ 2,337 1,556
--------- ---------
Net cash used in operating activities ................. (93) (1,473)
--------- ---------
Cash flows provided by (used in) investing activities:
Proceeds from disposition of property, plant and equipment 114 3,554
Acquisition of property, plant and equipment .............. (3,322) (4,091)
Other ..................................................... (51) (17)
--------- ---------
Net cash used in investing activities ................. (3,259) (554)
--------- ---------
Cash flows provided by (used in) financing activities:
Net proceeds of revolving lines of credit and
short-term debt ....................................... 2,578 3,135
Payments of long-term debt and capital leases ............. (684) (978)
--------- ---------
Net cash provided by financing activities ............. 1,894 2,157
--------- ---------
Increase (decrease) in restricted cash and cash equivalents .... (1,458) 130
Restricted cash and cash equivalents, beginning of period ...... 3,191 2,607
--------- ---------
Restricted cash and cash equivalents, end of period ............ $ 1,733 $ 2,737
========= =========
Supplemental information:
Cash paid for income taxes, net of refunds ................ $ 581 $ 118
========= =========
Cash paid for interest .................................... $ 8,840 $ 7,995
========= =========
<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).
The consolidated financial statements included herein have been
prepared by the Company, without audit, following 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 following 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, 1997 filed with the
Securities and Exchange Commission on Form 10-K.
(2) Comprehensive Loss. As of January 1, 1998, the Company adopted Statement
130, Reporting Comprehensive Income. Statement 130 establishes new rules for the
reporting and display of comprehensive income and its components; however, the
adoption of this Statement had no impact on the Company's net loss or
shareholder's deficit. Statement 130 requires foreign currency translation
adjustments which, prior to adoption, were reported separately in shareholder's
equity to be included in other comprehensive income. Prior year financial
statements have been reclassified to conform to the requirements of Statement
130. The components of comprehensive loss for the six-month periods ended June
30, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended Ended
-------------------- --------------------
1998 1997 1998 1997
------ ------ ------ ------
<S> <C> <C> <C> <C>
Net income (loss) .......................... $ 465 $ 3,031 $(17,462) $ 1,422
Foreign currency translation adjustments ... (114) (56) (72) (79)
-------- -------- -------- --------
Comprehensive income (loss) ................ $ 351 $ 2,975 $(17,534) $ 1,343
======== ======== ======== ========
</TABLE>
The accumulated foreign currency translation adjustments at June 30, 1998
and December 31, 1997 were deficits of $258,000 and $186,000, respectively.
(3) Inventories. Consolidated net inventories consist of the following (in
thousands):
June 30, December 31,
1998 1997
---------- ----------
FIFO Basis Inventory:
Raw Materials ..................... $ 15,922 $ 11,450
Work in Process ................... 7,422 5,796
Finished Goods .................... 8,929 8,327
---------- ----------
32,273 25,573
---------- ----------
5
<PAGE>
LIFO Basis Inventory:
Raw Materials ..................... 2,100 2,160
Work in Process ................... 1,640 1,658
Finished Goods .................... 7,284 7,130
---------- ----------
11,024 10,948
---------- ----------
Total Inventory ........................ $ 43,297 $ 36,521
========== ==========
If the first-in, first-out method had been used for all inventories,
inventories would have approximated inventory valued on a last-in, first-out
method at June 30, 1998 and at December 31, 1997.
(4) Discontinued Operations. Effective April 2, 1998, the Company decided to
pursue a plan for selling TAG. In anticipation of this transaction, TAG's
results of operations are reported as discontinued operations in the
consolidated financial statements for the periods presented. In addition, the
net assets and liabilities, which will be disposed of relating to TAG, have been
segregated on the consolidated balance sheets from their historical
classifications to separately identify them as net assets of discontinued
operations. Condensed financial information relating to net assets of
discontinued operations is as follows (in thousands):
June 30, December 31,
1998 1997
---------- -----------
Net assets of discontinued operations:
Current assets ................................ $ 22,886 $ 19,716
Property, net ................................. 12,034 12,841
Intangible assets ............................. 18,713 20,130
---------- ----------
Total Assets .................................. 53,633 52,687
---------- ----------
Less current liabilities ...................... 12,573 9,950
Less provision for estimated loss on disposal . 15,429 --
---------- ----------
Net Assets .................................... $ 25,631 $ 42,737
========== ==========
Revenues of the TAG division were $70,700,000 and $71,300,000 for the six
months ended June 30, 1998 and 1997, respectively. The losses from discontinued
operations were as follows for the six months ended June 30 (in thousands):
1998 1997
---------- ----------
Loss from operations of TAG, less
applicable income taxes of $34
and $0, respectively ........................... $ 1,044 $ 4,975
Loss on disposal of TAG, including
provision of $641 for estimated operating
losses through disposal date, less
applicable income taxes ........................ 14,385 --
---------- ----------
$ 15,429 $ 4,975
========== ==========
Losses from operations of TAG include interest expense of $1,657,000 and
$851,000 related to the borrowings of TAG under the Revolving Loan Agreement for
the six months ended June 30, 1998 and 1997, respectively. The borrowings are
anticipated to be repaid using the proceeds from the sale of TAG. The Company
has not recorded tax benefits for the TAG losses due to the accumulation of net
operating losses that may not be realized.
6
<PAGE>
(5) Disposal of the Blue Ridge Component of the Floor Covering Segment.
Effective June 8, 1998 the Company signed a letter of intent to sell the assets
of Blue Ridge. Blue Ridge, including Courier, is part of Lowy Group and designs,
manufactures and markets commercial carpeting. Condensed financial information
relating to the Blue Ridge portion of the Floor Covering Segment (dollars in
thousands):
June 30, December 31,
1998 1997
---------- ----------
Current assets ..................................... $ 10,078 $ 10,157
Property, net ...................................... 2,301 2,396
Long-term assets ................................... 721 737
---------- ----------
Total assets ....................................... 13,100 13,290
---------- ----------
Less current liabilities ........................... 4,904 5,263
Less long-term liabilities ......................... 852 796
---------- ----------
Net assets ......................................... $ 7,344 $ 7,231
========== ==========
Revenues of Blue Ridge were $15,229,000 and $15,810,000 for the six months
ended June 30, 1998 and 1997, respectively. There were no material inter-company
sales during the periods. Operating income was $1,359,000 and $1,795,000 for the
six month periods, respectively.
The Company expects that it will complete the transaction in the third
quarter of 1998 and record a gain on the sale of Blue Ridge. The net proceeds
from the sale will be used to repay borrowings under the Revolving Credit
Agreement.
(6) Gain on Sale of Facility. Lowy sold two warehouse and office facilities in
Minnesota and Iowa during the six months ended June 30, 1997 and realized a
$3,000,000 gain on the transaction which is included in other income and expense
on the accompanying statement of operations.
(7) Revolving Credit Agreement. Effective May 13, 1998, the Company's principal
revolving credit lenders agreed to increase the maximum borrowings available to
the Company's subsidiaries, under the Revolving Loan Agreement, from $50,000,000
to $55,000,000. At August 12, 1998 the maximum available borrowing was
$55,000,000, unused available borrowing capacity under the Revolving Loan
Agreement was approximately $16,900,000.
(8) Income Taxes. The income tax expense of $348,000 in 1998 and $1,480,000 in
1997 represent state and foreign income taxes payable. The provision for income
tax differs from amounts computed based on the federal statutory rates
principally due to an increase in the deferred tax valuation allowance relating
to net operating losses that may not be realized.
(9) 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. Together, two of Morgan's customers
accounted for approximately 55% and 57% of Morgan's net sales during the six
months ended June 30, 1998 and 1997, respectively, and 34% and 33% of
consolidated net sales, respectively.
7
<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 averse effect on the Company.
(10) Segments Disclosure. In June 1997, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standard No. 131 - "Disclosure
About Segments of an Enterprise and Related Information" ("SFAS 131"). Although
SFAS 131 is effective beginning the first quarter of 1998, the Company has
elected not to report segment information in interim financial statements in the
first year of application consistent with the provisions of the statement.
(11) Derivative Instruments and Hedging Activities. In June 1998, the Financial
Accounting Standards Board issued Statement No. 133 - "Accounting for Derivative
Instruments and Hedging Activities," which is required to be adopted in years
beginning after June 15, 1999. Because of the Company's minimal use of
derivatives, management does not anticipate that the adoption of the new
Statement will have a significant effect on earnings or the financial position
of the Company.
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.
Effective June 8, 1998, the Company signed a letter of intent to sell
the Blue Ridge and Courier division of Lowy Group. The sale will result in a
gain that will be recognized upon completion of the sale. Net proceeds will be
used to repay borrowings under the Revolving Credit Agreement.
Effective April 2, 1998, the Company decided to pursue a plan to sell
its TAG operations. Accordingly, the results of operations of TAG have been
classified as discontinued operations in the consolidated statements of
operations.
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 have not been restated to reflect the transfer of Gem
Top. The operating results of Gem Top were not material to the operating results
of Morgan or TAG. Inter-company sales between Gem Top and TAG have been
eliminated.
Results of Operations
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997
Net sales increased 8% to $172.2 million for the six months ended June
30, 1998 compared to $159.0 million during 1997. The increase was due primarily
to Morgan whose sales increased 14% or $13.0 million. The Company also recorded
sales increases at EFP of 9% or $1.4 million and at MIC of 1% or $0.2 million
offset by a decrease at Lowy of 4% or $1.4 million.
8
<PAGE>
Cost of sales increased 14% to $144.4 million for the six months ended
June 30, 1998 compared to $126.4 million during 1997. Gross profit decreased 15%
to $27.8 million (16% of net sales) for the first six months of 1998 compared to
$32.5 million (20% of net sales) for 1997. Gross profit at Morgan decreased 24%
to $11.6 million (11% of net sales) during the 1998 period compared to $15.1
million (16% of net sales) during 1997.
Selling, general and administrative expense increased 8% to $21.7
million (13% of net sales) for the six months ended June 30, 1998 compared to
$20.0 million (13% of net sales) during 1997.
Operating income decreased to $6.2 million (4% of net sales) for the
six months ended June 30, 1998 compared to operating income of $15.5 million
(10% of net sales) in 1997 primarily due to a $5.5 million (68%) decline at
Morgan. Operating income for the six months ended June 30, 1997 includes a $3.0
million gain on the sale of certain real property by Lowy.
Interest expense increased 3% to $7.9 million for the first six months
ended June 30, 1998 compared to $7.6 million during 1997. Average short-term
borrowings increased $9.2 million or 36% during the 1998 period compared to the
same period in 1997.
The provision for income tax of $0.3 million on a pre-tax loss of $1.7
million for the first six months of 1998 is the result of state income taxes in
jurisdictions where no benefits will be received for losses at TAG. Valuation
allowances have been provided against the the benefits of operating losses that
may not be realized.
Second Quarter 1998 Compared to Second Quarter 1997
Net sales for the quarter ended June 30, 1998 increased 3% to $92.5
million compared to $90.0 million for the same period in 1997. The increase was
due primarily to a 5% or $2.8 million improvement in sales at Morgan. Net sales
decreased 4% or $0.8 million at Lowy and increased 13% or $1.1 million at EFP
while sales at MIC were approximately the same for the second quarter of 1998
compared to the same period in 1997.
Cost of sales increased 9% to $76.7 million during the quarter ended
June 30, 1998 compared to $70.5 million for the same period in 1997. Gross
profits decreased $3.6 million to $15.9 million during the quarter ended June
30, 1998 compared to $19.5 million during the prior year. Gross profits as a
percentage of net sales were 17% during the current quarter compared to 22% for
the same quarter in 1997.
Selling, general and administrative expense increased $1.5 million or
12% to $11.3 million during the quarter ended June 30, 1998 compared to $9.8
million for the same period in the prior year. Selling, general and
administrative expense as a percent of sales increased 1% to approximately 12%
of sales.
Operating income decreased 53% to $4.6 million (5% of net sales) for
the second quarter of 1998 compared to $9.7 million (11% of net sales) in 1997.
The decrease was due primarily to a $3.9 million or 60% decrease in operating
income at Morgan and the inclusion in the 1997 quarter of a $3.0 million gain on
the sale of certain real estate operated by Lowy.
9
<PAGE>
Morgan
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997
Net sales increased $13.0 million or 14% to $106.3 million for the first
six months of 1998 compared to sales of $93.4 million for the first six months
of 1997. Through June 1998, net sales included $3.6 million attributable to Gem
Top, transferred to Morgan in July 1997. Total unit shipments increased 3.7%
during the 1998 period compared to 1997. An increase of 19% in commercial
product shipments was partially offset by a decline in the shipment of consumer
rental products. Backlog at June 30, 1998 was $52.6 million compared to $36.7
million at December 31, 1997 and $39.2 million at June 30, 1997. The increase in
backlog reflects strong demand for Morgan products, however, Morgan depends upon
chassis manufacturers for timely delivery of its customers' chassis.
Approximately $16.3 million of backlog at June 30, 1998 is a result of delayed
chassis deliveries.
Cost of sales increased 21% to $94.8 million for the first six months of
1998 compared to $78.3 million for the same period in 1997. Gross profit
decreased 24% to $11.6 million (11% of net sales) during 1998 compared to $15.1
million (16% of net sales) during 1997. The decline in gross profit during 1998
compared to the same period during 1997 is due primarily to increased labor and
raw materials costs.
Selling, general and administrative expense increased 27% to $9.0
million (8% of net sales) for the first six months of 1998 compared to $7.1
million (8% of net sales) for the same period in 1997. The increase was due
primarily to commissions paid on increased commercial sales and personnel costs
including severance and relocation expenses related to management changes.
Morgan's operating income decreased $5.5 million to $2.5 million during
the first six months of 1998 compared to $8.0 million for the first six months
of 1997.
Second Quarter 1998 Compared to Second Quarter 1997
Net sales increased 4% or $2.4 million to $58.3 million for the second
quarter of 1998 compared to $56.0 million for the second quarter of 1997. Net
sales in 1998 included $1.6 million attributable to Gem Top, transferred to
Morgan in July 1997. The total number of units shipped decreased 4.5% during the
1998 period compared to 1997, however, sales increased due primarily to an
increase in commercial unit shipments, the average selling price of which is
greater than consumer rental units.
Cost of sales increased 11% to $50.9 million for the second quarter of
1998 compared to $45.8 million for the same period in 1997. Gross profit
decreased 27% to $7.4 million (13% of net sales) during the second quarter of
1998 compared to $10.1 million (18% of net sales) during 1997. The deterioration
in gross profit as a percent of sales was primarily due to increased material
and overhead costs relative to sales price.
Selling, general and administrative expense increased 33% to $4.8
million (8% of net sales) for the second quarter of 1998 compared to $3.6
million (6% of net sales) for the same period of 1997. Gem Top's selling and
administrative expenses were $0.3 million during the 1998 period. Morgan's
selling, general and administrative expense as a percent of sales increased
primarily due to certain hiring and termination costs associated with management
changes.
Morgan's operating income decreased 60% or $3.9 million to $2.6 million
during the second quarter of 1998 compared to $6.5 million for the second
quarter of 1997.
10
<PAGE>
Lowy
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997
Net sales decreased 4% to $33.3 million for the first six months of
1998 compared to $34.8 million for the first six months of 1997. Both the floor
covering distribution division and the carpet manufacturing division had
declines in sales for the period.
Cost of sales decreased 2% to $24.4 million for the first six months of
1998 compared to $25.0 million for the same period in 1997. Several factors,
including a favorable raw material purchases which occurred in 1997 for the
carpet manufacturing division, did not reoccur in 1998. Gross profit decreased
9% to $8.9 million (27% of net sales) for the first six months of 1998 compared
to $9.8 million (28% of net sales) for the 1997 period.
Selling, general and administrative expense decreased 6% to $7.4
million (22% of net sales) for the first six months of 1998 compared to $7.9
million (23% of net sales) for the first six months of 1997.
Lowy Distribution sold two warehouse facilities during the first six
months of 1997 realizing a gain of $3.0 million which was included in Other
Income and Expense for the six months ended June 30, 1997.
Lowy Group's operating income decreased $3.3 million to $1.6 million
for the first six months of 1998 compared to $4.9 million for the first six
months of 1997, primarily due to the gain on sale of certain real estate during
1997.
Second Quarter 1998 Compared to Second Quarter 1997
Net sales decreased 4% to $17.5 million for the second quarter of 1998
compared to $18.3 million for the second quarter of 1997.
Cost of sales decreased $0.5 million to $12.4 million for the second
quarter of 1998 compared to $12.9 million for the second quarter of 1997. Gross
profit decreased 6% to $5.0 million (29% of net sales) for the second quarter of
1998 versus $5.3 million (29% of net sales) for the same period in 1997.
Selling, general and administrative expense decreased to $3.8 million
during the second quarter of 1998 compared to $4.0 million in the second quarter
of 1997.
Lowy Group's operating income decreased $0.4 million to $1.3 million
for the second quarter 1998 compared to $1.7 million for the second quarter of
1997. Of the $0.4 million decrease in operating income, $0.3 million was due to
a gain on sale of real estate in the second quarter of 1997.
11
<PAGE>
EFP
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997
Net sales increased 9% to $17.1 million for the first six months of
1998 compared to $15.7 million for the comparable period of 1997 due primarily
to increased sales of packaging products and tooling produced by EFP's pattern
division.
Cost of sales increased 7% to $13.3 million during the 1998 period
compared to $12.5 million during 1997. Primarily due to lower material costs and
better overhead absorption on higher volume, gross profit increased to $3.8
million (22% of net sales) for the first six months of 1998 compared to $3.2
million (20% of net sales) for the first six months of last year.
Selling, general and administrative expense increased 3% to $2.1
million (12% of net sales) for the first six months of 1998 compared to $2.0
million (13% of net sales) during the comparable period of 1997. Operating
income increased $0.5 million or 43% to $1.7 million during the first six months
of 1998 compared to $1.2 million during 1997.
Second Quarter 1998 Compared to Second Quarter 1997
Net sales increased 13% to $9.0 million for the second quarter of 1998
compared to $7.9 million for the comparable period of 1997.
Cost of sales increased $0.9 million to $7.1 million during the second
quarter of 1998 compared to $6.2 million for the comparable period of 1997.
Gross profit increased to $1.9 million (21% of net sales) for the second quarter
of 1998 compared to $1.7 million (22% of net sales) for the second quarter of
1997.
Selling, general and administrative expense increased 8% to $1.1
million (12% of net sales) for the second quarter of 1998 compared to $1.0
million (13% of net sales) during the comparable period of 1997.
EFP's operating income increased $.1 million to $0.8 million for the
second quarter of 1998 compared to operating income of $0.7 million for the same
period of 1997.
MIC Group
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997
Net sales increased 1% to $15.4 million for the first six months of
1998 compared to $15.2 million during the comparable period in 1997. The decline
in the price of oil has not significantly affected sales or backlog at June 30,
1998. Backlog at June 30, 1998 was $6.9 million compared to $6.5 million at
December 31, 1997.
Cost of sales increased 11% to $11.9 million for the first six months
of 1998 compared to $10.7 million for the first six months of 1997 due primarily
to increased material costs at MIC's electromechanical assembly division as well
as start up costs at a recently opened Houston facility. Gross profit decreased
to $3.5 million (23% of net sales) for the first six months of 1998 compared to
$4.4 million (29% of net sales) for the first six months of 1997.
12
<PAGE>
Selling, general and administrative expenses increased to $1.8 million
(12% of net sales) for the first six months of 1998 compared to $1.6 million
(11% of net sales) for the comparable period of 1997.
Operating income decreased by $1.1 million to $1.7 million for the
first six months of 1998 compared to $2.8 million for the first six months of
1997.
Second Quarter 1998 Compared to Second Quarter 1997
Net sales of $7.8 million were approximately the same for the second
quarter of 1998 and for the comparable period in 1997.
Cost of sales increased 14% to $6.2 million for the second quarter of
1998 compared to $5.5 million for the second quarter of 1997. Gross profit
decreased 33% to $1.6 million (20% of net sales) during 1998 compared to $2.3
million (30% of net sales) during the same period in 1997, due primarily to
higher labor and material costs during the quarter.
Selling, general and administrative expense increased $0.1 million to
$1.0 million for the second quarter of 1998 compared to $0.9 million for the
second quarter of 1997.
Operating income decreased 60% to $0.6 million for the second quarter
of 1998 compared to $1.5 million for the second quarter 1997.
Liquidity and Capital Resources
Operating activities during the six months ended June 30, 1998 used
cash of $0.1 million compared to using cash of $1.3 million during the same
period in 1997. The investment in working capital decreased by $4.4 million
during the six months ended June 30,1998 compared to 1997, primarily due to a
lower seasonal increase in accounts receivable than in the same period in 1997.
At August 12, 1998, the Company had total borrowing availability of
$55.0 million, of which $4.7 million was used to secure letters of credit and
finance trade transactions. Additionally, $33.4 million had been borrowed to
fund operations resulting in unused availability of $16.9 million.
Capital expenditures for the period of $3.3 million related primarily
to the maintenance of existing capacity.
The Company is pursuing the sale of TAG and has accordingly treated the
operations of TAG as discontinued. Additionally the company has signed a letter
of intent to sell the Blue Ridge operations of Lowy. The anticipated proceeds
from the sales will be used to pay down revolver borrowings and invest in
existing operations. The results of operations of TAG are not anticipated to
significantly affect liquidity prior to their disposal.
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.
13
<PAGE>
Discontinued Operations - Truck Accessories Group (TAG)
Effective April 2, 1998, the Company decided to pursue the sale of the
assets of TAG. Accordingly, the results of operations have been classified as
discontinued operations in the consolidated statement of operations. Although
the improvement in TAG's operating performance, discussed below, is significant,
it has not been recognized in the results of operations of the Company except as
reflected in the statement of cash flows. Management has provided $14.4 million
for an estimated loss on disposal of TAG including a provision for losses
through the disposal date, net of applicable taxes.
The following discussion excludes the results of the operations of Gem
Top which was acquired by Morgan in June 1997.
Six Months Ended June 30, 1998 Compared to Six Months Ended June 30, 1997
Net sales increased $1.6 million or 2% to $70.7 million for the first
six months of 1998 compared to $69.1 million for the same period in 1997. TAG
Manufacturing's net third party sales were $41.6 million for the six months
ended June 30, 1998, principally the same as 1997.
Net third party sales at TAG Distribution increased 10 percent to $29.1
million for the six months ended June 30, 1998 from $26.5 million for the same
period in 1997. At Leer Retail, sales decreased 5 percent to $17.1 million, as a
result of closing six unprofitable stores during the latter part of 1997. Same
store sales increased approximately 8 percent from $18.7 million to $20.2
million. Wholesale sales increased 19 percent or $2.5 million to $15.4 million
in 1998 compared to 1997. Sales during 1998 included MTA sales of $3.9 million
which was acquired during October 1997.
TAG cost of sales increased by $0.8 million or 2 percent to $51.0
million compared to the same period in 1997. At TAG Manufacturing, cost of sales
decreased by $3.1 million or 8 percent to $37.2 million compared to the same
period in 1997. Improvements in manufacturing processes, reduction in rework and
returns and lower labor costs at Leer Manufacturing reduced cost of sales by
approximately $3.2 million during the first half of 1998. Indicators of quality,
including customer returns improved by 9 percent during the first six months
compared to the same period in 1997.
Cost of sales at TAG Distribution increased by $2.5 million or 14
percent to $20.1 million compared to $17.6 million in the same period last year,
due primarily to the operations of MTA acquired during October 1997.
Gross profit increased $2.0 million or 11 percent. Gross profit at TAG
Manufacturing increased by $1.7 million or 19 percent to $10.7 million (26
percent of sales) compared to $9.0 million (21 percent of sales) in the same
period of 1997. The operating improvements at Leer Manufacturing and a new
product introduction at 20th Century were the primary causes for the increased
gross profit. Gross profit at TAG Distribution increased by $0.2 million or 2
percent to $9.1 million compared to $8.9 million in the same period in 1997.
Selling, general and administrative expenses were reduced by $3.8
million or 17% to $18.0 million compared to the same period in 1997. At TAG
Manufacturing, selling, general and administrative costs decreased by $2.0
million or 18 percent to $8.9 million compared to $11.0 million for the same
period in 1997. The reduction of administrative staff at Leer Manufacturing
reduced expenses by $1.0 million in 1998. Excess reserves for warranties, bad
debts and worker's compensation claims were favorably adjusted by $0.8 million
in the first half of 1998.
14
<PAGE>
Selling, general and administrative expenses at TAG Distribution
decreased by $2.0 million or 19% to $8.8 million compared to $10.8 million in
the same period of 1997. The elimination of the TAG Distribution administrative
headquarters completed in December of 1997, reduced expenses approximately $1.6
million. The closure of six unprofitable retail stores reduced selling, general
and administrative expenses at Leer Retail by $1.1 million. At NTA, selling,
general and administrative expenses increased by $0.5 million or 11 percent to
$3.6 million in the first six months of 1998 compared to $3.1 million in the
same period in 1997, due to the acquisition of MTA in October, 1997.
TAG's operating income increased $5.7 million to an income of $1.8
million for the first six months of 1998 compared to an operating loss of $3.9
million for the first six months of 1997.
Second Quarter 1998 Compared to Second Quarter 1997
Net sales increased 7% to $39.2 million for the three months ended June 30, 1998
compared to $36.7 million for the same period in 1997. TAG Manufacturing's net
third party sales increased to $23.1 million for the three months ended June 30,
1998 compared to $22.9 million during 1997.
Net third party sales at TAG Distribution increased 13% to $16.1 million
for the three months ended June 30, 1998 from $14.3 million for the three months
in 1997. At Leer Retail, sales were constant at $9.6 million for the 1998 and
1997 periods. Wholesale sales increased 40% or $1.9 million due to the October
31, 1997, acquisition of Midwest Truck Aftermarket Inc.
Gross profit during the second quarter of 1998 increased $1.1 million or
11% to $11.1 million (28% of net sales) compared to $10.0 million (27% of net
sales) during the 1997 period. TAG Distribution gross profit was equal to second
quarter, 1997 at $4.9 million. TAG Manufacturing's gross profit increased 23% or
$1.2 million. Gross profit as a percentage of sales at TAG Manufacturing
increased to 24% as compared to 20% in the same quarter in 1997. The increase in
gross profit margin at TAG Manufacturing during the second quarter of 1998
compared to 1997 was primarily due to the effectiveness of product quality
improvements at Leer Manufacturing, a price increase at 20th Century Fiberglass
and reductions in material costs and warranty charges at Raider.
Selling, general and administrative expense decreased 17% to $9.3
million (or 24% of net sales) for the second quarter of 1998 compared to $11.3
million (or 31% of net sales) for the second quarter of 1997. The decrease was
due primarily to lower general and administrative expenses as a result of the
closure of TAG Distribution's headquarters, lower sales expenses at TAG
Distribution due to the closure of stores, and lower general and administrative
costs at TAG Manufacturing.
TAG's operating income increased $3.1 million to $2.0 million for the
second quarter of 1998 compared to an operating loss of $1.1 million for the
second quarter of 1997. The increase in operating income was due primarily to
cost reductions and product quality improvements.
Other Matters
The Company's subsidiaries are, where necessary, in the process of
remediating their information technology systems to recognize the year 2000. The
modifications are expected to be substantially complete by mid 1999 and to cost
between $1.0 million and $2.0 million. This estimate excludes the costs to
upgrade and replace systems in the normal course of business. The project is not
expected to materially affect the results of operations of the Company.
15
<PAGE>
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995
Forward-looking statements in this report, including without limitation,
statements relating to the Company's plans, strategies, objectives,
expectations, intentions and adequacy of resources, are made following the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995.
Investors are cautioned that such forward-looking statements involve risks and
uncertainties including without limitation the following: (1) the Company's
plans, strategies, objectives, expectations and intentions are subject to change
at any time at the discretion of the Company; (2) any sale of a business unit is
subject to many factors including terms considered satisfactory to the
management of the Company; and (3) other risks and uncertainties indicated from
time to time in the Company's filings with the Securities and Exchange
Commission.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits. The following exhibits are filed herewith:
10.1.6. Amendment No. 1 to the Loan and Security Agreement by and
among Congress Financial Corporation as lender and J.B.
Poindexter & Co., Inc., as borrower.
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
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: August 13, 1998 By: S. Magee
---------------------------------------
S. Magee, Executive Vice President
By: R. S. Whatley
---------------------------------------
R. S. Whatley, Chief Accounting Officer
17
<PAGE>
AMENDMENT NO. 1 TO LOAN AND SECURITY AGREEMENT
J.B. POINDEXTER & CO, INC.
1100 Louisiana Street
Suite 5400
Houston, Texas 77002
May 13, 1998
Congress Financial Corporation
1133 Avenue of the Americas
New York, New York 10036
Gentlemen:
Congress Financial Corporation ("Lender"), J.B. Poindexter & Co., Inc.
("Borrower"), EFP Corporation ("EFP"), Lowy Group, Inc. ("Lowy"), Magnetic
Instruments Corp. ("MIC"), Morgan Trailer Mfg. Co. ("Morgan"), Truck Accessories
Group, Inc. ("TAG"), and Raider Industries Inc. ("Raider"; and together with
EFP, Lowy, MIC, Morgan and TAG, each individually, a "Guarantor" and,
collectively, "Guarantors") have entered into certain financing arrangements as
set forth in the Loan and Security Agreement, dated as of June 28, 1996, by and
among Lender, Borrower and Guarantors (as heretofore amended or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced, the
"Loan Agreement"), together with all other agreements, documents, supplements
and instruments now or at any time hereafter executed and/or delivered by
Borrower, Guarantors or any other person, with, to or in favor of Lender in
connection therewith (all of the foregoing, together with this Amendment and the
other agreements and instruments delivered hereunder, as the same now exist or
may hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced, collectively, the "Financing Agreements").
Borrower and Guarantors have requested that Lender (a) increase the
Maximum Credit from $50,000,000 to $55,000,000 and (b) increase the sublimit on
Revolving Loans in respect of Eligible Inventory from $25,000,000 to
$30,000,000. Lender is willing to do so to the extent and subject to the terms
and conditions set forth herein.
In consideration of the foregoing, the mutual agreements and covenants
contained in this Amendment No. 1 to Loan and Security Agreement (this
<PAGE>
"Amendment"), and other good and valuable consideration, the adequacy and
sufficiency of which are hereby acknowledged, Borrower, Guarantors and Lender
agree as follows:
1. Definitions.
(a) Amendment to Definition of Maximum Credit.
Section 1.57 of the Loan Agreement is hereby amended by deleting the reference
to the figure "$50,000,000" contained therein and substituting the following
figure therefor: "$55,000,000".
(b) Other Definitions. For purposes of this
Amendment, unless otherwise defined herein, all capitalized terms used herein,
shall have the respective meanings ascribed to them in the Loan Agreement.
2. Inventory Sublimit Increase. Section 2.1(c) of the Loan
Agreement is hereby amended by deleting the reference to the figure
"$25,000,000" contained therein and substituting the following figure therefor:
"$30,000,000."
3. Line Increase Fee. In addition to all other fees, charges,
interest and expenses payable by Borrower to Lender hereunder and under the
other Financing Agreements, Borrower shall pay to Lender a fee in respect of the
increase in the Maximum Credit provided for hereunder. The fee shall be in the
amount of $37,500, which amount is fully earned as of the date hereof and is
payable on June 28, 1998; provided, that the fee shall, at Lender's option,
become immediately due and payable upon or at any time after an Event of Default
or any termination or non-renewal hereof.
4. Representations, Warranties and Covenants. In addition to
the continuing representations, warranties and covenants heretofore or hereafter
made by Borrower or Guarantors to Lender pursuant to the other Financing
Agreements, Borrower and Guarantors hereby represent, warrant and covenant with
and to Lenders as follows (which representations, warranties and covenants are
continuing and shall survive the execution and delivery hereof and shall be
incorporated into and made a part of the Financing Agreements):
(a) This Amendment has been duly authorized,
executed and delivered by Borrower and Guarantors, and the agreements and
obligations of Borrower and Guarantors contained herein constitute legal, valid
and binding obligations of Borrower and Guarantors enforceable against Borrower
and Guarantors in accordance with their respective terms.
-2-
<PAGE>
(b) Neither the execution and delivery of this
Amendment, nor the modifications to the Financing Agreements contemplated by
this Amendment (i) shall violate any applicable law or regulation, or any order
or decree of any court or any governmental instrumentality in any respect or
(ii) does or shall conflict with or result in the breach of, or constitute a
default in any respect under, any indenture, or any material mortgage, deed of
trust, security agreement, agreement or instrument to which Borrower or any
Guarantor is a party or may be bound, or (iii) violate any provision of the
organizational documents of Borrower or Guarantors.
(c) All of the representations and warranties
set forth in the Loan Agreement as amended hereby, and the other Financing
Agreements, are true and correct in all material respects, except to the extent
any such representation or warranty is made as of a specified date, in which
case such representation or warranty shall have been true and correct as of such
date.
(d) No Event of Default exists on the date of
this Amendment (after giving effect to the amendments to the Loan Agreement
provided in this Amendment).
5. Conditions Precedent. The effectiveness of the
amendments set forth herein shall be subject to the receipt by Lender of each of
the following, in form and substance satisfactory to Lender:
(a) an original of this Amendment, duly
authorized, executed and delivered by Borrower and Guarantors;
(b) an original amendment to each Intercompany
Note that increases the maximum principal amount of each Intercompany Note to up
to $55,000,000, duly authorized, executed and delivered by each Guarantor;
(c) a legal opinion of counsel to Borrower and
Guarantors with respect to this Amendment and the other documents to be
delivered hereunder and such other matters as Lender may request;
(d) all requisite corporate action and
proceedings in connection with this Amendment and the documents and instruments
to be delivered hereunder shall be in form and substance satisfactory to Lender,
and Lender shall have received all information and copies of all documents,
including, without limitation, records of requisite corporate action and
proceedings which Lender may have requested in connection therewith, such
documents where requested by Lender or its counsel to be certified by
appropriate corporate officers or governmental authorities; and
-3-
<PAGE>
(e) after giving effect to the amendments to the
Loan Agreement provided in this Amendment, no Event of Default shall exist or
have occurred and no event, act or condition shall have occurred or exist which
with notice or passage of time or both would constitute an Event of Default.
6. Effect of this Amendment. This Amendment and the
instruments and agreements delivered pursuant hereto constitute the entire
agreement of the parties with respect to the subject matter hereof and thereof,
and supersede all prior oral or written communications, memoranda, proposals,
negotiations, discussions, term sheets and commitments with respect to the
subject matter hereof and thereof. Except for the specific amendments expressly
set forth herein, no other changes or modifications to the Financing Agreements,
and no waivers of any provisions thereof are intended or implied, and in all
other respects the Financing Agreements are hereby specifically ratified,
restated and confirmed by all parties hereto as of the date hereof. To the
extent of conflict between the terms of this Amendment and the other Financing
Agreements, the terms of this Amendment shall control. The Loan Agreement and
this Amendment shall be read and construed as one agreement.
7. Further Assurances. Borrower shall execute and deliver such
additional documents and take such additional action as may be reasonably
requested by Lender to effectuate the provisions and purposes of this Amendment.
8. Governing Law. The rights and obligations hereunder of each
of the parties hereto shall be governed by and interpreted and determined in
accordance with the internal laws of the State of New York (without giving
effect to principles of conflicts of law).
9. Binding Effect. This Amendment shall be binding upon and
inure to the benefit of each of the parties hereto and their respective
successors and assigns.
10. Counterparts. This Amendment may be executed in any number
of counterparts, but all of such counterparts shall together constitute but one
and the same agreement. In making proof of this Amendment, it shall not be
necessary to produce or account for more than one counterpart thereof signed by
each of the parties hereto.
-4-
<PAGE>
Please sign in the space provided below and return a counterpart of
this Amendment, whereupon this Amendment, as so agreed to and accepted by
Lender, shall become a binding agreement among Borrower, Guarantors and Lender.
Very truly yours,
J.B. POINDEXTER & CO., INC.
By: __________________________
Title: _______________________
AGREED AND ACCEPTED:
CONGRESS FINANCIAL CORPORATION
By: ___________________________
Title: ________________________
ACKNOWLEDGED AND
CONSENTED TO:
EFP CORPORATION
By: __________________________
Title: _______________________
LOWY GROUP, INC.
By: __________________________
Title: _______________________
[SIGNATURES CONTINUE ON NEXT PAGE]
-5-
<PAGE>
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
MAGNETIC INSTRUMENTS CORP.
By: __________________________
Title: _______________________
MORGAN TRAILER MFG. CO.
By: __________________________
Title: _______________________
TRUCK ACCESSORIES GROUP, INC.
By: __________________________
Title: _______________________
RAIDER INDUSTRIES INC.
By: __________________________
Title: _______________________
-6-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE 1998 2ND
QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,733
<SECURITIES> 0
<RECEIVABLES> 35,163
<ALLOWANCES> 661
<INVENTORY> 43,297
<CURRENT-ASSETS> 82,179
<PP&E> 32,817
<DEPRECIATION> 0
<TOTAL-ASSETS> 155,420
<CURRENT-LIABILITIES> 72,652
<BONDS> 105,043
0
0
<COMMON> 16,486
<OTHER-SE> (38,761)
<TOTAL-LIABILITY-AND-EQUITY> 155,420
<SALES> 172,154
<TOTAL-REVENUES> 172,154
<CGS> 144,377
<TOTAL-COSTS> 144,377
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,903
<INCOME-PRETAX> (1,685)
<INCOME-TAX> 348
<INCOME-CONTINUING> (2,033)
<DISCONTINUED> (15,429)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,462)
<EPS-PRIMARY> (5.708)
<EPS-DILUTED> (5.708)
<FN>
OTHER EXPENSES ARE INCLUDED IN SELLING, GENERAL AND ADMINISTRATIVE ON
THE FINANCIAL STATEMENTS.
</FN>
</TABLE>
