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, 1999
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 2, 1999.
1
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
June 30, December 31,
1999 1998
--------- -------------
Current assets
Restricted cash .................................. $ 1,592 $ 2,194
Accounts receivable, net of allowance for doubtful
accounts of $813 and $727, respectively ....... 35,990 26,836
Inventories, net ................................. 33,367 32,151
Deferred income taxes ............................ 3,085 3,071
Prepaid expenses and other ....................... 369 562
-------- --------
Total current assets ......................... 74,403 64,814
Property, plant and equipment, net .................... 38,161 38,211
Net assets of discontinued operations ................. -- 9,773
Goodwill, net ......................................... 15,271 14,517
Deferred income taxes ................................. 4,817 4,465
Other assets .......................................... 3,872 5,052
-------- --------
Total assets ..................................... $136,524 $136,832
======== ========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities
Current portion of long-term debt ................. $ 797 $ 1,019
Borrowings under the revolving credit facilities .. 19,023 18,433
Accounts payable .................................. 20,687 18,178
Accrued compensation and benefits ................. 6,421 4,657
Net liabilities of discontinued operations ........ 621 --
Accrued income taxes .............................. 133 483
Other accrued liabilities ......................... 10,219 7,492
-------- --------
Total current liabilities ..................... 57,901 50,262
-------- --------
Noncurrent liabilities
Long-term debt, less current portion ........ 85,934 101,186
Employee benefit obligations and other ...... 3,082 2,583
-------- --------
Total noncurrent liabilities ............ 89,016 103,769
-------- --------
Commitments and contingencies
Stockholder's deficit
Common stock and paid-in-capital ..................... 16,486 16,486
Accumulated other element of comprehensive income .... (355) (491)
Accumulated deficit .................................. (26,524) (33,194)
--------- ---------
Total stockholder's deficit ...................... (10,393) (17,199)
--------- ---------
Total liabilities and stockholder's deficit ...... $ 136,524 $ 136,832
========= =========
The accompanying notes are an integral part of these
consolidated financial statements.
2
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J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited- in thousands except share and per share amounts)
<TABLE>
<CAPTION>
For the Quarter For the Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
---------- ---------- --------- ---------
<S> <C> <C> <C> <C>
Net sales ............................................................ $ 121,658 $ 104,183 $229,756 $ 191,509
Cost of sales ........................................................ 99,145 86,599 189,435 161,106
--------- --------- -------- ---------
Gross profit ......................................................... 22,513 17,584 40,321 30,403
Selling, general and administrative expense .......................... 14,222 12,848 26,434 23,811
Other (income) expense ............................................... 101 (141) 52 (213)
--------- --------- -------- ---------
Operating income ..................................................... 8,190 4,877 13,835 6,805
Interest expense ..................................................... 3,463 4,130 7,180 8,326
--------- --------- -------- ---------
Income (loss) from continuing operations, before
income taxes .................................................... 4,727 747 6,655 (1,521)
Income tax provision ................................................. 123 327 171 443
--------- --------- -------- ---------
Income (loss) from continuing operations ............................. 4,604 420 6,484 (1,964)
Income (loss) from discontinued operations,
less applicable taxes ........................................... -- 45 -- (15,498)
Extraordinary gain (loss) on purchase of Senior Notes,
net of applicable taxes ........................................ (36) -- 186 --
--------- --------- -------- ---------
Net income (loss) .................................................... $ 4,568 $ 465 $ 6,670 $ (17,462)
========= ========= ======== =========
Basic and diluted loss per share:
Income (loss) from continuing operations......................... $ 1,505 $ 137 $ 2,120 $ (642)
Income (loss) from discontinued operations....................... - 15 - (5,066)
Extraordinary gain (loss) on purchase of
Senior Notes................................................. (12) - 60 -
---------- ---------- ---------- ----------
Net income (loss).......................................... $ 1,493 $ 152 $ 2,180 $(5,708)
========== ========== ========= ========
Weighted average shares outstanding............................. 3,059 3,059 3,059 3,059
===== ===== ===== ======
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited - in thousands)
For the Six Months
Ended June 30,
1999 1998
------ ------
Cash provided by (used in) operations ....................... $6,920 $(93)
------ ----
Cash flows provided by (used in) investing activities:
Proceeds from sales of businesses and equipment ........ 10,903 114
Acquisition of property, plant and equipment ........... (4,002) (3,322)
Other .................................................. (48) 51
------- ------
Net cash provided by (used in) investing activities 6,853 (3,259)
------- ------
Cash flows provided by (used in) financing activities:
Net proceeds from revolving lines of credit and
short-term debt .................................. 589 2,578
Purchase of Senior Notes and payments of
other long-term debt ............................. (14,964) (684)
-------- -------
Net cash (used in) provided by financing activities (14,375) 1,894
-------- -------
Decrease in restricted cash and cash equivalents .......... (602) (1,458)
Restricted cash and cash equivalents, beginning of period . 2,194 3,191
-------- -------
Restricted cash and cash equivalents, end of period ....... $ 1,592 $ 1,733
======== =======
Supplemental information:
Cash paid for income taxes, net of refunds ............. $ 376 $ 581
====== ======
Cash paid for interest ................................. $6,799 $8,840
====== ======
The accompanying notes are an integral part of these
consolidated financial statements.
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
primarily manufacturing businesses. Subsidiaries consist of Morgan Trailer Mfg.
Co., (Morgan), Truck Accessories Group, Inc., (TAG), 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 understandable. These financial
statements should be read in conjunction with the audited consolidated financial
statements and notes thereto for the year ended December 31, 1998 filed with the
Securities and Exchange Commission on Form 10-K.
(2) Segment Data. The following is a summary of the business segment data
(dollars in thousands):
For the Quarter For the Six Months
Ended June 30, Ended June 30,
------------------ ----------------------
1999 1998 1999 1998
---- ---- ---- ----
Net Sales:
Morgan .................... $ 74,498 $ 58,810 $140,105 $107,160
TAG ....................... 35,014 28,613 63,752 51,846
EFP ....................... 8,718 8,973 17,405 17,108
MIC Group ................. 3,428 7,787 8,494 15,395
-------- -------- -------- --------
Net Sales ................. $121,658 $104,183 $229,756 $191,509
======== ======== ======== ========
Operating Income (Loss):
Morgan .................... $ 6,950 $ 2,613 $ 11,898 $ 2,538
TAG ....................... 1,912 1,631 2,533 2,174
EFP ....................... 686 768 1,286 1,683
MIC Group ................. (524 588 (262) 1,731
JBPCO (Corporate) ......... (834 (723 (1,620) (1,321)
------- ------- -------- -------
Operating Income .......... $ 8,190 $ 4,877 $ 13,835 $ 6,805
======= ======= ======== =======
June 30, December 31,
Total Assets as of: 1999 1998
-------- ------------
Morgan ....................................... $ 69,640 $ 60,454
TAG .......................................... 44,156 37,569
EFP .......................................... 13,461 16,233
MIC Group .................................... 7,383 9,078
JBPCO (Corporate) ............................ 1,884 3,725
Net assets of discontinued
operations ............................... -- 9,773
-------- --------
Total Assets ................................. $136,524 $136,832
======== ========
5
<PAGE>
Net sales for the six-month periods ended June 30,1999 and 1998 included
$2,900,000 and $7,300,000, respectively, from intercompany sales to TAG
Distribution, which has been classified as a discontinued operation.
Morgan has two customers (truck leasing and rental companies) that together
accounted for approximately 58% and 59% of Morgan's net sales during the six
months ended June 30, 1999 and 1998, respectively. EFP has four customers in the
electronics industry that accounted for approximately 40% and 39% of EFP's net
sales in the six months ended June 30, 1999 and 1998, respectively. MIC Group
has an industry concentration, pertaining to international oil field service
companies, with one customer that accounted for approximately 40% and 39% of MIC
Group's net sales during the six months ended June 30, 1999 and 1998,
respectively.
(3) Comprehensive Income (Loss). The components of comprehensive income (loss)
were as follows (in thousands):
For the Quarter For the Six Months
Ended June 30, Ended June 30,
------------------ -------------------
1999 1998 1999 1998
---- ---- ---- ----
Net income (loss) ................... $4,568 $ 465 $6,670 $(17,462)
Foreign currency translation
adjustments ..................... 59 (114) 136 (72)
------ ----- ------ --------
Comprehensive income (loss) ......... $4,627 $ 351 $6,806 $(17,534)
====== ===== ====== ========
The net loss for the six months ended June 30, 1998 included a provision of
$8,184,000 for losses on disposal of TAG Manufacturing, which was reversed in
the third quarter of 1998.
(4) Inventories. Consolidated net inventories consisted of the following (in
thousands):
June 30, December 31,
1999 1998
--------- ------------
FIFO Basis Inventory:
Raw Materials .................................$ 20,775 $ 19,549
Work in Process................................. 4,394 4,296
Finished Goods ................................. 8,198 8,306
-------- -------
Total Inventory .................................$ 33,367 $ 32,151
======== ========
(5) Discontinued Operations - Truck Accessories Group (TAG Distribution
Division). TAG Distribution's results of operations have been reported as
discontinued operations in the consolidated financial statements for all periods
presented. In addition, the remaining net assets and liabilities of TAG
Distribution, which are expected to be disposed of, have been segregated within
the accompanying consolidated balance sheets as "net assets (liabilities) of
discontinued operations."
The TAG Distribution plan of disposal is substantially complete. Based on
improved operating performance, the Company decided during the second quarter of
1999 to retain Midwest Truck Aftermarket (MTA) and three retail stores.
Accordingly, that portion of the estimated loss on disposal of TAG Distribution
related to MTA of $1,306,000 has been reversed in the accompanying consolidated
statement of operations for the three months ended June 30, 1999. Additionally
the results of operations of MTA have been included in continuing operations for
all periods presented.
As of July 30, 1999, the Company had sold two wholesale locations and 28
retail locations, including eight stores, which were part of Radco. Two
wholesale locations and three retail locations were closed. The Company realized
total proceeds of approximately $4,726,000 from the disposition of these assets.
The proceeds were used to repay borrowings under the Revolving Loan Agreements.
6
<PAGE>
Condensed financial information related to the TAG Distribution Division
was as follows (in thousands):
June 30, December 31,
1999 1998
--------- ------------
Net assets (liabilities) of discontinued operations:
Current assets ............................. $ 123 $ 7,831
Property, net .............................. 241 2,124
Intangible assets .......................... 155 159
------- -------
Total assets ............................... 519 10,114
Less current liabilities ................... 2,365 5,890
------- -------
Net assets (liabilities) ........................ $(1,846) $ 4,224
======= =======
TAG Distribution revenues were $7,408,000 and $25,196,000 for the six
months ended June 30, 1999 and 1998, respectively. At June 30, 1999, accrued
expenses included $1,236,000 for operating expenses, severance costs and lease
obligations. Substantially, all of this accrual will be paid in 1999. The income
(loss) from discontinued operations related to TAG Distribution was as follows
(in thousands):
<TABLE>
<CAPTION>
For the Quarter For the Six Months
Ended June 30, Ended June 30,
-------------------- -------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Loss from TAG Distribution's
operations, less applicable
income taxes of $0, $0, $0 and $0.......... $ - $ - $ - $ (1,280)
Reversal of loss on disposal of MTA
net of applicable income
taxes of $0, $0, $0 and $0.................. 1,306 - 1,306 -
Loss on disposal of TAG including provision
of $1,306, $1,046, $1,306 and $1,687 for
estimated operating losses through
disposal date, less applicable income taxes
of $0, $0, $0 and $0........................ (1,306) (1,046) (1,306) (15,431)
-------- --------- --------- ---------
$ - $ (1,046) $ - $(16,711)
========= ========= ========= =========
</TABLE>
Losses from operations of TAG Distribution included interest expense of
$922,000 related to the borrowings of TAG Distribution under the Revolving Loan
Agreement for the six months ended June 30, 1998. The proceeds from the sale of
TAG Distribution were used to repay borrowings under the Revolving Loan
Agreement.
The loss on disposal of TAG of $15,431,000, recorded during the six months
ended June 30,1998, included a write down of the assets of TAG Manufacturing of
$8,184,000. The write down was reversed, effective September 1998, upon the
Company's decision to retain TAG Manufacturing.
Discontinued Operations - Lowy. Effective June 7, 1999, the Company sold the
business and principally all of the assets excluding real estate of Lowy
Distribution, the Company's Floor Covering segment. The Company realized net
cash proceeds of $6,241,000, which approximated the carrying value of the
related assets and liabilities. Certain real estate is being held for sale by
Lowy. Lowy's results of operations have been reported as discontinued operations
in the consolidated financial statements for the periods presented. In addition,
7
<PAGE>
the net assets and liabilities, which have been disposed of, are segregated
within the consolidated balance sheets as "net assets of discontinued
operations."
Condensed financial information related to Lowy was as follows (in
thousands):
June 30, December 31,
1999 1998
------- ------------
Net assets of discontinued operations:
Current assets ......................... $ 71 $7,517
Deferred disposal costs .................. 782 --
Property, net ............................ 274 473
Long-term assets ......................... 1,048 1,498
------ ------
Total assets ............................. 2,175 9,488
Less current liabilities ................. 334 2,659
Less long-term liabilities ............... 616 1,280
------ ------
Net assets ......................................... $1,225 $5,549
====== ======
Lowy revenues were $15,934,000 and $33,338,000 for the six months ended
June 30, 1999 and 1998, respectively. Revenues for the six months ended June 30,
1998 included the operations of Blue Ridge, which was sold effective August 31,
1998. The income from discontinued operations related to Lowy was as follows (in
thousands):
For the Quarter For the Six Months
Ended June 30, Ended June 30,
1999 1998 1999 1998
Net income from operations of Lowy,
net of applicable income taxes of
$60 and $63, respectively ................. $-- $1,091 $-- $1,213
Net income of Lowy includes interest expense related to the borrowings of
Lowy under the Revolving Loan Agreement for the six months ended June 30, 1999
and 1998 of $182,000 and $312,000, respectively.
(6) Revolving Loan Agreements. Effective February 12, 1999, the Company's lender
waived an event of default arising from the Company purchasing $5,500,000 of its
Senior Notes. The lender also provided consent, subject to certain conditions,
for the Company to purchase an additional $4,500,000, at cost including accrued
interest, of the Senior Notes. Effective May 26, 1999 the Company's lender
provided an additional consent, subject to certain conditions, for the Company
to purchase an additional $10,000,000, in principal, of the Senior Notes.
Effective March 29, 1999, the lender exercised its option to extend the
renewal date of the Revolving Loan Agreement to June 28, 2000. At June 30, 1999,
the Company had total borrowing availability of $41,641,000, of which $3,944,000
was used to secure letters of credit and foreign currency transactions.
Additionally, $3,293,000 had been borrowed to fund operations and $14,470,000 to
fund the purchase of $15,000,000 of the Company's Senior Notes, resulting in
unused availability of $19,934,000.
(7) Long-term Debt. During the six months ended June 30, 1999, the Company
purchased $15,000,000 of its Senior Notes. The Company realized a gain of
$186,000, net of income taxes of $6,000 and net of related deferred loan costs
of $332,000, which was recognized as an extraordinary gain in the consolidated
statements of operations for the period.
8
<PAGE>
(8) Income Taxes. The income tax expense of $171,000 in 1999 differs from
amounts computed based on the federal statutory rates principally due to the
Company's ability to utilize the benefit of net operating losses against which
valuation allowances had been previously provided.
(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.
EFP is subject to a lawsuit concerning the supply of natural gas to one of
its manufacturing plants. The utility company has alleged that EFP was
under-billed by approximately $500,000 over a four-year period as a result of
errors made by the utility company. EFP was granted a motion for summary
judgement dismissing the suit effective April 20, 1999. The Company will
continue to aggressively defend the suit in the event of an appeal and believes
that it will not have a material adverse effect on the Company.
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) Derivative Instruments and Hedging Activities. In June 1998, the Financial
Accounting Standards Board issued Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and Hedging Activities, which, as
amended, is required to be adopted in fiscal years beginning after June 15,
2000. Because of the Company's limited use of derivatives to manage its exposure
to fluctuations in foreign exchange rates, 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 and
levels of oil and gas exploration.
During the quarter ended June 30, 1999, the Company substantially completed
the disposition of the distribution operations of the Truck Accessories Group.
Based on improved operating performance, the Company decided during the second
quarter of 1999 to retain Midwest Truck Aftermarket (MTA), a wholesale
operation, and three retail stores. Two of the three retail stores are an
integral part of the manufacturing facilities, to which they are attached, and
will provide factory outlet capabilities. The results of operations of MTA have
been included in continuing operations for all periods presented.
The results of operations of the retained stores have been included in
continuing operations for the year to date period ended June 30,1999, however,
the Company's results of operations for the prior periods have not been
restated. During the six months ended June 30,1999 net sales of these stores
combined was $2.1 million, cost of sales was $1.5 million and the stores
recorded operating income of $110,000. Total assets at June 30, 1999 were
$507,000.
9
<PAGE>
Effective June 7,1999, the Company sold the business and substantially all
of the assets of Lowy Distribution. Upon the sale of certain real estate, the
disposition of the Company's floor covering operations will be complete. The
Company realized net cash proceeds of $6.2 million which were used to reduce
revolver borrowings.
Results of Continuing Operations
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998
Net sales increased 20 % to $229.8 million for the six months ended June
30, 1999 compared to $191.5 million during 1998. The increase was due primarily
to Morgan whose sales increased 31% or $33.0 million. The Company also recorded
sales increases at TAG of 23% or $11.9 million. Net sales at MIC decreased 45%
or $6.9 million, during 1999 compared to 1998.
Cost of sales rose 18% to $189.4 million for the six months ended June 30,
1999 compared to $161.1 million during 1998. Gross profit increased 33% to $40.3
million (18% of net sales) for the first six months of 1999 compared to $30.4
million (16% of net sales) for 1998, primarily as a result of improved volume
and labor efficiencies at Morgan.
Selling, general and administrative expenses were $26.4 million (11% of net
sales) for the six months ended June 30, 1999 compared to $23.8 million (13% of
net sales) during 1998. The improvement in expenses as a percentage of sales was
due to Morgan whose expenses remained consistent with the prior year despite a
31% increase in sales.
Operating income increased 103% or $7.0 million to $13.8 million (6% of net
sales) for the six months ended June 30, 1999 compared to $6.8 million (4% of
net sales) in 1998, primarily due to Morgan whose operating income increased
$9.4 million for the period.
Interest expense was $7.2 million for the six months ended June 30, 1999,
14% less than the $8.3 million during the same period in 1998. Average
borrowings under the revolving credit facility decreased by approximately 50% or
$22 million during the six months ended June 30,1999 which reduced interest by
approximately $800,000 compared to 1998. The Company purchased $15.0 million of
its Senior Notes during the six months ended June 30, 1999, which, because of
the difference between the interest rate on the Senior Notes compared to that of
the revolving credit facility, reduced interest expense by approximately
$300,000 during the 1999 period.
The income tax expense of $171,000 in 1999 differs from amounts computed
based on the federal statutory rates principally due to the Company's ability to
utilize the benefit of net operating losses against which valuation allowances
had been previously provided.
The Company purchased $15.0 million of its Senior Notes in the open market
during the six months ended June 30,1999. The Company recorded an extraordinary
gain on the purchases of $186,000, net of tax of $6,000 and net of deferred loan
costs of $332,000, related to the purchased Senior Notes. The Company purchased
the Senior Notes as a short-term investment and the decision to hold or to sell
them will depend upon future market conditions.
Second Quarter 1999 Compared to Second Quarter 1998
Net sales increased 17% to $121.7 million for the quarter ended June
30,1999 compared to $104.2 million during the 1998 period, primarily due to a
27% or $15.7 million increase at Morgan.
10
<PAGE>
Cost of sales increased 14% to $99.2 million for the quarter ended June
30,1999 compared to $86.6 million during 1998. Gross profit was $22.5 million
(19% of net sales) for the second quarter of 1999 compared to $17.6 million (17%
of net sales) for 1998.
Selling, general and administrative expenses increased to $14.2 million
(12% of net sales) for the quarter ended June 30, 1999 compared to $12.9 million
(also 12% of net sales) during 1998.
Operating income from continuing operations was $8.2 million (7% of net
sales) for the quarter ended June 30, 1999 compared to $4.9 million (5% of net
sales) in 1998, an increase of 68%.
Interest expense decreased 16% to $3.5 million during the quarter ended
June 30, 1999 compared to $4.1 million during 1998.
The Company purchased $7.0 million of its Senior Notes in the open
market during the quarter ended June 30,1999. The Company recorded an
extraordinary loss on the purchases of $36,000, net of tax and net of deferred
loan costs of $332,000, related to the Senior Notes purchased during the six
months ended June 30, 1999.
Morgan
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998
Net sales rose by 31% or $33.0 million to $140.1 million for the first six
months of 1999 compared to $107.2 million for the first six months for 1998, due
to strong demand for Morgan's van bodies and improved availability of chassis.
Total unit shipments increased 32% during the 1999 period compared to 1998.
Backlog at June 30, 1999 was $66.3 million compared to $73.3 million at December
31, 1998 and $59.8 million at June 30, 1998.
Cost of sales was $119.3 million for the first six months of 1999 compared
to $95.6 million for the same period in 1998. Gross profit increased 80% to
$20.8 million (15% of net sales) during 1999 compared to $11.6 million (11% of
net sales) during 1998. The increase in gross profit is due primarily to
improved labor efficiencies.
Selling, general and administrative expenses decreased 1% to $8.9 million
(6% of net sales) for the first six months of 1999 compared to $9.0 million (8%
of net sales) for the same period in 1998. Expenses remained at the same level
during 1999 as compared to 1998 as cost savings from sales personnel reductions
were offset by higher commissions and the costs associated with the remediation
of computer systems in preparation for the year 2000.
Operating income increased 369% or $9.4 million to $11.9 million during the
first six months of 1999 compared to $2.5 million for the first six months of
1998.
Second Quarter 1999 Compared to Second Quarter 1998
Net sales of $74.5 million for the second quarter of 1999 were 27% greater
than sales of $58.8 million in the second quarter of 1998. Shipments increased
25% during the 1999 period compared to 1998 due to improved chassis availability
during this year.
Cost of sales was $62.7 million for the second quarter of 1999 compared to
$51.4 million for the same period in 1998. Gross profit increased 59% to $11.8
million (16% of net sales) during 1999 compared to $7.4 million (13% of net
sales) during the second quarter of last year.
Selling, general and administrative expenses were $4.8 million for the
second quarter of 1999 equal to $4.8 million for the same period of 1998.
11
<PAGE>
Morgan's operating income increased 166% or $4.4 million to $7.0 million
during the second quarter of 1999 compared to $2.6 million for the same period
of 1998.
Truck Accessories Group
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998
Net sales increased 23% to $63.8 million for the first six months of 1999
compared to sales of $51.8 million for the same period in 1998. Total unit
shipments increased 17% during the 1999 period compared to 1998.
Cost of sales was $48.7 million for the first six months of 1999 compared
to $40.3 million for the same period in 1998, consequently, gross profit
increased 30% to $15.0 million (24% of net sales) during 1999 compared to $11.6
million (22% of net sales) during 1998, mostly due to improved overhead
absorption on higher volume.
Selling, general and administrative expenses increased to $12.4 million
(20% of net sales) for the first six months of 1999 compared to $9.6 million
(19% of net sales) for the same period in 1998. Costs during the 1998 period
were reduced by $800,000 as a result of favorable adjustments to warranty, bad
debt and worker's compensation insurance reserves, all accrued in prior periods.
Operating income increased $359,000 to $2.5 million during the first six
months of 1999 compared to $2.2 million for the first six months of 1998.
Second Quarter 1999 Compared to Second Quarter 1998
Net sales increased $6.4 million or 22% to $35.0 million for the quarter
ended June 30, 1999 compared to $28.6 million for the same period in 1998. Unit
shipments increased 21% during 1999 compared to 1998.
Cost of sales increased by $4.3 million to $26.1 million compared to the
same period in 1998. Gross profit increased by $2.2 million or 31% to $8.9
million (25% of net sales) compared to $6.8 million (24% of net sales) in the
same period of 1998.
Selling, general and administrative expenses increased by $1.6 million or
31% to $6.9 million (20% of net sales) for the quarter ended June 30, 1999
compared to $5.2 million (18% of net sales) for the same period in 1998. The
increase was due primarily to higher costs at Leer associated with a new
marketing program.
Operating income increased $281,000 to $1.9 million for the second quarter
of 1999 compared to $1.6 million for the second quarter of 1998.
EFP
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998
Net sales increased $297,000 or 2% to $17.4 million for the first six
months of 1999 compared to sales of $17.1 million for the first six months for
1998. A 13% or $1.5 million increase in sales of packaging products was offset
by a decline in sales of Styrocast and tooling products.
Cost of sales increased 5% to $14.1 million for the first six months of
1999 compared to $13.4 million for the same period in 1998. Gross profit
decreased 11% to $3.3 million (19% of net sales) during 1999 compared to $3.8
million (22% of net sales) during 1998. The increase in cost of sales was due
primarily to increased overhead costs including higher warehousing and equipment
leasing costs.
12
<PAGE>
Selling, general and administrative expense were $2.1 million (11% of net
sales) for the first six months of 1999, equal to $2.1 million (12% of net
sales) for the same period in 1998.
Because of the decline in gross profit, operating income decreased $397,000
to $1.3 million during the first six months of 1999 compared to $1.7 million for
the first six months of 1998.
Second Quarter 1999 Compared to Second Quarter 1998
Net sales decreased 3% to $8.7 million for the second quarter of 1999
compared to $9.0 million for the comparable period of 1998.
Cost of sales were $7.1 million during the 1999 period equal to $7.1
million during 1998. Gross profit decreased to $1.6 million (19% of net sales)
for the second quarter of 1999 compared to $1.9 million (21% of net sales) for
the second quarter of 1998. The increase in cost of sales as a percentage of
sales was caused primarily by increased overhead spending.
Selling, general and administrative expenses decreased 13% to $1.0 million
(11% of net sales) for the second quarter of 1999 compared to $1.1 million (12%
of net sales) for the same period in 1998.
EFP's operating income decreased to $686,000 for the second quarter of 1999
compared to $768,000 for the second quarter of 1998.
MIC Group
Six Months Ended June 30, 1999 Compared to Six Months Ended June 30, 1998
Net sales decreased $6.9 million or 45% to $8.5 million for the first six
months of 1999 compared to $15.4 million for the first six months for 1998. The
decrease was a result of a significant decline in the demand for MIC's products
and services to its customers involved in the exploration and production of oil
and gas.
Cost of sales decreased 38% to $7.3 million for the first six months of
1999 compared to $11.9 million for the same period in 1998. Gross profit
decreased 67% to $1.2 million (14% of net sales) during 1999 compared to $3.5
million (23% of net sales) during 1998. The decrease in gross profit as a
percent of sales was due primarily to reduced overhead absorption on lower sales
and increased material costs relative to sales.
Selling, general and administrative expenses decreased 22% to $1.4 million
(17% of net sales) for the first six months of 1999 compared to $1.8 million
(12% of net sales) for the same period in 1998. General and administrative
expenses decreased 28% or $425,000 during 1999 compared to 1998, as a result of
reductions in personnel and related costs.
Operating income decreased $2.0 million to a loss of $262,000 during the
first six months of 1999 compared to income of $1.7 million for the first six
months of 1998.
Second Quarter 1999 Compared to Second Quarter 1998
Net sales decreased 56% to $3.4 million for the second quarter of 1999
compared to $7.8 million during the comparable period in 1998.
13
<PAGE>
Cost of sales decreased 48% to $3.2 million for the second quarter of 1999
compared to $6.2 million for the second quarter of 1998. Gross profit decreased
to $199,000 (6% of net sales) for the second quarter of 1999 compared to $1.6
million (20% of net sales) for the second quarter of 1998.
Selling, general and administrative expenses decreased 27% to $723,000 (21%
of net sales) for the second quarter of 1999 compared to $1.0 million (13% of
net sales) for the same period in 1998.
Operating income decreased by $1.1 million to a loss of $524,000 for the
second quarter of 1999 compared to $600,000 for the second quarter of 1998.
Liquidity and Capital Resources
Operating activities during the six months ended June 30, 1999 generated
cash of $6.9 million compared to using cash of $93,000 during the same period in
1998. The improved cash from operations during the six months ended June 30,
1999 compared to 1998 was due primarily to the $8.5 million improvement in net
income from continuing operations. The change in working capital over the same
period of 1999 approximated the change during 1998. However, working capital at
June 30, 1999 of $16.5 million was $7.0 million greater than at June 30, 1998,
primarily due to a $20.0 million decrease in revolver borrowings, which was
partially offset by a $10.0 million decrease in inventories. The Company used
proceeds from the sale of discontinued operations to reduce revolver borrowings.
Increased shipments at Morgan reduced inventory levels during 1999 compared to
1998.
During the six months ended June 30,1999, the Company substantially
completed the disposition of its distribution businesses. During the period, the
Company received proceeds of approximately $4.7 million from the sale of TAG
Distribution stores and effective June 7, 1999, the Company realized net
proceeds of $6.2 million from the sale of Lowy Distribution. Proceeds of $10.9
million from the sale of discontinued operations and funds from operations were
used to reduce borrowings under the revolving credit facility.
The ability to borrow under the Revolving Loan Agreement depends on the
amount of eligible collateral, which, in turn, depends on certain advance rates
applied to the value of accounts receivables and inventory. At August 1, 1999,
the Company had unused available borrowing capacity of $22.3 million under the
terms of the Revolving Loan Agreement.
Capital expenditures for the six months ended June 30, 1999 of $4.0 million
related primarily to the maintenance of existing capacity at TAG Manufacturing
and Morgan.
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 expenditures, working capital requirements and known obligations. The
Company is in compliance with the terms of the Revolving Loan Agreement.
Year 2000
The Year 2000 (Y2K) issue is the result of computer programs being written
using two digits rather than four to define a specific year. Absent corrective
actions, a computer program that has date sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
system failure or miscalculations resulting in disruptions to operations.
The Company's plan to resolve the Year 2000 issue involves the following
four phases: assessment, remediation, testing and implementation. Based on an
assessment of continuing operations, the Company determined that it would be
14
<PAGE>
necessary to modify or replace significant portions of its software and certain
hardware so that those systems would properly utilize dates beyond December 31,
1999 at certain of the Company's subsidiaries. The Company expects to have all
remediated systems fully tested and implemented by September 30, 1999. The
Company believes that with modifications or replacements of existing software
and certain hardware, the Y2K issue can be mitigated.
The Company has queried its significant suppliers and subcontractors that
do not share information systems with the Company (external agents). To date,
the Company is not aware of any external agent with a Y2K issue that would
materially impact the Company's results of operations, liquidity, or capital
resources.
The Company has and will continue to utilize both internal and external
resources to reprogram or replace, test, and implement the software and
operating equipment for Y2K modifications. The total cost of the Y2K project is
estimated at $1.5 million and is being funded through operating cash flows.
Approximately 20% of the cost is to replace equipment and the remainder is to
upgrade or reprogram software. The majority of these costs are being expensed as
incurred and are not expected to have a material adverse effect on the Company's
results of operations or financial position. To date, the Company has incurred
approximately $1.2 million related to all phases of the Y2K project.
The Company believes that the Y2K issue will not pose significant
operational problems for the Company. However, if all Y2K problems are not
identified and corrected in a timely manner, there can be no assurances that the
Y2K issue will not have a material adverse effect on the Company's results of
operations or adversely affect the Company's relationships with customers,
suppliers or other parties. In addition, there can be no assurances that outside
third parties, including customers, suppliers, utility and government entities,
will be in compliance with all Y2K issues. The Company believes that the most
likely worst case Y2K scenario, if it were to occur, would be the temporary
inability of third party suppliers, such as utility providers, telecommunication
companies and other critical suppliers, to continue providing their products and
services. The failure of these third party suppliers to provide on-going
services could have a material adverse effect on the Company's results of
operations.
Management of the Company believes it has an effective program in place to
resolve the Y2K issue in a timely manner. However, the Company currently has no
contingency plans in place in the event it or any of its major suppliers or
major customers experience Y2K problems. The Company continues to evaluate the
status of its key suppliers and determine if such a plan is necessary.
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 pursuant to 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.
15
<PAGE>
PART II. OTHER INFORMATION
Item 3. Other Information
None
Item 4. Exhibits and Reports on Form 8-K
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 9, 1999 By: S. Magee
----------------------------------------------
S. Magee, Chief Financial Officer and Director
By: R.S. Whatley
----------------------------------------------
R. S. Whatley, Principal Accounting Officer
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1999 2ND
QUARTER FORM 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-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 1,592
<SECURITIES> 0
<RECEIVABLES> 36,803
<ALLOWANCES> 813
<INVENTORY> 33,367
<CURRENT-ASSETS> 74,403
<PP&E> 97,047
<DEPRECIATION> 58,886
<TOTAL-ASSETS> 136,524
<CURRENT-LIABILITIES> 57,901
<BONDS> 89,016
0
0
<COMMON> 16,486
<OTHER-SE> (355)
<TOTAL-LIABILITY-AND-EQUITY> 136,524
<SALES> 229,756
<TOTAL-REVENUES> 229,756
<CGS> 189,435
<TOTAL-COSTS> 189,435
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,180
<INCOME-PRETAX> 6,655
<INCOME-TAX> 171
<INCOME-CONTINUING> 6,484
<DISCONTINUED> 0
<EXTRAORDINARY> 186
<CHANGES> 0
<NET-INCOME> 6,670
<EPS-BASIC> 0.218
<EPS-DILUTED> 0.218
<FN>
LOSS PROVISION IS INCLUDED IN SELLING, GENERAL AND ADMINISTRATIVE ON
THE FINANCIAL STATEMENTS.
</FN>
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1999 2ND
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FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 2,224
<SECURITIES> 0
<RECEIVABLES> 37,061
<ALLOWANCES> 772
<INVENTORY> 37,745
<CURRENT-ASSETS> 80,018
<PP&E> 94,676
<DEPRECIATION> 56,647
<TOTAL-ASSETS> 145,891
<CURRENT-LIABILITIES> 64,789
<BONDS> 96,140
0
0
<COMMON> 16,486
<OTHER-SE> (414)
<TOTAL-LIABILITY-AND-EQUITY> 145,891
<SALES> 108,098
<TOTAL-REVENUES> 108,098
<CGS> 90,290
<TOTAL-COSTS> 90,290
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,717
<INCOME-PRETAX> 1,928
<INCOME-TAX> 48
<INCOME-CONTINUING> 1,880
<DISCONTINUED> 0
<EXTRAORDINARY> 222
<CHANGES> 0
<NET-INCOME> 2,102
<EPS-BASIC> 0.687
<EPS-DILUTED> 0.687
<FN>
LOSS PROVISION IS INCLUDED IN SELLING, GENERAL AND ADMINISTRATIVE ON
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1999 2ND
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FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 2,194
<SECURITIES> 0
<RECEIVABLES> 27,563
<ALLOWANCES> 727
<INVENTORY> 32,151
<CURRENT-ASSETS> 64,814
<PP&E> 92,842
<DEPRECIATION> 54,631
<TOTAL-ASSETS> 136,832
<CURRENT-LIABILITIES> 50,262
<BONDS> 103,769
0
0
<COMMON> 16,486
<OTHER-SE> (491)
<TOTAL-LIABILITY-AND-EQUITY> 136,832
<SALES> 373,166
<TOTAL-REVENUES> 373,166
<CGS> 316,105
<TOTAL-COSTS> 316,105
<OTHER-EXPENSES> 335
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,695
<INCOME-PRETAX> (7,494)
<INCOME-TAX> 744
<INCOME-CONTINUING> (8,238)
<DISCONTINUED> (3,505)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (11,743)
<EPS-BASIC> (3.839)
<EPS-DILUTED> (3.839)
<FN>
LOSS PROVISION IS INCLUDED IN SELLING, GENERAL AND ADMINISTRATIVE ON
THE FINANCIAL STATEMENTS.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE 1999 2ND
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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
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<RECEIVABLES> 34,046
<ALLOWANCES> 744
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<CURRENT-ASSETS> 76,078
<PP&E> 90,662
<DEPRECIATION> 50,949
<TOTAL-ASSETS> 157,413
<CURRENT-LIABILITIES> 76,722
<BONDS> 102,981
0
0
<COMMON> 16,486
<OTHER-SE> (258)
<TOTAL-LIABILITY-AND-EQUITY> 157,413
<SALES> 191,509
<TOTAL-REVENUES> 191,509
<CGS> 161,106
<TOTAL-COSTS> 161,106
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 8,326
<INCOME-PRETAX> (1,521)
<INCOME-TAX> 443
<INCOME-CONTINUING> (1,964)
<DISCONTINUED> (15,498)
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<CHANGES> 0
<NET-INCOME> (17,462)
<EPS-BASIC> (5.708)
<EPS-DILUTED> (5.708)
<FN>
OTHER EXPENSES ARE INCLUDED IN SELLING, GENERAL AND ADMINISTRATIVE ON
THE FINANCIAL STATEMENTS.
</FN>
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION FROM THE 1999 2ND
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FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 1,767
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<RECEIVABLES> 31,631
<ALLOWANCES> 1,103
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<CURRENT-ASSETS> 75,608
<PP&E> 89,165
<DEPRECIATION> 49,836
<TOTAL-ASSETS> 159,319
<CURRENT-LIABILITIES> 78,755
<BONDS> 103,205
0
0
<COMMON> 16,486
<OTHER-SE> (144)
<TOTAL-LIABILITY-AND-EQUITY> 159,319
<SALES> 87,327
<TOTAL-REVENUES> 87,327
<CGS> 74,507
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<INCOME-PRETAX> (2,268)
<INCOME-TAX> 116
<INCOME-CONTINUING> (2,384)
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<EPS-BASIC> (5.044)
<EPS-DILUTED> (5.044)
<FN>
OTHER EXPENSES ARE INCLUDED IN SELLING, GENERAL AND ADMINISTRATIVE ON
THE FINANCIAL STATEMENTS.
</FN>
</TABLE>
