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United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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(Mark one) [X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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 if principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) (713)655-9800
Securities registered pursuant to Section 12(b) of the Act: None
Name of each exchange where registered: None
Securities registered pursuant to Section 12(g) of the Act: None
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant: $ 0
The number of shares outstanding of each of the registrants' classes of common
stock as of February 25, 2000: 3059
Documents Incorporated by Reference: None
<PAGE>
J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
PART I.
Item 1. Business
J.B. Poindexter & Co., Inc. ("JBPCO") operates primarily manufacturing
businesses. JBPCO's operating subsidiaries are Morgan Trailer Mfg Co.,
("Morgan"), Truck Accessories Group, Inc., ("TAG"), EFP Corporation, ("EFP") and
Magnetic Instruments Corp., ("MIC Group"). The JBPCO subsidiaries also include
Lowy Group, Inc., ("Lowy" or "Lowy Group"), the remaining operations, of which
were sold effective June 7, 1999.
Unless the context otherwise requires, the "Company" refers to JBPCO
together with its consolidated subsidiaries. The Company is controlled by John
B. Poindexter. In May 1994, the Company completed an initial public offering of
$100 million, 12 1/2% Senior Notes due 2004 (sometimes referred to herein as the
"Note Offering"). Concurrent with the Note Offering, the Company acquired, from
John B. Poindexter and various minority interests, TAG, Lowy Group, EFP and MIC
Group. During 1998, the Company's management made the strategic decision to
concentrate resources on the Company's manufacturing operations. Consequently,
the retail and wholesale distribution operations of TAG and Lowy Group were sold
or closed down and are treated as discontinued operations for all relevant
periods in the Consolidated Financial Statements of the Company. The Company
manages its assets on a decentralized basis, with a small corporate staff
providing strategic direction and support.
The Company considers each of its operating subsidiaries as an industry
segment. See Note 3 to the Consolidated Financial Statements of the Company.
Morgan
Morgan is the nation's largest manufacturer of commercial van bodies
("van bodies") for medium-duty trucks. Morgan products, which are mounted on
truck chassis manufactured and supplied by others, are used for general freight
and deliveries, moving and storage and distribution of refrigerated consumables.
Its 98 authorized distributors, seven manufacturing plants and six service
facilities are in strategic locations to provide nationwide service to its
customers, including rental companies, truck dealers and companies that operate
fleets of delivery vehicles. Formed in 1952, Morgan is headquartered in
Morgantown, Pennsylvania, and was acquired in 1990.
Morgan's van bodies are manufactured and installed on truck chassis,
which are classified by hauling capacity or gross vehicular weight rating
("GVWR"). There are eight classes of GVWR. Morgan generally manufactures
products for Classes 3 through 7, those having a GVWR of between 10,001 pounds
(light-duty dry freight vans) and 33,000 pounds (medium-duty trucks). It
generally does not manufacture products for Classes 1 or 2 (pickup trucks) or
Class 8. The principal products offered by Morgan are the following:
Dry Freight Bodies (Classes 3-7). Dry freight bodies are typically
fabricated with pre-painted aluminum or fiberglass reinforced plywood ("FRP")
panels, aerodynamic front-end treatment, hardwood floors and various door
configurations to accommodate end-user loading and unloading requirements. These
products are used for diversified dry freight transportation and represent more
than one-half of Morgan's sales.
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Refrigerated Van Bodies (Classes 3-7). Refrigerated vans are equipped
with insulated aluminum or FRP bodies that accommodate controlled temperature
and refrigeration needs of end-users. These products are used primarily on
trucks that transport dairy products, frozen foods and meats.
Cutaway Van Bodies (Classes 3-5). Aluminum or FRP cutaway van bodies
(which differ from conventional vans generally by having different floor
configurations and shorter lengths) are installed only on cutaway chassis, which
are available with or without access to the cargo area from the cab. Cutaway
bodies are used primarily for local delivery of parcels, freight and
perishables.
Stake Bodies and Flatbeds. Morgan also manufactures stake bodies, which
are flatbeds with various configurations of removable sides. Stake bodies are
used for the movement of a variety of materials for the agricultural and
construction industries, among others.
Gem Top Pickup Truck Caps. Pickup truck caps are fabricated enclosures
that fit over the beds of pickup trucks, converting the beds into weatherproof
storage areas. Effective June 30, 1997, Morgan acquired the operations of Gem
Top from TAG. Gem Top services primarily commercial customers. For a more
detailed discussion of the truck accessories business see TAG below.
Beltrami Door Company. During the year ended December 31, 1999, Morgan
acquired the assets of the Beltrami Door Company, which manufactures overhead
doors for use on van bodies produced by Morgan and other truck body
manufacturers. Beltrami manufactures standard overhead doors constructed
primarily of laminated wood; however, it has developed a door manufactured from
composite material, which Morgan intends to introduce as part of its product
offering.
Some of the components of Morgan's products, such as certain patented
methods for making curtained doors for vehicle bodies, are proprietary. Morgan
also offers certain products manufactured by others, including those distributed
by Morgan's Advanced Handling Systems Division that facilitate the loading and
unloading of cargo. Morgan distributes spare parts through and offers limited
service programs at some of its own facilities and through its 98 authorized
distributors.
Customers and Sales. The truck body industry has two major categories of
customers: (1) customers operating their own fleets of vehicles or who lease
their vehicles to third parties (collectively, "fleet/leasing customers"); and
(2) truck dealers and distributors who sell vehicles to others (collectively,
"dealer/distributor customers").
Morgan's net sales constituted 59%, 54% and 53% of the Company's total
net sales in 1999, 1998 and 1997, respectively. Morgan's revenue is generated by
five sources: (1) sales to commercial divisions of leasing companies, companies
with fleets of delivery vehicles, truck dealers and distributors ("Commercial
Sales"); (2) sales to consumer rental companies ("Consumer Rental Sales"); (3)
parts; (4) service and (5) the Advanced Handling Systems Division.
Consumer Rental Sales are composed of sales to companies that maintain
large fleets of one-way and local moving vehicles available for rent to the
general public. Procurement contracts for Consumer Rental Sales are negotiated
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annually, usually in late summer to early fall and tend to be the most volatile
and price sensitive aspect of Morgan's business.
Morgan's two largest customers, Ryder Truck Leasing, Inc. and Penske
Truck Leasing, L.P., have, together, historically represented approximately
40-55% of Morgan's total net sales. Each has been a customer of Morgan for
approximately 20 years and management considers relations with each to be good.
Sales to these customers represented 31%, 26% and 24% of the Company's
consolidated net sales during the years 1999, 1998, and 1997, respectively.
Morgan sells products through its own sales force and through
independent distributors. Most of the distributors sell a wide variety of truck
related equipment to truck dealers and end-users.
Manufacturing and Supplies. Morgan operates manufacturing, body mounting
and service facilities in Pennsylvania, Wisconsin, Georgia, Texas and Arizona.
It also has sales, service and body mounting facilities in Florida and
California. Its Gem Top division is located in Oregon.
Generally, all van bodies manufactured by Morgan are produced to order.
The shipment of a unit is dependent upon receipt of the chassis supplied by the
customer and the customer's arrangements for delivery of completed units.
Revenue is recognized and the customer is billed upon final body assembly and
quality inspection. Because contracts for Consumer Rental Sales are entered into
in the summer or fall but production does not begin until the following January,
Morgan generally has a significant backlog of Consumer Rental Sales orders at
the end of each year that is processed through May of the following year. In
addition, Morgan typically maintains a significant backlog of Commercial Sales.
At December 31, 1999 and 1998, Morgan's total backlog was approximately $70.3
million and $83.9 million, respectively. All of the products under the orders
outstanding at December 31, 1999 are expected to be shipped during 2000.
Morgan maintains an inventory of raw materials necessary to build van
bodies according to customers' orders. Raw materials are acquired from a variety
of sources and Morgan has not experienced significant shortages of materials in
recent years. Fiberglass reinforced plywood panels, which are important
components of some of Morgan's products, are acquired principally from two
suppliers. The loss of either of those suppliers could disrupt Morgan's
operations until a replacement source could be located. Morgan's customers
purchase their truck chassis from major truck manufacturing companies. The
delivery of a chassis to Morgan is dependent upon truck manufacturers'
production schedules, which are beyond Morgan's control. Delays in chassis
deliveries can disrupt Morgan's operations and can increase its working capital
requirements.
Industry. Industry revenue and growth are dependent primarily on the
demand for delivery vehicles in the general freight, moving and storage, parcel
delivery and food distribution industries. Replacement of older vehicles in
fleets represents an important revenue source, with replacement cycles varying
from approximately four to six years, depending on vehicle types. During
economic downturns, replacement orders are often deferred or, in some cases,
older vehicles are retired without replacement.
Competition. The van body manufacturing industry is highly competitive.
Morgan competes with a limited number of large manufacturers and a large number
of smaller manufacturers. Some of Morgan's competitors operate from more than
one location. Certain competitors are publicly owned with substantial capital
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resources. Competitive factors in the industry include product quality, delivery
time, geographic proximity of manufacturing facilities to customers, warranty
terms, service and price.
TAG
TAG is primarily a manufacturing operation consisting of Leer, 20th
Century Fiberglass (Century) and Raider Industries Inc., (Raider). TAG also
operates Midwest Truck AfterMarket (MTA), which is a wholesale distribution
business and three retail stores, two of which are integral parts of certain
manufacturing facilities. During 1999, the Company completed the disposition of
the distribution business of TAG (TAG Distribution), which is, accordingly,
treated as discontinued in the Consolidated Financial Statements. See Note 12 to
the Consolidated Financial Statements of the Company.
TAG is the nation's largest manufacturer of pickup truck caps and
tonneau covers and its products are marketed under the brand names Leer, Raider,
LoRider and Century. Caps and tonneau covers are fabricated enclosures that fit
over the beds of pickup trucks, converting the beds into weatherproof storage
areas. TAG's seven manufacturing plants and network of over 600 independent
dealers provide a national network through which its products are marketed to
individuals, small businesses and fleet operators. TAG's net sales constituted
29% of the Company's total net sales during each of 1999, 1998 and 1997,
respectively. Formed in 1971, TAG is headquartered in Elkhart, Indiana and was
acquired in 1987.
Customer and Sales. Most end users of TAG's products (purchased from
dealers) are individuals. TAG's products are sold through its national network
of independent dealers. TAG also sells its products in Canada and Europe. In
1999, foreign sales (primarily in Canada) represented approximately 10% of TAG's
total sales or less than 3% of the Company's total net sales. During 1999, 1998
and 1997, TAG had intercompany sales of $4.6 million, $13.1 million and $13.8
million, respectively, to TAG Distribution.
Manufacturing and Supplies. TAG designs and manufactures caps and
tonneau covers in seven manufacturing facilities located in California, Indiana,
Pennsylvania and Saskatchewan, Canada. TAG maintains an inventory of raw
materials necessary to manufacture its products. Raw materials are obtained from
a variety of sources and TAG has not experienced significant shortages of
materials in recent years. TAG purchases a substantial majority of its windows
for caps from a single supplier. Although the loss of that supplier would
disrupt TAG's production activities until a replacement supplier could be
located, management does not believe that such loss would have a material
adverse effect on the Company. TAG's products are typically manufactured upon
receipt of an order by the dealer and, consequently, backlog at TAG represents
between one and two weeks production or approximately $3 million.
TAG has developed and recently began shipments of a tonneau cover
manufactured from a polymer based product produced by the B.F. Goodrich company
and marketed under the name Telene.
Industry. Sales of caps and tonneaus tend to correspond to the level of
new pickup truck sales. Cap sales are seasonal, with sales typically being
higher in the spring and fall than in the summer and winter.
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Competition. The cap and tonneau cover industry is highly competitive.
Competitive factors include product availability, quality and price.
EFP
EFP molds and markets expandable foam plastics used primarily by the
automotive, electronics, furniture and appliance industries as packaging, shock
absorbing and materials handling products. Management believes that EFP is the
nation's third largest producer and marketer of custom-shaped, molded expandable
plastics. Management believes that EFP's competitive strengths include its
ability to manufacture high quality products for competitive prices while
providing excellent service to its customers, including timely delivery of
products. EFP's net sales made up 8%, 10% and 10% of the Company's total net
sales during each of the last three years, respectively. Founded in 1954, EFP is
headquartered in Elkhart, Indiana and was acquired in 1985.
Products. EFP's products are manufactured from expandable polystyrene
("EPS"), expandable polypropylene ("EPP"), expanded polyethylene ("EPE"), a
copolymer of polyethylene and polystyrene ("Copolymer") and certain high heat
resistant resins ("Resins"). EPP, EPE, Copolymer and Resins are each tougher and
more resilient, or have higher temperature tolerances, than EPS. Products made
from expandable foams are lightweight and durable, capable of absorbing shocks
and impacts, provide thermal insulation and are chemically neutral.
EFP manufactures and markets the following products:
o Packaging and Shock Absorbing Products. EFP sells these products to
manufacturers who use them to package and ship a wide assortment of
industrial and consumer products, such as computers, television
sets, toys, furniture, appliances and cameras. Virtually all of
these products are custom-made to fit the shape of the particular
product or item for which EFP's product is being manufactured.
These products are manufactured from EPS and EPP, with EPP being
used for more fragile products. Sales of packaging and shock
absorbing products represent approximately 75% of EFP's total
sales.
o Material Handling Products. These products include reusable trays
or containers that are used for transporting components to or from
a customer's manufacturing facility. EFP also offers its
Thin-Wall(TM) products, which are used as parts positioning trays
for robotic or automatic product assembly such as camera
manufacturing. Material handling products generally are produced
from EPS, EPP or Copolymer.
o Components. EFP provides materials manufactured from EPP, which are
used as energy absorbing components of automobile bumpers. EFP also
manufacturers a line of its Styro-Cast(R) foam foundry patterns
used by foundries in the "lost foam" or evaporative casting metal
casting process. During 1996, EFP began the production of door
cores, with a molded-in metal frame, for use in the mobile home
manufacturing industry.
Customers and Sales. EFP's products are sold to the automotive,
electronics, furniture, appliance and marine industries, among others. EFP has a
reasonably diversified customer base.
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EFP utilizes an in-house sales force and engages independent
representatives to provide supplemental sales support in the marketing of EFP's
packaging and shock absorbing products. EFP also employs an engineering staff
that assists customers in the production, design and testing of products.
Because expanded foams are very bulky, freight costs impose geographical
limitations on sales of those products. Generally, EFP considers its target
market to be limited to a 300-mile radius surrounding each manufacturing
facility. In certain circumstances, however, EFP has shipped its products
greater distances.
Manufacturing and Supplies. EFP manufactures its products at facilities
located in Indiana, Wisconsin, Alabama, Tennessee and Texas. The Texas and
Tennessee facilities manufacture products primarily for Compaq Computer
Corporation and Toshiba Corporation, respectively, although EFP utilizes both
facilities to manufacture products for other customers as well. EFP's business
is typically not seasonal. At December 31, 1999 and 1998, EFP's backlog was $3.4
million and $2.9 million, respectively.
As is customary in the industry, EFP purchases its raw materials from a
variety of sources on a purchase order basis and not pursuant to long term
supply contracts. Raw material prices fluctuate and EFP historically has been
affected by price increases in the past but has not experienced significant
shortages of raw materials in recent years.
EFP is QS 9000 and ISO 9000 certified at its facility in Elkhart,
Indiana and is seeking certification at its other locations. QS 9000 and ISO
9000 are an internationally recognized certifications of production practices
and techniques employed in manufacturing processes. QS 9000 is a certification
generally related to the automotive industry.
Industry. Because most of EFP's products are manufactured for use by
other industries, economic conditions that affect those other industries will
generally affect EFP's operations. In particular, growth or a downturn in the
automotive, electronics, furniture or appliance industries generally would be
expected to have a corresponding effect on EFP's business, as those are the
principal industries served by its packaging and shock absorbing products. Sales
of EFP's products typically are not seasonal, other than a slight reduction in
shipments during the latter part of December and early January.
Competition. EFP competes with other molded, expandable plastic
producers and with manufacturers of alternative packaging and handling
materials, including paper, corrugated boxes and other foam products (such as
soft urethane). Many of these competitors, particularly the paper companies, are
large companies having greater financial resources than EFP. Certain other
expandable plastic manufacturers have multiple facilities. EFP also competes
with other companies in the foundry patterns market. Competitive factors include
price, quality and the timely delivery of products.
MIC Group
MIC Group is a manufacturer, caster and assembler of precision metal
parts used in the worldwide oil and gas, aerospace and general industries.
Formed in 1963, MIC Group is located in Brenham, Texas and was acquired in 1992.
MIC Group operates an electronic assembly and testing facility in Houston, which
operates under the name ElectroSpec. MIC Group's net sales made up less than 10%
of the Company's net sales, during each of the last three years.
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Products. MIC Group manufactures various precision metal parts and
electro-mechanical devices that are utilized primarily in a variety of oilfield
applications but also in the aerospace and other industries. Most of the
precision parts currently manufactured by MIC Group are utilized in connection
with the exploration for oil and gas. Parts produced by MIC Group are utilized
for complex functions, such as well bore logging, perforation and fracturing.
Its products are also applicable to many seismic and geophysical activities.
ElectroSpec assembles electronic printed circuit boards and
instrumentation packages for the same or similar applications. Electronic
assembly provides additional sales opportunities by providing turnkey
value-added assemblies to its customers, who incorporate machined parts and
electronics in the manufacture of their products.
Customers. MIC Group sells its products primarily to international
oilfield services and aerospace companies. MIC Group has one customer that
represented approximately 39%, 37% and 24% of its total net sales during 1999,
1998 and 1997, respectively. The customer has purchased products and services
from MIC Group for more than five years and management considers relations with
the customer to be good.
Manufacturing and Supplies. MIC Group manufactures its products in
Brenham, Texas. ElectroSpec is located in Houston, Texas. Management believes
that MIC Group's manufacturing capabilities are among the most sophisticated in
the industry. It performs a broad range of services including
computer-controlled precision machining and welding, electrostatic discharge
machining, electron beam welding, trepanning and gun drilling. MIC Group also
performs investment casting services. At December 31, 1999 and 1998, MIC's
backlog was $6.1 million and $5.4 million, respectively.
MIC Group is ISO 9002 certified. ISO 9002 is an internationally
recognized certification of production practices and techniques employed in
manufacturing processes.
Products are manufactured primarily from non-magnetic stainless steel,
alloy steels, nickel-based alloys, titanium, brass and beryllium copper.
Materials are obtained from a variety of sources and MIC Group has not
experienced significant shortages in materials in recent years.
Industry. Because a significant portion of MIC Group's products are
sold to large international oilfield service companies, MIC is not dependent
solely on the domestic oil and gas industry. Rather, demand for equipment and
services supplied by those oilfield service companies and, in turn, sales of
related parts manufactured by MIC Group and ElectroSpec, are directly related to
the level of worldwide oil and gas drilling activity.
Competition. MIC Group competes with other businesses engaged in the
machining, casting and manufacturing of parts and equipment utilized in the oil
and gas exploration industry, aerospace and general industry. Technological
know-how and production capacity are the primary competitive factors in MIC
Group's industry.
Trademarks and Patents
The Company owns rights to certain presentations of Leer's name (part
of TAG), which the Company believes is valuable insofar as management believes
that it is recognized as being a leading "brand name." The Company also owns
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rights to certain other trademarks and tradenames, including certain
presentations of Morgan's name. Although these and other trademarks and
tradenames used by the Company help customers differentiate Company product
lines from those of competitors, the Company believes that the trademarks or
tradenames themselves are less important to customers than the quality of the
products and services. The Company's subsidiaries, principally Morgan and EFP,
hold patents on certain products and components used in the manufacturing
processes.
Employees
At February 28, 2000, the Company had approximately 3,200
full-time employees. Personnel are unionized in: EFP's Decatur, Alabama facility
(covering approximately 65 persons, with a contract expiring in August 2000);
and TAG's Raider Industries facility in Canada (covering approximately 170
persons, with a contract expiring in November 2000). The Company believes that
relations with its employees are good.
Environmental Matters
The Company's operations are subject to numerous environmental statutes
and regulations, including laws and regulations affecting its products and
addressing materials used in manufacturing the Company's products. In addition,
certain of the Company's operations are subject to federal, state and local
environmental laws and regulations that impose limitations on the discharge of
pollutants into the air and water. The Company also generates non-hazardous
wastes. The Company has received occasional notices of noncompliance, from time
to time, with respect to its operations, which are typically resolved by
correcting the conditions and the payment of minor fines, none of which
individually or in the aggregate has had a material adverse effect on the
Company. However, the Company expects that the nature of its operations will
continue to make it subject to increasingly stringent environmental regulatory
standards. Although the Company believes it has made sufficient capital
expenditures to maintain compliance with existing laws and regulations, future
expenditures may be necessary, as compliance standards and technology change.
Unforeseen significant expenditures required to maintain such future compliance,
including unforeseen liabilities, could limit expansion, or otherwise, have a
material adverse effect on the Company's business and financial condition.
Since 1989, Morgan has been named as a potentially responsible party
("PRP") with respect to the 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, the Company currently believes that it's
proportionate share, if any, of the ultimate costs related to any necessary
investigation and remedial work at those sites will not have a material adverse
effect on the Company. To date, Morgan's expenditures related to those sites
have not been significant.
Since the 1980s and early 1990s, products manufactured from expandable
polystyrene, such as some of the products manufactured by EFP, have been
criticized as being allegedly harmful to the environment. Management believes
that more recent information suggests that expandable polystyrene is not as
harmful to the environment as reported earlier. In the future, negative
publicity relating to expandable polystyrene has had and could have an adverse
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effect on EFP's business, although this publicity has not had a material adverse
effect on EFP's results of operations in the past.
Item 2. Properties
The Company owns or leases the following manufacturing, office and
sales facilities as of February 25, 2000:
<TABLE>
<CAPTION>
Owned
Approximate or Lease
Location Principal Use Square Feet Leased Expiration
-------- ------------- ----------- ------ ----------
<S> <S> <C> <S> <C>
Morgan:
Ehrenberg, Arizona Manufacturing 125,000 Owned --
Atlanta, Georgia Parts & service 20,000 Leased 2004
Rydal, Georgia Manufacturing 85,000 Leased 2004
Clackamas, Oregon Manufacturing 82,000 Leased 2003
Ephrata, Pennsylvania Manufacturing 50,000 Owned --
Morgantown, Pennsylvania Manufacturing 62,900 Leased 2000
Morgantown, Pennsylvania Office & manufacturing 261,500 Owned --
Morgantown, Pennsylvania Office 12,000 Leased 2000
Morgantown, Pennsylvania Office/Warehouse 110,000 Leased 2009
Corsicana, Texas Manufacturing 60,000 Owned --
Janesville, Wisconsin Manufacturing 38,000 Leased 2000
Janesville, Wisconsin Manufacturing 60,000 Leased 2009
Nuevo Leon, Mexico Manufacturing 25,000 Owned --
Denver, Colorado Parts & service 15,000 Leased 2004
Tampa, Florida Parts & service 13,500 Owned --
Bemidji, Minnesota Manufacturing 10,000 Leased 2001
TAG:
Woodland, California Manufacturing 92,000 Leased 2001
Woodland, California Reaearch and design 10,000 Leased 2001
Elkhart, Indiana Office & research 17,500 Owned --
Elkhart, Indiana Manufacturing 139,000 Leased 2001
Milton, Pennsylvania Manufacturing/Retail 102,000 Leased 2001
Elkhart, Indiana Manufacturing 91,900 Owned --
Elkhart, Indiana Office & manufacturing 18,400 Leased 2000
Drinkwater, Saskatchewan, Canada Office & manufacturing 72,000 Owned --
Moose Jaw, Saskatchewan, Canada Manufacturing 87,000 Leased 2005
Tulsa, Oklahoma Warehouse 32,500 Leased 2002
Tyler, Texas Warehouse 22,000 Leased 2001
Clackamas, Oregon Retail 10,000 Leased 2003
Houston, Texas Retail 10,000 Leased 2002
Milton, Pennsylvania Retail 10,000 Leased 2005
EFP:
Decatur, Alabama Manufacturing 175,000 Leased 2002
Elkhart, Indiana Office & manufacturing 211,600 Owned --
Gordonsville, Tennessee Manufacturing 40,000 Leased 2001
Lebanon, Tennessee Warehouse 18,000 Leased 2002
Marlin, Texas Manufacturing 73,000 Leased 2001
Waukesha, Wisconsin Manufacturing 13,850 Leased 2000
MIC Group:
Brenham, Texas Office & manufacturing 75,500 Owned --
Houston, Texas Manufacturing 9,600 Leased 2000
</TABLE>
The Company utilizes principally all of its facilities and believes
that its facilities are adequate for its current needs and are capable of being
utilized at higher capacities to supply increased demand, if necessary.
Item 3. Legal Proceedings
The Company is involved in various lawsuits, which arise in the
ordinary course of business. In the opinion of management, the ultimate outcome
of these lawsuits will not have a material adverse effect on the Company.
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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
judgment dismissing the suit effective April 20, 1999. The utility company has
appealed the motion for summary judgment and the Company will continue to
aggressively defend the suit. Management believes that the ultimate resolution
of this matter will not have a material adverse effect on the Company.
Item 4. Submission of Matters to a Vote of Security Holders
No matters were submitted to a vote of security holders during the
fourth quarter of the fiscal year covered by this report.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
The registrant's common equity is privately held and not publicly
traded. As of February 25, 2000, one individual owned all of the registrant's
issued and outstanding common equity. During the last three fiscal years, JBPCO
paid no cash dividends.
The Senior Note Indenture, dated as of May 23, 1994 and the Loan and
Security Agreement, dated as of February 25, 2000 with Congress Financial
Corporation, restricts the registrant's ability to pay dividends on its common
equity.
Item 6. Selected Financial Data
The historical financial data presented below, for the years ended
December 31, 1999, 1998, 1997, 1996 and 1995, are derived from the audited
Consolidated Financial Statements of the Company. The data presented below
should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations and the Consolidated Financial
Statements of the Company and notes thereto. The historical financial
information presented below has been restated to reflect the disposal of the
Lowy Group and the distribution operations of TAG, which have been classified as
discontinued in all periods presented. The financial information is not directly
comparable due to the acquisitions of Century and Raider in June 1995.
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<TABLE>
<CAPTION>
Year Ended December 31,
(Dollars in Millions, Except Per Share Amounts)
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating Data:
Net sales ............................................ $ 436.8 $ 375.4 $ 341.6 $ 314.9 $ 332.7
Cost of sales ........................................ 356.7 316.7 281.6 259.8 285.7
Selling, general and
administrative expense ............................ 56.0 50.0 49.5 45.5 44.5
Closed and excess facility costs ..................... -- 0.3 1.4 1.0 --
Other (income) expense ............................... -- (0.1) (0.1) 0.1 (1.0)
------ ------- ------ ------ ------
Operating income .................................... 24.1 8.5 9.2 8.5 3.5
Interest expense .................................... 13.8 15.7 15.8 14.5 14.2
Income tax provision (benefit) ...................... 1.5 0.7 1.0 (1.0) (2.9)
------ ------- ------ ------ ------
Income (loss) before extraordinary
loss and discontinued operations ................. 8.8 (7.9) (7.6) (5.0) (7.8)
Income (loss) from discontinued
operations ....................................... -- (4.2) -- (1.1) (0.7)
Extraordinary gain (loss) ........................... 0.2 -- -- (0.3) --
------ ------- ------ ------ ------
Net income (loss) ................................... $ 9.0 $ (12.1) $ (7.6) $ (6.4) $ (8.5)
====== ======== ======= ======= ======
Earnings (loss) per share ........................... $ 2,942 $ (3,972) $ (2,467) $ (2,092) $ (2,779)
======= ======== ======== ======= =======
Cash dividends per share ............................ $ -- $ -- $ -- $ -- $ --
======= ======== ======== ======= =======
Balance Sheet Data
(at period end):
Working capital ...................................... $ 19.0 $ 14.7 $ 1.9 $ 1.4 $ 7.1
Total assets ......................................... 136.7 137.8 165.9 162.9 169.0
Total long-term obligations .......................... 88.7 104.5 105.8 103.7 105.6
Stockholder's equity (deficit) ....................... $ (8.0) $ (17.2) $ (4.7) $ 3.0 $ 9.5
Cash Flow Data:
Net cash provided by (used in)
operating activities .......................... $ 12.9 $ 11.7 $ (2.5) $ 10.7 $ (8.2)
Capital expenditures ............................. (8.2) (6.2) (7.3) (8.1) (11.9)
Net cash provided by (used in)
investing activities ......................... 4.6 10.3 (6.4) (7.5) (19.0)
Net cash provided by (used in)
financing activities ......................... (18.8) (23.1) (9.5) (2.3) 19.8
Depreciation and amortization (a)................. 10.4 10.6 11.6 11.2 10.5
Other Data:
EBITDA (b)........................................ $ 34.2 $ 18.0 $ 20.3 $ 17.6 $ 10.9
Consolidated EBITDA
Coverage Ratio (c)......................... 2.5 1.2 1.3 1.2 0.8
</TABLE>
(a) Depreciation and amortization excludes amortization of debt issuance
cost of $0.7 million, $0.9 million, $0.8 million, $0.7 million and $0.7
million in 1999, 1998, 1997, 1996 and 1995, respectively.
12
<PAGE>
(b) "EBITDA" is net income from continuing operations increased by the sum
of interest expense, income taxes, depreciation and amortization and
other non-cash items as defined in the Indenture pertaining to the
Senior Notes. EBITDA is not included herein as operating data and
should not be construed as an alternative to operating income
(determined in accordance with generally accepted accounting
principles) as an indicator of the Company's operating performance.
The Company has included EBITDA because it is relevant for determining
compliance under the Indenture and because the Company understands
that it is one measure used by certain investors to analyze the
Company's operating cash flow and historical ability to service its
indebtedness.
(c) "Consolidated EBITDA Coverage Ratio" is the ratio of EBITDA of JBPCO
and its subsidiaries that guarantee the Notes, to interest expense that
is used in the Indenture to limit the amount of indebtedness that the
Company may incur. Certain of the Company's subsidiaries are not
guarantors of the Notes, see Note 7 of Notes to Consolidated Financial
Statements.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion of the Company's financial condition and
results of operations should be read in conjunction with the Consolidated
Financial Statements of the Company and the notes thereto.
Basis of Financial Statements
During 1999, the Company completed the disposal of the operations of
Lowy Group and the distribution operations of TAG. Accordingly, the operations
of Lowy and the distribution operations of TAG have been classified as
discontinued operations in the Consolidated Financial Statements for all periods
presented.
The Company committed to the plan to dispose of its distribution
operations during 1998 and as a result, recorded a loss from discontinued
operations of $4.2 million, net of taxes in 1998. The components of this net
loss are discussed further under the captions "Discontinued Operations - TAG
Distribution" and "Discontinued Operations - Lowy Group" and in Note 12 to the
Consolidated Financial Statements.
Overview
The Company operates in various industries and considers each of its
main operating subsidiaries a separate business segment. The businesses are
dependent on various factors reflecting general economic conditions including
corporate profitability, consumer spending patterns, sales of truck chassis and
new pickup trucks and the level of oil and gas exploration activity. Net sales
at Morgan and TAG increased 43% and 27%, respectively over the three-year period
ended December 31, 1999, as each segment experienced increased demand for its
products. EFP experienced a 9% increase in sales over the three-year period
despite a 5% decline in sales during 1999 compared to 1998. The MIC Group
business segment experienced a significant decline in activity during 1999 as a
result of the decline in the level of world-wide oil and gas exploration
activity.
13
<PAGE>
The following table represents the net sales, operating income and
operating margins for each business segment and on a consolidated basis.
Years Ended December 31,
1999 1998 1997
---- ---- ----
(Dollars in Millions)
Net Sales:
Morgan ............................... $ 258.9 $201.1 $ 181.7
TAG .................................. 126.1 110.3 98.8
EFP .................................. 36.1 38.0 33.0
MIC Group ............................ 16.7 26.9 28.6
Intersegment Elimination ............. (1.0) (0.9) (0.5)
------ ------ ------
Consolidated ......................... $ 436.8 $ 375.4 $ 341.6
====== ====== ======
Operating Income (Loss):
Morgan ........................... $ 21.3 $ 2.8 $ 8.5
TAG .............................. 4.5 3.0 (4.3)
EFP .............................. 3.3 4.0 3.0
MIC Group ........................ (0.5) 1.5 4.7
JBPCO ............................ (4.5) (2.8) (2.7)
----- ---- ----
Consolidated ..................... $ 24.1 $ 8.5 $ 9.2
===== ==== ====
Operating Margins:
Morgan .......................... 8% 1% 5%
TAG ............................. 4% 3% (4)%
EFP ............................. 9% 11% 9%
MIC Group ....................... (3)% 6% 16%
Consolidated .................... 6% 2% 3%
Net sales include $4.6 million, $13.2 million and $13.8 million in
1999, 1998 and 1997, respectively, from intercompany sales to the distribution
operations of TAG, which have been disposed of and thus classified as
discontinued operations. As a result, operating income includes approximately
$1.0 million, $2.9 million and $3.0 million, respectively, related to profits on
these sales. Since the operating results of the distribution operations of TAG
are classified as discontinued, the intercompany sales do not eliminate on a
line item basis in the accompanying consolidated statement of operations.
However, on a consolidated basis, such intercompany transactions are eliminated
in the accompanying Consolidated Statement of Operations for each period
presented.
During 1998, MIC Group closed a facility and incurred charges of $0.3
million, which was included in operating income for the period. TAG
Manufacturing operating income included $0.8 million of charges during the year
ended December 31, 1997, associated with the closure or write-down in carrying
value of certain excess facilities. During 1997, Morgan wrote down the carrying
value of its facility in Mexico by $0.5 million.
14
<PAGE>
Results of Continuing Operations
Consolidated Operating Results from Continuing Operations
Comparison of 1999 to 1998
Net sales increased $61.4 million or 16% to $436.8 million for the
year ended December 31, 1999 compared to $375.4 million during 1998. The
increase was due primarily to Morgan whose sales increased 29% or $57.8 million.
Unit shipments at Morgan increased 24% to 32,953 units, which include a 32%
increase in commercial product shipments. Morgan's backlog at December 31, 1999
was $70.3 million compared to $83.9 million at December 31, 1998. TAG sales
increased $15.8 million or 14% to $126.1 million due to improved product mix and
a 10% increase in unit shipments. EFP sales decreased $1.9 million or 5% mainly
due to a decrease in the Styrocast and tooling products businesses of $3.3
million offset by increased shipments of packaging products principally to the
electronics industry of $2.2 million. Backlog at EFP increased 17% to $3.4
million at December 31, 1999 compared to December 31, 1998. Sales at MIC Group
declined $10.2 million or 38% due to the depressed level of spending by MIC's
customers in the oilfield services business during most of 1999. MIC's backlog
at December 31, 1999 increased 14% to $6.1 million compared to $5.4 million at
December 31, 1998, and increased 244% compared to June 30, 1999.
Cost of sales rose 13% to $356.7 million for the year ended December
31, 1999 compared to $316.7 million, during the 1998 period. Gross profit
increased 36% to $80.1 million (18% of net sales) during 1999 compared to $58.8
million (16% of net sales) for 1998. The gross profit at Morgan increased $20.6
million or 103% to $40.6 million or 16% of sales compared to 10% of sales during
1998. The increase at Morgan is due mainly to increased production volume and
the resulting improved overhead absorption. TAG gross profit for the year ended
December 31, 1999, increased $4.7 million or 19% primarily due to higher sales
volume. Although partially reduced by increased material costs, TAG gross profit
as a percent of sales remained 23% during the 1999 and 1998 periods. Gross
profit declined $1.1 million or 13% at EFP and $2.9 million or 45% at MIC during
the year ended December 31, 1999 compared to 1998 on lower sales at both
subsidiaries.
Selling, general and administrative expenses increased $6.0 million or
12% to $56.0 million (13% of net sales) for the year ended December 31, 1999
compared to $50.1 million (13% of net sales) during 1998. An improvement in
expenses as a percentage of sales at Morgan whose expenses increased 12% despite
a 29% increase in sales was offset by increased general and administrative
expenses at TAG and increased selling expense at MIC Group.
Operating income increased 183% or $15.6 million to $24.1 million (6%
of net sales) for the year ended December 31, 1999 compared to $8.5 million (2%
of net sales) in 1998. Morgan's operating income increased $18.5 million for the
period. TAG's operating income increased $1.5 million while the operating income
at EFP and MIC decreased $0.7 million and $2.0 million, respectively.
Interest expense was $13.8 million for the year ended December 31,
1999, 12% less than the $15.7 million during the same period in 1998. Average
borrowings under the revolving credit facility decreased by approximately 46% or
$10.9 million during the year ended December 31, 1999 thereby reducing interest
by approximately $1.1 million compared to 1998. The Company purchased $15.0
15
<PAGE>
million of its Senior Notes during the year ended December 31, 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 $520,000 during the 1999 period.
The income tax expense of $1.5 million in 1999 is primarily state
income tax and 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 recorded an extraordinary gain of $198,000, net of deferred
loan costs of $332,000, related to the purchase of $15.0 million of its Senior
Notes. The Company purchased the Senior Notes as an investment and the decision
to hold or to sell them will depend upon future market conditions.
Comparison of 1998 to 1997
Net sales increased 10% to $375.4 million in 1998 compared to $341.6
million in 1997. The increase was due primarily to Morgan, whose sales increased
11% or $19.4 million. Shipments of van body units increased 13% to 26,600 units
in 1998 compared to 23,600 units during 1997. Backlog at December 31, 1998 was
$83.4 million compared to $55.2 million at the end of 1997. The increase in
backlog reflected continued demand for Morgan products. Approximately $13.2
million of backlog at December 31, 1998 was a result of delayed chassis
deliveries. EFP and TAG recorded sales increases of 15% or $5.0 million and 12%
or $11.4 million, respectively. TAG net sales of $110.3 million in 1998 and
$98.9 million in 1997 included intercompany sales to TAG Distribution of $13.2
million in 1998 compared to $13.8 million in 1997. TAG's net third party sales
increased 6% to $86.7 million during 1998 compared to $81.7 million during 1997
as shipments of caps and tonneaus increased to 175,000 units during 1998
compared to 162,000 units in 1997. The increase in units shipped was primarily
due to improved quality, more favorable product mix and product pricing. Sales
decreased 6% or $1.7 million at MIC Group. The decrease was attributable to
reduced demand for MIC's products and services caused by lower levels of
activity in the energy exploration and production business.
Cost of sales increased 12% to $316.7 million in 1998 from $281.6
million in 1997. Gross profits decreased 2% to $58.7 million (16% of net sales)
in 1998 compared to $60.1 million (18% of net sales) in 1997. The decrease in
gross profits was due primarily to Morgan and MIC Group, whose gross profits
decreased 22% or $5.6 million and 34% or $2.7 million, respectively, partially
offset by increases at EFP of 22% or $1.5 million and at TAG of 28% or $5.5
million. The decrease in gross profits at Morgan was the result of increased
material and overhead costs and less favorable pricing on certain products
during 1998. The increase at TAG was due to reduced warranty and material costs
as a result of improved quality at the Leer operations.
Selling, general and administrative expense increased 1% to $50.1
million (13% of net sales) in 1998 compared to $49.6 million (15% of net sales)
in 1997. The decrease as a percent of sales was due primarily to a 4% or $1.0
million decrease at TAG as a result of a decrease in corporate overhead costs.
16
<PAGE>
Operating income decreased 8% to $8.5 million in 1998 compared to $9.2
million in 1997. TAG's operating income increased $7.3 million to $3.0 million
in 1998 compared to an operating loss of $4.3 million in 1997 and EFP's
operating income increased 31% or $1.0 million. Operating income decreased 67%
or $5.8 million at Morgan and 67% or $3.2 million at MIC Group.
Interest expense decreased 1% to $15.7 million in 1998 compared to
$15.8 million in 1997 and weighted average total debt decreased approximately 5%
to $132.0 million during 1998 compared to $139.0 million during 1997.
The Company recorded an income tax expense of $0.7 million for the year
ended December 31, 1998 compared to a $1.0 million expense during 1997. The
income tax expense of $0.7 million in 1998 represents state and foreign income
taxes payable. The Company's income tax provision differs from the federal
statutory rate principally due to a $3.6 million increase in the deferred tax
valuation allowance relating to net operating losses that may not be realizable.
See Note 9 of Notes to the Consolidated Financial Statements.
Discontinued Operations - TAG Distribution
As a result of continued losses from TAG Distribution, on April 2,
1998, management committed to a formal plan to dispose of TAG Distribution.
Accordingly, the results of operations of TAG Distribution have been classified
as discontinued operations in the accompanying financial statements for all
periods presented. The plan of disposal was completed during 1999. In addition,
the net assets and liabilities of TAG Distribution, which were disposed of, have
been segregated within the 1998 consolidated balance sheet as "net assets of
discontinued operations."
As a result of this plan, in 1998 the Company recorded a loss on TAG
Distribution's discontinued operations of $12.8 million, net of applicable
taxes. This net loss was composed of $1.3 million related to losses on
operations prior to April 2, 1998 and $11.5 million related to the estimated
loss on disposal, each net of applicable taxes. The loss on disposal included
losses of $4.9 million for operations from April 2, 1998 through the disposal
date and $6.6 million for the excess of the carrying value of assets over
estimated net realized value, each net of applicable taxes. Total proceeds of
$4.6 million realized in 1999 from the disposal of the business and assets were
used to repay borrowings under the Revolving Loan Agreement.
Discontinued Operations - Lowy Group
The operations of Lowy Group have been classified as discontinued in
the Consolidated Financial Statements for all periods presented. The net assets
and liabilities of Lowy Group have been segregated within the 1998 consolidated
balance sheet as "net assets of discontinued operations." The Company completed
the disposal of Lowy Group which comprised its floor covering segment during
1999 with the sale of the operations and principally all of the assets of Lowy
Distribution. The Company realized net proceeds of approximately $7.8 million
and recorded a gain of approximately $57,000 during the year ended December 31,
1999. The proceeds were used to pay down borrowings under the Revolving Loan
Agreement. The sale of the Blue Ridge/Courier division of Lowy was completed and
effective on August 31, 1998, resulting in a gain of $6.5 million, proceeds of
$15.8 million were used to pay down borrowings during 1998.
17
<PAGE>
Liquidity and Capital Resources
During 1999, net cash provided by operations was $12.9 million compared
to $11.7 million during 1998. Overall changes in working capital used cash of
$7.0 million during 1999 primarily due to an increase in working capital at
Morgan of $6.9 million in response to a 29% or $57.8 million increase in sales.
The cash provided by operations and proceeds from the sale of discontinued
operations of $13.2 million were used to repurchase $15.0 million of the
Company's Senior Notes, to pay down revolver borrowings by $3.1 million and to
fund capital expenditures of $8.2 million.
At February 11, 2000, the Company had unused available borrowing
capacity of $23.7 million under the terms of the Revolving Loan Agreement. The
Company's ability to borrow under its Revolving Loan Agreement depends on the
amount of eligible collateral, which is dependent on certain advance rates
applied to the value of accounts receivables and inventory. At December 31,
1999, the Company had total borrowing capacity of $42.4 million, of which, $2.9
million was used to secure letters of credit and foreign exchange
accommodations. At December 31, 1999, the Company had unused available borrowing
capacity of approximately $25.0 million.
On February 25, 2000, the Revolving Loan Agreement was renewed for an
additional three years to March 31, 2003 effective March 1, 2000.
The Company's Welshman Industries subsidiary (part of TAG), which is a
non-guarantor subsidiary under the terms of the bond indenture, concurrently
with the acquisition of substantially all the assets of MTA, entered into a
three-year revolving credit agreement with the Company's revolving credit
lender. The agreement provided for borrowings of up to the lesser of $5.0
million or an amount based on advance rates applied to the total amounts of
eligible accounts receivable and inventories of Welshman. At December 31, 1999,
Welshman had total borrowings of approximately $0.8 million under the revolving
credit agreement.
As discussed in Notes 6 and 7 to the Consolidated Financial Statements,
the Company's Revolving Loan Agreement and Senior Notes Indenture restrict the
ability of the Company to dispose of assets, incur debt, pay dividends and
restrict certain corporate activities.
The Company believes that it has adequate resources to meet its working
capital and capital expenditure requirements consistent with past trends and
practices. The Company also believes that its cash balances and the borrowing
availability under the Revolving Credit Agreement will satisfy the Company's
cash requirements for the foreseeable future, given its anticipated additional
capital expenditure and working capital requirements and its known obligations.
Management Changes
During 1999, the Company appointed Peter K. Hunt President and Chief
Operating Officer. Previously Mr. Hunt served as president of Morgan. The
Company elected Kurt Kamm to its Board of Directors.
18
<PAGE>
Year 2000
The Year 2000 (Y2K) issue was 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 have resulted in system failure or miscalculations resulting in
disruptions to operations.
In prior years, the Company discussed the nature and progress of its
plans to become Year 2000 ready. In late 1999, the company completed its
remediation and testing of systems. As a result of those planning and
implementation efforts, the Company experienced no significant disruptions in
critical information technology and non-information technology systems and
believes those systems successfully responded to the Year 2000 date change. The
Company expensed approximately $1.1 million during 1999 in connection with
remediating its systems. The Company is not aware of any material problems
resulting from Year 2000 issues, either with its products, internal systems or
the products and services of third parties. The Company will continue to monitor
its computer applications and those of its suppliers and vendors through the
year 2000 to ensure that any latent Year 2000 matters that may arise are
addressed promptly.
Other Matters
The Company is significantly leveraged and had an $8.2 million
stockholder's deficit at December 31, 1999 compared to $17.2 million at December
31, 1998. Through its floating rate debt, the Company is subject to interest
rate fluctuations. The Company operates in cyclical businesses and the markets
for its products are highly competitive. In addition, the Company places
significant reliance on a relatively small number of customers, with two
customers accounting for 31% of 1999 consolidated net sales. The combination of
these factors, which are outside the Company's control, cause it to be subject
to changes in economic trends and new business developments.
The Company had net operating loss carryforwards of approximately $25.9
million for U.S. federal income tax purposes at December 31, 1999, which, if not
utilized, will begin to expire in 2004. The Company had a valuation allowance of
$2.2 million and $5.0 million as of December 31, 1999 and 1998, respectively,
against the net operating loss carryforwards. During 1999, the Company realized
tax benefits of $2.9 million from utilizing net operating loss carryforwards for
which deferred tax valuation allowances had been previously established. The
Company's estimate of projected taxable income for 2000 indicates that the
valuation allowance will be eliminated in 2000, however, the Company's
cumulative pretax losses over the prior three years limits its ability to reduce
the valuation allowance at December 31, 1999 based on estimates of future
taxable income. The Company has considered prudent and feasible tax planning
strategies in assessing the need for the valuation allowance and has assumed
approximately $7.5 million of benefits attributable to such tax planning
strategies. In the event the Company were to determine, in the future, that it
would not be able to utilize its deferred tax asset, an adjustment to the
deferred tax asset would be charged to income in the period the determination
was made.
Inflation historically has not materially affected the Company's
business, although raw materials and general operating expenses, such as
salaries and employee benefits, are subject to normal inflationary pressures.
19
<PAGE>
The Company believes that, generally, it has been able to increase its selling
prices to offset increases in costs due to inflation.
Since 1989, Morgan has been named as a potentially responsible party
("PRP") with respect to the generation of hazardous materials alleged to have
been handled or disposed of at two Federal Superfund sites in Pennsylvania and
one in Kansas. Although a precise estimate of liability cannot currently be made
with respect to these sites based upon information known to Morgan, the Company
currently believes that it's proportionate share, if any, of the ultimate costs
related to any necessary investigation and remedial work at those sites will not
have a material adverse effect on the Company. To date, the Company's
expenditures related to those sites have not been significant.
Certain of the Company's operations utilize paints and solvents in
their businesses. Also, raw materials used by EFP contain pentane, which is a
volatile organic compound subject to regulation under the Clean Air Act.
Although the Company believes that it has made sufficient capital expenditures
to maintain compliance with existing laws and regulations, future expenditures
may be necessary if and when compliance standards and technology change.
Although all of the Subsidiaries have reviewed the benefits of the
adoption of ISO 9000 or QS 9000, internationally recognized certifications
regarding production practices and techniques employed in manufacturing
processes, Morgan at its largest plant and headquarters in Morgantown,
Pennsylvania, MIC Group and EFP at its facilities in Indiana, have obtained
certification. The implementation of this standard is in recognition of the
international nature of a number of MIC Group's customers as well as being
reflective of the high precision nature of the services of both companies. The
Raider division of TAG has plans to implement the standard and EFP, at its other
locations, within the next two years. The Company believes that, except for
Morgan, MIC Group and EFP, none of the customers of the Company have requested
or expect the adoption by the Company of ISO 9000 or QS 9000.
The Company pays fees to a corporation, owned by Mr. Poindexter, for,
among other things, services provided by Messrs. Poindexter and Magee. The
Company charges the Subsidiaries for their use of funds and for stewardship
services provided to them by the Company.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
The Company is subject to certain market risks, including interest rate
risk and foreign currency risk. The adverse effects of potential changes in
these market risks are discussed below. The sensitivity analyses presented do
not consider the effects that such adverse changes may have on overall economic
activity, nor do they consider additional actions management may take to
mitigate the Company's exposure to such changes. Actual results may differ. See
the Notes to the Consolidated Financial Statements for a description of the
Company's accounting policies and other information related to these financial
instruments.
Interest Rates
Variable-Rate Debt. As of December 31, 1999, the Company had
approximately $15.3 million outstanding under its asset-based, revolving credit
facilities. The interest rates on the revolving credit facilities are based upon
a spread above either the Prime Interest Rate or London Interbank Overnight Rate
(LIBOR), which rates that are used are determined at the Company's option. The
20
<PAGE>
amount outstanding under this revolving credit facility will fluctuate
throughout the year based upon working capital requirements. Based upon the
$15.3 million outstanding under the revolving credit facilities at December 31,
1999, a 1.0% change in the interest rate (from the December 31, 1999 rate) would
have caused a change in interest expense of approximately $0.2 million on an
annual basis. The Company's objective in maintaining these variable rate
borrowings is the flexibility obtained regarding early repayment without
penalties and lower overall cost as compared with fixed-rate borrowings.
Fixed-Rate Debt. As of December 31, 1999, the Company had $85.0 million
of 12 1/2% Senior Notes, long-term debt, outstanding, with an estimated fair
value of approximately $81.6 million based upon their publicly traded value at
that date. Market risk, estimated as the potential increase in fair value
resulting from a hypothetical 1.0% decrease in interest rates, was approximately
$2.8 million as of December 31, 1999.
Foreign Currency
Raider Industries, a division of TAG, has two manufacturing plants in
Canada, which generated revenues of approximately $18.2 million during the year
ended December 31, 1999. The functional currency of Raider Industries is the
local currency (Canadian Dollar). Management does not currently employ risk
management techniques to manage this potential exposure to foreign currency
fluctuations, however, the majority of goods manufactured in Canada are imported
and sold to customers in the United States. Therefore, a weakening of the United
States Dollar in relation to the Canadian Dollar may have the effect of
decreasing Raider Industries' gross margin, assuming that the United States
sales price remains unchanged.
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) other risks and uncertainties
indicated from time to time in the Company's filings with the Securities and
Exchange Commission.
Item 8. Financial Statements and Supplementary Data
Index to Financial Statements:................................. Page
-----
Report of Independent Auditors................................. 22
Consolidated Balance Sheets as of December 31, 1999 and 1998... 23
Consolidated Statements of Operations for the years ended
December 31, 1999, 1998 and 1997...................... 24
Consolidated Statements of Cash Flows for the years ended
December 31, 1999, 1998 and 1997....................... 25
Consolidated Statements of Stockholder's Equity (Deficit) for the years
Ended December 31, 1999, 1998 and 1997................. 26
Notes to Consolidated Financial Statements...................... 27
21
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholder
J.B. Poindexter & Co., Inc.
We have audited the accompanying consolidated balance sheets of J.B. Poindexter
& Co., Inc. and subsidiaries as of December 31, 1999 and 1998 and the related
consolidated statements of operations, stockholder's deficit and cash flows for
each of the three years in the period ended December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of J.B.
Poindexter & Co., Inc. and subsidiaries at December 31, 1999 and 1998 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States.
ERNST & YOUNG LLP
Houston, Texas
February 25, 2000
22
<PAGE>
J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
ASSETS
December 31,
1999 1998
------ ------
Current assets
Restricted cash ....................................... $ 997 $ 2,194
Accounts receivable, net of allowance for doubtful
accounts of $1,121 and $731, respectively .. 33,114 26,849
Inventories, net ...................................... 37,774 32,514
Deferred income taxes ................................. 2,307 3,071
Prepaid expenses and other ............................ 829 580
-------- --------
Total current assets ......................... 75,021 65,208
Property, plant and equipment, net ......................... 37,332 38,326
Net assets of discontinued operations ...................... -- 9,049
Goodwill, net .............................................. 14,711 14,517
Deferred income taxes ...................................... 5,229 4,465
Other assets ............................................... 4,418 6,235
-------- --------
Total assets ............................................... $136,711 $137,800
======== ========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities
Current portion of long-term debt ................. $ 576 $ 1,228
Borrowings under the revolving credit facilities .. 15,286 18,433
Accounts payable .................................. 21,792 18,178
Accrued compensation and benefits ................. 9,388 4,674
Accrued income taxes .............................. 910 483
Other accrued liabilities ......................... 8,031 7,552
--------- ---------
Total current liabilities ................ 55,983 50,548
--------- ---------
Noncurrent liabilities
Long-term debt, less current portion .............. 85,404 100,977
Employee benefit obligations and other ............ 3,347 3,474
--------- ---------
Total noncurrent liabilities ............. 88,751 104,451
--------- ---------
Commitments and contingencies
Stockholder's deficit
Common stock and paid-in capital .................. 16,486 16,486
Cumulative other elements of comprehensive income . (316) (491)
Accumulated deficit ............................... (24,193) (33,194)
--------- ---------
Total stockholder's deficit ............................ (8,023) (17,199)
--------- ---------
Total liabilities and stockholder's deficit ............ $ 136,711 $ 137,800
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
23
<PAGE>
J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands except per share amounts)
Year Ended December 31,
1999 1998 1997
---- ---- ----
Net sales ................................... $ 436,787 $ 375,405 $ 341,632
Cost of sales ............................... 356,707 316,657 281,579
--------- --------- ---------
Gross profit ................................ 80,080 58,748 60,053
Selling, general and administrative expense . 56,025 50,054 49,550
Closed and excess facility costs ............ -- 335 1,364
Other income, net ........................... -- (136) (83)
--------- --------- ---------
Operating income ............................ 24,055 8,495 9,222
Interest expense ............................ 13,822 15,695 15,827
--------- --------- --------
Income (loss) from continuing operations before
income taxes and extraordinary gain .... 10,233 (7,200) (6,605)
Income tax provision ........................ 1,487 744 947
--------- --------- ---------
Income (loss) from continuing operations before
extraordinary gain ...................... 8,746 (7,944) (7,552)
Income (loss) from discontinued operations,
net of applicable taxes ............. 57 (4,209) 6
Extraordinary gain on purchase of senior notes,
net of income tax expense of $0 .... 198 -- --
--------- --------- ---------
Net income (loss) ........................... $ 9,001 $ (12,153) $ (7,546)
========= ========= =========
Basic and diluted income (loss) per share:
Income (loss) from continuing operations before
extraordinary gain ....................... $ 2,859 $(2,596) $(2,467)
Income (loss) from discontinued operations,
net of applicable taxes .................. 19 (1,376) --
Extraordinary gain on purchase of senior
notes, net of applicable taxes ........... 64 -- --
------- ------- -------
Net income (loss) ............................. $ 2,942 $(3,972) $(2,467)
======= ======= =======
Weighted average shares outstanding ........... 3,059 3,059 3,059
======= ======= =======
The accompanying notes are an integral part of these consolidated financial
statements.
24
<PAGE>
J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
Year Ended December 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net income (loss) ................................................... $ 9,001 $(12,153) $ (7,546)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization ..................................... 11,080 11,535 12,382
Provision for write-down of assets of
discontinued operations ...................................... -- 5,505 --
(Gain) loss on sale of discontinued operations .................... (57) (6,529) --
Extraordinary gain on purchase of senior notes,
net of tax .................................................... (198) -- --
Closed and excess facility costs .................................. -- 47 1,834
(Gain) loss on sale of facilities and equipment ................... 64 23 (2,545)
Deferred federal income tax provision ............................. -- -- 226
Other ............................................................. (38) (801) 347
Increase (decrease) in assets and liabilities net
of the effect of acquisitions:
Accounts receivable.............................................. (5,991) 2,093 (4,903)
Inventories...................................................... (3,810) 1,206 (1,077)
Prepaid expenses and other....................................... (97) - 485
Accounts payable................................................. 3,823 7,765 (151)
Accrued income taxes............................................. 247 297 (378)
Other accrued liabilities........................................ (1,125) 2,757 (1,189)
---------- --------- --------
Net cash provided by (used in)
operating activities................................. 12,899 11,745 (2,515)
---------- --------- --------
Cash flows provided by (used in) investing activities:
Purchase of businesses, net of cash acquired..................... (368) - (2,700)
Proceeds from disposition of business, facilities
and equipment................................................ 13,210 16,164 3,674
Acquisition of property, plant and equipment..................... (8,195) (6,226) (7,262)
Other ........................................................ 25 397 (145)
--------- ---------- --------
Net cash provided by (used in) investing activities.......... 4,672 10,335 (6,433)
--------- ---------- --------
Cash flows provided by (used in) financing activities:
Net (payments) proceeds of revolving lines of
credit and short term debt................................... (3,147) (21,758) 11,037
Payments of long-term debt and capital leases.................... (15,621) (1,319) (1,298)
Debt issuance costs.............................................. - - (207)
---------- --------- --------
Net cash provided (used in) financing activities............. (18,768) (23,077) 9,532
---------- --------- --------
Increase (decrease) in restricted cash.................. (1,197) (997) 584
Restricted cash beginning of period................................ 2,194 3,191 2,607
---------- -------- --------
Restricted cash end of period...................................... $ 997 $ 2,194 $ 3,191
========== ======== ========
Supplemental information:
Cash paid for income taxes....................................... $ 1,191 $ 633 $ 1,526
========= ======== ========
Cash paid for interest cost...................................... $ 13,241 $15,615 $15,029
========= ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
25
<PAGE>
J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S EQUITY (DEFICIT)
FOR THE YEARS ENDED DECEMBER 31, 1997,
1998 and 1999 (Dollars in thousands,
except share amounts)
<TABLE>
<CAPTION>
Cumulative
Shares of Common Retained Other Elements
Common Stock and Earnings of Comprehensive
Stock Paid-in Capital (Deficit) Income Total
<S> <C> <C> <C> <C> <C>
December 31, 1996........................ 3,059 $ 16,486 $(13,495) $ 39 $ 3,030
------- -------- --------- --------- ---------
Net loss ......................... - - (7,546) - (7,546)
Translation adjustment.............. - - - (225) (225)
------------
Comprehensive loss.................. - - - - (7,771)
----------- ------------- ------------- ---------- -----------
December 31, 1997........................ 3,059 16,486 (21,041) (186) (4,741)
-----------
Net loss ......................... - - (12,153) - (12,153)
Translation adjustment.............. - - - (305) (305)
------------
Comprehensive loss.................. - - - - (12,458)
---------- ------------- -------------- ---------- ----------
December 31, 1998........................ 3,059 16,486 (33,194) (491) (17,199)
Net income.......................... - - 9,001 - 9,001
Translation adjustment.............. - - - 175 175
-----------
Comprehensive income................ - - - - 9,176
---------- ------------- -------------- ---------- ----------
December 31, 1999........................ 3,059 $16,486 $(24,193) $ (316) $ (8,023)
====== ======= ========= ======= ==========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
26
<PAGE>
J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization & Business:
J.B. Poindexter & Co., Inc. ("JBPCO") and its subsidiaries (the
"Subsidiaries", and together with JBPCO, the "Company") operate primarily
manufacturing businesses primarily in North America. JBPCO and the Subsidiaries
are controlled by John B. Poindexter.
Morgan Trailer Manufacturing Co. ("Morgan") Acquired January 12, 1990,
Morgan manufactures truck bodies for dry freight and refrigerated vans
(excluding those made for pickup trucks and tractor-trailer trucks). Its
customers include rental companies, truck dealers and companies that operate
fleets of delivery vehicles.
Effective July 1,1997, Morgan acquired the assets of Gem Top
Manufacturing, Inc. ("Gem Top") from the Truck Accessories Group, Inc. Gem Top
manufactures and distributes light truck caps primarily to commercial customers
and was originally acquired on March 16, 1993. Since both companies are under
common control the acquisition was accounted for in a manner similar to a
pooling of interests.
Truck Accessories Group, Inc. ("TAG") Acquired on August 14, 1987, TAG is
a manufacturer of pickup truck "caps" and tonneau covers, which are fabricated
enclosures that fit over the open beds of pickup trucks, converting the beds
into weatherproof storage areas.
TAG includes Leer, which was acquired on August 14, 1987, 20th Century
Fiberglass (Century), which was acquired June 29, 1995, and Raider Industries
Inc. (Raider), a Saskatchewan, Canada corporation that acquired the cap
manufacturing businesses of Raider and LoRider on June 30, 1995. TAG also
includes Welshman Industries, Inc., which does business as Midwest Truck
AfterMarket (MTA) which was acquired October 31, 1997.
EFP Corporation ("EFP") Acquired on August 2, 1985, EFP molds and markets
expandable foam products which are used as casting patterns, packaging, shock
absorbing and materials handling products primarily by the automotive,
electronics, furniture, appliance and other industries. It also manufactures
products used as thermal insulators. On August 31, 1992, EFP acquired Astro
Pattern Corporation's ("Astro") assets. Astro's assets are used to produce
machine tooling and wood patterns primarily for the foundry industry.
MIC Group ("MIC Group") Acquired on June 19, 1992, MIC Group is a
manufacturer, investment caster and assembler of precision metal parts for use
in the worldwide oil and gas exploration, aerospace and general industries.
2. Summary of Significant Accounting Policies:
Principles of Consolidation. The consolidated financial statements have
been prepared in accordance with accounting principles generally accepted in the
United States. All intercompany accounts and transactions have been eliminated
in consolidation.
Restricted Cash. At December 31, 1999 and 1998, substantially all of the
Company's cash is restricted pursuant to the terms of the revolving credit
facility (See Note 6).
27
<PAGE>
Accounts Receivable. Accounts receivable are stated net of an allowance
for doubtful accounts of $1,121,000 and $731,000 at December 31, 1999 and 1998,
respectively. During the years ended December 31, 1999, 1998 and 1997, the
Company charged to expense, $487,000, $259,000, and $696,000, respectively, as a
provision for doubtful accounts and deducted from the allowance $97,000,
$954,000 and $694,000, respectively, for write-offs of bad debts.
Inventories. Inventories are stated at the lower of cost or market. Cost is
determined by the first-in, first-out (FIFO) method.
Property, Plant and Equipment. Property, plant and equipment, including
property under capital leases, are stated at cost. The cost of property under
capital leases represents the present value of the future minimum lease payments
at the inception of the lease. Depreciation and amortization is computed by
using the straight-line method over the estimated useful lives of the applicable
assets for financial reporting purposes and accelerated methods for income tax
purposes. The cost of maintenance and repairs is charged to operating expense as
incurred and the cost of major replacements and significant improvements is
capitalized.
Warranty. Morgan provides product warranties for periods up to seven
years. TAG provides a warranty period, exclusive to the original truck owner,
which is, in general but with exclusions, one year for parts, five years for
paint and lifetime for structure. A provision for warranty costs is included in
cost of sales when goods are sold based on historical experience.
Advertising Expense. The Company expenses advertising costs as incurred.
During the years ended December 31, 1999, 1998 and 1997, advertising expense was
approximately $2,031,000, $1,136,000 and $1,030,000, respectively.
Income Taxes. The Company accounts for income taxes under the provisions
of Statement of Financial Accounting Standards (SFAS) No. 109. Under SFAS No.
109, deferred tax assets and liabilities are computed based on the difference
between the financial statement and income tax bases of assets and liabilities
using the enacted tax rates. Deferred income tax expenses or credits are based
on the changes in the deferred tax asset or liability from period to period.
Revenue Recognition. Revenue is recognized upon shipment of the product
to customers, except for Morgan where revenue is recognized and the customer is
billed upon final body assembly and quality inspection. Adjustments to arrive at
net sales include allowances for discounts and returns.
Earnings per Share. Earnings per share are calculated by dividing net
income by the weighted average number of shares outstanding during the period.
No common stock equivalents exist.
Use of Estimates. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
28
<PAGE>
Recently Issued Accounting Standards. In June 1998, the Financial
Accounting Standards Board (FASB) issued SFAS No. 133, Accounting for Derivative
Instruments and Hedging Activities, which, as amended by SFAS No. 137,
Accounting for Derivative Instruments and Hedging Activities - Deferral of the
Effective Date of FASB Statement 133, is required to be adopted in fiscal years
beginning after June 15, 2000. Because of the Company's limited 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.
3. Segment Data:
The Company operates and manages its subsidiaries individually and
considers each subsidiary a separate business segment. The Company evaluates
performance and allocates resources based on the operating income of each
subsidiary. The accounting policies of the reportable business segments are the
same as those described in the summary of significant accounting policies. For a
description of each business segment, see Note 1. The following is a summary of
the business segment data for the years ended December 31, 1999, 1998 and 1997
(dollars in thousands):
Net Sales 1999 1998 1997
---------- ---------- -------
Morgan ............................ $ 258,887 $ 201,126 $ 181,652
TAG ............................... 126,143 110,306 98,921
EFP ............................... 36,080 37,986 32,954
MIC Group ......................... 16,685 26,858 28,562
Inter Segment Eliminations ........ (1,008) (871) (457)
--------- --------- ---------
Net Sales ......................... $436,787 $375,405 $341,632
========= ========= =========
Operating Income (Loss)
Morgan ......................... $ 21,269 $ 2,781 $ 8,531
TAG ............................ 4,474 2,982 (4,289)
EFP ............................ 3,321 3,971 3,031
MIC Group ...................... (544) 1,542 4,732
JBPCO (Corporate) .............. (4,465) (2,781) (2,783)
-------- -------- --------
Operating Income ............... $ 24,055 $ 8,495 $ 9,222
======== ======== ========
Depreciation and Amortization Expense
Morgan .......................... $ 2,589 $ 2,326 $ 2,424
TAG ............................. 4,958 4,504 4,372
EFP ............................. 1,683 1,684 1,853
MIC Group ....................... 858 944 1,230
JBPCO (Corporate) ............... 741 1,039 945
Discontinued operations ......... 251 1,038 1,558
------- ------ ------
Depreciation and Amortization Expense $ 11,080 $11,535 $12,382
======= ======= =======
29
<PAGE>
Total Assets 1999 1998 1997
------- ------- -------
Morgan ..................................... $70,711 $60,454 $65,205
TAG ........................................ 41,996 38,284 41,012
EFP ........................................ 13,604 16,233 14,253
MIC Group .................................. 8,493 9,078 10,500
JBPCO (Corporate) .......................... 1,907 4,702 7,271
Net assets of discontinued operations ...... -- 9,049 27,651
------- ------- -------
Identifiable Assets ........................ $136,711 $137,800 $165,892
======== ======== ========
Capital Expenditures
Morgan ..................................... $2,618 $2,646 $3,071
TAG ........................................ 3,403 1,824 2,670
EFP ........................................ 1,786 510 478
MIC Group .................................. 401 392 750
JBPCO (Corporate) .......................... 67 27 101
Discontinued operations .................... 10 827 192
------ ------ ------
Capital Expenditures ....................... $8,285 $6,226 $7,262
====== ====== ======
Net sales include $4,556,000, $13,149,000 and $13,816,000 in 1999, 1998
and 1997, respectively, from intercompany sales to the distribution operations
of TAG, which have been classified as discontinued operations. As a result,
operating income included approximately $989,000, $2,920,000 and $2,965,000,
respectively, related to profits on these sales. Since the TAG Distribution's
results of operations are classified as discontinued, the intercompany sales do
not eliminate on a line item basis in the accompanying consolidated statement of
operations. However, on a consolidated basis, such intercompany transactions are
eliminated in the accompanying consolidated statement of operations for each
period presented.
During 1998, MIC Group closed its Houston machining facility and incurred
charges of $335,000, which was included in operating income for the period, of
these charges $47,000 was non-cash expense related to the write-down of assets.
TAG's operating income included $805,000 of charges, during the year ended
December 31, 1997 associated with the closure or write-down in carrying value of
certain excess facilities. During 1997, Morgan wrote down the carrying value of
its facility in Mexico by $559,000, which was included in operating income as
part of Closed and Excess Facility Costs for the period.
Morgan has two customers (truck leasing and rental companies) that
accounted for, on a combined basis, approximately 53%, 49% and 49% of Morgan's
net sales during 1999, 1998 and 1997, respectively. EFP has three customers in
the electronics industry that accounted for approximately 26%, 37% and 28% of
EFP's net sales in 1999, 1998 and 1997, respectively. MIC Group has an industry
concentration, pertaining to international oil field service companies, with one
customer in 1999 and 1998 and three customers in 1997 that accounted for
approximately 51%, 57% and 53% of MIC Group's net sales, respectively.
The Company's operations are located principally in the United States.
However, Raider Industries, Inc., a subsidiary of TAG, is located in Canada and
30
<PAGE>
Acero-Tec, S.A. de C.V., a subsidiary of Morgan, is located in Mexico. The
following information pertains to these foreign subsidiaries as of December 31
(dollars in thousands):
1999 1998
---- ----
Long lived assets................ $5,087 $5,296
====== ======
Consolidated net sales include $12,521,000, $11,118,000 and $11,084,000
in 1999, 1998 and 1997, respectively, for sales to customers outside the United
States.
4. Inventories:
Consolidated net inventories consist of the following (dollars in thousands):
December 31,
1999 1998
---------- ---------
Raw Materials ............................ $24,990 $19,549
Work in Process .......................... 5,296 4,296
Finished Goods ........................... 7,488 8,669
------- -------
Total Inventory ......................... $37,774 $32,514
======= =======
Inventories are stated net of an allowance for shrinkage, excess and
obsolete inventory of $2,484,000 and $1,265,000 at December 31, 1999 and 1998,
respectively. During the years ended December 31, 1999, 1998 and 1997, the
Company charged to expense $1,926,000, $1,196,000 and $923,000, respectively, as
a provision for excess and obsolete inventory and deducted from the allowance
$707,000, $783,000 and $1,635,000, respectively, for write-offs of excess and
obsolete inventory.
5. Long Lived Assets
Property, plant and equipment, as of December 31, 1999 and 1998,
consisted of the following (dollars in thousands):
Range of Useful Lives 1999 1998
--------------------- ------- -----
Land .................................... -- $ 3,421 $ 3,598
Buildings and improvements .............. 5-25 19,326 19,330
Machinery and equipment ................. 3-10 56,092 51,576
Furniture and fixtures .................. 2-10 10,406 8,675
Transportation equipment ................ 2-10 3,185 3,337
Leasehold improvements .................. 3-10 3,634 4,066
Construction in progress ................ -- 2,409 2,541
------- -------
98,473 93,123
Accumulated depreciation and amortization (61,141) (54,797)
--------- --------
Property, plant and equipment, net....... $ 37,332 $ 38,326
========= ========
Depreciation expense was $8,625,000, $8,215,000 and $8,620,000 for the
years ended December 31, 1999, 1998 and 1997, respectively.
31
<PAGE>
Other assets and goodwill as of December 31, 1999 and 1998, consist of
the following (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998
------------------------------- ---------------------
Amortization Accumulated Net Book Accumulated Net Book
Period Amortization Value Amortization Value
Other Assets:
<S> <C> <C> <C> <C> <C>
Cash surrender value of
life insurance............ - $ - $ 1,969 $ - $ 2,146
Agreements not-to-compete 3-6 1,777 400 1,337 840
Debt issuance costs and other 3-10 3,476 2,049 3,075 3,249
--------- -------- ------- --------
Total......................... $ 5,253 $ 4,418 $4,412 $ 6,235
========= ======== ======= ========
Goodwill...................... 25-40 $ 8,967 $14,711 $7,937 $14,517
========= ======== ======= ========
</TABLE>
Goodwill is being amortized on a straight-line basis over forty years for
Morgan and twenty-five years for TAG.
In accordance with FASB Statement No. 121, Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed of, the Company
records impairment losses on long-lived assets used in operations when events
and circumstances indicate that the assets may be impaired and the undiscounted
cash flows estimated to be generated by those assets are less than the carrying
amounts of those assets.
6. Revolving Credit Agreements:
Amounts outstanding under the Revolving Credit Agreement as of December
31, 1999 and 1998 were (in thousands):
1999 1998
---- ----
Revolving loan due March 31, 2003
(Weighted average interest rate of 8.5%) ............. $14,485 $16,813
Revolving loan due October 2000
(Weighted average interest rate of 9.8%) ............. 801 1,620
------- -------
Total ................................................ $15,286 $18,433
======= =======
On June 28, 1996, the Company entered into a three-year senior secured
revolving loan agreement (Revolving Loan Agreement) providing for borrowing by
its Subsidiaries of up to $50,000,000, which was subsequently increased to
$55,000,000, effective May 13, 1998. Effective March 29, 1999, the lender
exercised its option to extend the renewal date of the agreement to June 2000.
On February 25, 2000, the Revolving Loan Agreement was renewed for an additional
three years on improved terms compared to the expiring agreement, effective
March 1, 2000.
The Revolving Loan Agreement allows the Company to borrow funds and
provides for the guarantee of letters of credit and certain foreign exchange
contracts, issued by the Company's banks, up to the lesser of $55,000,000 or an
amount based on advance rates applied to the total amounts of eligible accounts
receivable and inventories of the Subsidiaries. The advance rates vary by
subsidiary and range between 75% and 85% for receivables and between 40% and 60%
for inventory. The Revolving Loan Agreement provides for borrowing at variable
rates of interest, based on either LIBOR (London Interbank Offered Rate, 6.5% at
December 31, 1999) or U.S. prime rate (8.50% at December 31, 1999). Interest is
32
<PAGE>
payable monthly including a fee of one-half of one percent on a portion of
unused borrowing availability. The Subsidiaries are guarantors of this
indebtedness, and inventory and receivables are pledged under the Revolving Loan
Agreement. At December 31, 1999, the Company had total borrowings of
$14,485,000, and letters of credit of $2,910,000 outstanding pursuant to the
Revolving Loan Agreement. At December 31, 1999, the Company's unused available
borrowing under the Revolving Loan Agreement totaled approximately $24,986,000.
The Revolving Loan Agreement contains provisions allowing the lender to
accelerate debt repayment upon the occurrence of an event the lender determines
to represent a material adverse change. Accordingly, balances outstanding under
the Revolving Loan Agreement are classified as current liabilities. The
Revolving Loan Agreement also contains restrictive covenants, which, among other
things, restrict the ability of the Company to dispose of assets, incur debt and
restrict certain corporate activities. At December 31, 1999, the Company was in
compliance with all covenants of the Revolving Loan Agreement. At December 31,
1999, the Company was prohibited from paying dividends under the terms of the
Revolving Loan Agreement. Additionally, the Company's cash balance is restricted
under the terms of the Revolving Loan Agreement. During the year ended December
31, 1999, the Company obtained a waiver from the lender permitting the Company
to repurchase up to $15,000,000 of its 12 1/2% Senior notes (See Note 7),
subject to certain conditions.
Welshman Industries is a non-guarantor of the Company's Senior Notes
(See Note 7) and is not a Subsidiary Guarantor under the terms of the Company's
Revolving Loan Agreement. Concurrent with the acquisition of substantially all
the assets of MTA, Welshman Industries entered into a three-year revolving
credit agreement providing for borrowings of up to the lesser of $5,000,000 or
an amount based on advance rates applied to the total amounts of eligible
accounts receivable and inventories due October 27, 2000. At December 31, 1999,
Welshman Industries had total borrowings of $801,000, and unused available
borrowing capacity totaling approximately $378,000.
7. Long-term debt and Note Offering:
Long-term debt as of December 31, 1999 and 1998 consists of the
following (Dollars in the table in thousands):
1999 1998
JBPCO:
12 1/2% Senior Notes due 2004 .................. $ 85,000 $100,000
-------- --------
TAG:
Note payable, due November 1, 2002, quarterly
principal payments of $27,643 plus
interest at 9% .............................. 307 500
Note payable, due June 15, 2000, monthly principal
payments of $26,666 plus interest at U.S.
prime, (8.5% at December 31, 1999) .......... 160 480
Obligations under various non-compete agreements 507 929
Obligations under capital leases ............... 6 82
---- -----
980 1,991
---- -----
33
<PAGE>
EFP:
Various equipment notes, due in monthly or annual installments, interest from
8.12% to 10%, with maturities from May 1997 to
September 1999, each collateralized by specific
assets ................................... - 214
------ --------
Total long-term debt 85,980 102,205
Less current portion 576 1,228
-------- --------
Long-term debt, less current portion ............. $ 85,404 $100,977
======== ========
The Senior Notes Indenture contains restrictive covenants, which, among
other things, restrict the ability of the Company to dispose of assets, incur
debt and restrict certain corporate activities. At December 31, 1999, the
Company was in compliance with all covenants of the Senior Notes Indenture.
Under the terms of the Senior Notes Indenture, proceeds in excess of $2,000,000
from the sale of assets, including the stock of the Company's subsidiaries, are
required to be used to repay borrowings under the Revolving Loan Agreement.
Proceeds in excess of amounts outstanding under the Revolving Loan Agreement may
be re-invested in assets of the Company within one year of the asset sale. At
December 31, 1999, the Company was prohibited from paying dividends under the
terms of the Senior Notes Indenture.
The Company's obligations under the Senior Notes are guaranteed by all
significant directly wholly owned subsidiaries of JBPCO (the "Subsidiary
Guarantors"). Each guarantee is a senior unsecured obligation of the subsidiary
providing such Guarantee and ranks pari passu with all other senior unsecured
indebtedness of such subsidiary. In addition, the Subsidiary Guarantors
guarantee the indebtedness outstanding under the Revolving Loan Agreement and
have pledged substantially all of their assets. Separate financial statements of
the Subsidiary Guarantors are not included because (a) all the Subsidiary
Guarantors provide the Guarantees, and (b) the Subsidiary Guarantors are jointly
and severally liable on a full and unconditional basis.
The Company's non-guarantor subsidiaries are Beltrami Door Company
acquired September 1999 (See Note 13), Welshman Industries (acquired by TAG in
December 1994 and including MTA acquired in October 1997) and Acero-Tec, S.A. de
C.V. (Morgan's Mexico subsidiary). The Company believes that separate financial
statements or other disclosures of the guarantors and non-guarantors are not
material to the investors. Beltrami, Welshman Industries and Acero-Tec, S.A. de
C.V. had total assets of approximately $6,034,000 at December 31, 1999, and the
results of operations and cash flows were not significant during the three years
then ended. The Company intends to designate the non-guarantor, unrestricted
subsidiaries as guarantor, restricted subsidiaries during the first quarter of
2000.
The Company estimates the fair value of the 12 1/2% Senior Notes at
December 31, 1999 to be $81,600,000 based on their publicly traded value at that
date compared to a recorded amount of $85,000,000 as of December 31, 1999.
During the year ended December 31, 1999, the Company purchased
$15,000,000 of its 2004 12 1/2% Senior Notes for an aggregate purchase price of
approximately $14,470,000. The Company recorded an extraordinary gain on the
purchase of the Senior Notes of approximately $198,000, net of related deferred
loan costs of $332,000. The Company's decision to purchase and hold the Senior
Notes or to sell the Senior Notes is dependent upon the interest rate arbitrage
between the Senior Notes and borrowings under the Revolving Loan Agreement and
market conditions. The purchases were made in the open market and the company
34
<PAGE>
does not intend to cancel or redeem the Senior Notes and may re-sell the Senior
Notes in the open market at a future date.
Maturities. Aggregate principal payments on long-term debt for the next
five years subsequent to December 31, 1999, are as follows (dollars in
thousands):
2000........................................................ $ 576
2001........................................................ 189
2002........................................................ 215
2003........................................................ -
2004........................................................ 85,000
2005........................................................ -
---------
$85,980
8. Operating Leases:
The Company leases certain manufacturing facilities and equipment under
noncancelable operating leases certain of which contain renewal options. The
future minimum lease payments for the next five years subsequent to December 31,
1999 are as follows (dollars in thousands):
2000........................................................ $ 7,295
2001........................................................ 6,362
2002........................................................ 4,688
2003........................................................ 3,214
2004........................................................ 2,526
---------
$24,085
Total rental expense included in continuing operations under all
operating leases was $7,358,000, $9,230,000 and $5,599,000 for the years ended
December 31, 1999, 1998 and 1997, respectively.
9. Income Taxes:
The income tax provision (benefit) consists of the following for the
years ended December 31, 1999, 1998 and 1997 (dollars in thousands):
1999 1998 1997
---- ---- ----
Current:
Federal................................... $ 192 $ - $ -
State..................................... 1,122 248 721
Foreign................................... 173 496 -
Deferred:
Federal................................... - - 525
State..................................... - - (299)
Foreign................................... - - -
-------- -------- --------
Income tax provision....................... $1,487 $ 744 $ 947
======== ======== ========
35
<PAGE>
The following table reconciles the differences between the statutory
Federal income tax rate and the effective tax rate for the years ended December
31, 1999, 1998 and 1997 (Dollars in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------------------- ------------------ -------------
Amount % Amount % Amount %
------- - ------ - ------ -
<S> <C> <C> <C> <C> <C> <C>
Tax provision (benefit) at statutory
federal income tax rate.............. $3,480 34% $ (2,710) 34% $ (2,320) 34%
Valuation allowance....................... (2,963) (28) 2,397 (33) 1,277 (19)
Goodwill amortization..................... 27 - 234 (2) 239 (4)
Non deductible expenses................... 83 1 86 (1) 196 (3)
Expiration of ITC......................... - - - - 663 (10)
State income taxes, net of federal
income tax benefit................... 664 6 167 (2) 268 (4)
Intangible asset write-down............... - - 317 (3) - -
Foreign income and withholding
taxes, net of federal benefit........ 114 1 346 (4) 173 (2)
Other..................................... 82 1 (93) 1 451 (6)
--------- ------ --------- ------- ------- -----
Provision (benefit) for income
taxes and effective tax rates........ $1,487 15% $ 744 (10%) $ 947 (14%)
======= ===== ======= ====== ====== =====
</TABLE>
Deferred taxes are based on the estimated future tax effects of
differences between the financial statements and tax basis of assets and
liabilities given the provisions of the enacted tax laws. The net deferred tax
assets and liabilities as of December 31, 1999 and 1998 are comprised of the
following (dollars in thousands):
1999 1998
---- ----
Current deferred tax (assets):
Allowance for doubtful accounts .................... $ (626) $ (579)
Employee benefit accruals and reserves ............. (1,109) (853)
Warranty liabilities ............................... (179) (215)
Excess facility costs .............................. (136) (1,242)
Other .............................................. (257) (182)
------- --------
Total current deferred tax (assets)................ (2,307) (3,071)
-------- --------
Long term deferred tax (assets):
Tax benefit carryforwards ......................... (9,909) (12,720)
Warranty liabilities .............................. (1,235) (1,109)
Other ............................................. (677) (670)
Intangible write-off .............................. (426) (1,181)
Valuation allowance ............................... 2,274 5,236
------- --------
Total long term deferred tax (assets).............. (9,973) (10,444)
------- --------
Long term deferred tax liabilities:
Depreciation and amortization ...................... 2,839 4,161
Other .............................................. 1,905 1,818
------- -------
Total long term deferred tax liability ............. 4,744 5,979
------- -------
Net long term deferred tax (assets) ............. (5,229) (4,465)
------- -------
Net deferred tax assets ................. $(7,536) $(7,536)
======= =======
36
<PAGE>
Tax Carryforwards. The Company has investment tax credit carryforwards of
approximately $108,000 for U.S. federal income tax purposes, which will expire
between 2000 and 2001 if not previously utilized. The Company has recorded a
valuation allowance of $108,000 against the investment tax credit carryforward
as the Company believes that the corresponding deferred tax asset may not be
realizable. The Company has alternative minimum tax credit carryforwards of
approximately $1,008,000 for U.S. federal income tax purposes, which may be
carried forward indefinitely. The utilization of $817,000 of the alternative
minimum tax credit carryforward is restricted to the taxable income of one
Subsidiary. In addition, the Company has net operating loss carryforwards of
approximately $25,900,000 for U.S. federal income tax purposes at December 31,
1999, which if not utilized, will begin to expire in 2004. The Company had a
valuation allowance of $2,166,000 and $5,000,000 as of December 31, 1999 and
1998, respectively, against the net operating loss carryforwards. The change in
the valuation allowance is the result of utilizing net operating losses for
which valuation allowances were previously established. The deferred tax
valuation allowances have been established due to uncertainty regarding the
realization of the net operating carryforwards before they expire.
The Company has considered prudent and feasible tax planning strategies
in assessing the need for the valuation allowance. The Company has assumed
approximately $7,500,000 of benefits attributable to such tax planning
strategies. In the event the Company were to determine in the future that any
such tax planning strategies would not be implemented, an adjustment to the
deferred tax asset would be charged to income in the period such determination
was made.
10. Common Stock:
As of December 31, 1999 and 1998, there were 100,000 shares authorized
and 3,059 shares issued and outstanding of JBPCO common stock with a par value
of $.01 per share. JBPCO was incorporated in Delaware. No other classes of
common stock, preferred stock or common stock equivalents exist.
11. Employee Benefit Plans:
Defined Contribution Plans
JBPCO 401(k) Plan. The JBPCO-sponsored 401(k) savings plan allows
participating employees to contribute through salary deductions up to 15% of
gross pay and provides for Company matching contributions up to two percent of
gross pay as well the opportunity for an annual discretionary contribution.
Vesting in the Company matching contribution is 20% per year over the first five
years. The Company incurred expenses of $1,161,823, $1,250,000 and $1,355,000
during the years ended December 31, 1999, 1998 and 1997, respectively, including
administrative fees of approximately $75,000 in each year.
Defined Benefit Plans
Morgan. Morgan assumed future sponsorship of the National Steel Service
Centers, a company that ceased doing business in 1993 and into which Morgan was
merged during 1993 pension plan and continued to make contributions to the plan
37
<PAGE>
in accordance with the funding requirements of the Internal Revenue Service. No
further benefits have accrued subsequent to February 12, 1992. The plan was
terminated effective December 31, 1999 and the distribution of plan assets in
satisfaction of plan obligations will be completed during the first quarter of
2000.
Gem Top, a division of Morgan, had a defined benefit plan covering
hourly employees working at least 1,000 hours per year. The plan was frozen
effective March 31, 1996, and at December 31, 1999 and 1998 plan assets
approximated projected benefit obligations.
The Company's funding policy for the remaining plan is to make the
minimum annual contributions required by applicable regulations. The following
table sets forth the funded status and amounts recognized in the Company's
consolidated balance sheets as of December 31, 1999 and 1998, and the
significant assumptions used in accounting for the defined benefit plans.
(dollars in thousands):
1999 1998
---- ----
Change in benefit obligation
Benefit obligation at beginning of year ............ $ 3,843 $ 3,552
Interest cost ...................................... 244 253
Actuarial gains .................................... 507 288
Benefits paid ...................................... (337) (251)
Benefit settlements ................................ (2,533) --
Benefits assumed by acquirer ....................... -- --
------- -------
Benefit obligation at end of year .................. $1,724 $3,842
------ ------
Change in plan assets
Fair value of plan assets at beginning of year...... $ 4,544 $ 3,964
Actual return on plan assets ....................... 496 823
Company contributions .............................. 11 33
Expenses ........................................... (76) (25)
Benefits paid ...................................... (337) (251)
Benefit settlements ................................ (2,533) --
------- -------
Fair value of plan assets at end of year............ 2,105 4,544
-------- -------
Funded status of the plans (underfunded) ........... 381 702
Unrecognized actuarial loss ........................ (102) (41)
Unrecognized net (gains) losses .................... (9) (518)
--------- -------
Prepaid benefit cost ............................... $ 270 $ 143
========= =======
1999 1998
-------- ------
Weighted-average assumptions
as of December 31:
Discount rate ....................................... 7% 7.0%
Expected return on plan assets ...................... 8% 8.0%
38
<PAGE>
1999 1998 1997
----- ----- -----
Components of net periodic
benefit cost
Service cost .................................. $ 5 $ 5 $ 67
Interest cost ................................. 243 253 373
Expected return on plan assets ................ (345) (309) (341)
Recognized net actuarial (gains)/losses ....... (5) (4) 44
Settlement gains .............................. (17) - -
----- ----- ------
Net periodic benefit cost ..................... $(119) $ (55) $ 143
===== ===== ======
Lowy Group. The disposal of the business and principally all of the
assets of Lowy Group was completed during 1999. Lowy Group retained obligations
under supplementary benefit agreements related to certain terminated executives
of Lowy or their beneficiaries that provide a fixed amount of retirement
benefit to key employees. Lowy maintains life insurance policies with cash
surrender values of $793,000 and $963,000 at December 31, 1999 and 1998,
respectively, to fund obligations of $527,000 and $968,000 as of December 31,
1999 and 1998, respectively. Payments made to retired individuals were
$407,000, $522,000 and $142,000 in 1999, 1998 and 1997, respectively. Benefits
are based on the employee's age at retirement and the fixed monthly benefit
amount specified in each individual supplementary benefit agreement.
12. Discontinued Operations
TAG Distribution. The disposal of TAG's distribution operations was
completed during the year ended December 31, 1999. The results of operations of
the distribution operations of TAG have been reported as discontinued operations
in the consolidated financial statements for all periods presented. In addition,
the net assets and liabilities have been segregated within the accompanying
consolidated balance sheets as "net assets of discontinued operations." Based on
improved operating performance, the Company decided during the second quarter of
1999 to retain Midwest Truck Aftermarket (MTA) and three retail stores (the
Stores). Accordingly, the MTA portion of the estimated loss on disposal of TAG
Distribution of $1,306,000, which represented the goodwill related to the
acquisition of MTA, was reversed in the accompanying consolidated statement of
operations for the year ended December 31, 1999. Additionally, the results of
operations of MTA and the Stores have been included in continuing operations for
all periods presented.
During the year ended December 31, 1999, the Company sold two wholesale
locations and 30 retail locations, including eight stores, which were part of
Welshman Industries (formerly 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.
39
<PAGE>
Condensed financial information related to the distribution operations
of TAG at December 31, 1998 is as follows (in thousands):
December 31,
1998
------------
Net assets of discontinued operations:
Current assets............................. $ 7,437
Property, net.............................. 2,009
--------
Total Assets............................... 9,446
Less current liabilities.................... 5,814
--------
Net Assets....................................... $ 3,632
========
TAG revenues from discontinued distribution operations were
$8,211,000, $47,051,000 and $49,997,000 for the years ended December 31, 1999,
1998 and 1997, respectively. The income (loss) from discontinued operations
related to TAG Distribution, during the twelve months ended December 31, 1999,
1998 and 1997, were as follows (in thousands):
For the Twelve Months
Ended
---------------------------
1999 1998 1997
---- ---- ----
Loss from TAG Distribution's operations less
applicable income taxes of
$-0-, $-0- and $-0-, respectively ........ $ -- $ (1,303) $ (6,075)
Reversal of loss on disposal of MTA, net
applicable income taxes of $0 ........... 1,306 -- --
Loss on disposal of TAG, less applicable income
taxes of $ -0- ........................... (1,306) (11,458) --
-------- --------- --------
$ - $(12,761) $(6,075)
======== ========= ========
At December 31, 1998 the loss on disposal of TAG Distribution was
estimated to be $11,458,000 which included $7,962,000 for the estimated loss on
sale and $3,496,000 for the estimated losses from operations from the
measurement date through the dates of disposal. The estimated loss on disposal
included the write-down of the related goodwill of $4,225,000. The $1,306,000
additional loss recorded in 1999 represents the amounts in excess of the
estimate provided in 1998. The actual loss on sale exceeded the prior estimate
by $638,000 and the actual losses from operations during the period after the
measurement date exceeded the estimate by $668,000.
Losses from the distribution operations of TAG include interest expense of
$94,000, $717,000 and $495,000 related to the borrowings of TAG Distribution
under the Revolving Loan Agreement for the twelve months ended December 31,
1999, 1998 and 1997, respectively. The borrowings were repaid using the proceeds
from the sale of TAG Distribution.
Lowy Group. Effective December 28, 1999, the Company completed the disposal
of Lowy Group, which was composed of Lowy Distribution and Blue Ridge/Courier
and comprised the Company's floor covering segment. Certain assets and
liabilities of Lowy Distribution were sold effective June 7, 1999 and certain
remaining real estate was sold effective November 24 and December 30, 1999. The
Company realized total net cash proceeds of approximately $7,843,000 and
realized a gain of approximately $57,000 on the disposal, net of goodwill
written off of $369,000.
40
<PAGE>
Effective August 31, 1998, the Company sold certain assets and
liabilities of Blue Ridge/Courier and realized net cash proceeds of
approximately $15,800,000 and recognized a pre-tax gain of approximately
$6,500,000 during the year ended December 31, 1998.
The results of operations of Lowy Group have been reported as
discontinued operations in the consolidated financial statements for the periods
presented. In addition, the net assets and liabilities, which were disposed of,
have been segregated within the consolidated balance sheets as "net assets of
discontinued operations."
Condensed financial information related to Lowy at December 31, 1998, is as
follows (in thousands):
December 31,
1998
------------
Current assets........................ $ 7,517
Property, net......................... 473
Long-term assets...................... 475
--------
Total assets.......................... 8,465
Less current liabilities.............. 2,659
Less long-term liabilities............ 389
--------
Net assets............................ $ 5,417
========
Lowy revenues were $15,932,000, $56,891,000 and $69,724,000 for the
twelve months ended December 31, 1999, 1998 and 1997, respectively.
The income from discontinued operations was as follows related to Lowy (in
thousands):
For the Twelve Months
Ended
1999 1998 1997
---- ---- ----
Net income from operations of Lowy, less
applicable income taxes of $-,
$262 and $446, respectively ................. $ -- $2,052 $6,081
Gain on disposal of assets, less applicable
taxes of $-0- ............................... 57 6,500 --
------ ------ ------
$ 57 $8,552 $6,081
====== ====== ======
The gain on disposal during 1999 is shown net of operating losses of
$383,000 which represents the results of operations subsequent to the
measurement date. The above operating results of Lowy include interest expense
of $164,000, $218,000 and $624,000 related to the borrowings of Lowy under the
Revolving Loan Agreement for the twelve months ended December 31, 1999, 1998 and
1997, respectively. The related borrowings were repaid using the proceeds from
the sale of the operations. Net income of Lowy for the twelve months ended
December 31, 1997, includes a gain on the sale of certain real estate of
$3,000,000.
41
<PAGE>
13. Acquisitions:
Beltrami Door Co.
Effective September 7, 1999, the Company purchased substantially all the
assets of Beltrami Door Company (Beltrami) located in Bemidji, Minnesota.
Beltrami manufactures wood and composite material overhead doors for van bodies
and truck trailers. Beltrami is operated as part of Morgan. The Company paid
approximately $368,000 in cash as the purchase price for the assets. The results
of operations of Beltrami, included in the consolidated financial statements
from the date of acquisition, are not material to the financial statements of
the Company.
14. Commitments and 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 utility company has
appealed the motion for summary judgement and the Company will continue to
aggressively defend the suit. Management believes that the ultimate resolution
of this matter will not have a material adverse effect on the Company.
Letters of Credit and Other Commitments. The Company had $2,910,000 and
$3,541,000 in standby letters of credit outstanding at December 31, 1999 and
1998, respectively, primarily securing the Company's insurance programs.
Environmental Matters. Since 1989, Morgan has been named as a
potentially responsible party ("PRP") with respect to the generation of
hazardous materials alleged to have been handled or disposed of at two Federal
Superfund sites in Pennsylvania and one in Kansas. Although a precise estimate
of liability cannot currently be made with respect to these sites, based upon
information known to Morgan, the Company currently believes that it's
proportionate share, if any, of the ultimate costs related to any necessary
investigation and remedial work at those sites will not have a material adverse
effect on the Company. To date, the Company's expenditures related to those
sites have not been significant.
Certain of the Company's operations utilize paints and solvents in their
businesses. Also, raw materials used by EFP contain pentane, which is a volatile
organic compound subject to regulation under the Clean Air Act. Although the
Company believes that it has made sufficient capital expenditures to maintain
compliance with existing laws and regulations, future expenditures may be
necessary if and when compliance standards and technology change.
Self-Insured Risks. The Subsidiaries utilize a combination of insurance
coverage and self-insurance programs for health care and workers compensation.
The Company has reserves recorded to cover the self-insured portion of these
risks based on known facts and historical trends and management believes that
42
<PAGE>
such reserves are adequate and the ultimate resolution of these matters will not
have a material adverse effect on the financial position or results of
operations of the Company.
15. Related Party Transactions:
Concurrently with the Note Offering on May 23, 1994, the Company entered
into a Management Services Agreement with Southwestern Holdings, Inc. a
corporation ("Southwestern") owned by Mr. Poindexter. Pursuant to the Management
Services Agreement, Southwestern provides services to the Company, including
those of Mr. Poindexter and Mr. Magee its Chief Financial Officer. The Company
pays to Southwestern approximately $625,000 per year for these services, subject
to annual automatic increases based upon the consumer price index. The Company
may also pay a discretionary annual bonus to Southwestern subject to certain
limitations; none was paid in 1999, 1998 or 1997. The Company paid Southwestern
$625,000, $619,000 and $613,000 during 1999, 1998 and 1997, respectively for
these services. MTA, which is not a restricted subsidiary under the terms of the
Bond Indenture or a guarantor under the terms of the Company's Revolving Loan
Agreement, paid Southwestern Holdings $120,000 and $85,000 during 1999 and 1998,
respectively, for certain services.
Mr. Poindexter and Mr. Magee are officers of JBPCO and are partners in a
partnership that leases to Morgan certain real property in Georgia. Morgan paid
$230,000, $222,000 and $222,000 in rent to the partnership in 1999 and 1998 and
1997 pursuant to such lease.
TAG leases certain real estate in Canada from an entity controlled by
the President of TAG. Total lease expense for that facility was $114,000,
$108,000 and $117,000 in 1999, 1998 and 1997, respectively.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III.
Item 10. Directors and Executive Officers of the Registrant
The directors and executive officers of the Company are set forth
below. All directors hold office until the next annual meeting of stockholders
of the Company or until their successors are duly elected and qualified.
Executive officers of the Company are appointed by the Board of Directors
annually and serve at the discretion of the Board of Directors.
Name Age Position
John B. Poindexter 55 Chairman of the Board and Chief Executive Officer
W.J. Bowen 78 Director
Peter K. Hunt 53 Director, President and Chief Operating Officer
Kurt Kamm 57 Director
Stephen P. Magee 52 Director, Executive Vice President, Chief
Financial Officer and Treasurer
R.S. Whatley 48 Vice President, Controller
L.T. Wolfe 51 Vice President Administration
43
<PAGE>
John B. Poindexter has served as Chairman of the Board and Director of
the Company since 1988 and Chief Executive Officer since 1994. From 1985 through
1996, Mr. Poindexter was the majority limited partner of J.B. Poindexter & Co.,
L.P., a privately held, long-term equity investment and management firm formed
by Mr. Poindexter. From 1983 through 1985, he was co-managing partner of KD/P
Equities, a privately held equity investment firm that he co-founded. From 1976
through 1985, Mr. Poindexter worked for Smith Barney, Harris Upham & Co. While
with Smith Barney, he became a senior vice president for its Smith Barney
Venture Corporation and Smith Barney Capital Corporation ("SBCC") affiliates and
a partner in First Century Partnership II, an investment fund managed by SBCC.
Peter Hunt was named President and Chief Operating Officer of J.B.
Poindexter & Co., Inc. in November 1999. He had served as President of Morgan
Trailer Mfg. Co. since joining the Company in April 1998. Previously, Mr. Hunt
was the Senior Vice President and General Manager of the Industrial Group of
Greenfield Industries, Inc. Mr. Hunt has 29 years of manufacturing, engineering
and management experience.
Stephen P. Magee has served as Treasurer and a Director of the Company
since the Company was formed in 1988 and Chief Financial Officer since 1994.
W.J. Bowen retired in 1992 as the Chairman of the Board of Transco Energy
Company ("Transco"), a diversified energy company based in Houston, Texas. Mr.
Bowen served as Chief Executive Officer of Transco from 1974 until his
retirement from that position in 1987.
Kurt Kamm is currently a partner in the private equity investment firm
of Kamm Theodore. Previously he served as a partner in several private equity
investment firms and has been involved as a principal in the acquisition of 65
companies.
R.S. Whatley has served as Vice President, Controller since June 1994.
Larry T. Wolfe has served as Vice President of Administration since May
of 1995.
Directors who are officers or employees of the Company do not receive
fees for serving as directors. The Company pays $20,000 per year as director's
fees to each outside director.
Other Significant Persons
Although not an executive officer of the Company, each of the following
persons is an officer of the referenced Subsidiary or division thereof and is an
important contributor to the Company's operations:
Name Age Position
Martin Brown 44 President of TAG Manufacturing
Nelson Byman 53 President of MIC Group
James R. Chandler 64 President of EFP
Robert Ostendorf 49 President of Morgan
44
<PAGE>
Martin Brown was named President of TAG Manufacturing in March 1998.
Mr. Brown was the previous owner of Raider and LoRider, acquired by the Company
in June 1995. He has served as President of Raider Industries since June 1995.
Nelson Byman has 24 years of engineering and management experience and
was most recently Vice President/General Manager of a domestic division of
Weatherford/Enterra, a manufacturer of oilfield related equipment.
James R. Chandler has served as President of EFP since 1978. Prior to
1978, Mr. Chandler worked in various marketing and executive positions with the
Ames Division of Miles Laboratories, Inc. and in the management consulting
section of Price Waterhouse & Co.
Robert Ostendorf, Jr. became President and Chief Operating Officer of
Morgan Trailer Mfg., Co. in November 1999. Previously, Mr. Ostendorf served as
President of the Truck Group of Cambridge Industries, Inc. He has over 22 years
of experience in a variety of manufacturing and general management positions in
the truck and automotive related industries.
Item 11. Executive Compensation
The following table sets forth certain information regarding the
compensation paid to the Company's Chief Executive Officer and the other
executive officers whose total annual salary and bonus are anticipated to exceed
$100,000 for the fiscal years ended December 31, 1999, 1998 and 1997:
Summary Compensation Table
Annual Compensation All Other
Name and Principal Position Year Salary Bonus Compensation
- --------------------------- ---- ------ ----- ------------
John B. Poindexter 1999 $ (a) $ - $ -
Chairman of the Board and 1998 (a)
Chief Executive Officer 1997 (a)
Stephen P. Magee 1999 $ (a) $ (b) $ -
Chief Financial Officer 1998 (a)
1997 (a)
Peter K. Hunt 1999 $278,000 $75,000 $40,000
President and 1998 $204,000 $ - $ -
Chief Operating Officer
R.S. Whatley Controller 1999 $124,600 $ - $ -
1998 $115,000 $ - $ -
L.T. Wolfe Vice President 1999 $192,794 $20,000 $ -
Administration 1998 $168,000 $ - $ -
(a) Messrs. Poindexter and Magee do not receive salaries from the Company.
Rather, their services are provided to the Company pursuant to a Management
Services Agreement. See "Management Services Agreement."
(b) It is anticipated that Mr. Magee will be eligible to receive in the future
an annual bonus pursuant to the incentive plan described below.
45
<PAGE>
The Company's incentive compensation plan covering certain of its
executive officers is similar to the Subsidiary Incentive Plans described below.
During 1999, the Company adopted a long-term performance plan in order to
provide key members of the Company and its Subsidiaries with financial
incentives for achieving long-term financial objectives of the Company. Messrs.
Poindexter and Magee are covered by the various insurance programs provided by
Morgan to its employees.
Management Services Agreement
Concurrently with the Note Offering, the Company entered into a
Management Services Agreement with a corporation ("Southwestern") owned by Mr.
Poindexter. Pursuant to the Management Services Agreement, Southwestern provides
services to the Company, including those of Mr. Poindexter who serves as the
Company's Chairman of the Board and Chief Executive Officer and of Mr. Magee who
serves as its Chief Financial Officer. The Company paid to Southwestern
approximately $745,000 during the year ended December 31,1999, for these
services which is subject to annual automatic increases based upon the consumer
price index. The Company may pay a discretionary annual bonus to Southwestern
for the provision of Mr. Poindexter's and Mr. Magee's services and may increase
the annual fee payable above the automatic annual increase, in each case subject
to certain limitations, if after giving effect to such payment and/or increase
the Company's Consolidated EBITDA Coverage Ratio is 2.00 to 1 or higher.
Subsidiary Incentive Plans
The Company has adopted an incentive compensation plan for members of
upper management of each of its Subsidiaries (collectively the "Incentive
Plans") to provide for the payments of annual bonuses based upon the attainment
of performance-based goals. Eligible employees are entitled to receive a bonus
if the Subsidiary attains or surpasses a stated percentage (which varies by
Subsidiary) of that Subsidiary's budgeted pre-tax profit, with the amount of
bonus being tied to the Subsidiary's actual pre-tax profits. Individual bonuses
are then allocated among the eligible employees based upon their individual
achievement of stated performance objectives. The Subsidiaries also maintain
certain other benefit plans for their respective officers and employees. See
Note 15 to the Consolidated Financial Statements for the Company.
Compensation Committee Interlocks and Insider Participation
The Company does not have a compensation committee.
Item 12. Security of Ownership of Certain Beneficial Owners and Management
Beneficial Ownership
Number Percent
Directors, Officers and 5% Stockholders of Shares of Class
- --------------------------------------- --------- --------
John B. Poindexter 3,059 100%
c/o J.B. Poindexter & Co., Inc.
1100 Louisiana, Suite 5400
Houston, Texas 77002
46
<PAGE>
Stephen P. Magee -- --
c/o J.B. Poindexter & Co., Inc.
1100 Louisiana, Suite 5400
Houston, Texas 77002
Peter K. Hunt -- --
c/o J.B. Poindexter & Co., Inc.
1100 Louisiana, Suite 5400
Houston, Texas 77002
William J. Bowen -- --
c/o J.B. Poindexter & Co., Inc.
1100 Louisiana, Suite 5400
Houston, Texas 77002
Kurt Kamm -- --
c/o J.B. Poindexter & Co., Inc.
1100 Louisiana, Suite 5400
Houston, Texas 77002
All directors and officers as a _____ _____
group (5 persons) 3,059 100%
----- -----
Mr. Poindexter has sole voting and investment power with respect to all
shares that he beneficially owns.
Item 13. Certain Relationships and Related Transactions
Messrs. Poindexter and Magee are members of a partnership ("Bartow")
that leases certain real property in Georgia to Morgan. During each of 1999,
1998 and 1997, Morgan paid $230,000, $222,000 and $222,000, respectively as rent
to Bartow, and it will continue to pay such rent to Bartow in the future. The
Company believes that the rent paid by Morgan to Bartow is a competitive market
rate for the location.
The Company has entered into a Management Services Agreement with
Southwestern Holdings, Inc. a corporation ("Southwestern") owned by Mr.
Poindexter. Pursuant to the Management Services Agreement, Southwestern provides
services to the Company, including those of Mr. Poindexter and Mr. Magee its
Chief Financial Officer. The Company pays to Southwestern approximately $625,000
per year for these services, subject to annual automatic increases based upon
the consumer price index. The Company may also pay a discretionary annual bonus
to Southwestern subject to certain limitations. For all services the Company
paid Southwestern $625,000, $619,000 and $613,000 during 1999, 1998 and 1997,
respectively.
Welshman, which is not a restricted subsidiary under the terms of the
Senior Notes Indenture or a guarantor under the terms of the Company's Revolving
Loan Agreement, paid Southwestern Holdings $120,000, $85,000 and $60,000 during
1999, 1998 and 1997, respectively for certain services.
47
<PAGE>
TAG leases certain real estate in Canada from an entity controlled by
the President of TAG Manufacturing. Total lease expenses was $114,000, $108,000
and $117,000 in 1999, 1998 and 1997, respectively, the Company considers this to
be a market rate for the property.
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a)(1) Financial Statements - None, other than as previously listed
in response to Item 8.
(a)(2) Financial Statement Schedules - None
(a)(3) Exhibits
3.1(a) Second Restated Certificate of Incorporation
3.1.1(e) Certificate of First Amendment to Second Restated Certificate
of Incorporation.
3.2(a) Amended and Restated Bylaws
4.1(e) Form of 12 1/2% Senior Note due 2004 (included in Exhibit 4.2)
4.2(e) Indenture dated as of May 23, 1994
4.2.1(f) First Supplemental Indenture dated as of May 11, 1995.
Incorporated by reference to Exhibit 4.1 to the Form 10-Q for
the quarterly period ended June 30, 1995, as filed with the
Commission on August 15, 1995
4.2.2(f) Second Supplemental Indenture dated as of June 26, 1995.
Incorporated by reference to Exhibit 4.2 to the Form 10-Q for
the quarterly period ended June 30, 1995, as filed with the
Commission on August 15, 1995.
4.3(a) List of certain promissory notes
10.1.5(h) Loan and Security Agreement by and among Congress Financial
Corporation and J.B.Poindexter & Co., Inc., dated June 28,1996
10.1.6(j) Amendment No. 1 to Loan and Security Agreement by and among
Congress Financial Corporation and J.B.Poindexter & Co., Inc.,
dated May 13, 1998.
10.23(a) Lease Agreement, dated as of March 29, 1990, between Bartow
Partners, L.P. and Morgan Trailer Manufacturing Co., d/b/a
Morgan Corporation, as amended by the First Amendment to Lease
Agreement, dated June 13, 1991
10.24(a) Form of Salary Continuance Agreement for director level
employees of Morgan Trailer Mfg. Co.
10.25(a) Form of Salary Continuance Agreement for officers of Morgan
Trailer Mfg. Co.
10.26(a) Form of Incentive Plan for certain employees of the
Subsidiaries
10.27(a) Morgan Trailer Mfg.Co.Long-Term Management Equity Appreciation
Program
10.32(a) Lease Agreement, dated August 14, 1987, between C&D Realty
Partnership and Leer, Inc., as amended by the Lease Option and
Amendment Agreement, dated as of August 14, 1992
10.33(a) Lease Agreement, dated August 14, 1987, between J&R Realty
Company and Leer, Inc.
10.34(a) Lease Agreement, dated August 14, 1987, between BCD Realty
Partnership with Leer, Inc., as amended by the Lease Option
and Amendment Agreement, dated as of August 14, 1992 (missing
page 2 of Amendment)
10.35(a) Lease Agreement, dated August 14, 1987, between John M.Collins
and Leer, Inc., as amended by the Lease Option and Amendment
Agreement, dated as of August 14, 1992, and the Addendum to
Lease Agreement, dated as of August 1, 1993
10.36(a) Lease agreement, dated August 14, 1987, between PCD Realty
Partnership and Leer, Inc., as amended by the Lease Option and
Amendment Agreement, dated as of August 14, 1992
48
<PAGE>
10.86(e) Management Services Agreement dated as of May 23, 1994,between
J.B. Poindexter & Co., Inc. and Southwestern Holdings, Inc.
10.102(f) Asset Purchase Agreement, dated as of June 15, 1995, among
Leer Inc., 20th Century Fiberglass, Inc., Steven E. Robinson
and Ronald E. Hickman. Incorporated by reference to Exhibit
10.1 to the current report on Form 8-K, dated June 29, 1995,
as filed with the Commission on September 11, 1995
10.103(f) Promissory Note, dated June 29, 1995, executed by Leer, Inc.
Incorporated by reference to Exhibit 10.2 to the current
report on Form 8-K, dated June 29, 1995, as filed with the
Commission on September 11, 1995
10.104(f) Asset Purchase Agreement, dated as of June 15, 1995 among
Leer Inc., Century Distributing, Inc., Steven E. Robinson
and Ronald E. Hickman. Incorporated by reference to Exhibit
10.3 to the current report on Form 8-K, dated June 29, 1995,
as filed with the Commission on September 11, 1995
10.105(f) Consulting Agreement, dated as of June 29, 1995, between
Leer, Inc. and Steven E. Robinson. Incorporated by reference
to Exhibit 10.4 to the current report on Form 8-K, dated
June 29, 1995, as filed with the Commission on September 11,
1995
10.106(f) Consulting Agreement, dated as of June 29, 1995, between
Leer, Inc. and Ronald E. Hickman. Incorporated by reference
to Exhibit 10.5 to the current report on Form 8-K, dated June
29, 1995, as filed with the Commission on September 11, 1995.
10.107(f) Non-Competition Agreement, dated as of June 29, 1995,
between Leer, Inc. and Steven E.Robinson. Incorporated by
reference to Exhibit 10.6 to the current report on Form 8-K,
dated June 29, 1995, as filed with the Commission on September
11, 1995.
10.108(f) Non-Competition Agreement, dated as of June 29, 1995,
between Leer, Inc. and Ronald E. Hickman. Incorporated by
reference to Exhibit 10.7 to the current report on Form 8-K,
dated June 29, 1995, as filed with the Commission on September
11, 1995.
10.109(f) Share Purchase Agreement dated as of June 30, 1995, between
Raider Industries, Inc. and Martin Brown
10.110(f) Asset Purchase Agreement dated as of June 30, 1995, by and
between Raider Industries Inc., Pro-More Industries Ltd.,
Brown Industries (1976) Ltd. and Martin Brown
10.111(i) Loan and Security Agreement by and between Congress Financial
Corporation and Radco Industries Inc., dated October 31,1997
10.112(i) Asset Purchase Agreement by and among Radco Industries Inc.
and Midwest Truck After Market and William J. Avery, Sr. and
Sarah A. Avery, dated October 31.1997.
10.113 Asset Purchase Agreement by and among Lowy Group, Inc., J.B.
Poindexter & Co., Inc. and Blue Ridge Acquisition Company,LLC,
dated August 31, 1998.
10.114 J.B. Poindexter & Co., Inc. Long-Term Performance Plan.
10.115 Asset Purchase Agreement between L.D.Brinkman & Co.(Texas)Inc.
and Lowy Group, Inc. dated June 7, 1999.
21.1 Subsidiaries of the Registrant
27.1 Financial data schedule
27.2 Restated financial data schedule for the years 1998 and 1997
(a) Incorporated by reference to the Company's Registration Statement on Form
S-1 (No. 33-75154) as filed with the Commission on February 10, 1994
(b) Incorporated by reference to the Company's Amendment No. 1 to Registration
Statement (No. 33-75154) as filed with the Commission on February 24, 1994
(c) Incorporated by reference to the Company's Amendment No. 2 to Registration
Statement (No. 33-75154) as filed with the Commission on March 23, 1994
49
<PAGE>
(d) Incorporated by reference to the Company's Amendment No. 3 to Registration
Statement (No. 33-75154) as filed with the Commission on May 16, 1994
(e) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1994, as filed with the Commission on March 31,
1995.
(f) Incorporated by reference to the Company's Annual Report on form 10-K for
the year ended December 31, 1995, as filed with the Commission on March 29,
1996.
(g) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1996, as filed with the Commission on May
10, 1996.
(h) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1996, as filed with the Commission on August
13, 1996.
(i) Incorporated by reference to the Company's Annual Report on Form 10-K for
the year ended December 31, 1997, as filed with the Commission on March 30,
1998.
(j) Incorporated by reference to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1998, as filed with the Commission on August
14, 1998.
(b) Reports of Form 8-K. The Company filed the following reports on Form 8-K
during the year: --------------------
None
Supplemental Information to Be Furnished With Reports Filed Pursuant to Section
15 (d) of the Act by Registrants Which Have Not Registered Securities Pursuant
to Section 12 of the Act.
The registrant has not delivered to its security holders any annual report to
security holders covering the last fiscal year, proxy statement, form of proxy
or other proxy soliciting material (as described under this caption in Form 10-K
as promulgated by the Securities and Exchange Commission). A copy of this Form
10-K will be sent to each registered holder of the registrant's 12 1/2% Senior
Notes due 2004.
50
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: February 25, 2000 By: John B. Poindexter
----------------------
John B. Poindexter, Chairman of the
Board and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Date: February 25 , 2000 John B. Poindexter
------------------
John B. Poindexter
Chairman and Chief Executive Officer and Director
(Principal Executive Officer)
Date: February 25, 2000 Peter K. Hunt
-------------
Peter K. Hunt
President and Chief Operating Officer and Director
Date: February 25, 2000 Stephen P. Magee
----------------
Stephen P. Magee
Chief Financial Officer and Director
(Principal Financial Officer)
Date: February 25, 2000 W.J. Bowen
----------
W.J. Bowen
Director
Date: February 25, 2000 Kurt Kamm
----------
Kurt Kamm
Director
Date: February 25, 2000 Robert S. Whatley
-----------------
Robert S. Whatley
Chief Accounting Officer
(Principal Accounting Officer)
DRAFT - 11/18/99
J.B. Poindexter & Co., Inc.
Long Term Performance Plan
SECTION 1
General
1.1. Purpose and Effective Date. J.B. Poindexter & Co. Inc. (the "Company") has
established the J.B. Poindexter & Co., Inc. Long Term Performance Plan (the
"Plan" or the "LTPP"), effective January 1, 2000, the "Effective Date" of the
Plan as set forth herein. The purpose of the Plan is to provide approved
participants who are key members of the Company's and the Affiliates' (as
defined in subsection 1.2) management team with financial incentives for
achieving strategic long term financial objectives of the Company.
1.2. Affiliates. For purposes of the Plan, the term "Affiliate" means any
subsidiary of the Company. Any Affiliate that, with the consent of the Company,
adopts the Plan for the benefit of its eligible employees shall be referred to
herein as an "Adopting Affiliate". The Company and each Adopting Affiliate shall
be referred to herein collectively as the "Employers" and individually as an
"Employer".
1.3. Plan Administration. The authority to operate and administer the Plan shall
be vested in the Board of Directors (the "Board") of the Company. The Board
shall have full power and authority to interpret, construe and administer the
Plan. The Board's interpretations and construction of the Plan, and actions
thereunder, shall be binding and conclusive on all persons for all purposes. No
member of the Board shall be liable to any person for any action taken or
omitted in connection with the interpretation and administration of the Plan
unless attributable to his own willful misconduct or lack of good faith.
1.4. Source of Payments. The obligations of the Employers under the Plan are
purely contractual. Any amount payable under the terms of the Plan shall be paid
from the general assets of the Employers and no trust or other separate fund
shall be established for this purpose.
1.5. Notices. Any notice or document required to be filed under the Plan shall
be considered to be properly filed if delivered or mailed by registered mail,
postage prepaid, to the Board, in care of the Company, at its corporate
headquarters or such other address the Company has designated for such purpose
hereunder and communicated to Participants. Any notice required under the Plan
may be waived by the person entitled thereto.
1.6. Action by Employers. Any action required or permitted to be taken under the
Plan by an Employer that is a corporation shall be by resolution of its Board of
Directors, by a duly authorized officer of the Employer, or by such other person
or entity as may be designated by the Board of Directors of the Employer.
<PAGE>
1.7. Gender and Number. Where the context admits, words in any gender shall
include any other gender, words in the singular shall include the plural, and
the plural shall include the singular.
1.8. Governing Law. The Plan shall be construed and administered in accordance
with the internal laws of the State of Texas, to the extent that such laws are
not preempted by the laws of the United States of America.
1.9. Plan Year. The Plan Year shall be the calendar year.
1.10. Plan Not Guarantee of Employment. The Plan does not constitute a guarantee
of employment by the Employers, and participation in the Plan will not give any
individual the right to be retained in the employ of the Employers, nor any
right or claim to any benefit under the Plan, unless such right or claim has
specifically arisen under the Plan. The Employers reserve all of their rights to
discharge employees at-will or to amend or modify any of the terms and
conditions of their employment.
SECTION 2
Participation
2.1. Participation. Each key employee of an Employer whose position directly
impacts the Company's success and who is designated by the Board shall become a
"Participant" in the Plan effective on the first day of the LTPP Cycle (as
defined in subsection 3.1) that begins after such designation; provided,
however, the Board may designate a key employee as a Participant in a LTPP Cycle
that started fewer than six months before the employee was hired or was
transferred into a Plan-eligible position for the first time.
2.2. Duration of Participation. A Participant who is entitled to payment of a
benefit under the provisions of Section 3 shall remain a Participant in the Plan
until the full amount of his benefit has been paid.
<PAGE>
SECTION 3
LTPP Awards
3.1. Amount of LTPP Award. At the beginning of each three-year period that
begins on the Effective Date and each anniversary thereof (a "LTPP Cycle"), the
Board will determine (i) each Participant's LTPP target award for the LTPP Cycle
as a percentage of the Participant's base salary, and (ii) the percentages of
Participants' LTPP target awards that will be payable upon the Company's
achieving, in full or in part, or exceeding the EBT that is targeted in the
Company's long-term planning and budgeting process for the LTPP Cycle. In the
event a Participant transfers from one Plan-eligible position to another with a
different LTPP target award level (or is deemed not eligible for future awards)
during a LTPP Cycle, the Participant's award for the LTPP Cycle will be
calculated on a pro rata basis according to the proportion of time spent in each
position during the LTPP Cycle. The amount of each LTPP Award will be determined
by the Board and will be based on audited year-end results. For purposes of the
Plan, "EBT" means earnings before taxes.
3.2. Payment of LTPP Award. The LTPP Awards described in subsection 3.1 will be
paid in cash as soon as practicable after the end of the LTPP Cycle to which
they relate after the books of the Company are closed and audited for the last
year of the Cycle, except to the extent the Participant has elected to defer
such payment under either or both of the Company's qualified and nonqualified
deferred compensation plans. A Participant who receives a pro-rata award by
reason of his termination of employment during a LTPP Cycle may not elect to
defer the award.
3.3. Vesting. A Participant shall be 100% vested in the LTPP Award for a LTPP
Cycle if he is an employee of an Employer on the last day of the Cycle. A
Participant who terminates employment after the first year of a LTPP Cycle by
reason of involuntary termination (other than for cause), retirement, disability
or death is entitled to a pro-rata portion of the LTPP Award for the LTPP Cycle
based on the Participant's actual months of service during the LTPP Cycle. A
Participant who resigns (other than by reason of retirement) or is terminated
for cause during a LTPP Cycle shall not be entitled to the LTPP Award for that
Cycle. For purposes of the Plan, "retirement" means voluntary termination of
employment or involuntary termination of employment without cause after
attainment of age 60 years. Notwithstanding the foregoing, if the stock or
assets of an Employer are sold, an affected Participant shall be vested in each
LTPP Award that has accrued as of the date of the sale.
3.4. Nonalienation. Participants shall not have any right to pledge,
hypothecate, anticipate, or in any way create a lien upon any benefits provided
under the Plan, and no benefits payable hereunder shall be assignable in
anticipation of payment, either by voluntary or involuntary acts, or by
operation of law. Nothing in this subsection 3.4 shall limit a Participant's
rights or powers to dispose of his property by will, limit any rights or powers
which his executor or administrator would otherwise have with regard to benefits
to which a Participant is entitled hereunder, or restrict any right of set-off,
counterclaim or recoupment which the Employers may otherwise have against any
Participant.
3.5. Withholding. All payments with respect to a Participant under the Plan will
be subject to such deductions as may be required to be made pursuant to law,
government regulations or order. All tax liability of the recipient resulting
from the payments under the Plan shall be the responsibility of the recipient.
<PAGE>
3.6. Benefits on Death. In the event of a Participant's death after becoming
entitled to a benefit under the Plan but before complete payment of his benefit,
his benefit shall be paid to his estate.
SECTION 4
Amendment or Termination
4.1. Amendment or Termination. The Board in its sole discretion may amend or
terminate the Plan at any time; provided, however, that the Plan shall not be
terminated with respect to any LTPP Cycle that has commenced and no amendment or
termination shall adversely affect the Plan benefits, if any, which have vested.
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (this "Agreement") dated as of June 7,
1999, between L.D. BRINKMAN & CO. (TEXAS), INC., a Texas corporation ("Buyer"),
LOWY GROUP, INC., a Delaware corporation ("Seller"), and for certain limited
purposes, J.B. POINDEXTER & CO., INC., a Delaware corporation ("Parent").
W I T N E S S E T H:
WHEREAS, Seller is in the business (the "Business") of distributing
carpeting, floor coverings and related products directly, and indirectly through
a wholly owned subsidiary, Tile By Design, Inc., a Delaware corporation
("TBDI"); and
WHEREAS, Seller is a wholly owned subsidiary of Parent; and
WHEREAS, Buyer wishes to purchase or acquire (directly or indirectly
through subsidiaries) from Seller and Seller wishes to sell, assign and transfer
to Buyer, certain of the assets and properties held in connection with the
Business, including all of the issued and outstanding equity securities of TBDI,
and Buyer has agreed to assume (directly or indirectly through one or more
subsidiaries) the Assumed Liabilities, all for the purchase price and upon the
terms and subject to the conditions herein set forth;
NOW, THEREFORE, in consideration of the mutual covenants,
representations and warranties made herein and of the mutual benefits to be
derived hereby, the parties hereto agree as follows:
I. ARTICLE
SALE AND PURCHASE OF THE ASSETS
A. Assets. Subject to and upon the terms and conditions set forth in this
Agreement, the Seller hereby sells, assigns, transfers, conveys and delivers to
Buyer and Buyer purchases and acquires from Seller, all of the right, title and
interest of Seller in and to the tangible and intangible assets, rights and
privileges described on Schedule 1.1 (collectively, the "Assets"). Subject to
the terms and conditions hereof, the Assets are being transferred or otherwise
conveyed to the Buyer free and clear of Liens excepting only Assumed Liabilities
and the Permitted Liens in accordance with the provisions of (i) an Assignment
and Bill of Sale, (ii) Assignments relating to the Assumed Contracts, (iii)
certificates of title relating to motorized vehicles, (iv) assignments of each
Lease and related transfer declarations and (v) any other transfer instruments
deemed necessary for the Buyer and Seller, in each case dated as of the Closing
Date.
A. Excluded Assets. Notwithstanding anything herein to the contrary, the parties
hereto recognize and agree that the Assets shall include only those assets,
1
<PAGE>
rights and privileges described on Schedule 1.1 and that Seller will retain
assets, rights and privileges not constituting Assets (collectively referred to
as the "Excluded Assets").
I. ARTICLE
THE CLOSING
A. Place and Date. The closing of the sale and purchase of the Assets (the
"Closing") has taken place on June 7, 1999 (the "Closing Date"), effective as of
the opening of business on that day.
A. Purchase Price. Subject to the remaining provisions of this Agreement, Buyer
has agreed to deliver to the Seller aggregate consideration (the "Purchase
Price") equal to the book value of the Assets less $1,000,000. Subject to the
adjustments contemplated in Section 4.3 of this Agreement, the Purchase Price
has been estimated on the Closing Date by reference to the Closing Date Balance
Sheet and paid by (i) delivering cash in an amount equal to $6,240,382.00 (the
book value of the Assets, less the actual dollar amount of liabilities reflected
on the Closing Date Balance Sheet, less $1,000,000) (and such amount is
hereinafter referred to as the "Closing Date Payment") and (ii) assuming the
Assumed Liabilities. The parties contemplate that the Purchase Price will be
adjusted pursuant to the provisions of Section 4.3.
A. Allocation of Purchase Price.
a) The Purchase Price shall be allocated among the Assets in accordance with an
allocation schedule to be prepared by the Buyer and consented to by Seller,
which consent will not be unreasonably withheld. Such allocation schedule shall
be prepared in accordance with section 1060 of the Code.
a) In connection with the determination of the schedule contemplated in 2.3(a)
above, the parties shall cooperate with each other and provide such information
as any of them shall reasonably request. The parties will each report the
federal, state and local and other Tax consequences of the purchase and sale
contemplated hereby (including the filing of Internal Revenue Service Form 8594)
in a manner consistent with such allocation schedule.
A. Assumption of Liabilities.
a) Subject to the terms and conditions set forth herein, including Section 2.5,
at the Closing the Buyer shall assume and agree to pay, honor and discharge when
due all of the following liabilities (collectively, the "Assumed Liabilities"):
(1) the accounts payable, and other liabilities, obligations and commitments to
the extent reflected on the Closing Date Balance Sheet;
2
<PAGE>
(1) Seller's obligations to replace defective merchandise sold prior to Closing
to third parties in the ordinary course of business, to the extent that the
original manufacturer of such merchandise shall provide replacement merchandise
for delivery to such third party or shall otherwise credit Buyer with
consideration with respect thereto (it being understood that Seller will remain
liable to third parties with respect to amounts or claims for which Buyer is not
indemnified, reimbursed or otherwise made whole);
(1) all liabilities and obligations of Seller arising under the Contracts,
including the Leases; and
(1) obligations to pay for the types of goods described as "Inventories" on the
Closing Date Balance Sheet ("Inventories") which have been ordered by Seller in
the ordinary course of business but not delivered prior to the date hereof; and
(1) Losses arising from environmental claims against Buyer or TBDI by
Governmental Authorities or other third parties other than Losses that result
from a breach of the representations and warranties contained in Section 3.1.8.
a) At the Closing, the Buyer has assumed and agreed to discharge the Assumed
Liabilities relating to the Business by executing and delivering to Seller an
assumption agreement in a form reasonably satisfactory to Seller (the
"Assumption Agreement").
A. Retained Liabilities. Seller shall retain and Buyer shall not assume any
liabilities, obligations or commitments of Seller other than the Assumed
Liabilities. The liabilities, obligations and commitment to be retained by
Seller (the "Retained Liabilities") shall include those arising from or relating
to the following:
a) Indebtedness owed by Seller or TBDI to Parent, any Affiliate of Parent or to
any lender to Parent or Seller;
a) The Excluded Assets;
a) Seller's obligation to pay Taxes relating to its conduct of the Business
prior to the Closing;
a) Seller's obligations relating to its Employees or Plans;
a) Environmental claims against Seller by Governmental Authorities or other
third parties as a result of activities of Seller prior to the Closing; and
a) Sales by Seller of assets outside of the ordinary course of business,
including but not limited to sales of assets of Blue Ridge Acquisition Company,
LLC; and
b) Conduct of Seller's business after the Closing.
3
<PAGE>
A. Buyer's Obligations After Closing. From and after the Closing, Buyer shall be
liable for liabilities associated with the conduct of its business and its use
or disposition of the Assets in connection therewith, including, but not limited
to, the following liabilities:
a) All warranty claims relating to sales by Buyer of Inventories; and
a) All losses arising from environmental claims against Buyer or TBDI by
Governmental Authorities or other third parties other than Losses for which
Buyer has indemnity under Section 3.1.8.
I. ARTICLE
REPRESENTATIONS AND WARRANTIES
A. Representations and Warranties of Seller. Seller represents and warrants to
the Buyer as follows:
1. Authorization, etc. Seller has the corporate power and authority to execute
and deliver this Agreement and each of the Collateral Agreements to which it
will be a party, to perform fully its obligations thereunder, and to consummate
the transactions contemplated thereby. The execution and delivery of this
Agreement, and the consummation of the transactions contemplated hereby, have
been, and the execution and delivery of the Collateral Agreements to which it
will be a party and the consummation of the transactions contemplated thereby
will have been, duly authorized by all requisite corporate action. This
Agreement and each of the Collateral Agreements to which Seller is a party are
the legal, valid and binding obligation of Seller, enforceable against it in
accordance with its respective terms subject to (a) applicable bankruptcy,
insolvency, reorganization, fraudulent transfer and conveyance, receivership,
moratorium and similar laws affecting creditors rights generally and (b)
equitable principles of general applicability relating to the availability of
specific performance, injunctive relief and other equitable remedies.
1. Corporate Status (except as set forth in Schedule 3.1.2).
a) Each of the Seller and TBDI is a corporation duly organized, validly existing
and in good standing under the laws of their respective states of incorporation,
with full corporate power and authority to carry on its business and to own or
lease and to operate its properties as and in the places where such business is
conducted and such properties are owned, leased or operated.
a) Each of the Seller and TBDI is duly qualified or licensed to do business and
is in good standing in each of the jurisdictions in which the operation of the
Business or the character of the properties owned, leased or operated by it in
connection with the Business makes such qualification or licensing necessary
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except where the failure to be so qualified would not have a material adverse
effect on the Business or the consummation of the transactions contemplated
herein.
a) Neither of the Seller or TBDI is in violation of any of the provisions of its
certificate of incorporation or bylaws or other organizational documents.
1. No Conflicts, etc. The execution, delivery and performance by Seller of this
Agreement and each of the Collateral Agreements to which it is a party, and the
consummation of the transactions contemplated hereby and thereby, do not and
will not conflict with or result in a violation of or a default under (with or
without the giving of notice or the lapse of time or both) (i) to the Knowledge
of Seller, any Applicable Law applicable to Seller or TBDI or any of the
properties or assets of Seller or TBDI (including but not limited to the
Assets), or (ii) the certificate of incorporation or bylaws or other
organizational documents of Seller or TBDI.
1. Closing Date Balance Sheet. Seller has delivered to Buyer the "Closing Date
Balance Sheet" setting forth the Assets and certain of the Assumed Liabilities
as of the opening of business on the Closing Date, and, except as set forth in
the procedures and conventions described on the supporting schedules thereto,
(i) valuing the Assets in accordance with GAAP, consistently applied, (ii)
valuing the Assumed Liabilities in accordance with GAAP, consistently applied
and (iii) setting forth such reserves for doubtful accounts, obsolete inventory,
warranty claims and the like as required by GAAP, consistently applied. The
Closing Date Balance Sheet fairly presents, in accordance with GAAP and the
procedures and conventions described on the supporting schedules to the Closing
Date Balance Sheet, the values of the Assets and the Assumed Liabilities (and
any related reserves) and the net asset value of the Assets less the Assumed
Liabilities as of the Closing Date. The parties hereto acknowledge that
consistent with GAAP some or all of the liabilities described in Section
2.4(a)(ii), (iii), (iv) and (v) are not required to be reflected as liabilities
on the Closing Date Balance Sheet (or are not required to have a dollar value
assigned thereto).
1. Assets. Except as disclosed in Schedule 3.1.5, Seller has good and marketable
title to all the Assets free and clear of any and all Liens other than Permitted
Liens.
EXCEPT AS EXPRESSLY PROVIDED IN THIS AGREEMENT, SELLER MAKES NO
REPRESENTATION OR WARRANTY, EXPRESSED OR IMPLIED, AS TO THE
MAINTENANCE, REPAIR, CONDITION, DESIGN, WORKMANSHIP, SUITABILITY,
UTILITY OR MARKETABILITY OF ANY OF THE ASSETS OR ANY PORTION
THEREOF OR ANY OTHER PROPERTY THEREON OR THE ABSENCE OF ANY
DEFECTS THEREIN, WHETHER LATENT OR PATENT. WITHOUT LIMITING THE
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GENERALITY OF THE FOREGOING, SELLER EXPRESSLY DISCLAIMS ANY
EXPRESSED OR IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. BUYER AND SELLER RECOGNIZE THAT EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT, THE BUYER WILL ACQUIRE THE
ASSETS IN THEIR PRESENT CONDITION AND STATE OF REPAIR "AS IS" AND
"WHERE IS" AND "WITH ALL FAULTS."
1. Contracts. Schedule 3.16 contains a complete and correct list of all
agreements, contracts, commitments and other instruments and arrangements
(whether written or oral) which constitute or could give rise to Assumed
Liabilities (the "Contracts") other than (i) obligations to sell or deliver
Inventories in the ordinary course, (ii) Contracts relating to Inventories
ordered in the ordinary course but not delivered, (iii) the Leases, (iv)
Contracts requiring the expenditure of funds for the delivery of goods or
services having a value of, in either case, not more than $10,000 with regard to
any such Contract and (v) accounts payable to the extent provided for on the
Closing Date Balance Sheet.
1. Real Property.
a) Owned Real Property. There are no fee interests in real estate constituting
part of the Assets.
a) Leases. Schedule 3.1.7(b) contains a complete and correct list of all real
property leases, subleases, leases and occupancy agreements constituting
Contracts and pursuant to which Seller occupies Leased Real Property (the
"Leases"). Seller or TBDI, as the case may be, has delivered to the Buyer
correct and complete copies of Leases. The Seller or TBDI has good and valid
title to the leasehold estate under each Lease free and clear of all Liens other
than Permitted Liens. Seller enjoys peaceful and undisturbed possession under
its respective Leases for the Leased Real Property.
a) No Proceedings. There are no eminent domain or other similar proceedings to
which Seller is a party, pending or to the Knowledge of Seller, threatened,
affecting any portion of Real Property. There is no writ, injunction, decree,
order or judgment outstanding against or naming Seller, nor any action, claim,
suit or proceeding, pending to which Seller is a party, or to the Knowledge of
Seller, threatened, relating to the lease, use, or operation by Seller or TBDI
of any Real Property.
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1. Environmental Matters.
a) The sole representations of the Seller with respect to environmental matters
are set forth in this Section 3.1.8. To the extent representations in other
sections of this Agreement also could be interpreted to apply to environmental
matters, including, but not limited to matters related to, arising under or
concerning Environmental Laws, such representations shall be construed to
exclude all environmental matters and to apply only to matters other than
environmental matters. The exclusive remedy which may be asserted by Buyer with
respect to any environmental matters or matters related to, arising under or
concerning Environmental Laws, shall be a contract action to recover Buyer's
actual economic damages pursuant to the indemnification provisions of Section
6.2 of this Agreement if Buyer proves a breach of any of the representations
contained in this Section 3.1.8. Without limiting the foregoing, no action in
tort or strict liability or for contribution or cost recovery may be maintained
by Buyer against Seller or Parent, related to the Assets in connection therewith
including any action pursuant to any Environmental Laws, and BUYER HEREBY
IRREVOCABLY WAIVES THE RIGHT TO BRING, AND AGREES NOT TO BRING, ANY SUCH ACTION
AGAINST SELLER OR PARENT.
a) Except as set forth on Schedule 3.1.8 to Seller's Knowledge:
(1) The Business and the Assets are in material compliance with all applicable
Environmental Laws that could give rise to any material Liens and no condition
or event has occurred which, with or without notice or the passage of time or
both, is reasonably likely to give rise to any material Liens under any
applicable Environmental Laws in connection with the Assets or the Business;
(1) Each of TBDI and the Seller has obtained and is in compliance in all
material respects with all Environmental Permits required for the ownership of
the Assets and the conduct and operation of the Business;
(1) No material quantity of any Hazardous Substance has been intentionally or
unintentionally released into the environment (including releases to air, soil,
surface, water, and groundwater) at, or on the Leased Real Property except
releases in compliance with Environmental Laws, nor has the Leased Real Property
been used at any time by any person or entity as a landfill or a disposal site
for any Hazardous Substance or for garbage, waste, or refuse of any kind, which
release or use would be reasonably likely to give rise to any Liens or
proceedings under any Environmental Laws; and
(1) Neither TBDI nor the Seller is subject to any existing, pending, or
threatened proceedings involving any alleged violations of, or potential
liability arising under, any Environmental Laws in connection with the Business.
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1. Employees, Labor Matters, etc. Except as set forth in Schedule 3.1.9, Seller
is not a party to or bound by any collective bargaining agreement and there are
no labor unions or other organizations representing or to the Knowledge of
Seller, purporting to represent or attempting to represent any employees
employed in the operation of the Business (the "Employees). Since August 31,
1991 there has not occurred or been threatened any material strike, slowdown,
picketing, work stoppage, concerted refusal to work overtime or other similar
labor activity with respect to any employees employed in the operation of the
Business. Except as may result from the consummation of the transactions
contemplated herein, there are no labor disputes currently subject to any
grievance procedure, arbitration or litigation and there is no representation
petition pending or to the knowledge of Seller threatened with respect to any
employee employed in the operation of the Business. Seller has complied with all
provisions of Applicable Law pertaining to the employment of employees,
including, without limitation, all such Applicable Laws relating to labor
relations, equal employment, fair employment practices, entitlements, prohibited
discrimination or other similar employment practices or acts, except for any
failure so to comply that, individually or together with all such other
failures, has not and will not result in a material liability or obligation on
the part of the Buyer.
1. Brokers, Finders, etc. All negotiations relating to this Agreement the
Collateral Agreements, and the transactions contemplated hereby and thereby,
have been carried on without the participation of any Person acting on behalf of
Seller or the Parent or their respective Affiliates in such manner as to give
rise to any valid claim against the Buyer or any of its subsidiaries or
Affiliates for any brokerage or finder's commission, fee or similar
compensation, or for any bonus payable to any officer, director, employee, agent
or sales representative of or consultant to Seller or the Parent or their
respective Affiliates upon consummation of the transactions contemplated hereby
or thereby or otherwise.
1. Liabilities to Affiliates. As of the Closing, the Assumed Liabilities will
not include any amounts owed to Parent or Seller, any Affiliate of the Parent or
Seller, or to any Person acting as the transferee of any of them.
A. Representations and Warranties of the Buyer. The Buyer represents and
warrants to Seller as follows:
1. Corporate Status; Authorization, etc. Buyer is a corporation duly organized,
validly existing and in good standing, under the laws of the jurisdiction of its
incorporation with full corporate power and authority to execute and deliver
this Agreement and the Collateral Agreements to which it is a party, to perform
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its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. The execution and delivery by the Buyer of this
Agreement, the Collateral Agreements and the consummation of the transactions
contemplated hereby and thereby, have been duly authorized by all requisite
corporate action of Buyer. The Buyer has duly executed and delivered this
Agreement and the Collateral Agreements to which it is a party. This Agreement
and each of the Collateral Agreements to which the Buyer is a party are valid
and legally binding obligations of the Buyer, enforceable against the Buyer in
accordance with their respective terms.
2. No Conflicts, etc. The execution, delivery and performance by Buyer of this
Agreement and each of the Collateral Agreements to which it is a party, and the
consummation of the transactions contemplated hereby and thereby, do not and
will not conflict with or result in a violation of or under (with or without the
giving of notice or the lapse of time, or both) (i) the articles of
incorporation or bylaws of Buyer, (ii) any Applicable Law applicable to Buyer or
any of its Affiliates or any of its or their properties or assets or (iii) any
contract, agreement or other instrument applicable to Buyer or any of its
Affiliates or any of its or their properties or assets, except, in the case of
clause (iii), for violations and defaults that, individually and in the
aggregate, have not and will not materially impair the ability of Buyer to
perform its obligations under this Agreement or under any of the Collateral
Agreements to which it is a party. Except as specified in Schedule 3.2.2, no
Governmental Approval or other Consent is required to be obtained or made by
Buyer in connection with the execution and delivery of this Agreement or the
Collateral Agreements or the consummation of the transactions contemplated
hereby and thereby.
1. Brokers, Finders, etc. All negotiations relating to this Agreement, the
Collateral Agreements and the transactions contemplated hereby and thereby have
been carried on without the participation of any Person acting on behalf of the
Buyer Parties in such manner as to give rise to any valid claim against Seller
or any of its Affiliates for any brokerage or finder's commission, fee or
similar compensation.
I. ARTICLE
COVENANTS
A. Covenants of Seller and TBDI
1. Access and Information.
a) From and after the Closing Date, until the second anniversary thereof,
subject to such reasonable limitations as may be necessary to prevent
unreasonable disruptions of Seller's business, Seller and the Parent will (and
will use reasonable efforts to cause their respective accountants, counsel,
consultants, employees and agents to) give the Buyer, the Buyer's accountants,
counsel, consultants, employees and agents, full access during normal business
hours to, and furnish them with (and permit them, at Buyer's cost, to make
copies of) all documents, records, work papers and information relating to the
Assets as the Buyer shall from time to time reasonably request.
a) Subject to the remainder hereof, Seller will retain all books and records
relating to the Business in accordance with Seller's record retention policies
as presently in effect. During the seven-year period beginning on the Closing
Date, Seller shall not dispose of or knowingly permit the disposal of any such
books and records without first giving 60 days' prior written notice to the
Buyer offering to surrender the same to the Buyer at the Buyer's expense.
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a) Buyer shall maintain all information obtained pursuant to this Section 4.1.1
in confidence in accordance with the Confidentiality Agreement dated on or about
December 22, 1998 between Buyer and Seller.
1. Further Assurances. Following the Closing, the Seller and the Parent shall,
from time to time, execute and deliver such additional instruments, documents,
conveyances or assurances and take such other actions as shall be necessary, or
otherwise reasonably requested by the Buyer, to confirm and assure the rights
and obligations provided for in this Agreement and in the Collateral Agreements
and render effective the consummation of the transactions contemplated thereby;
provided, however, that Seller or Parent shall not be required to incur any
unreimbursed cost or expense in connection herewith. Seller shall execute such
consents or powers of attorney as shall be reasonably necessary to permit Seller
to file the returns relating to Transfer Taxes contemplated in Section 4.2.2.
1. Use of Business Name. After the Closing, neither Seller nor the Parent will,
directly or indirectly, use or do business, or allow any Affiliate to conduct
any business competitive with the Business under the name "Lowy Group" (or any
other name confusingly similar to such name).
1. Facilities Access. Subject to the provisions of Section 4.2.4, Seller shall
permit Buyer and its agents and employees the nonexclusive use of and access to
Seller's business premises at 4001 North Kingshighway, St. Louis, Missouri 63115
(the "Premises") on a rent-free basis for one hundred and twenty (120) days from
and after the Closing Date. During such 120-day period, Seller may continue to
occupy the Premises and show the Premises to prospective buyers or tenants. In
addition, Seller will permit Buyer to have primary user/system administrator
access to Seller's data bases, files, operating systems, systems applications
and the like utilized by Seller in the conduct of the Business and the
maintenance and preparation of its books and records of account and its
financial statements, during the ninety (90) days following the Closing.
A. Covenants of the Buyer.
1. Liability for Transfer Taxes. The Buyer shall be responsible for the timely
payment of, and shall indemnify and hold harmless the Seller against, all sales
(including, without limitation, bulk sales), use, value added, documentary,
stamp, gross receipts, registration, transfer, conveyance, excise, recording,
firearm, ammunition, license and other similar Taxes and fees ("Transfer
Taxes"), arising out of or in connection with or attributable to the
transactions effected pursuant to this Agreement and the Collateral Agreements.
The Buyer shall prepare and timely file all Tax Returns required to be filed in
respect of Transfer Taxes (other than any elective notices permitted to be given
to creditors as provided in any applicable bulk transfer laws).
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2. Further Assurances. Following the Closing, the Buyer shall, and shall cause
its Affiliates to, from time to time, execute and deliver such additional
instruments, documents, conveyances or assurances and take such other actions as
shall be necessary, or otherwise reasonably requested by the Seller, to confirm
and assure the rights and obligations provided for in this Agreement and in the
Collateral Agreements and render effective the consummation of the transactions
contemplated hereby and thereby.
1. Use of Premises. In connection with Buyer's use of the Premises as provided
in Section 4.1.4, Buyer shall promptly upon demand therefor, reimburse Seller
for the actual out of pocket cost of any charges by providers of gas, electric,
janitorial and other services (but excluding any rent, common area maintenance
or other similar charge levied by lessors) directly or indirectly benefitting
Buyer during it use of the Premises. Buyer, at its expense, shall promptly (i)
repair any damage to the Premises caused by Buyer or its employees or agents and
(ii) remove any mechanics', materialmen's or other liens that attach to the
Premises as a result of Buyer's activities at the Premises.
A. Purchase Price Adjustments
a) Not later than sixty (60) days following the Closing Date, Buyer shall
prepare and deliver to Seller a statement (the "True Up Balance Sheet"), setting
forth, as of the opening of business on the Closing Date, the Assets and the
Assumed Liabilities, determined in each case consistently with the Closing Date
Balance Sheet. In connection with preparing the True Up Balance Sheet, the Buyer
shall also calculate (i) the "Cash Amount," which shall be an amount equal to
the net value of the Assets less the dollar amount of liabilities associated
with Assumed Liabilities and less $1,000,000, and (ii) the amount of any
payment, if any, due to Seller or Buyer, pursuant to the remainder of this
Section 4.3(a). To the extent that Seller shall so request, Seller shall be
entitled to observe Buyer's preparation of the True Up Balance Sheet. To the
extent that the Cash Amount as calculated by the Buyer in accordance with this
Section 4.3(a) shall be in excess of the Closing Date Payment, the difference
(the "Final Payment Amount") shall be remitted by Buyer to Seller in cash within
ten (10) days of the delivery of the True Up Balance Sheet and the Purchase
Price shall be increased by the amount of Final Payment Amount. Alternatively,
to the extent that the Cash Amount calculated by the Buyer is less than the
Closing Date Payment, the difference (the "Refund Amount") shall be remitted by
the Seller to the Buyer in cash within ten (10) days of the delivery of the True
Up Balance Sheet to Seller, and the Purchase shall be decreased by the amount of
the Refund Amount.
a) If Seller disputes the existence of all or part of the Refund Amount or the
amount of the Purchase Price, as adjusted pursuant to Section 4.3(a), Seller
shall, prior to the expiration of ten (10) days following receipt of the True Up
Balance Sheet deliver a notice to Buyer (the "Demand Notice") together with cash
in an amount equal to any undisputed portion of the Refund Amount, if any. The
Demand Notice shall contain a description, in reasonable detail, setting forth
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Seller's objection to the Refund Amount and the Purchase Price determined by
Buyer, the basis of which objections shall be limited to the application of GAAP
and the procedures and conventions utilized in connection with the preparation
of the Closing Date Balance Sheet, as set forth in the supporting schedules
thereto, to the True Up Balance Sheet and the Assets and the amount of the
Assumed Liabilities reflected thereon. Within ten (10) days of receipt of the
Demand Notice, Buyer shall submit to the managing partner of the Houston, Texas
office of KPMG Peat Marwick, a national firm of independent public accountants,
or his or her designee (who need not be a member or employee of KPMG Peat
Marwick) (the "Managing Partner") the True Up Balance Sheet and the Demand
Notice, together with details regarding its calculation of the Purchase Price
and the Refund Amount with the request that the Managing Partner make a
determination regarding the proper amount to be reflected as the Purchase Price.
Each of the parties shall supply such additional information as the Managing
Partner shall request in connection with his or her determination and shall
share, equally, any fees and expenses the Managing Partner shall have with
regard thereto. Each of the parties agrees to indemnify, defend and hold
harmless the Managing Partner and any Affiliate of the Managing Partner with
regard to any act or omission, including acts or omissions constituting
negligence, other than acts or omissions constituting intentional misconduct
relating to the activities of the Managing Partner and his or her Affiliates
taken pursuant to this Section 4.3(b). The Managing Partner shall not conduct a
physical inventory or other investigation in connection with his or her
determinations hereunder, but shall rely, exclusively, upon documentary evidence
provided by the parties hereto. The Managing Partner shall determine, consistent
with Section 4.3(a), the appropriate treatment of any disputed item on the True
Up Balance Sheet not later than sixty (60) days following the submission of the
last documentary evidence to be requested by him or her pursuant to this Section
4.3(b) and shall calculate (i) the Final Payment Amount or Refund Amount, as
appropriate and (ii) the resulting Purchase Price as adjusted thereby. Such
determination by the Managing Partner shall be final and binding upon the
parties. Notwithstanding the equal sharing of expenses provided for in this
Section 4.3(b), the Buyer shall bear all reasonable expenses of each of the
parties relating to the procedure contemplated in this Section 4.3(b), including
reasonable and documented accounting and legal fees, if the amount determined by
the Managing Partner as the Purchase Price as adjusted hereby is greater than
the average of the Purchase Price determined by Buyer and that set forth in the
Demand Notice and the Seller shall bear all such expenses in the event that such
amount shall be less than such average. Any amount owing by one party to the
other party following compliance with this Section 4.3(b) shall be paid in cash
with five (5) Business Days of the delivery by the Managing Partner of his
calculation of (i) the Final Payment Amount or Refund Amount, if any, and (ii)
the adjusted Purchase Price.
A. Use of Business Names by the Buyer. To the extent that the trademarks,
service marks, brand names or trade, corporate or business names (the "Names")
owned by Seller are used by the Business on stationery, signage, invoices,
receipts, forms, packaging, advertising and promotional materials, product,
training and service literature and materials, computer programs or like
materials ("Marked Materials"), the Buyer may use the Marked Materials in
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connection with the collection of accounts receivable, the sale of Inventories
or the providing of notice to third parties for one year.
I. ARTICLE
EMPLOYEES AND EMPLOYEE BENEFIT PLANS
A. Employment of Seller's Employees.
a) Buyer shall have no obligation to hire any of the Employees. As to any
Employee offered employment by Buyer prior to the Closing or for six months
thereafter, for a period of two years from the Closing Date, Seller and the
Parent will not, and will not permit any of their Affiliates to, solicit, offer
to employ or retain the services for the purpose of engaging in any business
competitive with the Business. b) Notwithstanding any provision hereof to the
contrary, Buyer shall not assume any liability of Seller in respect of any of
the Employees or any other Person for accrued but unpaid salaries, wages,
vacation and sick pay or incentive compensation and Seller shall remain liable
therefor and shall also remain responsible for payment of any and all retention,
change in control or other similar compensation or benefits which are or may
become payable in connection with the consummation of the transactions
contemplated by this Agreement or the Collateral Agreements.
a) Notwithstanding any other provision hereof to the contrary, it is not Buyer's
intent to assume or become liable with respect to any collective bargaining
agreement to which Seller may be a party or that Buyer or any of its Affiliates
recognize any collective bargaining unit or become subject to any agreement or
arrangement therewith.
a) From and after the Closing, the Seller shall remain solely responsible for
any and all Benefit Liabilities in respect of the Employees and their
beneficiaries and dependents, relating to or arising in connection with or as a
result of (i) the employment or the actual or constructive termination of
employment of any such Employee by Seller (including, without limitation, in
connection with the consummation of the transactions contemplated by this
Agreement or the Collateral Agreements), (ii) the participation in or accrual of
benefits or compensation under, or the failure to participate in or to accrue
compensation or benefits under, any Plan or other employee or retiree benefit or
compensation plan, program, practice, policy, agreement or arrangement of Seller
or (iii) accrued but unpaid salaries, wages, bonuses, incentive compensation,
vacation or sick pay or other compensation or payroll items (including, without
limitation, deferred compensation) relating to such Employee's employment with
Seller.
a) Seller shall remain solely responsible for the payment or withholding of
Taxes relating to employment of the Employees by Seller. The parties do not
contemplate treating Buyer as a "successor employer" within the meaning of
Sections 3121(a)(1) and 3306(b)(1) of the Code with respect to any Employee
hired by Buyer following the Closing.
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a) Notwithstanding any other provision hereof to the contrary, Seller shall not
be liable for any claim, liability, loss, cost or expense (including attorney's
fees) arising out of or relating to (i) any Employee's employment by Buyer, or
(ii) Buyer's failure to employ any Employee in violation of any Governmental
Authority.
A. Welfare and Benefit Plans.
a) From and after the Closing Date, Seller shall remain solely responsible for
any and all Benefit Liabilities in respect of any Employee (i) under any Plan of
Seller or Parent that is an "employee welfare benefit plan" (within the meaning
of section 3(1) of ERISA) that provides post-employment benefits of any kind (a
"Seller Retiree Welfare Plan") or (ii) otherwise in connection with the
provision of, or the failure to provide, post-employment welfare benefits or
coverage to or in respect of any such Employee relating to or arising from
Employee's employment by Seller.
a) From and after the Closing Date, the Seller shall remain solely responsible
for any and all Benefit Liabilities relating to or arising in connection with
the requirements of section 4980B of the Code to provide continuation of health
care coverage under any Plan of Seller or Parent, including any Benefit
Liabilities contemplated in proposed Regulation Section 1.162-26 et.seq.
proposed to be adopted pursuant to the Code, in respect of Employees and their
covered dependents.
A. Workers Compensation. From and after the Closing Date, the Seller shall
remain solely responsible for any and all Benefit Liabilities to or in respect
of any Employee relating to or arising in connection with any and all claims for
workers' compensation benefits arising in connection with any occupational
injury or disease occurring or existing on or prior to the Closing Date.
I. ARTICLE
DEFINITIONS, POST CLOSING COVENANTS AND MISCELLANEOUS
A. Definition of Certain Terms. The terms defined in this Section 6.1, whenever
used in this Agreement (including in the Schedules), shall have the respective
meanings indicated below for all purposes of this Agreement. All references
herein to a Section, Article or Schedule are to a Section, Article or Schedule
of or to this Agreement, unless otherwise indicated.
Accounts Receivable: the accounts receivable of Seller and TBDI
reflected on the Closing Date Balance Sheet.
Affiliate: of a Person means a Person that directly or indirectly
through one or more intermediaries, controls, is controlled by, or is under
common control with, the first Person. "Control" (including the terms
"controlled
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by" and "under common control with") means the possession, directly or
indirectly, of the power to direct or cause the direction of the management
policies of a person, whether through the ownership of voting securities,
by contract or credit arrangement, as trustee or executor, or otherwise.
Agreement: this Asset Purchase Agreement, including the Schedules
hereto.
Applicable Law: all currently applicable provisions of all (i)
constitutions, treaties, statutes, laws (including the common law), rules,
regulations, ordinances, codes or orders of any Governmental Authority,
(ii) Governmental Approvals and (iii) orders, decisions, injunctions,
judgments, awards and decrees of or agreements with any Governmental
Authority.
Assets: as defined in Section 1.1.
Assumed Liabilities: as defined in Section 2.4.
Benefit Liabilities: liabilities, obligations, commitments, costs and
expenses, including reasonable fees and disbursements of attorneys and
other advisors, including any such expenses incurred in connection with the
enforcement of any applicable provision of this Agreement.
Business: as defined in the recitals hereto.
Business Day: shall mean a day other than a Saturday, Sunday or other
day on which commercial banks in Dallas, Texas are authorized or required
to close.
Buyer: as defined in the preamble of this Agreement.
Buyer Indemnitees: as defined in Section 6.2(a).
Cash Amount: as defined in Section 4.3(a).
Closing: the Closing as defined in Section 2.1.
Closing Date: as defined in Section 2.1.
Closing Date Balance Sheet: as defined in Section 3.1.4 and attached
as Schedule 3.1.4.
Closing Date Payment: as defined in Section 4.3(a).
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Code: the Internal Revenue Code of 1986, as amended.
Collateral Agreements: the agreements and other documents and
instruments delivered by the Buyer or Seller to the other at the Closing.
Consent: any consent, approval, authorization, waiver, permit, grant,
franchise, concession, agreement, license, exemption or order of,
registration, certificate, declaration or filing with, or report or notice
to, any Person, including but not limited to any Governmental Authority.
Contracts: as defined in Section 3.1.6.
Demand Notice: as defined in Section 4.3(b).
$ or dollars: lawful money of the United States.
Employees: as defined in Section 3.1.9.
Environmental Laws shall mean any Applicable Laws that require or
relate to the environment in effect in the jurisdiction in which the
Business is being conducted or where any of the Assets are located,
including without limitation, the Superfund Amendments and Reauthorization
Act of 1986, as amended, the Resource Conservation and Recovery Act of
1976, as amended, the Toxic Substances Control Act of 1976, as amended, the
Federal Water Pollution Control Act Amendments of 1972, the Clean Water Act
of 1977, as amended, any so-called "Superfund" or "Superlien" Law
(including those already referenced in this definition), the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended,
and the Hazardous Transportation Act, as amended, and any other Law having
a similar subject matter. "Environmental Laws" does not include the
Occupational Safety and Health Act or any other federal, state or local
law, statute, ordinance, regulation or order governing worker safety or
workplace conditions.
Environmental Permits: any federal, state and local permit, license,
registration, consent, order, administrative consent order, certificate,
approval or other authorization with respect to the Seller necessary for
the conduct of the Business as currently conducted under any Environmental
Law.
ERISA: the Employee Retirement Income Security Act of 1974, as
amended.
Excluded Assets: as defined in Section 1.2.
Final Payment Amount: as defined in Section 4.3(a).
16
<PAGE>
GAAP: at any time, generally accepted accounting principles as in
effect in the United States.
Governmental Approval: any Consent of, with or to any Governmental
Authority.
Governmental Authority: any nation or government, any state or other
political subdivision thereof, any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government, including, without limitation, any government
authority, agency, department, board, commission or instrumentality of the
United States, any State of the United States or any political subdivision
thereof, and any tribunal or arbitrator(s) of competent jurisdiction, and
any self-regulatory organization.
Hazardous Substances" shall mean any material, chemical, substance,
waste or matter which (i) is petroleum or a petroleum product, (ii)
constitutes a hazardous substance, hazardous waste, toxic substance or
pollutant as such terms are defined by or pursuant to any Environmental Law
or (iii) is regulated or controlled as a Hazardous Substance, toxic
substance, pollutant or other regulated or controlled material, chemical,
substance, waste or matter pursuant to any Environmental Law.
Indemnified Party: as defined in Section 6.2(d).
Indemnifying Party: as defined in Section 6.2(d).
Inventories: as defined in Section 2.4(a)(iv).
IRS: the Internal Revenue Service.
Knowledge: means, with respect to a particular fact or other matter,
actual knowledge and awareness of such fact or other matter after due and
reasonable inquiry. As used in this Agreement, the phrases "Seller's
Knowledge," "Knowledge of Seller," "Known to Seller" and similar phrases
shall mean only the Knowledge of John B. Poindexter, Stephen P. Magee, M.
James Levine, J. Michael Hart, Robert S. Whatley, Larry T. Wolfe and Frank
Klaus.
Leased Real Property: means all interests leased pursuant to the
Leases.
Leases: as defined in Section 3.7(b).
Liens: any lien, mortgage, pledge, hypothecation, right of others,
claim, security interest, encumbrance, lease, sublease, license, occupancy
agreement, easement, option, right of first refusal, charge or other
encumbrance.
17
<PAGE>
Losses: as defined in Section 8.2(a).
Marked Materials: as defined in Section 4.4.
Names: as defined in Section 4.4.
Parent: as defined in the preamble of this Agreement.
Permitted Liens: means (i) Liens specifically reserved against on the
Closing Date Balance Sheet or the schedules thereto, to the extent so
reserved (ii) Liens relating exclusively to the Assumed Liabilities which
are not required to be set forth on the Closing Date Balance Sheet by
reason of the requirements of Section 3.1.4 (iii) Liens created by the
Buyer, (iv) Liens and rights to Liens of mechanics, warehousemen, carriers,
repairmen and others by operation of law and incurred in the ordinary
course of business, securing obligations not yet delinquent, and (v) the
rights of lessors under the Leases.
Person: any natural person, firm, partnership, association,
corporation, company, limited liability company, limited partnership,
trust, business trust, Governmental Authority or other entity.
Plan: as defined in Section 3.1.9.
Premises: as defined in Section 4.1.4.
Purchase Price: as defined in Section 2.2.
Real Property: the Leased Real Property.
Refund Amount: as defined in Section 4.3(a).
Retained Liabilities: as defined in Section 2.6.
Seller: as defined in the preamble of this Agreement.
Tax: any federal, state, provincial, local, foreign or other income,
alternative, minimum, accumulated earnings, personal holding company,
franchise, capital stock, net worth, capital, profits, windfall profits,
gross receipts, value added, sales, use, goods and services, excise,
customs duties, transfer, conveyance, mortgage, registration, stamp,
documentary, recording, premium, severance, environmental (including taxes
under Section 59A of the Code), real property, personal property, ad
valorem, intangibles, rent, occupancy, license, occupational, employment,
unemployment insurance, social security, disability, workers' compensation,
payroll, health care, withholding, estimated or other similar tax, duty or
other governmental charge or assessment or deficiencies thereof (including
all interest and penalties thereon and additions thereto whether disputed
or not).
18
<PAGE>
Tax Return: any return, report, declaration, form, claim for refund or
information return or statement relating to Taxes, including any schedule
or attachment thereto, and including any amendment thereof.
TBDI: as defined in the recitals hereto.
Transaction Expenses: as defined in Section 6.5.
Transfer Taxes: as defined in Section 4.2.2.
Treasury Regulations: the regulations prescribed pursuant to the Code.
True Up Balance Sheet: as defined in Section 4.3(a).
A. Indemnification.
a) By Seller and Parent. Subject to Section 6.2(e), Seller and the Parent,
jointly and severally, covenant and agree to defend, indemnify and hold harmless
the Buyer, its officers, directors, employees, agents, advisers, representatives
and Affiliates (including TBDI) (collectively, the "Buyer Indemnitees") from and
against, and pay or reimburse the Buyer Indemnitees for, any and all claims,
liabilities, obligations, losses, fines, costs, royalties, proceedings,
deficiencies or damages (whether absolute, accrued, conditional or otherwise and
whether or not resulting from third party claims, but without duplication and
only to the extent recognizable for financial statement reporting purposes under
GAAP), including out-of pocket expenses and reasonable attorneys' and
accountants' fees incurred in the investigation or defense of any of the same or
in asserting any of their respective rights hereunder (collectively, "Losses"),
resulting from or arising out of:
(1) the Retained Liabilities;
(1) the breach by Seller or Parent of any representation, warranty, covenant or
agreement set forth in this Agreement or in any Collateral Agreement.
(1) except to the extent reserved for on the Closing Date Balance Sheet, any
claim by any third party arising from the actual or alleged intentional
misconduct or gross negligence of Seller or TBDI; and
(1) except to the extent reserved for in the Closing Date Balance Sheet or to
the extent Buyer shall receive indemnity and defense from any third party
(including any insurer or manufacturer) any claim by any third party that any
product or service provided by Seller or TBDI was or is defective.
19
<PAGE>
a) By the Buyer. The Buyer covenants and agrees to defend, indemnify and hold
harmless Seller, the Parent and their respective officers, directors, employees,
agents, advisers, representatives and Affiliates (collectively, the "Seller
Indemnitees") from and against any and all Losses resulting from or arising out
of:
(1) the breach by Buyer of any representation, warranty, covenant or agreement
set forth in this Agreement or in any Collateral Agreement; or
(1) the Assumed Liabilities;
(1) the use by the Buyer of any of Seller's tradenames or trademarks after the
Closing Date as contemplated by Section 6.5; and
(1) Buyer's use or occupation of the Premises (including without limitation,
torts committed by Buyer or Buyer's agents while using the Premises) and use of
computer software and files made available to Buyer pursuant to Section 4.1.4;
and
(1) Buyer's ownership, operation or use of the Assets following the Closing
Date, except, to the extent such Losses result from or arise out of the Retained
Liabilities or constitute Losses for which the Seller and Parent are required to
indemnify the Buyer Indemnitees under Section 6.2(a).
a) Adjustments to Indemnification Payments. Any payment made by Seller or the
Parent to the Buyer Indemnitees, on the one hand, or by the Buyer to the Seller
Indemnitees, on the other hand, pursuant to this Section 6.2 in respect of any
claim shall be net of any insurance proceeds realized by and paid to the
Indemnified Party in respect of such claim. The Indemnified Party shall use its
reasonable efforts to make insurance claims relating to any claim for which it
is seeking indemnification pursuant to this Section 6.2; provided that the
Indemnified Party shall not be obligated to make such an insurance claim if the
Indemnified Party in its reasonable judgment believes that the cost of pursuing
such an insurance claim together with any corresponding increase in insurance
premiums or other chargebacks to the Indemnified Party, as the case may be,
would exceed the value of the claim for which the Indemnified Party is seeking
indemnification.
a) Indemnification Procedures. In the case of any claim asserted by a third
party against a party entitled to indemnification under this Agreement (the
"Indemnified Party"), notice shall be given by the Indemnified Party to the
party required to provide indemnification (the "Indemnifying Party") promptly
after such Indemnified Party has actual knowledge of any claim as to which
indemnity may be sought, and the Indemnified Party shall permit the Indemnifying
Party (at the expense of such Indemnifying Party) to assume the defense of any
claim or any litigation resulting therefrom, provided that (1) the counsel for
the Indemnifying Party who shall conduct the defense of such claim or litigation
shall be reasonably satisfactory to the Indemnified Party, (ii) the Indemnified
20
<PAGE>
Party may participate in such defense at such Indemnified Party's expense, and
(iii) the omission by any Indemnified Party to give notice as provided herein
shall not relieve the Indemnifying Party of its indemnification obligation under
this Agreement except to the extent that such omission results in a failure of
actual notice to the Indemnifying Party and such Indemnifying Party is
materially damaged as a result of such failure to give notice. Except with the
prior written consent of the Indemnified Party, no Indemnifying Party, in the
defense of any such claim or litigation, shall consent to entry of any judgment
or enter into any settlement that provides for injunctive or other nonmonetary
relief affecting the Indemnified Party or that does not include as an
unconditional term thereof the giving by each claimant or plaintiff to such
Indemnified Party of a release from all liability with respect to such claim or
litigation. In the event that the Indemnified Party shall in good faith
determine that the conduct of the defense of any claim subject to
indemnification thereunder or any proposed settlement of any such claim by the
Indemnifying Party might be expected to affect adversely the Indemnified Party's
Tax liability or the ability of the Buyer to conduct its business, or that the
Indemnified Party may have available to it one or more defenses or counterclaims
that are inconsistent with one or more of those that may be available to the
Indemnifying Party in respect of such claim or any litigation relating thereto,
the Indemnified Party shall have the right at all times to take over and assume
control over the defense, settlement, negotiations or litigation relating to any
such claim at the sole cost of the Indemnifying Party, provided that if the
Indemnified Party does so take over and assume control, the Indemnified Party
shall not settle such claim or litigation without the written consent of the
Indemnifying Party, such consent not to be unreasonably withheld. In the event
that the Indemnifying Party does not accept the defense of any matter as above
provided, the Indemnified Party shall have the full right to defend against any
such claim or demand and shall be entitled to settle or agree to pay in full
such claim or demand. In any event, the Indemnifying Party and the Indemnified
Party shall cooperate in the defense of any claim or litigation subject to this
Section 6.2 and the records of each shall be available to the other with respect
to such defense.
a) Limits of Liability. The Seller and Parent shall have no liability under
Section 6.2(a)(ii) for any breach of Seller's representations and warranties set
forth in Section 3.1 except to the extent that Losses suffered by the Buyer
Indemnitees shall exceed $200,000 in the aggregate but only to the extent that
such Losses are less than the sum of (i) one-half of the Purchase Price and (ii)
$200,000. The foregoing provisions of this Section 6.2(e) shall not have the
effect of limiting Buyer's right to indemnity under Section 6.2(a)(i), (iii) or
(iv).
a) Time Limitation. All claims for indemnification under clause (i) of Section
6.2(a) or clause (i) of Section 6.2(b) must be asserted within 30 days of the
termination of the respective survival periods set forth in Section 6.3.
a) Treatment of the Parent and Seller. For the purposes of this Section 6.2, the
rights, duties and obligations of the Parent and Seller (and their respective
successors, heirs and assigns) shall be joint and several, and the action of one
21
<PAGE>
of them, or notice to or from one of them, shall be the action of, notice to or
from and binding upon the other for all purposes. No dissolution, liquidation,
winding up or any other action of Seller shall have the effect of limiting the
rights, duties or obligations of Buyer or the Buyer Indemnitees under this
Section 6.2 with respect to Seller or the Seller Indemnitees, who, in any such
circumstance, shall continue to consist of the Parent and Seller (and their
respective successors, heirs and assigns.)
a) EXPRESS NEGLIGENCE. WITHOUT EXPANDING THE INDEMNITIES PROVIDED BY SECTION
6.2(a) AND (b) ABOVE, THE PARTIES UNDERSTAND THAT INDEMNIFICATION MAY EXIST
THEREUNDER FOR LOSSES WHICH ARISE IN PART AS A RESULT OF THE ACTUAL OR ALLEGED
NEGLIGENCE OF AN INDEMNIFIED PARTY. THE FOREGOING SENTENCE IS INCLUDED IN THIS
AGREEMENT FOR THE PURPOSE OF COMPLYING WITH THE EXPRESS NEGLIGENCE DOCTRINE AND
SHALL NOT BE CONSTRUED TO MODIFY THE OBLIGATIONS OF THE PARTIES.
A. Survival of Representations and Warranties etc. The representations and
warranties contained in this Agreement shall survive the execution and delivery
of this Agreement, any examination by or on behalf of the parties hereto and the
completion of the transactions contemplated herein, but only to the extent
specified below:
a) the representations and warranties contained in Sections 3.1.1, 3.1.2, 3.1.5
and 3.1.6 and Section 3.2 shall survive without limitation.
a) except as provided in clause (a) above, the representations and warranties
contained in Section 3.1 shall not survive the first anniversary of the Closing
Date.
A. Dispute Resolution. Any dispute, claim or controversy (other than a dispute,
claim or controversy solely between Seller and the Parent) arising from, or
relating to, or in connection with this Agreement, its validity, or its
performance or nonperformance, including disputes, claims, or controversies for
tortious interference or other tortious or statutory claims, providing only that
such dispute, claim, or controversy touches upon matters covered by this
Agreement (a "Dispute" for the purposes of this Article), shall be settled by
the procedures of this Article, and not by litigation or administrative
procedure before the courts or administrative bodies of any jurisdiction except
to the extent that resolution thereof is provided for in Section 4.3, whereupon
such section shall control.
1. Statement of Positions. In the event of a Dispute, each party shall first
promptly provide the others with a general written statement of its claim(s) and
position(s). This statement shall indicate that it is the first statement of a
formal dispute resolution process under this Agreement. The other party or
parties shall have 14 days to respond in writing. The statement or response need
22
<PAGE>
not be complete and will not limit the claims of a party in any further
procedure. If the parties cannot resolve by negotiation the Dispute within 14
days of receipt of any response, a party may proceed as set forth in Section
6.4.2 through 6.4.4 below.
1. Negotiation Procedures. Within one month of the time of the failure to
resolve the dispute using the procedure set out in Section 6.4.1, the parties
shall meet in Houston, Texas to attempt to reach a resolution of the matter and
set forth that resolution in writing. At least one person from each of the
parties (an "Authorized Person") shall have the authority to settle the Dispute
and to execute a writing to that effect without seeking further instruction or
authorization.
1. Mediation Resolution Procedure. If the parties cannot resolve a Dispute
pursuant to Sections 6.4.1 through 6.4.2, the parties shall, within 21 days of
such failure, commence mediation by notice of selection of a third party,
neutral mediator and proposed time(s) and date(s) for the mediation. If the
other party does not propose an alternative mediator, then the mediation shall
occur before the first person proposed. If the other party does propose an
alternative mediator, then the two proposed mediators shall promptly jointly
select a third, neutral party to act as the sole mediator. If the Parties cannot
agree among themselves on a proposed mediator, then the mediator shall be
selected, and the mediation conducted, under the then-existing Commercial
Mediation Rules of the American Arbitration Association ("AAA"). The mediation
shall take place in Houston, Texas and mediator fees shall be equally shared by
Buyer and the Parent. If the mediation resolves the Dispute, the resolution
shall be memorialized in writing. If the parties cannot resolve the Dispute
through mediation, any party may terminate mediation. Upon termination of
mediation, the parties may submit the Dispute to binding arbitration under
Section 6.4.4 below. Each party shall be represented at any mediation by at
least one Authorized Person.
1. Binding Arbitration. If the parties cannot resolve a Dispute pursuant to
Sections 6.4.1 through 6.4.3 above, the Dispute shall be resolved by arbitration
in Houston, Texas as follows:
a) AAA Rules Apply. The arbitration shall be under the then existing Commercial
Arbitration Rules of the AAA.
a) Arbitrators. The parties shall attempt to agree on a single arbitrator. If
they cannot so agree, Buyer shall name one arbitrator and Seller shall name one
neutral arbitrator, and the two arbitrators shall jointly name a third neutral
arbitrator. Before the appointment of a third arbitrator, the parties may
communicate ex parte with the party-named arbitrators in order to ascertain any
conflicts of interest, to provide information about the subject matters of the
controversy, the parties, and any counsel or arbitrators involved and the
parties may communicate directly (i.e., not through the AAA administrator) with
23
<PAGE>
the arbitrator(s) using the same procedures under which it would be proper to
communicate with a judge and a decision of any two of the three arbitrators
shall bind the parties in all matters hereunder.
a) Discovery. The parties shall be permitted to engage in reasonable discovery,
including requests for production of relevant documents and other tangible
evidence at a time reasonably prior to the arbitration hearing. Depositions
shall be allowed by the arbitrator or arbitrators on a showing of need.
a) Administration and Hearing. The arbitration hearing shall be conducted in
Houston, Texas.
a) Award. The arbitrator's award shall be final. Judgment upon any award by the
arbitrator may be entered by the state or federal district courts located in any
court having jurisdiction over the parties.
a) Cost and Expenses. The prevailing party in any arbitration contemplated
pursuant to this Section 6.4.4 shall be entitled to receive, as determined by
the arbitrator in such action, reasonable attorneys fees and costs related to
such arbitration, to the extent so related. Notwithstanding the foregoing, the
arbitrator shall not be compelled to determine a prevailing party, and no award
of attorneys fees and expenses shall be made absent such a determination. The
arbitrator may make partial awards of attorneys fees and expenses.
A. Expenses. Except as specifically provided herein, Seller and the Parent, on
the one hand, and the Buyer, on the other hand, shall bear their respective
expenses, costs and fees (including attorneys', auditors' and financing
commitment fees) in connection with the transactions contemplated hereby,
including the preparation, execution and delivery of this Agreement and
compliance herewith (the "Transaction Expenses").
A. Relationship of Parent. The Parent's obligations hereunder are set forth
herein by specific reference to Parent only, and no other obligations of Parent
shall be implied or inferred by its execution and delivery hereof.
A. Severability. If any provision of this Agreement, including any phrase,
sentence, clause, Section or subsection is inoperative or unenforceable for any
reason, such circumstances shall not have the effect of rendering the provision
in question inoperative or unenforceable in any other case or circumstance, or
of rendering any other provision or provisions herein contained invalid,
inoperative, or unenforceable to any extent whatsoever.
A. Notices. All notices, requests, demands, waivers and other communications
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to have been duly given if (a) delivered personally or (b) sent
by reputable next-day or overnight mail or delivery, proof of delivery
requested.
24
<PAGE>
(1) if to the Buyer to,
L. D. Brinkman & Co. (Texas), Inc.
1655 Waters Ridge
Lewisville, TX 75057
Attention: Chief Executive Officer
with a copy to:
Jackson Walker, L.L.P.
901 Main Street, Suit 6000
Dallas, Texas 75202
Attention: Jeffrey M. Sone, Esq.
(1) if to Seller or Parent,
Lowy Group, Inc.
c/o J.B. Poindexter & Co., Inc.
1100 Louisiana Street, Suite 5400
Houston, Texas 77002
Attn: Stephen Magee and John Poindexter
with a copy to:
Mayer, Brown & Platt
700 Louisiana Street, Suite 3600
Houston, Texas 77002
Attention: Paul B. Clemenceau, Esq.
or, in each case, at such other address as may be specified in writing to the
other parties hereto.
All such notices, requests, demands, waivers and other communications
shall be deemed to have been received (w) if by personal delivery on the day
after such delivery, or (x) if by next-day or overnight mail or delivery, on the
day delivered.
A. Miscellaneous.
1. Headings. The headings contained in this Agreement are for purposes of
convenience only and shall not affect the meaning or interpretation of this
Agreement.
1. Entire Agreement. This Agreement (including the Schedules hereto) and the
Collateral Agreements (when executed and delivered) constitute the entire
25
<PAGE>
agreement and supersede all prior agreements and understandings, both written
and oral, between the parties with respect to the subject matter hereof.
2. Counterparts. This Agreement may be executed in several counterparts, each of
which shall be deemed an original and all of which shall together constitute one
and the same instrument.
1. Governing Law, etc. This Agreement shall be governed in all respects,
including as to validity, interpretation and effect, by the internal laws of the
State of Texas, without giving effect to the conflict of laws rules thereof
without modifying the provisions of Section 6.4. The Buyer, the Parent and
Seller hereby irrevocably submit to the jurisdiction of the courts of the State
of Texas and the Federal courts of the United States of America located in the
State of Texas and the City of Houston, County of Harris solely in respect of
the interpretation and enforcement of the provisions of this Agreement and of
the documents referred to in this Agreement, and hereby waive, and agree not to
assert, as a defense in any action, suit or proceeding for the interpretation or
enforcement hereof or of any such document, that it is not subject thereto or
that such action, suit or proceeding may not be brought or is not maintainable
in said courts or that the venue thereof may not be appropriate or that this
Agreement or any of such document may not be enforced in or by said courts, and
the parties hereto irrevocably agree that all claims with respect to such action
or proceeding shall be heard and determined in such a Texas State or Federal
court. The Buyer, the Parent and Seller hereby consent to and grant any such
court jurisdiction over the person of such parties and over the subject matter
of any such dispute and agree that delivery of process or other papers in
connection with any such action or proceeding in the manner provided in Section
6.8, or in such other manner as may be permitted by law, shall be valid and
sufficient service thereof.
1. Binding Effect. This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective heirs, successors and permitted
assigns.
1. Assignment. This Agreement shall not be assignable or otherwise transferable
by any party hereto without the prior written consent of the other party hereto,
provided that the Buyer may assign this Agreement to any direct or indirect
wholly owned subsidiary of the Buyer.
1. No Third Party Beneficiaries. Except as provided in Section 6.2 with respect
to indemnification of Indemnified Parties hereunder, nothing in this Agreement
shall confer any rights upon any person or entity other than the parties hereto
and their respective heirs, successors and permitted assigns. Without limiting
the generality of the foregoing, no provision of this Agreement or any
Collateral Agreement shall constitute an offer, guaranty or contract of
employment.
1. Amendment; Waivers, etc. No amendment, modification or discharge of this
Agreement, and no waiver hereunder, shall be valid or binding unless set forth
26
<PAGE>
in writing and duly executed-by the party against whom enforcement of the
amendment, modification, discharge or waiver is sought. Any such waiver shall
constitute a waiver only with respect to the specific matter described in such
writing and shall in no way impair the rights of the party granting such waiver
in any other respect or at any other time. Neither the waiver by any of the
parties hereto of a breach of or a default under any of the provisions of this
Agreement, nor the failure by any of the parties, on one or more occasions, to
enforce any of the provisions of this Agreement or to exercise any right or
privilege hereunder, shall be construed as a waiver of any other breach or
default of a similar nature, or as a waiver of any of such provisions, rights or
privileges hereunder. The rights and remedies herein provided are cumulative and
are not exclusive of any rights or remedies that any party may otherwise have at
law or in equity. Except as provided in Section 3.1.8, the rights and remedies
of any party based upon, arising out of or otherwise in respect of any
inaccuracy or breach of any representation, warranty, covenant or agreement or
failure to fulfill any condition shall in no way be limited by the fact that the
act, omission, occurrence or other state of facts upon which any claim of any
such inaccuracy or breach is based may also be the subject matter of any other
representation, warranty, covenant or agreement as to which there is no
inaccuracy or breach. The representations and warranties of Seller shall not be
affected or deemed waived by reason of any investigation made by or on behalf of
the Buyer (including but not limited to by any of its advisors, consultants or
representatives) or by reason of the fact that the Buyer or any of such
advisors, consultants or representatives knew or should have known that any such
representation or warranty is or might be inaccurate.
[Reminder of page intentionally left blank]
27
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date first above written.
L. D. BRINKMAN & CO. (TEXAS), INC.
By:
Name:
Title:
LOWY GROUP, INC.
By:
Name:
Title:
J.B. POINDEXTER & CO., INC.
By:
Name:
Title:
Subsidiaries of J. B. Poindexter & Co., Inc.
1. EFP Corporation, a Delaware corporation
a. EFP Corporation also operates under the following names:
i. Astro Pattern Corporation
ii. Engineered Foam Plastics
2. Beltrami Door Company, a Delaware corporation.
3. Lowy Group, Inc., a Delaware corporation
Lowy Group, Inc. also operates under the following names:
i. Fred T. Lowy Distributors Division
ii. Lowy Enterprises of Minnesota
iii. Fred Lowy Linoleum & Rug
iv. Flooring Distributors
v. Lowy Distributors
4. Magnetic Instruments Corp., a Delaware corporation
a. Magnetic Instruments Corp. also operates under the following names:
i. Electrospec Corporation
ii. MIC Group
iii. Manufacturing Innovations
5. Morgan Trailer Mfg. Co., a New Jersey corporation
a. Acero-Tec S.A. de C.V., a Monterry, Nuevo Leon, Mexico corporation, is
a subsidiary of Morgan Trailer Mfg. Co.
b. Morgan Trailer Mfg. Co. also operates under the names Morgan
Corporation and Gem Top Mfg.
6. Truck Accessories Group, Inc., a Delaware corporation, f/w/a Leer, Inc.,
f/w/a Leer Holdings Inc.
a. Subsidiaries of Truck Accessories Group, Inc. include:
i Raider Industries, Inc., a Saskatchewan, Canada corporation, is
a wholly- owned subsidiary of Truck Accessories Group, Inc.
(a) Raider Industries, Inc. also operates under the
following names:
1) Lo Rider
2) Raider
ii. Leer Acquisition Company, Inc., a Delaware corporation, is a
wholly-owned subsidiary of Truck Accessories Group, Inc.
(a) Welshman Industires, Inc., f/w/a Radco Industries,
Inc., a Minnesota corporation, is a wholly-owned
subsidiary of Leer Acquisition Company, Inc., and
operates under the following name:
1) Midwest Truck Aftermarket
b. Truck Accessories Group, Inc. also operates under the following names:
i. 20th Century Fiberglass
ii. Century Fiberglass
iii. Century
iv. Leer
v. Leer Corporate
vi. Leer East
vii. Leer Midwest
viii. Leer Retail
ix. Leer Southeast
x. Leer Specialty Products
xi. Leer Truck Accessory Centers
xii. Leer West
xiii. National Truck Accessories
xiv. National Truck Accessories Headquarters
xv. National Truck Accessories Midwest
xvi. National Truck Accessories Southeast
xvii. National Truck Accessories West
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 1999
FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 997
<SECURITIES> 0
<RECEIVABLES> 34,235
<ALLOWANCES> 1,121
<INVENTORY> 37,774
<CURRENT-ASSETS> 75,021
<PP&E> 98,473
<DEPRECIATION> 61,141
<TOTAL-ASSETS> 136,711
<CURRENT-LIABILITIES> 55,983
<BONDS> 88,751
0
0
<COMMON> 16,486
<OTHER-SE> (316)
<TOTAL-LIABILITY-AND-EQUITY> 136,711
<SALES> 436,787
<TOTAL-REVENUES> 436,787
<CGS> 356,707
<TOTAL-COSTS> 412,732
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,822
<INCOME-PRETAX> 10,233
<INCOME-TAX> 1,487
<INCOME-CONTINUING> 8,346
<DISCONTINUED> 57
<EXTRAORDINARY> 198
<CHANGES> 0
<NET-INCOME> 9,001
<EPS-BASIC> 2.942
<EPS-DILUTED> 2.942
<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 EXTRACTED FROM THE 1999
FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH 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> 27,580
<ALLOWANCES> 731
<INVENTORY> 32,514
<CURRENT-ASSETS> 65,208
<PP&E> 93,120
<DEPRECIATION> 54,794
<TOTAL-ASSETS> 137,800
<CURRENT-LIABILITIES> 50,548
<BONDS> 104,451
0
0
<COMMON> 16,486
<OTHER-SE> (491)
<TOTAL-LIABILITY-AND-EQUITY> 137,800
<SALES> 375,405
<TOTAL-REVENUES> 375,405
<CGS> 316,657
<TOTAL-COSTS> 366,575
<OTHER-EXPENSES> 335
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,695
<INCOME-PRETAX> (7,200)
<INCOME-TAX> 744
<INCOME-CONTINUING> (7,944)
<DISCONTINUED> (4,209)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (12,153)
<EPS-BASIC> (3.973)
<EPS-DILUTED> (3.973)
<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 EXTRACTED FROM THE 1999
FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 3,191
<SECURITIES> 0
<RECEIVABLES> 30,186
<ALLOWANCES> 1,426
<INVENTORY> 31,395
<CURRENT-ASSETS> 66,693
<PP&E> 90,071
<DEPRECIATION> 48,766
<TOTAL-ASSETS> 165,892
<CURRENT-LIABILITIES> 64,826
<BONDS> 105,807
0
0
<COMMON> 16,486
<OTHER-SE> (186)
<TOTAL-LIABILITY-AND-EQUITY> 165,892
<SALES> 341,632
<TOTAL-REVENUES> 341,632
<CGS> 281,579
<TOTAL-COSTS> 331,046
<OTHER-EXPENSES> 1,364
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,827
<INCOME-PRETAX> (6,605)
<INCOME-TAX> 947
<INCOME-CONTINUING> (7,552)
<DISCONTINUED> 6
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,546)
<EPS-BASIC> (2.467)
<EPS-DILUTED> (2.467)
<FN>
LOSS PROVISION IS INCLUDED IN SELLING, GENERAL AND ADMINISTRATIVE ON
THE FINANCIAL STATEMENTS.
</FN>
</TABLE>
