United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
-------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to __________
Commission file number 33-75154
J.B. POINDEXTER & CO., INC.
(Exact name of registrant as specified in its charter)
Delaware 76-0312814
------------- -------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1100 Louisiana
Suite 5400
Houston, Texas
77002
---------------------
(Address of principal executive offices)
(Zip code)
(713) 655-9800
---------------------
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
There were 3,059 shares of Common Stock, $.01 par value, of the registrant
outstanding as of August 1, 2000.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
June 30, December 31,
2000 1999
----------- -------------
(Unaudited)
Current assets
Restricted cash ................................... $ 117 $ 997
Accounts receivable, net of allowance for doubtful
accounts of $1,141 and $1,121, respectively ..... 46,755 33,114
Inventories, net .................................. 46,984 37,774
Deferred income taxes ............................. 1,856 2,307
Prepaid expenses and other ........................ 1,133 829
--------- ------------
Total current assets ..................... 96,845 75,021
Property, plant and equipment, net ................ 51,435 37,332
Goodwill, net ..................................... 19,545 14,711
Deferred income taxes ............................. 3,210 5,229
Other assets ...................................... 4,325 4,418
----------- -----------
Total assets ...................................... $175,360 $136,711
=========== ===========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities
Current portion of long-term debt ................. $ 3,448 $ 576
Borrowings under the revolving credit facilities .. 35,961 15,286
Accounts payable .................................. 23,543 21,792
Accrued compensation and benefits ................. 7,624 9,548
Accrued interest .................................. 1,571 1,404
Accrued income taxes .............................. 1,347 910
Other accrued liabilities ......................... 6,754 6,467
------- -------
Total current liabilities ......................... 80,248 55,983
------- -------
Noncurrent liabilities
Long-term debt, less current portion .............. 93,250 85,404
Employee benefit obligations and other ............ 3,996 3,347
------- --------
Total noncurrent liabilities ...................... 97,246 88,751
------- --------
Commitments and contingencies
Stockholder's deficit
Common stock and paid-in-capital .................. 16,486 16,486
Cumulative other elements of comprehensive income . (399) (316)
Accumulated deficit ............................... (18,221) (24,193)
-------- --------
Total stockholder's deficit ....................... (2,134) (8,023)
-------- --------
Total liabilities and stockholder's deficit ....... $175,360 $136,711
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
2
<PAGE>
J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited-in thousands except share and per share amounts)
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
2000 1999 2000 1999
---------- ---------- --------- -------
<S> <C> <C> <C> <C>
Net sales ......................................... $ 131,177 $ 121,658 $ 245,986 $ 229,756
Cost of sales ..................................... 106,277 99,145 200,893 189,435
--------- --------- --------- ---------
Gross profit ...................................... 24,900 22,513 45,093 40,321
Selling, general and administrative expense ....... 15,563 14,222 30,020 26,434
Other (income) expense ............................ (81) 101 (106) 52
--------- --------- --------- --------
Operating income ................................... 9,418 8,190 15,179 13,835
Interest expense ................................... 3,966 3,463 7,474 7,180
--------- --------- --------- ---------
Income before income taxes ......................... 5,452 4,727 7,705 6,655
Income tax provision ............................... 1,225 123 1,733 171
--------- --------- --------- ---------
Income before extraordinary gain ................... 4,227 4,604 5,972 6,484
Extraordinary gain (loss) .......................... -- (36) -- 186
--------- --------- --------- ---------
Net income ......................................... $ 4,227 $ 4,568 $ 5,972 $ 6,670
========= ========= ========= =========
Basic and diluted income per share:
Income from continuing operations ............. $ 1,382 $ 1,505 $ 1,952 $ 2,120
Extraordinary gain (loss) ..................... -- (12) -- 60
------- ------- ------- -------
Net income .................................... $ 1,382 $ 1,493 $ 1,952 $ 2,180
======= ======= ======= =======
Weighted average shares outstanding ................ 3,059 3,059 3,059 3,059
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
3
<PAGE>
J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
For the Six Months
Ended June 30,
2000 1999
---- ----
(Unaudited)
Cash (used in) provided by operations .................... $ (6,598) $ 6,920
-------- --------
Cash flows (used in) provided by investing activities:
Purchases of businesses net of cash acquired ........ (14,673) --
Proceeds from sales of businesses and equipment ..... 168 10,903
Acquisition of property, plant and equipment ........ (8,295) (4,002)
Other ............................................... -- (48)
-------- --------
Net cash (used in) provided by investing
activities................................... (22,800) 6,853
-------- --------
Cash flows provided by (used in) financing activities:
Net proceeds from revolving lines of credit and
short-term debt ................................. 20,676 589
Proceeds from long-term debt ........................ 8,710 --
Payments of long-term debt and capital leases ....... (868) (14,964)
-------- --------
Net cash provided by (used in) financing
activities.................................. 28,518 (14,375)
-------- --------
Decrease in restricted cash .............................. (880) (602)
Restricted cash, beginning of period ..................... 997 2,194
-------- --------
Restricted cash, end of period ........................... $ 117 $ 1,592
======== ========
Supplemental information:
Cash paid for income taxes, net of refunds .......... $ 797 $ 376
======== ========
Cash paid for interest .............................. $ 7,059 $ 6,799
======== ========
The accompanying notes are an integral part of these
consolidated financial statements.
4
<PAGE>
J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
(1) Organization and Business. J.B. Poindexter & Co., Inc. (JBPCO) and its
subsidiaries (the Subsidiaries, and, together with JBPCO, the Company), operate
primarily manufacturing businesses. Subsidiaries consist of Morgan Trailer Mfg.
Co., (Morgan), Truck Accessories Group, Inc., (TAG), EFP Corporation, (EFP), and
the Specialty Manufacturing Group comprising: Magnetic Instruments Corp., (MIC
Group), KWS Manufacturing, Inc., (KWS) and Universal Brixius, Inc., (Universal).
The consolidated financial statements included herein have been prepared by
the Company, without audit, following the rules and regulations of the
Securities and Exchange Commission. In the opinion of management, the
information furnished reflects all adjustments, consisting only of normal
recurring adjustments, which are necessary for a fair presentation of the
results of the interim periods. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted following such
rules and regulations. However, the Company believes that the disclosures are
adequate to make the information presented understandable. Operating results for
the six-month period ended June 30, 2000 are not necessarily indicative of the
results that may be expected for the year ended December 31, 2000. These
financial statements should be read in conjunction with the audited consolidated
financial statements and notes thereto for the year ended December 31, 1999
filed with the Securities and Exchange Commission on Form 10-K.
(2) Segment Data. The following is a summary of the business segment data
(in thousands):
<TABLE>
<CAPTION>
For the Three Months For the Six Months
Ended June 30, Ended June 30,
--------------------------- -------------------
2000 1999 2000 1999
---- ---- ---- ----
Net Sales:
<S> <C> <C> <C> <C> <C>
Morgan ............................................... $ 72,021 $ 72,899 $ 137,572 $ 137,453
TAG .................................................. 38,099 36,613 70,564 66,404
Specialty Manufacturing Group ........................ 12,937 3,428 21,420 8,494
EFP .................................................. 8,350 8,718 16,916 17,405
Intercompany Sales ................................... (230) -- (486) --
--------- --------- --------- --------
Net Sales ............................................ $131,177 $121,658 $245,986 $229,756
======== ========= ========= ========
Operating Income (Loss):
Morgan ............................................... $ 5,550 $ 7,047 $ 9,327 $ 12,276
TAG .................................................. 2,270 1,815 3,195 2,155
Specialty Manufacturing Group ........................ 1,929 (524) 3,336 (262)
EFP .................................................. 683 686 1,369 1,286
JBPCO (Corporate) .................................... (1,014) (834) (2,048) (1,620)
----------- --------- -------- --------
Operating Income ..................................... $ 9,418 $ 8,190 $15,179 $13,835
========== ========= ========= =======
</TABLE>
<TABLE>
<CAPTION>
June 30, December 31,
Total Assets as of: 2000 1999
----------- ------------
<S> <C> <C>
Morgan .............................................. $81,671 $67,229
TAG ................................................. 47,691 45,478
Specialty Manufacturing Group ....................... 30,077 8,493
EFP ................................................. 14,201 13,604
JBPCO (Corporate) ................................... 1,720 1,907
------- -------
Total Assets ........................................ $175,360 $136,711
======== ========
</TABLE>
5
<PAGE>
Effective June 30, 2000, the operations of Gem Top, which manufactures
and distributes light truck caps, primarily to commercial customers, were
transferred from Morgan to TAG. The results of operations, for all periods
presented, for Morgan and TAG have been restated to reflect the transfer of
Gem Top.
During the six months ended June 30, 2000, MIC Group acquired two
corporations, see Note 5 below. The acquired companies operate machining and
fabrication businesses, which with MIC Group make up the Specialty Manufacturing
Group segment of operations. The total assets acquired were approximately
$19,445,000 at June 30, 2000.
(3) Comprehensive Income. The components of comprehensive income (loss)
were as follows (in thousands):
For the Three Months For the Six Months
Ended June 30, Ended June 30,
-------------------- -------------------
2000 1999 2000 1999
---- ---- ---- ----
Net income ........................... $ 4,227 $ 4,568 $ 5,972 $ 6,670
Foreign currency translation
adjustments ...................... (78) 59 (83) 136
------- ------- ------- -------
Comprehensive income ................. $ 4,149 $ 4,627 $ 5,889 $ 6,806
======= ======= ======= =======
(4) Inventories. Consolidated net inventories consisted of the following
(in thousands):
June 30, December 31,
2000 1999
-------------- -------------
FIFO Basis Inventory:
Raw Materials ....................... $32,823 $ 24,990
Work in Process....................... 8,061 5,296
Finished Goods ....................... 6,100 7,488
--------- ----------
Total Inventory ....................... $46,984 $ 37,774
========= ==========
(5) Acquisitions. Effective March 8, 2000, MIC Group acquired the stock of
KWS Manufacturing Company, Inc. (KWS). Based in Joshua, Texas, KWS designs and
fabricates bulk material handling equipment. MIC Group paid approximately
$5,964,000, net of cash acquired, in cash for the stock of KWS. Goodwill
recorded of $1,005,000 will be amortized over 20 years. The acquisition was
treated as a purchase and revenues and operating income from the date of
acquisition until June 30, 2000 of $3,817,000 and $528,000, respectively, were
included in the consolidated results of operations for the six months ended June
30, 2000.
Effective March 17, 2000, MIC Group acquired the stock of Universal
Brixius, Inc. (Universal). Based in Milwaukee, Wisconsin, Universal is a
diversified, high-volume contract machining company that produces close
tolerance parts from castings and forgings usually provided by its customers.
MIC Group paid approximately $11,600,000, net of cash acquired for the stock of
Universal, of which $8,725,000 was paid in cash. In addition, $2,875,000 of the
purchase price was evidenced by a promissory note payable in 12 consecutive
quarterly installments of principal and interest. Goodwill recorded of
approximately $3,700,000 will be amortized over 20 years. The acquisition was
treated as a purchase and revenues and operating income from the date of
6
<PAGE>
acquisition until June 30, 2000 of $3,233,000 and $858,000, respectively, were
included in the consolidated results of operations for the six months ended June
30, 2000.
The Company's consolidated results of operations on an unaudited pro forma
basis, as though the businesses acquired during the six months ended June 30,
2000 had been acquired on January 1, 1999 were as follows (in thousands, except
per share amounts):
For the Six Months
Ended June 30,
2000 1999
---- ----
Pro forma net sales ................................ $249,221 $240,032
Pro forma operating income ......................... 15,555 15,501
Pro forma income before extraordinary gain ......... 5,997 7,550
Pro forma net income ............................... 5,997 7,736
Pro forma income per share:
Income before extraordinary gain ............... $ 1,960 $ 2,468
Net income ..................................... $ 1,960 $ 2,529
These pro forma results are presented for informational purposes only.
These results do not purport to show the actual results, which would have
occurred had the business combinations been consummated on January 1, 1999, nor
should they be viewed as indicative of future results of operations. The
allocations of purchase price to the assets acquired and liabilities assumed has
been initially assigned and recorded based on preliminary estimates of fair
value and may be revised as additional information concerning the valuation of
such assets and liabilities becomes available.
(6) Revolving Loan Agreements. At June 30, 2000, the Company had total
borrowing availability of approximately $55,000,000, of which $2,338,000 was
used to secure letters of credit. Additionally, $35,961,000 had been borrowed to
fund operations, resulting in unused availability of $16,701,000.
(7) Long-term Debt. During the six months ended June 30, 1999, the Company
purchased $15,000,000 of its 2004 12 1/2% Senior Notes. The Company realized a
gain of $186,000, net of income taxes of $6,000 and net of deferred loan costs
of $332,000, which was recognized as an extraordinary gain in the consolidated
statements of operations for the period. As a result of this purchase, the
Company held $15,000,000 of its Senior Notes in a brokerage account as of June
30, 2000.
(8) Income Taxes. The income tax provision of $1,225,000 and $1,733,000 for
the three and six month periods ended June 30, 2000, respectively, differs from
amounts computed based on the federal statutory rates principally due to the
Company's ability to utilize the benefit of net operating loss carryforwards
against which valuation allowances had been previously provided. The effective
tax rate is greater than 1999 as the net operating loss carryforwards against
which valuation allowances have been previously provided are completely utilized
and the Company begins to utilize the remaining net operating loss carryforwards
for which no valuation allowances have been established.
7
<PAGE>
(9) Contingencies.
Claims and Lawsuits. The Company is involved in certain claims and lawsuits
arising in the normal course of business. In the opinion of management, the
ultimate resolution of these matters will not have a material adverse effect on
the financial position or results of operations of the Company.
Environmental Matters. Since 1989, Morgan has been named as a potentially
responsible party ("PRP") with respect to its generation of hazardous materials
alleged to have been handled or disposed of at two Federal Superfund sites in
Pennsylvania and one in Kansas. Although a precise estimate of liability cannot
currently be made with respect to these sites, based upon information known to
Morgan, the Company currently believes that it's proportionate share, if any, of
the ultimate costs related to any necessary investigation and remedial work at
those sites will not have a material adverse effect on the Company.
(10) New Accounting Pronouncements.
Derivative Instruments and Hedging Activities. In June 1998, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 133, Accounting for Derivative Instruments and Hedging Activities,
which, as amended, is required to be adopted by the Company in 2001. Because of
the Company's limited use of derivatives to manage its exposure to fluctuations
in foreign exchange rates, management does not anticipate that the adoption of
the new statement will have a significant effect on earnings or the financial
position of the Company.
Revenue Recognition. In December 1999, the Securities and Exchange
Commission ("SEC") issued Staff Accounting Bulletin 101 ("SAB 101"), "Revenue
Recognition in Financial Statements" which provides guidance related to revenue
recognition based on interpretations and practices followed by the SEC. The
effective date of this bulletin was deferred to the fourth quarter of 2000. SAB
101 requires companies to report any changes in revenue recognition as a
cumulative change in accounting principle at the time of implementation in
accordance with Accounting Principles Board Opinion No. 20, "Accounting
Changes." The Company is currently in the process of evaluating the impact SAB
101 will have on its financial position or results of operations.
Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations
The Company operates in industries that are dependent on various factors
reflecting general economic conditions, including corporate profitability,
consumer spending patterns, sales of truck chassis and new pickup trucks and
levels of oil and gas exploration.
Results of Operations
During the six months ended June 30, 2000, the Company made two
acquisitions. Effective March 8, 2000, the Company acquired the stock of KWS
Manufacturing Company, Inc., (KWS) and effective March 17, 2000, the Company
acquired the stock of Universal Brixius, Inc. (Universal). KWS and Universal are
machining and fabrication operations that are expected to complement the
existing machining operations of MIC Group and are part of the Company's
Specialty Manufacturing Group segment of operations.
Effective June 30, 2000, the operations of Gem Top, which manufactures
and distributes light truck caps, primarily to commercial customers, were
transferred from Morgan to TAG. The following historical financial results and
8
<PAGE>
comparisons for Morgan and TAG have been restated to reflect the transfer of Gem
Top. Inter-company sales between Gem Top and TAG have been eliminated.
Six Months Ended June 30, 2000 Compared to Six Months Ended June 30, 1999
Net sales increased $16.2 million or 7% to $246.0 million for the six
months ended June 30, 2000 compared to $229.8 million during 1999. KWS and
Universal added $7.1 million to sales during the six months ended June 30, 2000.
Morgan's sales were $137.6 million which approximated sales during the same
period of the prior year. Sales at Morgan's Advanced Handling Systems (AHS)
Division decreased $2.9 million or 82% during the six months ended June 30, 2000
because of the loss of the supplier of its principal product. A decrease in unit
shipments of 11% to 19,270 units, including a 1,889 unit decrease in consumer
rental shipments, was offset by sales of certain higher priced commercial
products. The higher levels of consumer rental purchasing activity during 1999
were not repeated during the same period in 2000. TAG sales increased $4.2
million or 6% to $70.6 million due to pricing changes and an improved product
mix as well as a 2% increase in unit shipments. EFP sales decreased $0.5 million
or 3%, mainly due to a decrease in the tooling products business of $0.4
million. Sales of the MIC Group component of the Specialty Manufacturing Group
increased $5.9 million or 69% during the 2000 period as a result of increased
demand for products used in the exploration and production of oil and gas.
Morgan's backlog at June 30, 2000 was $39.7 million compared to $66.3
million at June 30, 1999. Backlog at EFP was $3.5 million at June 30, 2000
compared to $3.3 million at June 30, 1999. Specialty Manufacturing Group's
backlog at June 30, 2000 was $13.6 million including a combined backlog of $5.5
million for KWS and Universal compared to $2.5 million at the end of the second
quarter of 1999 for MIC Group only.
Cost of sales rose 6% to $200.9 million for the six months ended June 30,
2000 compared to $189.4 million, during the 1999 period. Gross profit increased
12% to $45.1 million (18% of net sales) during the 2000 period compared to $40.3
million (18% of net sales) for 1999. Gross profit at Morgan decreased $2.6
million to $17.9 million or 13% of sales during the period compared to 15% of
sales during the 1999 period. Morgan incurred increased labor costs because of a
change in its product mix as well as high labor turnover at its main
Pennsylvania plant. TAG's gross profit for the six months ended June 30, 2000
increased $2.0 million or 13%. Although partially reduced by start up costs
associated with the new polymer based tonneau product, TAG's gross profit as a
percent of sales increased to 24% during the 2000 period compared to 23% during
1999 due to improved pricing of its products. Gross profit increased $0.2
million or 7% at EFP because of reduced costs due to product mix changes and
improved manufacturing processes. Specialty Manufacturing Group's gross profit
increased $5.2 million during 2000 compared to 1999. MIC group's gross profit
increased $2.6 million and the operations of KWS and Universal, acquired during
the period, added $2.6 million. Gross profit at MIC Group increased to $3.7
million (26% of sales) during 2000 compared to $1.1 million (14% of sales) in
1999 due to reduced labor and material costs relative to increased sales and
improved overhead absorption.
Selling, general and administrative expenses increased $3.6 million or 13%
to $30.0 million (12% of net sales) for the six months ended June 30, 2000
compared to $26.4 million (12% of net sales) during 1999. The increase in
selling, general and administrative expense was due primarily to combined costs
of $1.2 million at KWS and Universal acquired during the period.
Operating income increased 10% or $1.4 million to $15.2 million (6% of net
sales) for the six months ended June 30, 2000 compared to $13.8 million (6% of
net sales) in 1999. Specialty Manufacturing Group's operating income increased
$3.6 million, MIC Group's operating income increased $2.2 million to $2.0
million and KWS and Universal, together contributed $1.4 million subsequent to
their being acquired in March 2000. Morgan's operating income decreased $2.9
million for the period. The decrease was primarily the result of a $0.7 million
decrease at its AHS Division and higher labor and overhead costs associated with
the change in product mix. TAG and EFP's operating incomes increased $1.0
million and $0.1 million, respectively.
9
<PAGE>
Interest expense was $7.5 million for the six months ended June 30, 2000,
4% greater than the $7.2 million during the same period in 1999. The increase
was due to increased revolver borrowings and long-term debt associated with the
acquisitions of KWS and Universal during March 2000, offset by lower bond
interest as a result of the purchase of $15.0 million of the Company's 2004 12
1/2 % Senior Notes during the six months ended June 30, 1999.
The income tax provision for the three and six month periods ended June 30,
2000 of 22 1/2% differs from amounts computed based on the federal statutory
rates principally due to the Company's ability to utilize the benefit of net
operating loss carryforwards against which valuation allowances had been
previously provided. The effective income tax rate during fiscal 2000 is greater
than 1999 as the net operating loss carryforwards against which valuation
allowances have been provided are completely utilized and the Company begins to
utilize the remaining net operating loss carryforwards for which no valuation
allowance has been established.
Second Quarter 2000 Compared to Second Quarter 1999
Net sales increased $9.5 million or 8% to $131.2 million for the quarter
ended June 30, 2000 compared to $121.7 million during the 1999 period. KWS and
Universal, acquired during the first quarter of 2000, contributed $5.6 million
to the increase in sales during the quarter ended June 30, 2000. MIC Group
sales, that are included in the Specialty Manufacturing Group sales, increased
$3.9 million or 113% on higher activity at its oilfield services customers as
well as a 165% increase in sales to non-energy related customers. TAG sales
increased $1.5 million or 4% to $38.1 million due to pricing changes, an
improved product mix and a 3% increase in unit shipments. Morgan's sales
decreased 1% or $0.9 million, including a $2.5 million decrease at its AHS
Division. Shipments of consumer rental products decreased 11% or 856 units and
commercial product shipments decreased 3% or 222 units. EFP sales decreased $0.4
million or 4%, mainly due to a $0.2 million decrease in the tooling products
business.
Cost of sales rose 7% to $106.3 million for the quarter ended June 30, 2000
compared to $99.2 million, during the 1999 period. Gross profit increased 11% to
$24.9 million (19% of net sales) during the 2000 quarter compared to $22.5
million (19% of net sales) for 1999. Specialty Manufacturing Group's gross
profit increased $3.6 million during 2000 compared to 1999 as a result of a $1.6
million increase at MIC Group on increased sales and $2.0 million of gross
profit from the operations of KWS and Universal acquired during the first
quarter of 2000. Gross profit as a percentage of sales at MIC Group increased to
25% during 2000 compared to 6% in 1999 due to reduced labor costs and improved
overhead absorption. Gross profit at Morgan decreased $1.9 million (17%) to $9.6
million or 13% of sales compared to 16% of sales during 1999, primarily due to
increased labor and overhead costs and the loss of sales by its AHS Division.
TAG's gross profit for the quarter ended June 30, 2000 increased $0.7 million or
7%. Although partially reduced by increased material costs associated with the
start up of production of the new polymer based tonneau product, TAG's gross
profit as a percent of sales increased to 26% during the 2000 period compared to
25% during 1999 due to improved pricing of its products. Gross profit increased
1% at EFP because of reduced material and labor costs due to product mix changes
and improved manufacturing processes.
Selling, general and administrative expenses increased $1.4 million or 9%
to $15.6 million (12% of net sales) for the quarter ended June 30, 2000 compared
to $14.2 million (12% of net sales) during 1999. The increase in selling,
general and administrative expense is due primarily to $1.0 million associated
with KWS and Universal acquired during the first quarter of 2000.
Operating income increased 15% or $1.2 million to $9.4 million (7% of net
sales) for the quarter ended June 30, 2000 compared to $8.2 million (7% of net
sales) in 1999. Specialty Manufacturing Group's operating income increased $2.5
million primarily due a $1.5 million increase at MIC Group and contributions
from KWS and Universal of $1.0 million. TAG's operating income increased 25% or
$0.5 million. Morgan's operating income decreased $1.5 million for the period
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<PAGE>
primarily as a result of a $0.7 million decrease in its AHS Division's operating
profits, high labor turnover and increased expenditures for the expansion of its
parts and service business. EFP's operating income of $0.7 million was the same
as the comparable prior period despite a 4% decrease in revenues.
Interest expense was $4.0 million for the quarter ended June 30, 2000, 15%
greater than the $3.5 million during the same period in 1999. The increase was
due to higher revolver borrowings and long-term debt associated with the
acquisitions of KWS and Universal and increased funding requirements by
operations.
Liquidity and Capital Resources
The Company used proceeds from its revolving line of credit of $20.7
million and net proceeds of $8.7 million from long-term debt to fund
acquisitions of $14.7 million, capital additions of $8.3 million and $6.6
million to fund operations. The increased funding requirements of operations was
due primarily to an increase in receivables and inventory at Morgan of $10.2
million as a result of an increase in its investment in the commercial products
and the parts and service businesses. Working capital at June 30, 2000 was $16.4
million compared to $19.0 million at December 31, 1999 and $17.1 million at June
30, 1999.
The ability to borrow under the Revolving Loan Agreement depends on the
amount of eligible collateral, which, in turn, depends on certain advance rates
applied to the value of accounts receivables and inventory. At August 1, 2000,
the Company had unused available borrowing capacity of approximately $18.0
million under the terms of the Revolving Loan Agreement. Borrowings under the
Revolving Loan Agreements at June 30, 2000 were $36.0 million compared to $15.3
million at December 31, 1999 and $19.0 million at June 30, 1999.
Capital expenditures for the six months ended June 30, 2000 were $8.3
million compared to $4.0 million during the same period in 1999. Expenditures
during the six months ended June 30, 2000 included $3.1 million at Morgan for
two new production facilities, a corporate office and warehouse facility and
three new parts and service facilities.
The Company believes that it has adequate resources to meet its working
capital and capital expenditure requirements consistent with past trends and
practices. Management believes that its cash balances and the borrowing
availability under the Revolving Loan Agreement will satisfy the Company's cash
requirements for the foreseeable future, given its anticipated additional
capital expenditures, working capital requirements and known obligations. The
Company is in compliance with the terms of the Revolving Loan Agreement.
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.
11
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PART II. OTHER INFORMATION
Item 3. Other Information
None
Item 4. Exhibits and Reports on Form 8-K
None
12
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
J.B. POINDEXTER & CO., INC.
(Registrant)
Date: August 10, 2000 By: S. Magee
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S. Magee, Chief Financial Officer and Director
By: R.S. Whatley
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R. S. Whatley, Principal Accounting Officer
