United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 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 November 1, 2000.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
ASSETS
September 30, December 31,
2000 1999
------------- -------------
(Unaudited)
Current assets
Restricted cash ................................... $ 2,371 $ 997
Accounts receivable, net of allowance for doubtful
accounts of $1,089 and $1,121, respectively.... 38,623 33,114
Inventories, net .................................. 41,643 37,774
Deferred income taxes ............................. 2,320 2,307
Prepaid expenses and other ........................ 1,201 829
-------- --------
Total current assets ..................... 86,158 75,021
Property, plant and equipment, net ................ 51,459 37,332
Goodwill, net ..................................... 19,562 14,711
Deferred income taxes ............................. 2,758 5,229
Other assets ...................................... 4,208 4,418
-------- --------
Total assets ...................................... $164,145 $136,711
======== ========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities
Current portion of long-term debt ................ $ 3,448 $ 576
Borrowings under the revolving credit facilities . 27,071 15,286
Accounts payable ................................. 20,300 21,792
Accrued compensation and benefits ................ 6,968 9,548
Accrued interest ................................. 4,051 1,404
Accrued income taxes ............................. 501 910
Other accrued liabilities ........................ 7,410 6,467
-------- --------
Total current liabilities .................... 69,749 55,983
-------- --------
Noncurrent liabilities
Long-term debt, less current portion ............. 92,087 85,404
Employee benefit obligations and other ........... 3,908 3,347
-------- --------
Total noncurrent liabilities ................. 95,995 88,751
-------- --------
Commitments and contingencies
Stockholder's deficit
Common stock and paid-in-capital ................. 16,486 16,486
Cumulative other elements of comprehensive income. (471) (316)
Accumulated deficit .............................. (17,614) (24,193)
--------- ---------
Total stockholder's deficit .................. (1,599) (8,023)
--------- ---------
Total liabilities and stockholder's deficit .. $164,145 $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 Nine Months
Ended September 30, Ended September 30,
2000 1999 2000 1999
---------- ---------- --------- -------
<S> <C> <C> <C> <C>
Net sales ................................................... $ 106,063 $ 103,880 $ 352,049 $ 333,636
Cost of sales ............................................... 87,908 84,930 288,801 274,365
--------- --------- --------- ---------
Gross profit ................................................ 18,155 18,950 63,248 59,271
Selling, general and administrative expense ................. 14,562 13,572 44,582 40,355
Other (income) expense ...................................... 40 35 (66) (262)
--------- --------- --------- ---------
Operating income ............................................ 3,553 5,343 18,732 19,178
Interest expense ............................................ 3,739 3,228 11,213 10,408
--------- --------- --------- ---------
Income (loss) before income taxes ........................... (186) 2,115 7,519 8,770
Income tax provision (benefit) .............................. (793) 57 940 228
--------- --------- --------- ---------
Income before extraordinary gain ............................ 607 2,058 6,579 8,542
Extraordinary gain .......................................... -- -- -- 186
--------- ---------- --------- ---------
Net income................................................... $ 607 $ 2,058 $ 6,579 $ 8,728
========= ========== ========= =========
Basic and diluted income per share:
Income from operations ...................................... $ 198 $ 673 $ 2,150 $ 2,792
Extraordinary gain .......................................... -- -- -- 61
--------- --------- ---------- ---------
Net income.............................................. $ 198 $ 673 $ 2,150 $ 2,853
========= ========= ========== =========
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 Nine Months
Ended September 30,
-------------------
2000 1999
---- ----
(Unaudited)
Cash provided by operations ....................... $ 8,013 $ 11,133
-------- --------
Cash flows (used in) provided by investing activities:
Purchases of businesses net of cash acquired ...... (14,673) --
Proceeds from sales of businesses and equipment ... 888 10,903
Acquisition of property, plant and equipment ...... (11,123) (6,717)
-------- --------
Net cash (used in) provided by investing
activities...................................... (24,908) 4,186
-------- --------
Cash flows provided by (used in) financing activities:
Net proceeds from (payments to) revolving lines
of credit and short-term debt .................. 11,590 (1,314)
Proceeds from long-term debt ...................... 8,710 --
Payments of long-term debt and capital leases ..... (2,031) (15,208)
-------- --------
Net cash provided by (used in) financing
activities..................................... 18,269 (16,522)
-------- --------
Increase (decrease) in restricted cash ................. 1,374 (1,203)
Restricted cash, beginning of period ................... 997 2,194
-------- --------
Restricted cash, end of period ......................... $ 2,371 $ 991
========= =========
Supplemental information:
Cash paid for income taxes, net of refunds ........ $ 1,349 $ 453
========= =========
Cash paid for interest ............................ $ 7,804 $ 7,266
========= =========
The accompanying notes are an integral part of these consolidated
financial statements.
4
<PAGE>
J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(1) Organization and Business. J.B. Poindexter & Co., Inc. (JBPCO) and its
subsidiaries (the Subsidiaries, and, together with JBPCO, the Company), operate
primarily manufacturing businesses. Subsidiaries consist of Morgan Trailer Mfg.
Co., (Morgan), Truck Accessories Group, Inc., (TAG), EFP Corporation, (EFP), and
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 nine-month period ended September 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 Nine Months
Ended September 30, Ended September 30,
-------------------------- ---------------------
2000 1999 2000 1999
---- ---- ---- ----
Net Sales:
<S> <C> <C> <C> <C>
Morgan ............................................. $ 51,556 $ 59,162 $ 189,127 $ 196,615
TAG ................................................ 32,925 32,891 103,489 99,295
Specialty Manufacturing Group ...................... 13,170 3,477 34,590 11,971
EFP ................................................ 8,704 8,633 25,620 26,038
Intercompany Sales ................................. (292) (283) (777) (283)
--------- --------- --------- ---------
Net Sales .......................................... $ 106,063 $ 103,880 $ 352,049 $ 333,636
========= ========= ========= =========
Operating Income (Loss):
<S> <C> <C> <C> <C>
Morgan ............................................. $ 1,555 $ 4,616 $ 10,882 $ 16,892
TAG ................................................ 955 1,243 4,150 3,399
Specialty Manufacturing Group ...................... 1,388 (324) 4,724 (587)
EFP ................................................ 670 784 2,039 2,070
JBPCO (Corporate) .................................. (1,015) (976) (3,063) (2,596)
---------- ---------- ---------- ---------
Operating Income ................................... $ 3,553 $ 5,343 $ 18,732 $ 19,178
========== ========== ========== =========
September 30, December 31,
Total Assets as of: 2000 1999
-------------------- ------------
<S> <C> <C>
Morgan........................................ $ 72,070 $ 67,229
TAG........................................... 47,757 45,478
Specialty Manufacturing Group................. 29,326 8,493
EFP........................................... 13,233 13,604
JBPCO (Corporate)............................. 1,759 1,907
--------- ---------
Total Assets.................................. $ 164,145 $ 136,711
========= =========
</TABLE>
5
<PAGE>
During the nine months ended September 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
$18,741,000 at September 30, 2000.
(3) Comprehensive Income. The components of comprehensive income (loss) were as
follows (in thousands):
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
---------------------- --------------------
2000 1999 2000 1999
---- ---- ---- ----
Net income (loss) ................... $ 607 $ 2,058 $ 6,579 $ 8,728
Foreign currency translation
adjustments ..................... (72) (25) (155) 111
------- ------- ------- -------
Comprehensive income (loss) ......... $ 535 $ 2,033 $ 6,424 $ 8,839
======= ======= ======= =======
(4) Inventories. Consolidated net inventories consisted of the following
(in thousands):
September 30, December 31,
2000 1999
-------------- -------------
FIFO Basis Inventory:
Raw Materials ........................... $ 28,299 $ 24,990
Work in Process........................... 6,807 5,296
Finished Goods ........................... 6,537 7,488
-------- --------
Total Inventory ........................... $ 41,643 $ 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 $1,323,000 will be amortized over 20 years. The acquisition was
treated as a purchase and revenues and operating income from the date of
acquisition until September 30, 2000 of $6,437,000 and $552,000, respectively,
were included in the consolidated results of operations for the nine months
ended September 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 $4,364,000 will be amortized over 20 years. The acquisition was
treated as a purchase and revenues and operating income from the date of
acquisition until September 30, 2000 of $6,174,000 and $1,489,000, respectively,
were included in the consolidated results of operations for the nine months
ended September 30, 2000.
6
<PAGE>
The Company's consolidated results of operations on an unaudited pro forma
basis, as though the businesses acquired during the nine months ended September
30, 2000 had been acquired on January 1, 1999 were as follows (in thousands,
except per share amounts):
For the Nine Months
Ended September 30,
2000 1999
---- ----
Pro forma net sales ................................ $356,704 $349,605
Pro forma operating income ......................... 19,486 21,478
Pro forma income before extraordinary gain ......... 7,054 9,377
Pro forma net income ............................... 7,054 9,563
Pro forma income per share:
Income before extraordinary gain ............... $ 2,306 $ 3,065
Net income ..................................... $ 2,306 $ 3,126
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 September 30, 2000, the Company had total
borrowing availability of approximately $48,800,000, of which $3,500,000 was
used to secure letters of credit. Additionally, $27,071,000 had been borrowed to
fund operations, resulting in unused availability of $18,229,000.
(7) Long-term Debt. During the nine months ended September 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
September 30, 2000.
(8) Income Taxes. The income tax benefit of $(793,000) and a provision of
$940,000 for the three and nine month periods ended September 30, 2000,
respectively, differ 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.
(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.
7
<PAGE>
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." SAB 101 provides guidance on applying
generally accepted accounting principles to revenue recognition issues in
financial statements. In June 2000, the SEC issued Staff Accounting Bulletin No.
101B ("SAB 101B"), Second Amendment: Revenue Recognition in Financial
Statements. SAB 101B delayed the implementation date of SAB 101 until no later
that the fourth fiscal quarter of 2000. The Company will adopt SAB 101 pursuant
to SAB 101B (including the recent Frequently Asked Questions and Answers
document issued by the SEC in October 2000) as required in the fourth quarter of
2000 and is evaluating the effect that such adoption may have on its
consolidated results of operations and financial position.
8
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
And Results of Operations
The Company operates in industries that are dependent on various factors
reflecting general economic conditions, including corporate profitability,
consumer spending patterns, sales of truck chassis and new pickup trucks and
levels of oil and gas exploration.
Results of Operations
During the nine months ended September 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
comparisons for Morgan and TAG have been restated to reflect the transfer of Gem
Top.
Nine Months Ended September 30, 2000 Compared to
Nine Months Ended September 30, 1999
Net sales increased $18.4 million or 6% to $352.0 million for the nine
months ended September 30, 2000 compared to $333.6 million during 1999. KWS and
Universal added $12.6 million to sales during the nine months ended September
30, 2000. Morgan's sales were $189.1 million compared to sales of $196.6 million
during the same period of the prior year. Sales at Morgan's Advanced Handling
Systems (AHS) Division decreased $5.7 million or 90% during the nine months
ended September 30, 2000 because of the loss of the supplier of its principal
product. A decrease in unit shipments of 13% to 22,800 units, included a 1,869
or 38% unit decrease in consumer rental shipments. The higher levels of consumer
rental production during 1999 were not repeated during the same period in 2000.
TAG sales increased $4.2 million or 4% to $103.5 million due to pricing changes
and an improved product mix. EFP sales decreased slightly to $25.6 million
compared to $26.0 million. Sales of the MIC Group component of the Specialty
Manufacturing Group increased $10.0 million or 84% 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 September 30, 2000 was $30.5 million compared to $54.9
million at September 30, 1999, reflecting a general reduction in orders from
Morgan's major customers. Backlog at EFP was $3.3 million at September 30, 2000
compared to $3.7 million at September 30, 1999. Specialty Manufacturing Group's
backlog at September 30, 2000 was $15.2 million including a combined backlog of
$6.2 million for KWS and Universal. MIC Group's backlog was $9.0 million at
September 30, 2000 compared to $4.6 million at the end of the third quarter of
1999.
Cost of sales rose 5% to $288.8 million for the nine months ended September
30, 2000 compared to $274.4 million, during the 1999 period. Gross profit
increased 7% to $63.2 million (18% of net sales) during the 2000 period compared
to $59.3 million (18% of net sales) for 1999. Gross profit at Morgan decreased
$6.5 million to $23.0 million or 12% of sales during the period compared to
$29.4 million or 15% of sales during the 1999 period. Morgan incurred increased
labor and overhead costs relative to sales and has implemented plans to reduce
labor costs during the fourth quarter of 2000. TAG's gross profit for the nine
months ended September 30, 2000 increased $2.0 million or 9%. Although partially
reduced by start up costs associated with the new polymer based tonneau product,
9
<PAGE>
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 remained 20% of sales at EFP. Specialty Manufacturing Group's gross
profit increased $8.4 million during 2000 compared to 1999. MIC Group's gross
profit increased $4.0 million and the operations of KWS and Universal, acquired
during the period, added $4.4 million. Gross profit at MIC Group increased to
$5.6 million (25% of sales) during 2000 compared to $1.5 million (13% of sales)
in 1999 due to improved labor efficiency and overhead absorption on higher
sales.
Selling, general and administrative expenses increased $4.2 million or 10%
to $44.6 million (13% of net sales) for the nine months ended September 30, 2000
compared to $40.4 million (12% of net sales) during 1999. The increase in
selling, general and administrative expense was due primarily to combined costs
of $2.2 million at KWS and Universal acquired during the period and a $0.7
million increase in selling expense at MIC Group where sales increased 84% for
the period compared to the prior year.
Operating income decreased 2% or $0.4 million to $18.7 million (5% of net
sales) for the nine months ended September 30, 2000 compared to $19.2 million
(6% of net sales) in 1999. Specialty Manufacturing Group's operating income
increased $5.3 million, MIC Group's operating income increased $3.3 million to
$2.7 million and KWS and Universal, together contributed $2.1 million subsequent
to their being acquired in March 2000. Morgan's operating income decreased $0.4
million for the period. The decrease was primarily the result of a $1.3 million
decrease in earnings at its AHS Division and higher labor and overhead costs.
TAG's operating income increased $0.8 million. EFP's operating income remained
at 1999 levels.
Interest expense was $11.2 million for the nine months ended September 30,
2000, 8% greater than the $10.4 million during the same period in 1999. The
increase was due to increased revolving credit 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 nine-month period ended September 30, 2000
of 12.5% 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.
Third Quarter 2000 Compared to Third Quarter 1999
Net sales increased $2.2 million or 2% to $106.1 million for the quarter
ended September 30, 2000 compared to $103.9 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 September 30, 2000.
MIC Group sales, that are included in the Specialty Manufacturing Group sales,
increased $4.1 million or 119% due to higher activity of its oilfield services
customers as well as a 123% increase in sales to non-energy related customers.
TAG sales of $32.9 million were consistent with the prior year period. Morgan's
sales during the third quarter decreased 13% or $7.6 million from $59.2 million
to $51.6 million. The reduction in Morgan's sales for the period was
attributable to $2.7 million less in sales by its Advanced Handling Systems
division and a $5.4 million decline in commercial sales. EFP sales remained the
same as 1999.
Cost of sales rose 4% to $87.9 million for the quarter ended September 30,
2000 compared to $84.9 million, during the 1999 period and gross profit
decreased 4% to $18.2 million (17% of net sales) during the 2000 quarter
compared to $19.0 million (18% of net sales) for 1999. Specialty Manufacturing
Group's gross profit increased $3.2 million during 2000 compared to 1999 as a
10
<PAGE>
result of a $1.5 million increase at MIC Group on increased sales and $1.7
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 24% during 2000 compared to 11% in 1999 due to better labor
utilization and improved overhead absorption. Gross profit at Morgan decreased
$3.9 million (43%) to $5.0 million or 10% of sales compared to 15% of sales
during 1999. Morgan's reduction in gross profit was primarily due to the lower
absorption of overhead costs on lower sales and the loss of sales at its AHS
division. TAG's gross profit for the quarter ended September 30, 2000 was $7.9
million or 24% consistent with the prior year period. Gross profit decreased 8%
to $1.6 million or 19% of sales at EFP because of increased raw material costs.
Selling, general and administrative expenses increased $1.0 million or 7%
to $14.6 million (14% of net sales) for the quarter ended September 30, 2000
compared to $13.6 million (13% 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
whose results are not included in the 1999 period.
Operating income decreased 34% or $1.8 million to $3.6 million (3% of net
sales) for the quarter ended September 30, 2000 compared to $5.3 million (5% of
net sales) in 1999. Specialty Manufacturing Group's operating income increased
$1.7 million due to a $1.1 million increase at MIC Group and contributions from
KWS and Universal totaling $0.7 million. TAG's operating income decreased 23% or
$0.3 million. Morgan's operating income decreased $3.0 million for the period
primarily as a result of a $0.6 million decrease in its AHS Division operating
profits and higher overhead costs. Morgan has implemented plans to reduce labor
and overhead costs. EFP's operating income of $0.7 million was the same as the
comparable prior period.
Interest expense was $3.7 million for the quarter ended September 30, 2000,
16% greater than the $3.3 million during the same period in 1999. The increase
was due to higher revolving credit borrowings and long-term debt associated with
the acquisitions of KWS and Universal and increased funding requirements for
operations.
Liquidity and Capital Resources
Net cash provided by operations decreased $3.1 million during the nine
months ended September 30, 2000 compared to the same period in 1999 due
primarily to the $2.9 million decrease in net income. Working capital at
September 30, 2000 was $16.4 million compared to $19.0 million at December 31,
1999 and $17.9 million at September 30, 1999. The decline at September 30, 2000
compared to September 30, 1999 is due primarily to increased revolver borrowings
at Morgan to fund operations and capital expenditures.
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 November 3, 2000,
the Company had unused available borrowing capacity of approximately $20.7
million under the terms of the Revolving Loan Agreement. Borrowings under the
Revolving Loan Agreement at September 30, 2000 were $27.1 million compared to
$15.3 million at December 31, 1999 and $17.2 million at September 30, 1999.
Capital expenditures for the nine months ended September 30, 2000 were
$11.1 million compared to $6.7 million during the same period in 1999.
Expenditures during the nine months ended September 30, 2000 included $4.5
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
11
<PAGE>
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.
PART II. OTHER INFORMATION
Item 3. Other Information
None
Item 4. Exhibits and Reports on Form 8-K
Exhibits
10.1.7 Amendment No. 2 to Loan and Security Agreement by and among Congress
Financial Corporation and J.B. Poindexter & Co., Inc., dated June
30, 1998
10.1.8 Amendment No. 3 to Loan and Security Agreement by and among Congress
Financial Corporation and J.B. Poindexter & Co., Inc., dated June
24, 1999
10.1.9 Amendment No. 4 to Loan and Security Agreement by and among Congress
Financial Corporation and J.B. Poindexter & Co., Inc., dated
February 25, 2000
10.1.10 Amendment No. 5 to Loan and Security Agreement by and among Congress
Financial Corporation and J.B. Poindexter & Co., Inc., dated
March 8, 2000
10.1.11 Amendment No. 6 to Loan and Security Agreement by and among Congress
Financial Corporation and J.B. Poindexter & Co., Inc., dated
March 17, 2000
10.1.12 Amendment No. 7 to Loan and Security Agreement by and among Congress
Financial Corporation and J.B. Poindexter & Co., Inc., dated ,
2000
10.1.13 Amendment No. 8 to Loan and Security Agreement by and among Congress
Financial Corporation and J.B. Poindexter & Co., Inc., dated
October 31, 2000
Form 8-K
None
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
J.B. POINDEXTER & CO., INC.
(Registrant)
Date: November 13, 2000 By: S. Magee
-------------------------------------
S. Magee, Chief Financial Officer and
Director
By: R.S. Whatley
-------------------------------------
R. S. Whatley, Principal Accounting Officer
