SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ending September 30, 1996
Commission File No. 0-24188
JOTAN, INC.
(Exact name of small business issuer as specified in its charter.)
Florida 59-3181162
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
118 W. Adams Street, Suite 900, Jacksonville, Florida 32202
(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code: (904) 355-2592
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15 (d) of the Securities Exchanged act of 1934 during the
past 12 months (or for such shorter period that the issuer was required to
file such reports) and (2) has been subject to such filing requirements for
the past 90 days.
Yes [ X ] No [ ]
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
5,679,411 shares of common stock, $.01 par value, as of October 22, 1996.
<PAGE>
INDEX
Jotan, Inc.
Part I--Financial Information
Item I -- Financial Statements (Unaudited)
Condensed Consolidated Statements of Operations
for the Nine Months and Quarter ended
September 30, 1996 and 1995........................................2
Condensed Consolidated Balance Sheets at September 30, 1996
and 1995.......................................................3 & 4
Condensed Consolidated Statements of Cash Flows for the
Nine Months ended September 30, 1996 and 1995......................5
Notes to Condensed Consolidated Financial Statements...............6
Item II -- Management's Discussion and Analysis of
Financial Condition and Result of Operations.................6
Part II -- Other Information
Item 6 - Exhibits and Reports on Form 8-K...............................10
Signature...................................................................11
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<TABLE>
JOTAN, INC.
Condensed Consolidated Statements of Operations
(Unaudited)
<CAPTION>
Three months ended Sept 30 Nine months ended Sept 30
__________________________ __________________________
1996 1995 1996 1995
____________ ____________ ____________ ____________
<S> <C> <C> <C> <C>
Sales $ 2,865,067 $ 2,685,053 $ 8,349,138 $ 7,872,556
Cost of sales 2,078,858 2,110,927 6,237,573 6,161,217
____________ ____________ ____________ ____________
Gross profit 786,209 574,126 2,111,565 1,711,339
Operating expenses 648,861 599,790 1,825,896 1,946,153
____________ ____________ ____________ ____________
Operating income (loss) 137,348 ( 25,664) 285,669 ( 234,814)
Other income 12,274 48,197 51,766 205,016
Interest expense ( 59,740) ( 62,180) ( 201,475) ( 169,898)
____________ ____________ ____________ ____________
Income (loss)
before taxes 89,882 ( 39,647) 135,960 ( 199,696)
Income tax expense - - - -
------------ ------------ ------------ ------------
Net Income (Loss) $ 89,882 $( 39,647) $ 135,960 $( 199,696)
============ ============ ============ ============
Net income (loss)
per share $ .01 $ (.01) $ .02 $ (.04)
=========== =========== =========== ===========
Weighted average number
of common and common
equivalent shares
outstanding 8,211,057 5,664,211 6,520,905 5,440,920
=========== =========== =========== ===========
See accompanying notes.
</TABLE>
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<TABLE>
JOTAN, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
<CAPTION>
September 30
1996 1995
____________ ____________
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalent $ 1,379,254 $ 81,837
Trade receivables (net) 1,242,764 1,006,590
Inventory 1,123,161 1,266,812
Other current assets 291,964 88,928
____________ ___________
Total current assets 4,037,143 2,444,167
Property and equipment
Land 110,000 110,000
Buildings 465,000 465,000
Leasehold improvements 36,105 33,954
Vehicles 279,472 294,283
Furniture, fixtures and equipment 347,750 332,447
____________ ____________
Total property and equipment 1,238,327 1,235,684
Less accumulated depreciation ( 377,463) ( 250,904)
____________ ____________
Net property and equipment 860,864 984,780
____________ ____________
Other assets 396,215 135,716
____________ ____________
Total assets $ 5,294,222 $ 3,564,663
============ ============
</TABLE>
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<TABLE>
JOTAN, INC.
Condensed Consolidated Balance Sheets
(Unaudited)
<CAPTION>
Liabilities and stockholders' equity
<S> <C> <C>
Current liabilities:
Trade payables $ 1,321,941 $ 990,986
Accrued expenses 46,849 35,927
Current maturities of notes payable 119,748 660,065
____________ ____________
Total current liabilities 1,488,538 1,686,978
Long-term debt:
Notes payable, less current maturities 519,291 518,404
Line of credit 1,295,960 1,004,898
____________ ____________
1,815,251 1,523,302
Stockholders' equity
Preferred stock
Authorized shares - 10,000,000
Issued and outstanding shares -
1,265,823 in 1996 and -0- in
1995 12,658 -
Voting common stock, $.01 par value:
Authorized shares - 40,000,000
Issued and outstanding shares -
5,679,411 in 1996 and 5,664,211
in 1995 56,794 56,642
Additional paid-in capital 3,963,983 2,149,077
Retained earnings (deficit) (2,043,002) (1,851,336)
____________ ____________
Total stockholders' equity 1,990,433 354,383
____________ ____________
Total liabilities and stockholders' equity $ 5,294,222 $ 3,564,663
============ ============
See accompanying notes.
</TABLE>
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<TABLE>
JOTAN, INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
<CAPTION> Nine months ended September 30
1996 1995
_____________ ____________
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ 135,960 $( 199,696)
Adjustments to reconcile net income
(loss) to net cash provided by
(used in) operating activities:
Depreciation and amortization expense 117,624 99,997
Loss on disposal of property and equipment - 23,211
Stock compensation expense 7,550 -
Changes in operating assets
and liabilities:
Trade receivables ( 286,338) 215,105
Inventory 138,776 ( 34,198)
Other assets ( 81,674) 76,837
Trade payables 112,921 ( 1,004,805)
Accrued expenses ( 12,013) ( 141,485)
____________ ____________
Net cash provided by (used in)
operating activities 132,806 ( 965,034)
____________ ____________
Cash flows from investing activities
Increase in other assets ( 350,961) ( 142,984)
Purchase of property and equipment ( 31,559) ( 31,005)
____________ ____________
Net cash flows used in
investing activities ( 382,520) ( 173,989)
____________ ____________
Cash flows from financing activities
Proceeds from line of credit borrowings 188,582 1,175,738
Repayments of amounts advanced from
Total Supply Systems, Inc. ( 353,749) ( 260,491)
Payments on long-term debt ( 55,262) ( 176,635)
Proceeds from note receivable - 64,191
Proceeds from issuance of common stock,
net of issuance costs - 402,000
Proceeds from issuance of preferred stock,
net of issuance costs 1,827,626 -
____________ ____________
Net cash provided by financing activities 1,607,197 1,204,803
____________ ____________
Net increase in cash and cash equivalents 1,357,483 65,780
Cash and cash equivalents
at beginning of period 21,771 16,057
____________ ____________
Cash and cash equivalents
at end of period $ 1,379,254 $ 81,837
============ ============
See accompanying notes.
</TABLE>
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Jotan, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. The Business and Basis of Presentation
Description of Business
Jotan, Inc. (the "Company") is a distributor of packaging and shipping supplies
located in the southeastern United States. The Company sells primarily to
manufacturers and provides Just On Time As Needed delivery service for its
products.
Basis of Presentation
The accompanying financial statements are unaudited and, in the opinion of
management reflect all the adjustments that are necessary for a fair
presentation of the financial position and results of operations for the
periods presented. All of such adjustments are of a normal and recurring
nature. The results of operations for the periods presented are not necessarily
indicative of the results to be expected for the entire year.
The financial statements at September 30, 1996 and September 30, 1995 reflect
the combined accounts of the Company and its subsidiaries. Certain information
and footnote disclosure normally included in the financial statements prepared
in accordance with generally accepted accounting principles have been condensed
or omitted.
2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Sales increased to $8,349,138 for the nine months ended September 30, 1996 from
$7,872,556 for the nine months ended September 30, 1995 or an increase of 6.1%.
Sales for the third quarter of 1996 increased 6.7% when compared to the third
quarter of 1995. The increase in sales resulted from new business at the
Company's four existing distribution centers, which more than offset the impact
of the closure of the Chattanooga distribution center during the third quarter
of 1995 and the decline in corrugated prices that occured during the first six
months of 1996.
The Company's existing distribution centers experienced comparible sales
increases of 23.2% in the first nine months of 1996. Unfortunately, the
Company's sales were impacted unfavorably by declining corrugated prices. While
sales at existing distribution centers increased 23.2%, manufactured square
feet of product sold increased by 39.8% compared to the same period in 1995.
Overall the sales numbers reflect strong demand for the Company's services
during 1996.
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<PAGE>
Cost of sales increased to $6,237,573 or 74.7% of sales for the nine months
ended September 30, 1996 from $6,161,217 or 78.3% for the nine months ended
September 30, 1995. Cost of sales for the third quarter of 1996 declined to
$2,078,858 or 72.6% of sales from $2,110,927 or 78.6% of sales for the third
quarter of 1995. The improvement in profit margins reflects the Company's
ability to purchase product more efficiently as a result of the overall
improved financial condition of the Company.
Operating expenses declined to $1,825,896 for the first nine months of 1996
from $1,946,153 for the same period in 1995, a 6.2% decrease. Several factors
contributed to the year to date decrease in operating expenses including the
closure of the Chattanooga distribution center, reduced payroll costs, and the
impact of the Company's cost cutting program. Expenses for the quarter ended
September 30, 1996 were up $49,071 compared to the same period in 1995, which
resulted prmiarily from increased costs related to higher delivery expenses,
insurance and other miscellaneous expenses.
As a result of the foregoing factors, the Company had operating income of
$285,669 for the nine months ended September 30, 1996 compared to an operating
loss of $234,814 for the nine months ended September 30, 1995. This represents
a $520,483 improvement in results from operations for the comparable nine month
period. For the three months ended September 30, 1996, the company had
operating income of $137,348 compared to an operating loss of $25,664 for the
three months ended September 30, 1995, an improvement of $163,012.
Other income declined to $51,766 for the nine months ended September 30, 1996,
from $205,016 for the nine months ended September 30, 1995. This decline
reflects the fact that during 1995 the Company settled certain payables at
a substantial discount. Interest expense increased to $201,475 for the nine
months ended September 30, 1996 from $169,898 for the nine months ended
September 30, 1995. This increase reflected the impact of increased borrowings
under the long term debt agreement with the CIT Financial Group during the
first six months of 1996. For the quarter ending September 30, 1996, interest
expense declined $2,440 from the same quarter in 1995, reflecting the impact of
the Company's improving financial condition.
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<PAGE>
As a result of the foregoing factors, the Company had net income of $135,960
for the nine months ended September 30, 1996 and net income of $89,882 for the
quarter ended September 30,1996. This represents an improvement of $335,656
when compared to the first nine months of 1995 and an improvement of $129,529
when compared to the quarter ended September 30, 1995. These results also
reflect a third straight profitable quarter, a first in the Company's short
history.
3. Liquidity and Capital Resources
Jotan, Inc. held its annual meeting of stockholders on May 14, 1996, at which
shareholders authorized the change in the Company's state of incorporation
through the merger of Jotan, Inc., an Idaho corporation ("Jotan-Idaho") into
Jotan, Inc., a Florida corporation and wholly owned subsidiary of Jotan-Idaho
("Reincorporation Merger"). The Reincorporation Merger was completed on
May 16, 1996.
This change in capital structure allowed the Company to arrange for the sale of
a preferred class of stock. On May 16, 1996, Jotan, Inc. (the "Company") signed
an agreement to sell up to $6,000,000 in Series A Preferred Stock to an
affiliate of Fairview Capital L.L.C., a Raleigh, N.C. based private investment
company. The initial funding closed May 16, 1996, and provided the Company
$2,000,000 through the sale of 1,265,823 shares of Series A Convertible
Preferred Stock to F-Jotan, L.L.C., the Fairview affialte. Under the terms of
the Series A Convertible Preferred Stock Purchase Agreement, the Company may
sell an additional $4,000,000 of Series A Convertible Preferred Stock to the
investors subject to certain conditions set forth in the Series A Convertible
Preferred Stock Purchase Agreement. The Series A Convertible Preferred Stock
carries an 8% annual dividend, which is payable in additional shares of
preferred stock, representing approximately 28% of the Company's outstanding
shares on a fully diluted basis.
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The completion of this transaction coupled with the agreement already in place
with CIT Financial provides the liquidity needed to fund the future short term
expansion plans of the Company. In addition, during the third quarter of 1996
the Company completed the repayment of the subordinated debenture to Total
Supply Systems, Inc.. The completion of this repayment will have a significant
favorable impact on the Company's future cash flow.
On July 10, 1996 the Board of Directors approved grants under the Long Term
Incentive Stock Option program which was approved by the shareholders on
May 14, 1996. Grants totaling the equivalent of 278,750 shares were issued at a
grant price of $1.00 per share. These grants contain vesting rights over a four
year period. The first 25% of these grants will vest on July 10, 1997.
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Part II--Other Information
Item 6--Exhibits and Reports on Form 8-K
a) Exhibit 11 Statement Re: Computation of Per Share Earnings
Three months ended Nine months ended
September 30 September 30
1996 1995 1996 1995
__________ __________ __________ __________
Average shares
outstanding 5,679,411 5,664,211 5,675,829 5,440,920
Net effect of
common stock
equivalant 2,531,646 -0- 845,076 -0-
__________ __________ __________ __________
Totals 8,211,057 5,664,211 6,520,905 5,440,920
Net Income $ 89,882 $ ( 39,647) $ 135,960 $ (199,696)
Per Share amount $ .01 $ (.01) $ .02 $ (.04)
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JOTAN, INC.
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.
Jotan, Inc.
By: ____________________________
Shea Ralph, President
By: _____________________________
David Freedman, Vice President
and Chief Financial Officer
October 22, 1996
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<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 1,379,254
<SECURITIES> 0
<RECEIVABLES> 1,242,764
<ALLOWANCES> 0
<INVENTORY> 1,123,161
<CURRENT-ASSETS> 4,037,143
<PP&E> 1,238,327
<DEPRECIATION> 377,463
<TOTAL-ASSETS> 5,294,222
<CURRENT-LIABILITIES> 1,488,538
<BONDS> 0
0
12,658
<COMMON> 56,794
<OTHER-SE> 1,920,981
<TOTAL-LIABILITY-AND-EQUITY> 5,294,222
<SALES> 8,349,138
<TOTAL-REVENUES> 8,349,138
<CGS> 6,237,573
<TOTAL-COSTS> 6,237,573
<OTHER-EXPENSES> 1,825,896
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 201,475
<INCOME-PRETAX> 135,960
<INCOME-TAX> 0
<INCOME-CONTINUING> 135,960
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 135,960
<EPS-PRIMARY> .02
<EPS-DILUTED> .02
</TABLE>
