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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
_X_ Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 28 1996 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 0-16059
JASON INCORPORATED
(Exact name of registrant as specified in its charter)
WISCONSIN 39-1756840
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
411 EAST WISCONSIN AVENUE, SUITE 2500, MILWAUKEE, WI 53202
(Address of principal executive offices)
(414) 277-9300
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Sections 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 ___
On June 28, 1996 there were outstanding 20,139,673 shares of the Registrant's
$.10 par value common stock.
JASON INCORPORATED
FORM 10-Q
JUNE 28, 1996
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Statements of Income for the Three Months
Ended June 28, 1996 and June 30, 1995 .......................... 3
Statements of Income for the Six Months
Ended June 28, 1996 and June 30, 1995 .......................... 4
Balance Sheets as at June 28, 1996 and
December 29, 1995 .............................................. 5
Statements of Cash Flows for the Six Months
Ended June 28, 1996 and June 30, 1995 .......................... 6
Notes to Financial Statements .................................... 7 - 8
Management's Discussion and Analysis of
Results of Operations and Financial Condition .................. 9 - 12
PART II. OTHER INFORMATION
Item 1 Legal Proceedings ......................................... 12
Item 2 Changes in Securities ..................................... 12
Item 3 Defaults Upon Senior Securities ........................... 12
Item 4 Submission of Matters to a Vote of
Security Holders ....................................... 12
Item 5 Other Information ......................................... 12
Item 6 (a) Exhibits ............................................. 12
(b) Reports on Form 8-K .................................. 12
Signatures ....................................................... 13
JASON INCORPORATED
STATEMENTS OF INCOME
(Dollars In Thousands, Except Earnings Per Share)
-------------------------------------------------
FOR THE THREE MONTHS ENDED
-------------------------------
JUNE 28, JUNE 30,
1996 1995
--------- ---------
(UNAUDITED)
-----------
NET SALES $ 111,034 $ 107,233
COST OF SALES 87,920 83,824
------- -------
Gross Profit 23,114 23,409
SELLING AND ADMINISTRATIVE EXPENSES 15,855 14,892
------- -------
Operating Income 7,259 8,517
INTEREST EXPENSE 2,388 2,514
OTHER EXPENSE 14 44
------- -------
Income Before Income Taxes 4,857 5,959
PROVISION FOR INCOME TAXES 1,991 2,496
------- -------
NET INCOME $ 2,866 $ 3,463
======= =======
NET INCOME PER SHARE $ 0.14 $ 0.17
======= =======
AVERAGE SHARES OUTSTANDING 20,604,000 20,648,000
========== ==========
JASON INCORPORATED
STATEMENTS OF INCOME
(Dollars In Thousands, Except Earnings Per Share)
-------------------------------------------------
FOR THE SIX MONTHS ENDED
-------------------------------
JUNE 28, JUNE 30,
1996 1995
--------- ---------
(UNAUDITED)
-----------
NET SALES $ 215,665 $ 215,899
COST OF SALES 171,093 168,578
------- -------
Gross Profit 44,572 47,321
SELLING AND ADMINISTRATIVE EXPENSES 30,579 30,334
------- -------
Operating Income 13,993 16,987
INTEREST EXPENSE 4,770 4,942
OTHER (INCOME) EXPENSE (56) 206
------- -------
Income Before Income Taxes 9,279 11,839
PROVISION FOR INCOME TAXES 3,804 4,960
------- -------
NET INCOME $ 5,475 $ 6,879
======= =======
NET INCOME PER SHARE $ 0.27 $ 0.33
======= =======
AVERAGE SHARES OUTSTANDING 20,556,000 20,633,000
========== ==========
JASON INCORPORATED
BALANCE SHEETS
(Dollars in Thousands)
----------------------
JUNE 28, DECEMBER 29,
1996 1995
--------- ------------
(Unaudited)
ASSETS -----------
- ------
Current Assets
Cash $ 2,090 $ 1,890
Accounts Receivable 65,795 54,819
Inventories (Note 3) 33,920 35,602
Costs And Earnings In Excess Of
Billings On Uncompleted Contracts 14,820 9,999
Deferred Income Taxes 8,045 8,045
Other Current Assets 5,079 4,179
-------- --------
Total Current Assets 129,749 114,534
-------- --------
Property, Plant and Equipment
Cost 134,619 124,322
Less - Accumulated Depreciation (61,373) (55,512)
--------- ---------
Net Property, Plant and Equipment 73,246 68,810
-------- --------
Intangible Assets 91,867 94,171
Other Assets 1,824 2,012
-------- --------
$ 296,686 $ 279,527
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
Current Portion of Long-Term Debt $ 3,250 $ 3,386
Accounts Payable 30,522 27,361
Accrued Compensation & Employee Benefits 10,582 12,553
Accrued Warranty 3,507 3,289
Accrued Interest 1,291 1,275
Accrued Income Taxes 601 1,968
Other Current Liabilities 7,701 8,037
Billings In Excess Of Costs And
Earnings On Uncompleted Contracts 13,419 8,995
-------- --------
Total Current Liabilities 70,873 66,864
Revolving Loan 34,550 27,010
Other Long-Term Debt 83,057 83,057
Deferred Income Taxes 8,624 8,062
Other Long-Term Liabilities 1,979 2,448
Postemployment & Postretirement Health
And Other Benefits 5,931 5,868
-------- --------
Total Liabilities 205,014 193,309
-------- --------
Commitments and Contingencies --- ---
SHAREHOLDERS' EQUITY
- --------------------
Common Stock & Additional
Contributed Capital 34,619 34,535
Retained Earnings 57,232 51,757
Foreign Currency Translation Adjustment (179) (74)
--------- ---------
Total Shareholders' Equity 91,672 86,218
-------- --------
$ 296,686 $ 279,527
======== ========
JASON INCORPORATED
STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
For The Six Months Ended
--------------------------------
June 28, June 30,
1996 1995
--------- ---------
(UNAUDITED)
-----------
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 5,475 $ 6,879
Adjustments To Reconcile Net Income To Net Cash
Provided By Operating Activities:
Depreciation 6,165 6,494
Amortization 2,938 3,000
Deferred Income Taxes 562 257
Increase (Decrease) In Cash, Excluding Effects Of
Acquisitions, Due To Changes In:
Accounts Receivable (10,976) 426
Inventories 1,682 (2,408)
Cost And Earnings In Excess Of Billings
On Uncompleted Contracts (4,821) (9,497)
Other Current Assets (900) 2,579
Other Assets (446) 973
Accounts Payable 3,161 5,004
Accrued Compensation & Employee Benefits (1,971) (548)
Accrued Warranty 218 (554)
Accrued Interest 16 351
Accrued Income Taxes (1,367) (253)
Billings In Excess Of Costs And Earnings
On Uncompleted Contracts 4,424 (4,913)
Other Liabilities (742) 539
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Total Adjustments (2,057) 1,450
------- -------
Net Cash Provided By Operations 3,418 8,329
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition Of Net Assets (45,123)
Acquisition Of Property, Plant And Equipment (10,622) (7,929)
Disposal Of Property, Plant And Equipment - Net 21 224
Other Net (105) 112
-------- --------
Net Cash Used For Investing Activities (10,706) (52,716)
-------- --------
Net Cash Used Before Financing Activities (7,288) (44,387)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds From Revolving Loan 66,455 81,713
Repayments Of Revolving Loan (58,915) (74,723)
Repayments Of Other Long Term Debt (136) 19,293
Proceeds From Convertible Notes 17,057
Issuance Of Common Stock - Net 84 34
------- -------
Net Cash Provided By Financing Activities 7,488 43,374
------- -------
Net Increase (Decrease) In Cash 200 (1,013)
Cash Beginning of Period 1,890 1,069
------- -------
Cash End of Period $ 2,090 $ 56
======= =======
Cash Paid For:
Interest 4,726 4,497
Income Taxes 4,645 4,952
JASON INCORPORATED
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - BASIS OF FINANCIAL STATEMENTS
The Company operates in three primary business segments: power generation
products, motor vehicle products, and industrial products. Power generation
products include the design and manufacture of silencing equipment, waste heat
recovery boilers, and other auxiliary equipment for the gas turbine and other
industries and the design and fabrication of electromagnetic shielding products
for medical and other electronic equipment applications. Motor vehicle products
include the manufacture and marketing of nonwoven needled fiber insulation,
mastic insulation, dielectric padding and other interior trim products primarily
for the automotive industry but also for furniture and industrial uses, plus
seating products for motorcycles, construction, agricultural and lawn/turf care
equipment. Industrial products include the manufacture and marketing of
industrial brushes, buffing wheels and compound used by manufacturers to finish
a wide variety of manufactured products, plus the manufacture and marketing of
precision components such as precision stampings, wire form components and
expanded metal products.
The financial statements at June 28, 1996 and June 30, 1995 and for the three
and six month periods then ended are unaudited, however, in the opinion of
management, all adjustments (consisting only of normal recurring accruals)
necessary for a fair presentation of the financial position at these dates and
the results of operations and cash flows for these periods have been included.
The results for the three and six month periods ended June 28, 1996 are not
necessarily indicative of the results that may be expected for the full year or
any other interim period.
Earnings per share are computed using the weighted average number of common and
common equivalent shares outstanding during the period. The weighted average
number of common and common equivalent shares outstanding during the second
quarters of 1996 and 1995 amounted to 20,604,000 and 20,648,000, respectively.
The weighted average number of common and common equivalent shares outstanding
during the first six months of 1996 and 1995 amounted to 20,556,000 and
20,633,000, respectively. Shares issuable under employee stock option plans are
included in the earnings per share computations for all periods presented.
NOTE 2 - ACQUISITIONS
On January 3, 1995, the Company completed the acquisition of Milsco
Manufacturing company for $45.5 million, including acquisition costs. Milsco is
a designer and manufacturer of seating for motorcycles, construction equipment,
agricultural equipment and lawn/turf care equipment.
The aforementioned acquisition has been accounted for using the purchase method
and, as such, the operating results have been included in the Company's
financial statements since the acquisition date.
NOTE 3 - INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out) or market and
consisted of the following (in thousands of dollars):
JUNE 28, DECEMBER 29,
1996 1995
-------- ------------
(Unaudited)
Raw materials $16,914 $18,134
Work in process 4,824 4,519
Finished goods 12,182 12,949
------- -------
$33,920 $35,602
======= =======
JASON INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Three months ended June 28, 1996 compared to the three months ended June 30,
1995:
Sales for the three months ended June 28, 1996 increased by 4% from $107,233,000
for the three months ended June 30, 1995 to $111,034,000. Sales of power
generation products decreased by 3% from $37,109,000 to $35,879,000. Sales of
motor vehicle products increased by 8% from $37,990,000 to $41,183,000. Sales
of industrial products increased by 6% from $32,134,000 to $33,972,000.
The lower power generation sales for the second quarter of 1996 compared to last
year was a result of a lower power generation backlog at the beginning of 1996
which was $69 million compared to $74 million a year earlier. Bookings in the
first half of 1996 of $100 million were up 39% compared to $72 million in the
first half of 1995. Sales in the first half of 1996 of $68 million compared to
$72 million in the first half of 1995 leaving a backlog at the end of the first
half of 1996 of $101 million compared to $74 million a year ago. With the
significant increase in bookings in the first quarter of 1996 compared to last
year and the higher ending backlog, management believes sales for the remainder
of the year will exceed that of last year.
The higher motor vehicle products sales was a result of the U.S. automobile
industry building 3% more vehicles in the second quarter of 1996 than they did
last year. However, sales of the Company's automotive products increased by 7%
due to a greater content per vehicle which is a result of improved sales of the
Company's Marabond_ moldable insulation product. The U.S. automotive industry
has announced a production schedule for the third quarter of 1996 that is above
the production level in the third quarter of 1995. Dealer inventories are down
to 61 days compared to 65 days at the end of the second quarter of 1995.
Whether or not the industry will build the number of units called for in the
schedule depends on retail vehicle sales during the third quarter.
Industrial products sales in the second quarter of 1996 were up compared to last
year with the Osborn brush and JacksonLea buff and compound businesses and the
Koller expanded metal, wire form, stamped components and assembled products
operations all showing increases in the quarter compared to last year. With the
improvement in the economy, it is expected that sales for the industrial
products segment for the third quarter will be up compared to the prior year.
Operating income declined in the second quarter of 1996 from $8,517,000 in the
second quarter of 1995 to $7,259,000.
Operating income for the power generation products segment declined from
$3,424,000 in the second quarter of 1995 to $1,315,000. The decline in
operating income is the result of lower volume and a less profitable product mix
which included start up costs associated with the Company's new inlet filter
product line.
Operating income for the motor vehicle products segment improved from $4,033,000
in the second quarter of 1995 to $4,294,000 due primarily to higher automotive
products volume and improved operating income at Milsco which generated higher
sales of original equipment and parts and accessories items for Harley-Davidson
as well as higher sales of lawn and turf care and agricultural equipment.
Operating income for the industrial products segment improved from $1,680,000 in
the second quarter of 1995 to $2,212,000. This increase in operating income was
a result of an improvement in sales volume at Osborn, JacksonLea and Koller.
Corporate expenses for the second quarter of 1996 were $562,000 compared to
$620,000 last year. This decrease is primarily due to a decrease in management
incentive compensation.
Interest expense declined slightly in the second quarter of 1996 from $2,514,000
in the second quarter of 1995 to $2,388,000 due to slightly lower interest
rates. Other expense in the second quarter of 1996 represents deferred
financing cost amortization offset by royalty income from foreign licensees of
the Company's finishing products plus income from foreign joint ventures. Other
expense in the second quarter of 1995 represents deferred financing cost
amortization partially offset by royalty income.
Six months ended June 28, 1996 compared to the six months ended June 30, 1995:
Sales for the six months ended June 28, 1996 of $215,665,000 were about the same
as the sales for the six months ended June 30, 1995 of $215,899,000. Sales of
power generation products decreased by 6% from $72,086,000 to $67,650,000.
Sales of motor vehicle products increased by 3% from $77,441,000 to $79,941,000.
Sales of industrial products increased by 3% from $66,372,000 to $68,074,000.
The lower power generation sales for the first half of 1996 compared to last
year was a result of a lower power generation backlog at the beginning of 1996
which was $69 million compared to $74 million a year earlier. Bookings in the
first half of 1996 of $100 million were up 39% compared to $72 million in the
first half of 1995. Sales in the first half of 1996 of $68 million compared to
$72 million in the first half of 1995 leaving a backlog at the end of the first
half of 1996 of $101 million compared to $74 million a year ago. With the
significant increase in bookings in the first quarter of 1996 compared to last
year and the higher ending backlog, management believes sales for the remainder
of the year will exceed that of last year.
Motor vehicle products sales increased in the first half of 1996 compared to
last year even though the U.S. automobile industry built 5% fewer vehicles in
the first half of 1996 than they did last year. However, sales of the Company's
automotive products were about the same as last year due to a greater content
per vehicle which is a result of improved sales of the Company's Marabond_
moldable insulation product. The U.S. automotive industry has announced a
production schedule for the third quarter of 1996 that is above the production
level in the third quarter of 1995. Dealer inventories are down to 61 days
compared to 65 days at the end of the second quarter of 1995. Whether or not
the industry will build the number of units called for in the schedule depends
on retail vehicle sales during the third quarter.
Industrial products sales in the first half of 1996 were up compared to last
year with the Osborn brush and JacksonLea buff and compound businesses showing
increases in the first half compared to last year and the Koller expanded metal,
wire form, stamped components and assembled products operations generating sales
at about the same level as last year. With the improvement in the economy, it
is expected that sales for the industrial products segment for the third quarter
will be up compared to the prior year.
Operating income declined in the first half of 1996 from $16,987,000 in the
first half of 1995 to $13,993,000.
Operating income for the power generation products segment declined from
$5,940,000 in the first half of 1995 to $2,181,000. The decline in operating
income is the result of lower volume and a less profitable product mix which
included start up costs associated with the Company's new inlet filter product
line.
Operating income for the motor vehicle products segment declined slightly from
$8,434,000 in the first half of 1995 to $8,180,000 due primarily to lower
automotive products volume which was almost completely offset by improved
operating income at Milsco which generated higher sales of original equipment
and parts and accessories items for Harley-Davidson as well as higher sales of
lawn and turf care and agricultural equipment.
Operating income for the industrial products segment improved from $3,804,000 in
the first half of 1995 to $4,647,000. This increase in operating income was a
result of an improvement in sales volume at Osborn and JacksonLea and lower
material costs at Koller.
Corporate expenses for the first half of 1996 were $1,014,000 compared to
$1,191,000 last year. This decrease is primarily due to a decrease in
management incentive compensation.
Interest expense declined slightly in the first half of 1996 from $4,942,000 in
the first half of 1995 to $4,770,000 due to slightly lower interest rates.
Other income in the first half of 1996 represents royalty income from foreign
licensees of the Company's finishing products plus income from foreign joint
ventures offset by deferred financing cost amortization. Other expense in the
first half of 1995 represents deferred financing cost amortization and peso
devaluation losses, partially offset by royalty income.
LIQUIDITY AND CAPITAL RESOURCES
During the first half of 1996, the Company satisfied the capital requirements of
its operations with internally generated funds. For the foreseeable future, the
Company believes it will generate funds from operations to meet the capital
requirements of its existing operations. As of June 28, 1996, the Company had
available unused borrowing capacity of $43,758,000 under its bank revolving loan
facility.
During the first half of 1995, the Company also satisfied the capital
requirements of its operations with internally generated funds. In the first
quarter of 1995, the purchase price for Milsco amounting to $45.5 million was
financed by an extension of the Company's bank revolving loan facility and $17
million of proceeds from the issuance of convertible notes to several of the
former shareholders of Milsco. In May 1995, the Company completed a $20 million
private debt placement with an insurance company, the proceeds of which were
used to pay down the revolving loan. The revolving loan commitment was then
reduced from $115 million to $95 million.
During the first half of 1996, working capital increased by $11,206,000 from
$47,670,000 at December 29, 1995 to $58,876,000 at June 28, 1996. This increase
was a result of strong bookings in the first half, particularly in power
generation, requiring an increase in working capital for new jobs in progress.
During the first half of 1996, the Company generated $3,418,000 in cash from
operations. The Company anticipates generating additional cash flow from
operations during the balance of the year.
In the first half of 1996 and 1995, the Company made capital expenditures of
$10,622,000 and $7,929,000, respectively. The major first half 1996
expenditures were in the motor vehicle segment for equipment to support new
Marabond_ programs at Janesville Products and for plant and office additions to
support an increased level of business at Milsco. The major first half 1995
expenditures were in the motor vehicle products segment for equipment at
Janesville Products to support new molded Marabond_ programs and to improve
efficiency and at Koller, Milsco and Sackner to support new programs at those
locations. Capital expenditures for 1996 are anticipated to approximate $22.0
million. No significant commitments are outstanding as of June 28, 1996.
SEASONALITY
U.S. auto makers traditionally shut down for the annual model changeover in the
third quarter. In addition, adjustments to production schedules are made
throughout the year based on retail auto sales and the level of dealer
inventories. These seasonal patterns affect the Company's motor vehicle
products operations most significantly but also have somewhat of an impact on
industrial products due to the effect on automotive suppliers which use the
Company's precision components and finishing products.
PART II
OTHER INFORMATION
ITEM 1 Legal Proceedings - None
ITEM 2 Changes in Securities - None
ITEM 3 Defaults Upon Senior Securities - None
ITEM 4 Submission of Matters to a vote of Security Holders
(a) The Annual Meeting of Shareholders was held on April 24, 1996.
(b) Not Applicable.
(c) At the Annual Meeting the shareholders:
(i)Voted to elect six directors to serve until the 1997 Annual
Meeting of Shareholders. Each nominee was elected by a vote
of the shareholders as follows:
DIRECTOR FOR WITHHELD
-------- --- --------
Vincent L. Martin 17,126,635 63,986
Mark Train 17,126,635 63,986
Wayne C. Oldenburg 17,126,635 63,986
Wayne G. Fethke 17,126,635 63,986
David J. Drury 17,126,635 63,986
Frank W. Jones 17,126,635 63,986
(ii) Voted to ratify the appointment of Price Waterhouse as
independent auditors of the Corporation for the 1996 fiscal
year as follows:
FOR: 17,147,551
AGAINST: 11,750
ABSTAIN: 31,320
(d) Not Applicable.
ITEM 5 Other information:
On April 24, 1996, the Board of Directors appointed Mark Train
President of the Company. Vincent Martin remains Chairman and
Chief Executive Officer.
ITEM 6 (a) Exhibits - None
(b) Reports on Form 8-K - None
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.
JASON INCORPORATED (Registrant)
by ________________________
Mark Train
President
(Chief Financial Officer)