UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d)OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal quarter ended September 27, 2002
-------------
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 0-25246
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BROWN JORDAN INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 63-1127982
- -------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1801 NORTH ANDREWS AVENUE, POMPANO BEACH, FLORIDA 33069
- ------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(954) 960-1100
--------------
(Registrant's telephone number, including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X . No
------ -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Class Shares Outstanding at November 7, 2002
- ---------------- -----------------------------------
$ .01 par value 1,000
BROWN JORDAN INTERNATIONAL, INC.
INDEX
PAGE
PART I - FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets, September 27, 2002(unaudited)
and December 31, 2001 3
Consolidated Statements of Operations for the Three and Nine
Months ended September 27, 2002 and September 28, 2001 (unaudited) 4
Consolidated Statements of Cash Flows for the Nine Months ended
September 27, 2002 and September 28, 2001 (unaudited) 6
Notes to the Consolidated Financial Statements (unaudited) 8
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 14
Item 3. Controls and Procedures 24
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 25
Item 4. Submission of Matters to a Vote of Security Holders 25
Item 6. Exhibits and Reports on Form 8-K 25
Signature 26
Certifications 27
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Brown Jordan International, Inc. and Subsidiaries
Consolidated Balance Sheets
(In Thousands, except per share amounts)
September 27, December 31,
2002 2001
------------------ ----------------
Assets (Unaudited)
Cash and cash equivalents ................ $ 3,170 $ 5,107
Accounts receivables, less
allowance for doubtful accounts of
$1,884 and $3,339 at September 27, 2002
and December 31, 2001, respectively .... 39,745 86,534
Inventories .............................. 28,253 28,111
Prepaid expenses and other
current assets ......................... 11,252 12,463
--------- ---------
Total current assets ........... 82,420 132,215
Property, plant and equipment, net ....... 29,844 37,258
Goodwill, net ............................ 342,160 343,027
Other assets ............................. 13,614 15,518
--------- ---------
Total Assets ................... $ 468,038 $ 528,018
========= =========
Liabilities and Stockholders' Equity
Current portion of long-term debt ........ $ 8,450 $ 7,200
Accounts payable ......................... 11,659 35,300
Accrued interest ......................... 5,789 5,214
Other accrued liabilities ................ 22,562 21,879
--------- ---------
Total current liabilities ...... 48,460 69,593
Long-term debt, net of current portion ... 248,674 287,878
Deferred income taxes .................... 193 2,182
--------- ---------
Total liabilities .............. 297,327 359,653
--------- ---------
Commitments and contingencies
Stockholders' equity:
Common stock; par value $.01
per share, 1,000 shares authorized
and issued at September 27, 2002 and
at December 31, 2001 respectively ...... $ -- $ --
Additional paid-in capital ............... 164,737 164,735
Retained earnings ........................ 8,748 5,084
Accumulated other comprehensive loss ..... (2,774) (1,454)
--------- ---------
Total stockholders' equity ..... 170,711 168,365
--------- ---------
Total liabilities and stockholders' equity $ 468,038 $ 528,018
========= =========
See accompanying notes to Consolidated Financial Statements.
Brown Jordan International, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
(In Thousands)
Nine Months Ended
-------------------------------------------------
September 27, September 28,
2002 2001
---------------------- ------------------------
Net sales $ 251,734 $ 176,085
Cost of sales 180,198 115,478
---------------------- ------------------------
Gross Profit 71,536 60,607
Selling, general
and administrative
expenses 40,041 31,706
Amortization 547 6,656
---------------------- ------------------------
Operating income 30,948 22,245
Interest expense, net 24,404 25,616
---------------------- ------------------------
Income (loss) before income taxes 6,544 (3,371)
Provision for income taxes 2,880 1,334
---------------------- ------------------------
Net income (loss) $ 3,664 $ (4,705)
====================== ========================
See accompanying notes to Consolidated Financial Statements.
Brown Jordan International, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
(In Thousands)
Three Months Ended
--------------------------------------------------
September 27, September 28,
2002 2001
----------------------- -----------------------
Net sales $ 52,461 $ 57,115
Cost of sales 34,535 39,557
----------------------- -----------------------
Gross Profit 17,926 17,558
Selling, general
and administrative
expenses 12,815 12,350
Amortization 182 2,458
----------------------- -----------------------
Operating income 4,929 2,750
Interest expense, net 7,876 7,073
----------------------- -----------------------
Loss before income taxes (2,947) (4,323)
Benefit for income taxes (734) (485)
----------------------- -----------------------
Net loss $ (2,213) $ (3,838)
======================= =======================
See accompanying notes to Consolidated Financial Statements.
Brown Jordan International, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
(In Thousands)
For the Nine Months Ended
---------------------------------------------
September 27, September 28,
2002 2001
-------------------- ---------------------
Cash flows from operating activities:
Net income (loss) $ 3,664 $ (4,705)
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 5,682 13,241
Net reduction in allowance for losses on accounts
receivable (537) (1,134)
Provision for losses on inventory 1,666 1,859
Loss on sale of fixed assets 733 -
Changes in operating assets and
liabilities, net of effects
from acquisitions and dispositions:
Accounts receivable 47,326 32,496
Inventories (1,808) 2,472
Prepaid expenses and other current assets 1,211 (1,611)
Other assets and goodwill, net (100) -
Accounts payable (23,641) (3,558)
Accrued interest 575 (4,465)
Other accrued liabilities (649) (6,111)
Deferred income taxes (1,108) (38)
-------------------- ---------------------
Total adjustments 29,350 33,151
Net cash provided by operating activities 33,014 28,446
-------------------- ---------------------
Cash flows from investing activities:
Capital expenditures (1,447) (3,790)
Proceeds from the sale of fixed assets 4,949 -
Investments in subsidiaries - (90,761)
-------------------- ---------------------
Net cash provided by (used in) investing activities 3,502 (94,551)
-------------------- ---------------------
Cash flows from financing activities:
Net payments under revolving credit agreements (38,324) (55,356)
Net borrowings for acquisitions under
Senior Credit facility - 205,322
Proceeds from issuance of
common stock, net - 73,969
Payoff of existing credit facility - (147,337)
Deferred financing costs (129) (8,254)
-------------------- ---------------------
Net cash provided by (used in) financing activities (38,453) 68,344
-------------------- ---------------------
Brown Jordan International, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Continued)
(Unaudited)
(In Thousands)
For the Nine Months Ended
---------------------------------------------
September 27, September 28,
2002 2001
-------------------- ---------------------
Net increase (decrease) in cash and
cash equivalents (1,937) 2,239
Cash and cash equivalents at
beginning of year 5,107 602
-------------------- ---------------------
Cash and cash equivalents at
End of period $ 3,170 $ 2,841
==================== =====================
For the Nine Months Ended
September 27, September 28,
2002 2001
-------------------- ---------------------
Supplemental disclosures:
Interest paid $ 21,645 $ 25,918
Income taxes paid $ 2,975 $ 653
Investing activities during the first nine months of 2001 included the
acquisition of The Woodsmiths Company and Brown Jordan International:
Fair value of assets acquired $ 145,667
Cash on-hand (977)
Liabilities assumed (52,629)
Maximum earn out (1,000)
Equity investment of seller (300)
--------------------------
--------------------------
Cash paid for acquisitions, net $ 90,761
of cash required ==========================
==========================
==========================
See accompanying notes to Consolidated Financial Statements.
BROWN JORDAN INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. WLFI Holdings
Prior to the acquisition of Brown Jordan International ("BJI"), WinsLoew
Furniture, Inc. ("WinsLoew" or the "Company") completed a recapitalization
transaction wherein, the Company became a wholly-owned subsidiary of a new
holding company called WLFI Holdings, Inc. (Holdings), a Florida corporation.
In order to accomplish the recapitalization, Holdings was initially formed as
the Company's wholly-owned subsidiary. In addition to Holdings, the Company
formed another company called WLFI Merger, Inc., a Florida corporation, as a
wholly-owned subsidiary of Holdings. Then, immediately prior to the consummation
of the Brown Jordan acquisition, the Company merged with WLFI Merger, Inc. and
was the surviving corporation of the merger.
As a result of these transactions, the Company became a wholly-owned subsidiary
of the new holding company, Holdings. All shares of common stock that were
outstanding immediately prior to the merger (850,497 shares) were converted into
shares of common stock of Holdings. In addition, each warrant or option to
purchase shares of the Company's common stock was converted into a warrant or
option to purchase an equivalent number of shares of common stock of Holdings.
1,000 shares of the Company's common stock was then issued to WLFI Holdings,
Inc. Finally, by operation of the merger, the separate corporate existence of
WLFI Merger ended.
Because there was no change in the stock ownership of the Company as a result of
the recapitalization, there was no change in the basis of the Company's assets
or liabilities.
2. Name Change
On April 23, 2002, the Board of Directors voted to change the name of the
Company to Brown Jordan International, Inc. This name change acknowledges that
Brown Jordan is one of the most recognized names in the industry and expresses
the Company's commitment to build upon that image and fine reputation which
Brown Jordan has earned as the preeminent brand in luxury leisure furniture.
3. Basis of Presentation
The accompanying unaudited consolidated financial statements of Brown Jordan
International, Inc. and subsidiaries are for interim periods do not include all
disclosures provided in the annual consolidated financial statements. These
unaudited consolidated financial statements should be read in conjunction with
the annual consolidated financial statements and notes thereto contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 2001, as
filed with the Securities and Exchange Commission.
All material intercompany balances and transactions have been eliminated. The
preparation of the consolidated financial statements requires the use of
estimates in the amounts reported.
In the opinion of the Company, the accompanying unaudited consolidated financial
statements contain all adjustments (which are of a normal recurring nature)
necessary for a fair presentation of the results for the interim periods. The
results of operations are presented for the Company's third quarter, which is
from June 29, 2002 through September 27, 2002. The results of operations for
this period are not necessarily indicative of the results to be expected for the
full year.
4. Inventories
Inventories consisted of the following:
(In thousands)
September 27, December 31,
2002 2001
---------------- ---------------
$ $
Raw materials 21,707 22,335
Work in process 3,233 2,824
Finished Goods 3,313 2,952
---------------- ---------------
$ $
28,253 28,111
================ ===============
5. Capital Stock
At December 31, 2001, there were 1,000 shares issued and outstanding. Since
December 31, 2001 and as of September 27, 2002, the Company has not issued any
additional shares of stock or repurchased any outstanding shares.
6. Acquisitions
On March 9, 2001 the Company purchased all of the assets of The Woodsmiths
Company. Woodsmiths, a manufacturer of custom tabletops for the contract and
hospitality industry, is located in Pompano Beach, Florida. The purchase price
of approximately $2.8 million was paid in cash of approximately $0.3 million and
a $2.5 million note payable to the sole shareholder of Woodsmiths.
The acquisition resulted in goodwill of approximately $3.4 million and was
accounted for under the purchase method of accounting. The operating results of
Woodsmiths have been included in the consolidated operating results beginning
with the month of March.
On May 8, 2001 WinsLoew Furniture, Inc. and its parent WLFI Holdings, Inc.
acquired all of the outstanding stock of Brown Jordan International, Inc. at a
purchase price of $78.6 million. The Stock Purchase Agreement by and among WLFI
Holdings, Inc., the Company, BJI and the Stockholders of BJI also called for the
repayment of outstanding BJI indebtedness at closing, which approximated $44.6
million. The amount of consideration paid by the Company for the BJI stock was
determined through an arm's length negotiation between representatives of the
Company and BJI.
The total purchase price of $123.2 million, including estimated transaction
costs and funded indebtedness, was allocated to the assets acquired using the
fair value of the assets acquired. Pursuant to the purchase method of
accounting, the excess of the purchase price over the $44.6 million fair value
of net assets after payment of BJI indebtedness at closing, has been recorded as
goodwill in the amount of $78.6 million. The operating results of BJI have been
included in the consolidated operating results since the date of acquisition.
In order to complete the acquisition, the merger described in Note 1 was
con-summated simultaneously.
WLFI Holdings, Inc. raised $50.9 million of equity and issued $22 million of
subordinated notes to the sellers for BJI stock. Holdings contributed the cash
of $50.9 million to the Company as additional equity. The stock of BJI, obtained
in the exchange of subordinated notes, was also contributed to the Company. The
balance of the proceeds was provided through a refinancing of the Company's
existing Senior Credit Facility. The new Senior Credit Facility consists of a
$165 million Term Loan and a $60 million revolving credit facility.
The operating results of the above acquisitions have been included in the
consolidated operating results since the dates of acquisition.
The following unaudited pro forma information has been prepared assuming that
the acquisitions of Woodsmiths and Brown Jordan International occurred on
January 1, 2001.
(In Thousands)
Nine months ended
September 28, 2001
------------------------------
------------------------------
Net sales $ 246,818
Income before taxes 263
------------------------------
Net income (loss) $ (4,044)
==============================
7. Segment Information
The Company has three segments organized and managed based on the products sold.
The Company evaluates performance and allocates resources based on gross profit.
There are no intersegment sales/transfers. Export revenues are not material.
(In thousands)
Three Months Ended Nine Months Ended
---------------------------------------- -----------------------------------------
September 27, September 28, September 27, September 28,
2002 2001 2002 2001
---------------------------------------- -----------------------------------------
NET SALES:
Casual products $ 34,819 $ 36,491 $ 203,414 $ 116,066
Contract seating products 16,334 18,458 43,196 53,673
Ready to assemble products 1,308 2,166 5,124 6,346
---------------------------------------- -----------------------------------------
Total net sales $ 52,461 $ 57,115 $ 251,734 $ 176,085
======================================== =========================================
SEGMENT GROSS PROFIT:
Casual products $ 13,215 $ 11,608 $ 58,882 $ 43,004
Contract seating products 4,219 5,576 11,694 16,684
Ready to assemble products 492 374 960 919
---------------------------------------- -----------------------------------------
Total segment gross profit 17,926 17,558 71,536 60,607
Reconciling items:
Selling, general and
administrative expenses 12,815 12,350 40,041 31,706
Amortization 182 2,458 547 6,656
---------------------------------------- -----------------------------------------
Operating income 4,929 2,750 30,948 22,245
Interest expense, net 7,876 7,072 24,404 25,616
---------------------------------------- -----------------------------------------
Income/(loss) before
income taxes $ (2,947) $ (4,322) $ 6,544 $ (3,371)
======================================== =========================================
(In thousands) September 27, December 31,
2002 2001
----------------------------------------
SEGMENT ASSETS:
Casual products $ 219,567 $ 267,913
Contract seating products 48,406 49,715
Ready to assemble products 4,890 6,416
----------------------------------------
Total 272,863 324,044
Reconciling items:
Corporate 195,175 203,974
----------------------------------------
Total consolidated assets $ 468,038 $ 528,018
========================================
8. Goodwill Impairment
In July 2001, the FASB issued Statement No. 141, Business Combinations, and
Statement No. 142, Goodwill and Other Intangible Assets. Statement No. 141
requires that the purchase method of accounting be used for all business
combinations initiated and completed after June 30, 2001. Statement No. 142
requires that goodwill and intangible assets with indefinite useful lives no
longer be amortized, but instead tested for impairment at least annually in
accordance with the provisions of the Statement. The Company adopted the
provisions of Statement 141 immediately and Statement 142 effective January 1,
2002. Pursuant to the provisions of Statement 142, the Company is required to
reassess the useful lives and residual values of all intangible assets acquired
in purchase business combinations, and make any necessary amortization period
adjustments by the end of the first interim period after For adoption. In
addition, to the extent an the intangible asset is identified as having For the
Three Nine an indefinite useful life, the Company Months ended Months is
required to test the intangible asset September 28, ended for impairment in
accordance with the September provisions of the Statement. Any 28, impairment
loss will be measured as of the date of adoption and recognized as the
cumulative effect of a change in accounting principle effective as of January 1,
2002.
During the second quarter, step 1 testing for initial indication of impairment
was completed. The results of the test indicate potential impairment in the
Casual and Contract reporting units. The Company expects to complete the second
step during the fourth quarter and will record any impairment loss as a
cumulative effect of an accounting change, effective as of January 1, 2002.
Transitional Disclosure for Adoption of Statement 142 Pro forma results for the
three and nine months ended, assuming the elimination of goodwill amortization,
are summarized below:
For the Three For the Nine
Months Ended Months Ended
(In thousands) September 28, September 28,
2001 2001
----------------------- -------------------------
Net income (loss)as reported $ (3,838) $ (4,705)
Goodwill amortization, net of tax 2,280 6,121
----------------------- -------------------------
Pro forma net income (loss) $ (1,558) $ 1,416
======================= =========================
9. DERIVATIVES
On January 1, 2001 the Company adopted SFAS No. 133, "Accounting For Derivative
Instruments and Hedging Activities," as amended by SFAS No. 137 and No. 138.
The Company enters into short term currency forward contracts to hedge currency
exposures associated with the purchase of certain raw materials and the funding
of foreign operations. At September 27, 2002, the change in fair value of these
hedges was not material.
On August 6, 2001 the Company entered into an interest rate swap agreement to
fix the interest rate on $100 million principal amount of variable rate debt
outstanding under the Senior Credit Facility. The interest rate swap is designed
to fix the adjusted LIBOR interest rate at 5.09% on $100 million through March
31, 2004 and on $80 million from March 31, 2004 to March 31, 2005.
As of September 27, 2002, the fair value of the swap was recorded as a liability
of $4,623,000 with an offsetting entry to other comprehensive loss, net of taxes
of $1,849,000. The portion of ineffectiveness of the hedge, as determined by the
change in variable cash flows of the interest rate swap to the Senior Credit
Facility, has been expensed.
From the period of January 1, 2002 through September 27, 2002, the 3-month LIBOR
interest rate decreased approximately 5.6 basis points. While the Company's
interest on LIBOR-based borrowing decreased during this period, the fair value
of the interest rate swap decreased also. Future movements in interest rates,
particularly the 3-month LIBOR rate, will correspondingly impact the Company's
cash interest expense and the fair value of the swap.
10. Statement Of Comprehensive Loss
Statement Of Comprehensive Loss
The components of other comprehensive loss and total comprehensive loss for the
three and nine months ended September 27, 2002 are as follows:
(In thousands) Nine Months Ended
September 27, September 28,
2002 2001
---------------------- ----------------------
Net income(loss) $ 3,664 $ (4,705)
Change in fair value of interest rate swap,
net of taxes (1,320) -
---------------------- ----------------------
Comprehensive income(loss) $ 2,344 $ (4,705)
====================== ======================
(In thousands) Three Months Ended
September 27, September 28,
2002 2001
---------------------- ----------------------
Net loss $ (2,213) $ (3,838)
Change in fair value of interest rate swap,
net of taxes (485) -
---------------------- ----------------------
Comprehensive loss $ (2,698) $ (3,838)
====================== ======================
Management's Discussion and Analysis of Financial Condition
And Results of Operations
Prior to the acquisition of Brown Jordan International ("BJI"), WinsLoew
Furniture, Inc. ("WinsLoew" or the "Company") completed a recapitalization
transaction wherein, the Company became a wholly-owned subsidiary of a new
holding company called WLFI Holdings, Inc. (Holdings), a Florida corporation.
In order to accomplish the recapitalization, Holdings was initially formed as
the Company's wholly-owned subsidiary. In addition to Holdings, the Company
formed another company called WLFI Merger, Inc., a Florida corporation, as a
wholly-owned subsidiary of Holdings. Then, immediately prior to the consummation
of the Brown Jordan acquisition, the Company merged with WLFI Merger, Inc. and
was the surviving corporation of the merger.
As a result of these transactions, the Company became a wholly-owned subsidiary
of the new holding company, Holdings. All shares of common stock that were
outstanding immediately prior to the merger (850,497 shares) were converted into
shares of common stock of Holdings. In addition, each warrant or option to
purchase shares of the Company's common stock was converted into a warrant or
option to purchase an equivalent number of shares of common stock of Holdings.
1,000 shares of the Company's common stock was then issued to WLFI Holdings,
Inc. Finally, by operation of the merger the separate corporate existence of
WLFI Merger ended.
Because there was no change in the stock ownership of the Company as a result of
the recapitalization, there was no change in the basis of the Company's assets
or liabilities.
On April 23, 2002, the Board of Directors voted to change the name of the
Company to Brown Jordan International, Inc. This name change acknowledges that
Brown Jordan is one of the most recognized names in the industry and expresses
the Company's commitment to build upon that image and fine reputation which
Brown Jordan has earned as the preeminent brand in luxury leisure furniture.
General
We are a leading designer, manufacturer and distributor of a broad offering of
casual indoor and outdoor furniture and contract and hospitality products. We
also manufacture certain ready-to-assemble furniture products. Our casual
furniture includes chairs, chaise lounges, tables, umbrellas and related
accessories, which are generally constructed from aluminum, wrought iron, wood
or fiberglass. In addition, our casual line includes a variety of tables,
chairs, benches and swings for the site amenity market. Our seating products
include wood, metal and upholstered chairs, sofas and loveseats, which are
offered in a wide variety of finish and fabric options. All of our casual
furniture, excluding Wabash, and contract and hospitality products are
manufactured pursuant to customer orders. We sell our furniture products to the
residential market and to the contract and hospitality market, consisting of
commercial and institutional users.
Business
We market our casual furniture products to the residential market under the
Winston, Pompeii, Brown Jordan and Vineyard brand names through approximately 67
independent sales representatives and to over 800 active customers, which are
primarily specialty patio furniture stores located throughout the United States.
In addition, we market our casual products to the national account market under
the Casual Living, Better Homes and Gardens and Samsonite brand names.
We also market a broad line of casual furniture products in the contract markets
under the Texacraft, Tropic Craft, Pompeii and Brown Jordan brand names,
primarily through our in-house sales force, to lodging and restaurant chains,
country clubs, apartment developers and property management firms, architectural
design firms, municipalities and other commercial and institutional users. In
addition, we market a variety of products under the Wabash brand name. These
products are targeted at educational facilities, municipality and recreation
centers, hotels and motels and other institutional and corporate users.
We market our seating products to a broad customer base in the contract and
hospitality market under the Loewenstein, Lodging By Charter and Charter brand
names through approximately 24 regional independent sales organizations. Our
customers include lodging and restaurant chains, architectural design firms,
professional sports complexes, schools, healthcare facilities, office furniture
dealers, retail store planners and other commercial and institutional users in
the contract and hospitality market. We manufacture over 300 distinct models of
seating products ranging from traditional to contemporary styles of chairs, as
well as reception area love seats, sofas and stools. We design, assemble and
finish our seating products with component parts from a variety of suppliers,
including a number of Italian manufacturers.
Over the past several years, we have undertaken a number of initiatives to
strengthen and grow our core casual furniture and seating businesses. We have
focused resources on our core business and disposed of non-core or unprofitable
operations. In 1997, we sold our wrought iron furniture business, and in 1998 we
discontinued and sold or liquidated certain of our ready-to-assemble furniture
operations. We also embarked on a focused acquisition program to broaden our
core product offering in the casual segment that, to date, has resulted in the
acquisitions of Tropic Craft, a manufacturer of casual furniture sold into the
contract markets; Pompeii, a manufacturer of upper-end casual furniture sold
into both the residential and contract markets; Brown Jordan, a manufacturer
whose products serve the premium to unlimited market categories in both retail
and contract markets and Casual Living Worldwide which markets to national
retailers and specialty patio stores under a variety of brand names in the
moderate to lower price points; and Wabash Valley, a manufacturer of site
amenity products in the institutional and corporate markets. Our balanced
approach to growth has also resulted in acquisitions to complement our seating
segment. These acquisitions included Stuart Clark and Charter during 2000, both
of which manufacture upholstered furniture for the hospitality industry. In
addition, the Company purchased The Woodsmiths Company in March 2001. Woodsmiths
is a manufacturer of custom tabletops for the contract and hospitality markets.
Results of Operations
The following table sets forth net sales, gross profit, and gross margin as a
percent of net sales for the respective periods for each of the Company's
product lines:
(In thousands)
Three Months Ended
---------------------------------------------------------------------------------------------------------
-------------------------------------------------- --------------------------------------------------
September 27, 2002 September 28, 2001
-------------------------------------------------- --------------------------------------------------
Net Gross Gross Net Gross Gross
Sales Profit Margin Sales Profit Margin
-------------------------------------------------- --------------------------------------------------
Casual products $ 34,819 $ 13,215 38.0% $ 36,491 $ 11,608 31.8%
Contract seating
products 16,334 4,219 25.8% 18,458 5,576 30.2%
RTA 1,308 492 37.6% 2,166 374 17.3%
-------------------------------------------------- --------------------------------------------------
Total $ 52,461 $ 17,926 34.2% $ 57,115 $ 17,558 30.7%
================================================== ==================================================
(In thousands)
Nine Months Ended
----------------------------------------------------------------------------------------------------------
-------------------------------------------------- ---------------------------------------------------
September 27, 2002 September 28, 2001
-------------------------------------------------- ---------------------------------------------------
Net Gross Gross Net Gross Gross
Sales Profit Margin Sales Profit Margin
-------------------------------------------------- ---------------------------------------------------
Casual products $ 203,414 $ 58,882 28.9% $ 116,066 $ 43,004 37.1%
Contract seating
products 43,196 11,694 27.1% 53,673 16,684 31.1%
RTA 5,124 960 18.7% 6,346 919 14.5%
-------------------------------------------------- ---------------------------------------------------
Total $ 251,734 $ 71,536 28.4% $ 176,085 $ 60,607 34.4%
================================================== ===================================================
(In thousands)
Pro forma
Nine Months Ended
---------------------------------------------------
---------------------------------------------------
September 28, 2001
---------------------------------------------------
Net Gross Gross
Sales Profit Margin
---------------------------------------------------
Casual products $ 186,130 $ 56,603 30.4%
Contract seating
products 54,342 16,904 31.1%
RTA 6,346 919 14.5%
---------------------------------------------------
Total $ 246,818 $ 74,426 30.2%
===================================================
The following table sets forth certain information relating to the Company's
operations expressed as a percentage of the Company's net sales:
Three Months Ended
---------------------------------------------------------
September 27, September 28,
2002 2001
------------------------ ----------------------
Gross profit 34.2% 30.7%
Selling, general and
administrative expense 24.4% 21.6%
Amortization 0.3% 4.3%
Operating income 9.4% 4.8%
Interest expense, net 15.0% 12.4%
Loss before income taxes -5.6% -7.6%
Net (loss) -4.2% -6.7%
Nine Months Ended
---------------------------------------------------------
September 27, September 28,
2002 2001
------------------------ ----------------------
Gross profit 28.4% 34.4%
Selling, general and
administrative expense 15.9% 18.0%
Amortization 0.2% 3.8%
Operating income 12.3% 12.6%
Interest expense, net 9.7% 14.5%
Income (loss) before income taxes 2.6% -1.9%
Net income (loss) 1.5% -2.7%
Pro Forma
Nine Months Ended
----------------------
September 28,
2001
----------------------
Gross profit 30.2%
Selling, general and
administrative expense 16.1%
Amortization 3.0%
Operating income 11.0%
Interest expense, net
Income (loss) before income taxes 11.9%
Net income (loss) -0.9%
Comparison of Three Months Ended September 27, 2002 and September 28, 2001
Net Sales
The Company's actual consolidated net sales for the third quarter 2002, $52.5
million decreased $4.7 million or 8.2% from $57.1 million in the third quarter
of 2001. Casual net sales for the third quarter of 2002 decreased by 4.6% from
the same period in 2001 as a result of the weakness in the retail and mass
merchandise national markets. The contract seating product line experienced a
net sales decrease of 11.5% resulting from the continued sluggishness in
construction and refurbishing projects in the hospitality industry. The RTA
product line experienced a sales decrease of 39.6% due to lost floor space with
a major mass merchandiser and a significant customer exiting the catalog market.
Gross Margin
Actual gross margin in the third quarter of 2002 increased $0.3 million or 1.7%
to $17.9 million compared to $17.6 million in the third quarter of 2001. Actual
gross margin percentage increased from 30.7% in the third quarter of 2001 to
34.2% in the third quarter of 2002. This increase results a favorable mix impact
from a higher percentage of casual product shipments. While gross margins in the
casual market increased by $1.6 million in the third quarter of 2002, the margin
percent increased from 31.8% in the third quarter of 2001 to 38.0% in the
corresponding period of 2002.
The gross margin for contract and hospitality declined to 25.8% in the third
quarter of 2002, compared to 30.2% in the third quarter of 2001. The decline is
primarily volume related. Gross margins in the RTA product line increased from
17.3% in the third quarter of 2001 to 37.6% during the third quarter of 2002, as
a result of warranty reserve adjustments.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $0.5 million in the third
quarter of 2002, compared to the third quarter of 2001. This reflects the
Company's investment in its sales and marketing function in order to grow its
product lines and revenue base.
Amortization
Amortization expense decreased by $2.3 million in the third quarter of 2002,
compared to the third quarter of 2001. This decrease results primarily from the
Company adopting the provisions of Statement of Financial Accounting Standards
No. 142, Goodwill and Other Intangible Assets(See Note 8). As a result of this
pronouncement, goodwill has not been amortized during 2002. Other definite lived
intangible assets such as non-compete agreements and patents and trademarks
continue to be amortized.
Operating Income
As a result of the above, operating income increased by $2.2 million, to $4.9
million (9.4% of net sales) in the third quarter of 2002, compared to $2.8
million (4.8% of net sales) in the third quarter of 2001.
Interest Expense, Net
Interest expense increased by $0.8 million in the third quarter of 2002,
compared to the third quarter of 2001. The increase reflects the impact of the
interest rate swap agreement entered in to on August 6, 2001 and interest rate
changes.
Provision for Income Taxes
The Company's effective tax rate for the third quarter of 2002 was 24.9% benefit
compared to a benefit of 11.3% for the third quarter of 2001. The increase in
effective tax rate is primarily due to the Company's adoption of Statement of
Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets.
(See Note 8) As a result of this pronouncement, goodwill has not been amortized
during the third quarter of 2002.
Comparison of Nine Months Ended September 27, 2002 and September 28, 2001
For purposes of this discussion, "pro forma" refers to the estimated
consolidated results had the acquisitions of Woodsmiths and Brown Jordan
International occurred on January 1, 2001.
Net Sales
The Company's actual consolidated net sales for the first nine months of 2002,
$251.7 million increased $75.6 million or 42.9% from $176.1 million for the
first nine months of 2001. On a pro forma basis, consolidated net sales for the
first nine months of 2002 increased $4.9 million or 2.0% compared to pro forma
net sales of $246.8 million during the same period of 2001. Aided by strong
shipments in the national accounts channel during the first quarter of 2002, net
sales in the casual segment increased $17.3 or 12.7% during the first nine
months of 2002 compared to pro forma net sales of $186.1 million in the first
nine months of 2001. The contract and hospitality product line experienced a pro
forma net sales decrease of 20.5% in the first nine months of 2002 when compared
to the same period in 2001. This decline is attributable to a slowdown in
construction and refurbishing projects in the hospitality industry. The RTA
product line experienced a sales decrease of 19.3% due to lost floor space with
a major mass merchandiser and a significant customer exiting the catalog market.
Gross Margin
Actual gross margin in the first nine months of 2002 increased $10.9 million or
18.0% to $71.5 million compared to $60.6 million in the first nine months of
2001. On a pro forma basis, consolidated gross margin decreased $2.9 million in
the first nine months of 2002 or 4.1% compared to $74.4 million in the first
nine months of 2001. Consolidated gross margin as a percent of net sales
decreased in the first nine months of 2002 to 28.4% compared to pro forma gross
margin of 30.1% for the same period in 2001. This margin percentage decline is
primarily the result of a first quarter 2002 sales mix in casual, which was
weighted to national account products, which carry lower margins than specialty
retail casual products. Specifically, the casual segment experienced a decline
in pro forma gross margin percent from 30.4% during the first nine months of
2001, to 28.8% during this same period in 2002.
The gross margin for contract products declined to 27.1% in the first nine
months of 2002, compared to 31.1% in the first nine months of 2001.
Additionally, contract pro forma gross margin was 31.0% during the first nine
months of 2001. The decline is attributable to increased pricing pressure. Gross
margins in the RTA product line increased from 14.5% in the first nine months of
2001 to 18.7% during the same period of 2002.
Selling, General and Administrative Expenses
Selling, general and administrative expenses increased $8.3 million in the first
nine months of 2002, compared to the same period of 2001 as a result of the
acquisitions. On a pro forma basis, expenses decreased $0.1 million from the
first nine months of 2001.
Amortization
Amortization expense decreased by $6.1 million in the first nine months of 2002,
compared to the first nine months of 2001. This decrease results primarily from
the Company adopting the provisions of Statement of Financial Accounting
Standards No. 142, Goodwill and Other Intangible Assets. (See Note 8) As a
result of this pronouncement, goodwill has not been amortized during 2002. Other
definite lived intangible assets such as non-compete agreements and patents and
trademarks continue to be amortized.
Operating Income
As a result of the above, operating income increased by $8.7 million, to $30.9
million (12.3% of net sales) in the first nine months of 2002, compared to $22.2
million (12.6% of net sales) in the same period of 2001.
Interest Expense
Interest expense decreased by $1.2 million in the first nine months of 2002,
compared to the first nine months of 2001. The decrease reflects additional debt
assumed in support of acquisitions which has been offset by lower interest
rates.
Provision for Income Taxes
The Company's effective tax rate for the first nine months of 2002 was 44.0%,
higher than the Federal statutory rate to state income taxes. For the first nine
months of 2001 there was a provision for income taxes even though there was a
pretax loss was due to non-deductibility of. The difference in the effective tax
rates between periods is due to the Company's adoption of Statement of Financial
Accounting Standards No. 142, Goodwill and Other Intangible Assets. (See Note 8)
As a result of this pronouncement, goodwill has not been amortized during 2002;
the majority of the 2001 goodwill amortization was not deductible for taxes.
Seasonality and Quarterly Information
Sales of retail casual products are typically higher in the second quarter of
each year as a result of high retail demand for casual furniture preceding the
summer months. Mass merchandise casual product sales are typically higher in the
fourth and first quarters as national accounts warehouse product in preparation
for the spring season. The timing of shipments to mass merchants can cause
significant swings in revenue from quarter to quarter. Specifically in 2002,
revenues from mass merchandise shipments were significantly higher in the first
quarter than those in the second quarter. In addition, such revenue swings have
a significant impact on gross margins as the mass merchandise shipments carry a
lower gross margin than the retail casual segment. Weather conditions during the
peak retail selling season and the resulting impact on consumer purchases of
outdoor furniture products can also affect sales of our casual products. The
furniture industry is cyclical and sensitive to changes in general economic
conditions, consumer confidence, discretionary income, interest rate levels and
credit availability.
The results of operations for any interim quarter are not necessarily indicative
of results for a full year.
Liquidity and Capital Resources
The Company's short-term cash needs are primarily for debt service and working
capital, including accounts receivable and inventory requirements. The Company
has historically financed its short-term liquidity needs with internally
generated funds and revolving line of credit borrowings. The Company actively
monitors its cash balances and applies available funds to reduce borrowings
under its long-term revolving line of credit. At September 27, 2002, the Company
had $34.0 million of working capital and $41.7 million of unused and available
funds under its revolving credit facility.
In addition to the Senior Credit Facility, the Company has $105 million of
Senior Subordinated Notes ("notes") which require interest and principal
repayments. The notes require semi-annual interest payments, which commenced in
February 2000 and will mature in August 2007. Borrowings under the new senior
credit facility require quarterly interest payments, which commenced in June
2001.
The Company's Senior Credit Facility restricts the Company from making cash
interest payments on the notes issued by Holdings, the parent. Such interest
payments are satisfied through the issuance of additional notes in amounts equal
to the interest due. These notes are the result of debt incurred in the
acquisition of BJI.
We believe that existing sources of liquidity and funds expected to be generated
from operations will provide adequate cash to fund our anticipated working
capital needs. Significant expansion of our business or the completion of any
material strategic acquisitions may require additional funds which, to the
extent not provided by internally generated sources, could require us to seek
access to debt or equity markets.
Operating cash flows are closely correlated to demand for the Company's
products. A decrease in demand for the Company's products would impact the
availability of these internally generated funds. Further, the Company's
revolving line of credit is contingent upon the Company maintaining particular
debt covenants. Failure to comply with these covenants would impact the
availability of funds on the revolving credit line. At the end of the third
quarter of 2002, the Company was in compliance with all Senior Debt covenants.
Cash Flows from Operating Activities. Cash provided by operating activities was
$33.0 million and $28.4 million for the first nine months of 2002 and 2001
respectively. The increase in cash provided results primarily from an earnings
increase and changes in other accrued liabilities.
Cash Flows from Investing Activities. Cash provided by investing activities was
$3.5 million in the first nine months of 2002 and cash used in investing
activities was $94.6 million during the first nine months of 2001. Cash invested
during 2001 included $90.8 million in support of acquisitions. Cash provided by
investing activities in 2002 include $2.0 million in proceeds from sale of the
Company's airplane and $3.0 million in proceeds from the sale of two facilities,
one in Houston, Texas and the other in Ocala, Florida.
Cash Flows From Financing Activities. Net cash used in financing activities was
$38.5 million during the first nine months of 2002 and cash provided by
investing activities was $68.3 million during the first nine months of 2001. In
2002, cash was principally used to retire revolving and term debt. Financing
activities during the first nine months of 2001 focused on the Company's
acquisition of Brown Jordan International and simultaneous restructuring of the
Company's Senior Credit Facility. Specifically, proceeds for the BJI acquisition
and Senior Credit Facility payoff were $205.3 million under the Company's new
Senior Credit facility and $50.9 million of equity investment. Of these amounts,
$147.3 million was used to payoff the existing Senior Credit Facility and $105.4
million was used for the acquisition of BJI, including payoff of funded
indebtedness.
Foreign Exchange Forward Contracts
The Company purchases some raw materials from several Italian suppliers. In
addition, the Company funds some expenses for its Juarez, Mexico manufacturing
facility. These transactions expose the Company to the effects of fluctuations
in the value of the U.S. dollar versus the Euro and Mexican Peso. If the U.S.
dollar declines in value versus these foreign currencies, the Company will pay
more in U.S. dollars for these transactions. To reduce its exposure to loss from
such potential foreign exchange fluctuations, the Company will occasionally
enter into foreign exchange forward contracts. These contracts allow the Company
to buy Euros and Mexican Pesos at a predetermined exchange rate and thereby
transfer the risk of subsequent exchange rate fluctuations to a third party.
Currently the Company has forward contracts on the Mexican Peso extending
through December 2002, with $1.2 million outstanding and unsettled at September
27, 2002. The Company has not incurred significant gains or losses during 2002
as a result of these foreign currency transactions. The Company's hedging
activities relate solely to its component purchases in Italy and operations
funding in Mexico. The Company does not speculate in foreign currency.
Inflation
Inflation has not had a significant impact on the Company in the past three
years and management does not expect inflation to have a significant impact in
the foreseeable future.
Forward Looking Statements
The part of this Quarterly Report on Form 10-Q captioned "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contains certain forward-looking statements, which involve risks and
uncertainties. These statements are based on current expectations, estimates and
projections about the markets in which we operate, management's beliefs and
assumptions made by management. Readers should refer to a discussion under
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" contained in our Annual Report on Form 10-K for the year ended
December 31, 2001 concerning certain factors that could cause our actual results
to differ materially from the results anticipated in such forward-looking
statements. Said discussion is hereby incorporated by reference into this
Quarterly Report.
Critical Accounting Policies and Estimates
Management's discussion and analysis of its financial condition and results of
operations are based upon the Company's consolidated financial statements, which
have been prepared in accordance with accounting principles generally accepted
in the United States. The preparation of these financial statements requires the
Company to make estimates and judgments that affect the reported amounts of
assets, liabilities, revenues and expenses, and related disclosure of contingent
assets and liabilities. On an on-going basis, the Company evaluates its
estimates, including those related to customer programs and incentives, product
returns, bad debts, inventories, intangible assets, income taxes, warranty
obligations, pensions and contingencies and litigation. The Company bases its
estimates on historical experience and on various other assumptions that are
believed to be reasonable under the circumstances, the results of which form the
basis for making judgments about the carrying values of assets and liabilities
that are not readily apparent from other sources. Actual results may differ from
these estimates under different assumptions or conditions.
The Company believes the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of its consolidated
financial statements.
Allowance for Doubtful Accounts
The Company maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments. If the
financial condition of the Company's customers were to deteriorate, resulting in
an impairment of their ability to make payments, additional allowances may be
required.
Warranties
The Company provides for the estimated cost of product warranties at the time
revenue is recognized. While the Company engages in product quality programs and
processes, including actively monitoring and evaluating the quality of its
component suppliers, the Company's warranty obligation is affected by product
failure rates, material usage and service delivery costs incurred in correcting
a product failure. Should actual product failure rates, material usage or
service delivery costs differ from the Company's estimates, revisions to the
estimated warranty liability would be required.
Inventory
The company writes down its inventory for estimated obsolescence or unmarketable
inventory equal to the difference between the cost of inventory and the
estimated market value based upon assumptions about future demand and market
conditions. If actual market conditions are less favorable than those projected
by management, additional inventory write-downs may be required.
Goodwill and other identifiable intangible assets
Goodwill associated with the excess purchase price over the fair value of assets
acquired and other identifiable intangible assets, such as trademarks and trade
names, favorable leases, and covenants not to compete, are currently amortized
on the straight-line method over their estimated useful lives.
These assets are currently reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable.
As discussed herein, the FASB issued SFAS 141 and SFAS 142 in June 2001. SFAS
141 requires business combinations initiated after June 30, 2001 to be accounted
for using the purchase method of accounting and broadens the criteria for
recording intangible assets separate from goodwill. SFAS 142 requires the use of
a non-amortization approach to account for purchased goodwill and certain
intangibles. We adopted these pronouncements effective January 1, 2002. At such
time we anticipate that amortization associated with purchased goodwill will
cease.
We have significant intangible assets related to goodwill and other acquired
intangibles. The determination of related estimated useful lives and whether or
not these assets are impaired involves significant judgments. Changes in
strategy and/or market conditions could significantly impact these judgments and
require adjustments to recorded asset balances.
Derivatives
Financial instruments, including derivatives, used in the Company's hedging
activities are recorded at fair value, and the amount of ineffectiveness
recorded in earnings. Fair values for certain derivative contracts are derived
from pricing models that consider time value and yield curve or volatility
factors underlying the positions.
Pricing models and their underlying assumptions impact the amount and timing of
unrealized gains and losses recognized, and the use of different pricing models
or assumptions could produce different financial results. Changes in the fixed
income and foreign exchange markets will impact the Company's estimates of fair
value in the future, potentially affecting revenues. To the extent financial
contracts have extended maturity dates, the Company's estimates of fair value
may involve greater subjectivity due to the lack of transparent market data
available upon which to base modeling assumptions. The illiquid nature of
certain securities or debt instruments (such as certain high-yield debt
securities, and certain senior secured loans) also requires a high degree of
judgment in determining fair value.
Controls and Procedures
As of September 27, 2002, an evaluation was performed under the supervision and
with the participation of our management, including the Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of
our disclosure controls and procedures. Based on that evaluation, our
management, including the Chief Executive Officer +and Chief Financial Officer,
believes that our disclosure controls and procedures are adequately designed to
ensure that the information that we are required to disclose in this report has
been accumulated and communicated to our management, including our Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding such required disclosure. There have been no significant
changes in our internal controls or in other factors that could significantly
affect internal controls subsequent to September 27, 2002.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
From time to time, we are subject to legal proceedings and other claims arising
in the ordinary course of our business. We maintain insurance coverage against
potential claims in an amount that we believe to be adequate. Based primarily on
discussions with counsel and management familiar with the underlying disputes,
we believe that we are not presently a party to any litigation, the outcome of
which would have a material adverse effect on our business, financial condition,
results of operations or future prospects.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
(a) None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
99.1 Certification of Chief Executive Officer under Section 906 of the
Sarbanes-Oxley Act of 2002
99.2 Certification of Chief Financial Officer under Section 906 of the
Sarbanes-Oxley Act of 2002
27 Financial Data Schedule
(1) Filed herewith
(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.
BROWN JORDAN INTERNATIONAL, INC.
By:/s/ Bruce R. Albertson
-------------------------
November 11, 2002 Bruce R. Albertson
President and Chief Executive Officer
November 11, 2002 By:/s/ Vincent A. Tortorici, Jr.
----------------------------------
Vincent A. Tortorici, Jr.
Chief Financial Officer
CERTIFICATIONS
I, Bruce R. Albertson, President and Chief Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Brown Jordan
International, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within
those entities, particularly during the period in which this
quarterly report is being prepared:
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the
filing date of this quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's
ability to record, process, summarize and report financial data
and have identified for the registrant's auditors any material
weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
6. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
By:/s/ Bruce R. Albertson
-------------------------
November 11, 2002 Bruce R. Albertson
President and Chief Executive Officer
CERTIFICATIONS
I, Vincent A. Tortorici, Jr., Financial Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Brown Jordan
International, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared:
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on
our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent functions):
d) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
e) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's
internal controls; and
The registrant's other certifying officers and I have indicated in this annual
report whether or not there were significant changes in internal controls or in
other factors that could significantly affect internal controls subsequent to
the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
November 11, 2002 By:/s/ Vincent A. Tortorici, Jr.
----------------------------------
Vincent A. Tortorici, Jr.
Chief Financial Officer
Exhibit 99.1
CERTIFICATION PURSUANT TO 18 U.S.C SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Brown Jordan International, Inc. (the
"Company") on Form 10-Q for the period ended September 27, 2002 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Bruce R. Albertson, President and Chief Executive Officer of the Company,
certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906
of the Sarbanes-Oxley Act of 2002:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
By:/s/ Bruce R. Albertson
-------------------------
November 11, 2002 Bruce R. Albertson
President and Chief Executive Officer
Exhibit 99.2
CERTIFICATION PURSUANT TO 18 U.S.C SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Brown Jordan International, Inc. (the
"Company") on Form 10-Q for the period ended September 27, 2002 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Vincent A. Tortorici, Jr., Chief Financial Officer of the Company, certify,
pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
November 11, 2002 By:/s/ Vincent A. Tortorici, Jr.
----------------------------------
Vincent A. Tortorici, Jr.
Chief Financial Officer