1
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 27, 1997 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
incorporation or organization) Identification No.)
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 27, 1997 there were outstanding 20,159,573 shares of the Registrant's
$.10 par value common stock.
Page 1 of 13
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JASON INCORPORATED
FORM 10-Q
JUNE 27, 1997
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
-------
Statements of Income for the Three Months
Ended June 27, 1997 and June 28, 1996 ................................................... 3
Statements of Income for the Six Months
Ended June 27, 1997 and June 28, 1996 ................................................... 4
Balance Sheets as at June 27, 1997 and
December 27, 1996 ....................................................................... 5
Statements of Cash Flows for the Six Months
Ended June 27, 1997 and June 28, 1996 ................................................... 6
Notes to Financial Statements ............................................................... 7
Management's Discussion and Analysis of
Results of Operations and Financial Condition ........................................... 8 - 11
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
Page 2 of 13
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JASON INCORPORATED
STATEMENTS OF INCOME
(Dollars In Thousands, Except Earnings Per Share)
FOR THE THREE MONTHS ENDED
----------------------------
JUNE 27, JUNE 28,
1997 1996
-------- --------
(UNAUDITED)
NET SALES $ 123,260 $ 111,034
COST OF SALES 97,996 87,920
----------- -----------
Gross Profit 25,264 23,114
SELLING AND ADMINISTRATIVE EXPENSES 17,954 15,855
----------- -----------
Operating Income 7,310 7,259
INTEREST EXPENSE 2,493 2,388
OTHER (INCOME) EXPENSE (512) 14
----------- -----------
Income Before Income Taxes 5,329 4,857
PROVISION FOR INCOME TAXES 2,078 1,991
----------- -----------
NET INCOME $ 3,251 $ 2,866
=========== ===========
NET INCOME PER SHARE $ 0.16 $ 0.14
=========== ===========
AVERAGE SHARES OUTSTANDING 20,512,000 20,604,000
=========== ===========
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JASON INCORPORATED
STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
-------------------------------------------------
FOR THE SIX MONTHS ENDED
---------------------------
JUNE 27, JUNE 28,
1997 1996
-------- --------
(UNAUDITED)
-----------
NET SALES $ 248,487 $ 215,665
COST OF SALES 200,051 171,093
--------- ---------
Gross Profit 48,436 44,572
SELLING AND ADMINISTRATIVE EXPENSES 35,009 30,579
--------- ---------
Operating Income 13,427 13,993
INTEREST EXPENSE 5,199 4,770
OTHER (INCOME) EXPENSE (765) (56)
--------- ---------
Income Before Income Taxes 8,993 9,279
PROVISION FOR INCOME TAXES 3,507 3,804
--------- ---------
NET INCOME $ 5,486 $ 5,475
========= =========
NET INCOME PER SHARE $ 0.27 $ 0.27
========= =========
AVERAGE SHARES OUTSTANDING 20,515,000 20,556,000
========== ==========
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JASON INCORPORATED
BALANCE SHEETS
(Dollars in Thousands)
----------------------
JUNE 27, DECEMBER 27,
1997 1996
----------- ------------
(Unaudited)
-----------
ASSETS
- ------
Current Assets
Cash And Cash Equivalents $ 2,036 $ 2,978
Accounts Receivable - Net 63,379 61,483
Inventories (Note 2) 37,492 37,839
Costs And Earnings In Excess Of
Billings On Uncompleted Contracts 13,399 21,626
Income Taxes Receivable --- 2,250
Deferred Income Taxes 7,795 7,795
Other Current Assets 5,580 6,029
-------- --------
Total Current Assets 129,681 140,000
-------- --------
Property, Plant and Equipment
Cost 159,945 158,057
Less - Accumulated Depreciation (71,915) (66,624)
-------- --------
Net Property, Plant and Equipment 88,030 91,433
-------- --------
Intangible Assets - Net 88,199 89,876
Other Assets 1,667 1,817
-------- --------
$307,577 $323,126
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current Liabilities
Current Portion of Long-Term Debt $ 5,840 $ 3,917
Accounts Payable 29,024 31,397
Accrued Compensation & Employee Benefits 12,660 13,050
Accrued Warranty 4,668 4,434
Accrued Interest 1,293 1,580
Accrued Income Taxes 331 ---
Other Current Liabilities 9,695 10,015
Billings In Excess Of Costs And
Earnings On Uncompleted Contracts 12,285 9,570
-------- --------
Total Current Liabilities 75,796 73,963
Revolving Loan 24,175 42,190
Other Long-Term Debt 89,077 92,277
Deferred Income Taxes 8,606 8,544
Other Long-Term Liabilities 3,617 4,903
Postemployment & Postretirement Health
And Other Benefits 6,068 5,985
-------- --------
Total Liabilities 207,339 227,862
-------- --------
Commitments and Contingencies --- ---
SHAREHOLDERS' EQUITY
- --------------------
Common Stock & Additional
Contributed Capital 34,687 34,687
Retained Earnings 66,109 60,623
Foreign Currency Translation Adjustment (558) (46)
-------- --------
Total Shareholders' Equity 100,238 95,264
-------- --------
$307,577 $323,126
======== ========
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JASON INCORPORATED
STATEMENTS OF CASH FLOWS
(Dollars in Thousands)
For The Six Months Ended
------------------------------
June 27, June 28,
1997 1996
-------- --------
(UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 5,486 $ 5,475
Adjustments To Reconcile Net Income To Net Cash
Provided By Operating Activities:
Depreciation 7,235 6,165
Amortization 2,502 2,938
Deferred Income Taxes 62 562
Increase (Decrease) In Cash, Excluding Effects Of
Acquisitions, Due To Changes In:
Accounts Receivable (2,110) (10,976)
Inventories 104 1,682
Costs And Earnings In Excess Of Billings
On Uncompleted Contracts 8,227 (4,821)
Other Current Assets 2,678 (900)
Other Assets (675) (446)
Accounts Payable (2,287) 3,161
Accrued Compensation & Employee Benefits (169) (1,971)
Accrued Warranty 234 218
Accrued Interest (266) 16
Accrued Income Taxes 331 (1,367)
Billings In Excess Of Costs And Earnings
On Uncompleted Contracts 2,715 4,424
Other Liabilities (1,438) (742)
-------- --------
Total Adjustments 17,143 (2,057)
-------- --------
Net Cash Provided By Operations 22,629 3,418
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition Of Property, Plant And Equipment (6,317) (10,622)
Disposal Of Property, Plant And Equipment - Net 633 21
Other, Net (498) (105)
-------- --------
Net Cash Used For Investing Activities (6,182) (10,706)
-------- --------
Net Cash (Used) Provided Before Financing Activities 16,447 (7,288)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds From Revolving Loan 43,340 66,455
Repayments Of Revolving Loan (61,355) (58,915)
Proceeds From (Repayments Of) Other Long-Term Debt 626 (136)
Issuance Of Common Stock - Net --- 84
-------- --------
Net Cash Provided By (Used For) Financing Activities (17,389) 7,488
-------- --------
Net Increase (Decrease) In Cash And Cash Equivalents (942) 200
Cash And Cash Equivalents, Beginning of Period 2,978 1,890
-------- --------
Cash And Cash Equivalents, End of Period $ 2,036 $ 2,090
======== ========
Cash Paid For:
Interest 5,520 4,726
Income Taxes 951 4,645
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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 needled
nonwoven 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 27, 1997 and June 28, 1996 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 27, 1997 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 1997 and 1996 amounted to 20,512,000 and 20,604,000, respectively.
The weighted average number of common and common equivalent shares outstanding
during the first six months of 1997 and 1996 amounted to 20,515,000 and
20,556,000, respectively. Shares issuable under employee stock option plans
are included in the earnings per share computations for all periods presented.
NOTE 2 - 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 27, DECEMBER 27,
1997 1996
----------- -------------
(Unaudited)
Raw materials $19,806 $18,588
Work in process 5,611 4,898
Finished goods 12,075 14,353
------- -------
$37,492 $37,839
======= =======
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JASON INCORPORATED
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Three months ended June 27, 1997 compared to the three months ended June 28,
1996:
Sales for the three months ended June 27, 1997 increased by 11% from
$111,034,000 for the three months ended June 28, 1996 to $123,260,000. Sales
of power generation products were about the same, decreasing slightly from
$35,879,000 to $35,735,000. Sales of motor vehicle products increased by 23%
from $41,183,000 to $50,851,000. Sales of industrial products increased by 8%
from $33,972,000 to $36,674,000.
As mentioned above, power generation sales for the second quarter of 1997 were
about the same as last year which was a result of the timing of customer
project requirements. The second quarter of 1997 started with a lower power
generation backlog of $70 million compared to $90 million a year earlier.
Bookings in the second quarter of $26 million were down 45% compared to the
unusually high booking level of $47 million in the second quarter of 1996.
Bookings have been impacted by competitive pressures and the timing of
projects. Sales in the second quarter of $36 million were at about the same
level as in the second quarter of 1996, leaving a backlog at the end of the
second quarter of 1997 of $60 million compared to $101 million a year ago. The
lower level of backlog and the increased requirements for foreign fabrication
have resulted in excess capacity at the U.S. facilities, necessitating a July
1997 decision by the Company to close the Fort Smith, Arkansas facility of
Braden Manufacturing in the second half of 1997. The net cost to exit this
facility is not expected to be material. With this significant decrease in
backlog, management believes that sales for the remainder of the year will be
below those of the second half of last year but operating income will be above
the second half of last year due to more profitable projects in the backlog.
The higher motor vehicle products sales were a result of an increase in
both the automotive products business and the seating business. Automotive
product sales include $3 million of sales for Suroflex, the European
manufacturer of automotive insulation products acquired in the fourth quarter
of 1996. Excluding Suroflex, automotive product sales increased by 12%. This
increase in sales was due to an increase in the Company's content per vehicle
which was due to improved sales of the Company's Marabond(R) moldable insulation
product, which more than offset a decrease in U.S. automobile industry
production of 4.2% in the second quarter of 1997 compared to last year. The
U.S. automotive industry has announced a production schedule for the third
quarter of 1997 that is about the same as the production level in the third
quarter of 1996 and dealer inventories are at a reasonably low 63 days compared
to 61 days at the end of the second quarter of 1996. 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. The Company's seating products
business was up 26% in the second quarter of 1997 compared to the prior year.
This was primarily the result of an increase in Harley-Davidson original
equipment and parts and accessories business as well as an increase in the
Company's content per motorcycle produced.
Industrial products sales in the second quarter of 1997 were up compared to
last year with the Osborn brush business showing the most significant increase,
but increases were also achieved for the JacksonLea buff and compound
businesses and the components business.
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Operating income increased in the second quarter of 1997 from $7,259,000 in the
second quarter of 1996 to $7,310,000.
Operating income for the power generation products segment declined from
$1,315,000 in the second quarter of 1996 to $389,000. The decline in operating
income is the result of industry price level pressures and a less profitable
product mix at Braden Manufacturing which included equipment package skids and
inlet filters. In addition, the relatively low backlog and the increased
requirements for foreign fabrication have resulted in under utilization of U.S.
manufacturing capacity at Braden Manufacturing.
Operating income for the motor vehicle products segment improved from
$4,294,000 in the second quarter of 1996 to $5,047,000 due primarily to higher
volume in both the automotive and seating businesses, as mentioned above.
Operating income for the industrial products segment improved from $2,212,000
in the second quarter of 1996 to $2,479,000. This increase in operating income
was a result of an improvement in sales volume at Osborn, JacksonLea and the
components businesses.
Corporate expenses for the second quarter of 1997 were $605,000 compared to
$562,000 last year. This increase is primarily due to an increase in
management incentive compensation.
Interest expense increased in the second quarter of 1997 from $2,388,000 in the
second quarter of 1996 to $2,493,000 due to additional debt required for the
Suroflex acquisition in the fourth quarter of 1996. The increase in other
income in the second quarter of 1997 represents an increase in foreign royalty
income and the minority interest in second quarter losses at Suroflex.
Six months ended June 27, 1997 compared to the six months ended June 28, 1996:
Sales for the six months ended June 27, 1997 increased by 15% from $215,665,000
for the six months ended June 28, 1996 to $248,487,000. Sales of power
generation products increased by 13% from $67,650,000 to $76,147,000. Sales of
motor vehicle products increased by 25% from $79,941,000 to $100,283,000.
Sales of industrial products increased by 6% from $68,074,000 to $72,057,000.
The higher power generation sales for the first half of 1997 compared to last
year was a result of a higher power generation backlog at the beginning of 1997
and the timing of customer project requirements. Backlog at the beginning of
1997 was $80 million compared to $69 million a year earlier. Bookings in the
first half of $56 million were down 44% compared to the unusually high booking
level of $100 million in the first half of 1996. Bookings have been impacted
by competitive pressures and the timing of projects. Sales in the first half
of 1997 of $76 million compared to $68 million in the first half of 1996
leaving a backlog at the end of the first half of 1997 of $60 million compared
to $101 million a year ago. The lower level of backlog and the increased
requirements for foreign fabrication have resulted in excess capacity at the
U.S. facilities, necessitating a July 1997 decision by the Company to close the
Fort Smith, Arkansas facility of Braden Manufacturing in the second half of
1997. The net cost to exit this facility is not expected to be material. With
this significant decrease in backlog, management believes that sales for the
remainder of the year will be below those of the second half of last year but
operating income will be above the second half of last year due to more
profitable projects in the backlog.
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The higher motor vehicle products sales were a result of an increase in both
the automotive products business and the seating business. Automotive product
sales include $6 million of sales for Suroflex, the European manufacturer of
automotive insulation products acquired in the fourth quarter of 1996.
Excluding Suroflex, automotive product sales increased by 17%. This increase
in sales was due to an increase in the Company's content per vehicle which was
due to improved sales of the Company's Marabond(R) moldable insulation product,
which more than offset the effect of a less than 1% increase in U.S. automobile
industry production for the first half of 1997 compared to last year. The U.S.
automotive industry has announced a production schedule for the third quarter
of 1997 that is about the same as the production level in the third quarter of
1996 and dealer inventories are at a reasonably low 63 days compared to 61 days
at the end of the second quarter of 1996. 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 of 1997. The Company's seating products
business was up 20% in the first half of 1997 compared to the prior year. This
was primarily the result of an increase in Harley-Davidson original equipment
and parts and accessories business as well as an increase in the Company's
content per motorcycle produced.
Industrial products sales in the first half of 1997 were up compared to last
year with the Osborn brush business showing the most significant increase, but
increases were also achieved for the JacksonLea buff and compound businesses
and the components businesses.
Operating income declined in the first half of 1997 from $13,993,000 in the
first half of 1996 to $13,427,000.
Operating income for the power generation products segment declined from
$2,181,000 in the first half of 1996 to $789,000. The decline in operating
income is the result of industry price level pressures and a less profitable
product mix at Braden Manufacturing which included equipment package skids and
inlet filters. In addition, the relatively low backlog and the increased
requirements for foreign fabrication have resulted in under utilization of U.S.
manufacturing capacity at Braden Manufacturing.
Operating income for the motor vehicle products segment improved from
$8,180,000 in the first half of 1996 to $9,692,000 due primarily to higher
volume in both the automotive and seating businesses, as mentioned above.
Operating income for the industrial products segment declined from $4,647,000
in the first half of 1996 to $4,294,000. This decrease in operating income was
a result of a mix of new and lower margin products at Osborn and higher
material costs at the components businesses.
Corporate expenses for the first half of 1997 were $1,348,000 compared to
$1,015,000 last year. This increase is primarily due to an increase in
management incentive compensation.
Interest expense increased in the first half of 1997 from $4,770,000 in the
first half of 1996 to $5,199,000 due to additional debt required for the
Suroflex acquisition in the fourth quarter of 1996. The increase in other
income in the first half of 1997 represents an increase in foreign royalty
income and the minority interest in first half losses at Suroflex.
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"). SFAS 128
replaces primary
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earnings per share ("EPS") with basic EPS, which excludes dilution, and
requires presentation of both basic and diluted EPS on the face of the income
statement. Diluted EPS is computed similarly to the current fully diluted EPS.
SFAS 128 is effective for financial statements issued for periods ending after
December 15, 1997, and requires restatement of all prior-period EPS data
presented. The adoption of this statement is not expected to materially affect
either future or prior-period EPS.
LIQUIDITY AND CAPITAL RESOURCES
During the first half of 1997, 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 27, 1997, the Company had
available unused borrowing capacity of $53,084,000 under its bank revolving
loan facility. During the first half of 1996, the Company also satisfied the
capital requirements of its operations with internally generated funds.
During the first half of 1997, working capital decreased by $12,152,000 from
$66,037,000 at December 27, 1996 to $53,885,000 at June 27, 1997. This
decrease was a result of lower power generation activity levels and better
progress payments on contracts in process. During the first half of 1997, the
Company generated $22,629,000 in cash from operations. The Company anticipates
generating modest additional cash flow from operations during the balance of
the year.
In the first half of 1997 and 1996, the Company made capital expenditures of
$6,317,000 and $10,622,000, respectively. The major first half of 1997
expenditures were in the motor vehicle products segment for equipment at
Milsco, Janesville Products and Sackner to support new programs and to improve
efficiency and in the industrial products segment for equipment at the
components businesses, Osborn and JacksonLea to support new programs at those
locations. The major first half of 1996 expenditures were in the motor vehicle
segment for equipment to support new Marabond(R) programs at Janesville Products
and for plant and office additions to support an increased level of business at
Milsco. Capital expenditures for 1997 are anticipated to approximate $15.0
million. No significant commitments are outstanding as of June 27, 1997.
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.
FORWARD LOOKING STATEMENTS
This report contains certain statements as to the Company's belief, expectation
or anticipation regarding future developments. Such statements constitute
forward-looking statements and are subject to certain risks and uncertainties
that could cause actual future results and developments to differ materially
from those currently projected. Such risks and uncertainties include, but are
not limited to, changes in auto maker production schedules, delays in
anticipated bookings and customer delivery requirements and general economic
conditions in the Company's market segments.
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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 23, 1997.
(b) Not Applicable.
(c) At the Annual Meeting the shareholders:
(i) Voted to elect six directors to serve until the 1998
Annual Meeting of Shareholders. Each nominee was
elected by a vote of the shareholders as follows:
DIRECTOR FOR WITHHELD
-------- --- --------
Vincent L. Martin 18,237,590 14,541
Mark Train 18,237,590 14,541
Wayne C. Oldenburg 18,237,590 14,541
Wayne G. Fethke 18,237,590 14,541
David J. Drury 18,237,590 14,541
Frank W. Jones 18,237,590 14,541
(ii) Voted to ratify the appointment of
Price Waterhouse LLP as independent auditors of the
Corporation for the 1997 fiscal year as follows:
FOR: 18,220,192
AGAINST: 6,866
ABSTAIN: 25,073
(d) Not Applicable.
ITEM 5 Other information:
On April 23, 1997, the Board of Directors appointed James Tyler
Senior Vice President of the Company and President of the newly
formed Jason Automotive Group.
ITEM 6 (a) Financial Data Schedule
(b) Reports on Form 8-K - None
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JASON INCORPORATED (Registrant)
by
--------------------------
Mark Train
President
(Chief Financial Officer)
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