-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, R/qxtK5RcAQ9zZWM+VL5VZMSOQtj2d/bVs1/9mtSkK4ixpSsYimtwABsaNsyUzA7 mc7TrIj41UwF+zklrkDbwA== 0000950144-98-013106.txt : 19981123 0000950144-98-013106.hdr.sgml : 19981123 ACCESSION NUMBER: 0000950144-98-013106 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19981003 FILED AS OF DATE: 19981116 DATE AS OF CHANGE: 19981120 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JOHNSTON INDUSTRIES INC CENTRAL INDEX KEY: 0000041017 STANDARD INDUSTRIAL CLASSIFICATION: 2221 IRS NUMBER: 111749980 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06687 FILM NUMBER: 98754393 BUSINESS ADDRESS: STREET 1: 105 THIRTEENTH ST CITY: COLUMBUS STATE: GA ZIP: 31901 BUSINESS PHONE: 7066413140 MAIL ADDRESS: STREET 2: 105 THIRTEENTH ST CITY: COLUMBUS STATE: GA ZIP: 31901 FORMER COMPANY: FORMER CONFORMED NAME: GI EXPORT CORP DATE OF NAME CHANGE: 19850403 FORMER COMPANY: FORMER CONFORMED NAME: GEON INDUSTRIES INC DATE OF NAME CHANGE: 19770921 FORMER COMPANY: FORMER CONFORMED NAME: GEON TRADING CORP DATE OF NAME CHANGE: 19700915 10-Q 1 JOHNSTON INDUSTRIES, INC. 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 [X] For the quarterly period ended October 3, 1998 ---------------------------------------------- Commission file number 1-6687 ------ JOHNSTON INDUSTRIES, INC. ------------------------- (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Delaware 11-1749980 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 105 Thirteenth Street, Columbus, Georgia 31901 (Address of principal executive offices) (Zip Code) (706) 641-3140 -------------- (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 [ ] The number of shares outstanding of the Registrant's Common Stock as of October 3, 1998 was 10,742,772 shares. 2 JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES INDEX TO FORM 10-Q PART I - FINANCIAL INFORMATION
PAGE(S) ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS: Condensed Consolidated Balance Sheets October 3, 1998 and January 3, 1998 3 Condensed Consolidated Statements of Operations Three Months and Nine Months ended October 3, 1998 and September 27, 1997 4 Condensed Consolidated Statements of Cash Flows Nine Months ended October 3, 1998 and September 27, 1997 5-6 Notes to Condensed Consolidated Financial Statements 7-11 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 12-18 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS 19 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 19 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 19 SIGNATURE PAGE 20 EXHIBIT 10.29 - AMENDMENT # 5 DATED JULY 10, 1998 TO BANK CREDIT AGREEMENT 21-29 EXHIBIT 11 - STATEMENTS OF COMPUTATION OF PER SHARE EARNINGS 30 EXHIBIT 27 - FINANCIAL DATA SCHEDULE (For SEC Use Only) 31
2 3 PART I - FINANCIAL INFORMATION ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) (UNAUDITED)
OCTOBER 3, JANUARY 3, 1998 1998 ---------- ---------- ASSETS CURRENT ASSETS: Cash and Cash Equivalents $ 1,236 $ 2,284 Accounts and Notes Receivable Net of Allowance for Doubtful Accounts of $1,738 and $2,016 39,819 34,283 Inventories (Note 6) 55,936 51,083 Income Taxes Receivable 2,572 4,838 Deferred Income Taxes 379 406 Assets Held for Sale 3,468 5,010 Prepaid Expenses and Other 4,909 5,200 --------- --------- Total Current Assets 108,319 103,104 Property, Plant and Equipment-Net 105,015 113,783 Goodwill - Net 11,006 11,477 Intangible Asset-Pension 1,882 1,882 Other Assets 3,469 4,542 --------- --------- Total Assets $ 229,691 $ 234,788 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts Payable $ 17,053 $ 17,088 Accrued Expenses 12,360 10,264 Revolving Credit Loan (Note 7) 69,619 73,995 Current Maturities of Long-Term Debt (Note 7) 5,406 3,393 --------- --------- Total Current Liabilities 104,438 104,740 Long-Term Debt - Less Current Maturities (Note 7) 58,667 61,688 Other Liabilities 9,396 9,022 Deferred Income Taxes 9,473 10,214 STOCKHOLDERS' EQUITY: Common Stock, Par Value $.10 per share; Authorized, 20,000,000 Shares; Issued 12,467,691 1,246 1,246 Additional Paid-In Capital 21,445 21,445 Retained Earnings 33,095 34,458 --------- --------- Total 55,786 57,149 Less Treasury Stock; 1,724,919 shares (8,069) (8,025) --------- --------- Total Stockholders' Equity 47,717 49,124 --------- --------- Total Liabilities and Stockholders' Equity $ 229,691 $ 234,788 ========= =========
See notes to Condensed Consolidated Financial Statements 3 4 JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) (UNAUDITED)
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED --------------------------- --------------------------- OCTOBER 3, SEPTEMBER 27, OCTOBER 3, SEPTEMBER 27, 1998 1997 1998 1997 ---------- ------------- ---------- ------------- Net Sales $ 69,572 $ 78,488 218,474 $ 252,990 -------- -------- -------- --------- Costs and Expenses: Cost of Sales, excluding Depreciation and Amortization 55,200 67,697 175,639 209,856 Selling, General and Administrative 6,826 7,264 20,753 20,852 Depreciation and Amortization 5,117 5,202 15,404 15,878 Restructuring and Impairment Charges (4) 83 96 8,104 -------- -------- -------- --------- Total Costs and Expenses 67,139 80,246 211,892 254,690 -------- -------- -------- --------- Income (Loss) from Operations 2,433 (1,758) 6,582 (1,700) Other Expenses (Income): Interest Expense 3,477 3,410 10,141 10,131 Interest Income (290) (213) (786) (669) Other-Net 201 771 641 1,109 -------- -------- -------- --------- Total Other Expenses - Net 3,388 3,968 9,996 10,571 Realized and Unrealized Investment Gain (Loss) (19) 379 (19) 572 -------- -------- -------- --------- Equity in Earnings of Equity Investments 114 -- 177 -- -------- -------- -------- --------- Loss from Continuing Operations before Tax Benefit (860) (5,347) (3,256) (11,699) Benefit for Income Taxes (1,000) (2,058) (1,893) (3,325) -------- -------- -------- --------- Income (Loss) from Continuing Operations 140 (3,289) (1,363) (8,374) DISCONTINUED OPERATIONS: Loss from Discontinued Operations of Jupiter National net of applicable income tax benefit $5 -- -- -- (11) Gain on Disposal of Jupiter National net of applicable income tax of $60 -- -- -- 137 -------- -------- -------- --------- Income from Discontinued Operations -- -- -- 126 -------- -------- -------- --------- Net Income (Loss) 140 (3,289) (1,363) (8,248) Dividends on Preferred Stock -- -- -- 81 -------- -------- -------- --------- Net Income (Loss) Available to Common Stockholders $ 140 $ (3,289) (1,363) $ (8,329) ======== ======== ======== ========= Earnings (Loss) Per Common Share-Basic and Diluted: Income (Loss) from Continuing Operations $ 0.01 $ (0.31) (0.13) $ (0.80) Discontinued Operations -- -- -- 0.01 -------- -------- -------- --------- Net Income (Loss) Per Common Share-Basic and Diluted $ 0.01 $ (0.31) (0.13) $ (0.79) ======== ======== ======== ========= Dividends Per Share $ -- $ -- -- $ 0.20 ======== ======== ======== ========= Weighted Average Number of Common Shares Outstanding 10,743 10,726 10,743 10,503 ======== ======== ======== =========
See notes to Condensed Consolidated Financial Statements 4 5 JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
FOR THE NINE MONTHS ENDED --------------------------- OCTOBER 3, SEPTEMBER 27, 1998 1997 ---------- ------------- OPERATING ACTIVITIES: CONTINUING OPERATIONS: Net Loss from Continuing Operations $ (1,363) $ (8,374) Adjustments to Reconcile Net Loss from Continuing Operations to Net Cash Provided by Operating Activities: Depreciation and Amortization 15,404 15,878 Restructuring and Impairment Charges -- 8,104 Provision for Bad Debts 627 512 Loss on Disposal of Fixed Assets 543 9 Net Unrealized (Gain) Loss on Portfolio Investments 19 (572) Undistributed Income in Equity Investments (177) -- Changes in Operating Assets and Liabilities: Accounts and Notes Receivables (4,663) (5,164) Inventories (4,853) 9,639 Deferred Income Taxes (714) (2,649) Prepaid Expenses and Other Assets 890 1,874 Accounts Payable 1,379 (4,603) Accrued Expenses 2,162 1,557 Income Taxes Receivable 2,266 223 Other Liabilities 381 (727) Other-Net 35 (200) -------- -------- Total Adjustments 13,299 23,881 -------- -------- Net Cash Provided by Continuing Operations 11,936 15,507 DISCONTINUED OPERATIONS: Loss from Discontinued Operations -- (11) Gain on Disposal of Discontinued Operations -- 137 Cash Provided by Discontinued Operations -- 1,901 -------- -------- Net Cash Provided by Discontinued Operations -- 2,027 -------- -------- Net Cash Provided by Operating Activities 11,936 17,534 INVESTING ACTIVITIES: Additions to Property, Plant and Equipment (7,578) (8,065) Decrease in Non-Operating Accounts Payable (1,414) (1,698) Proceeds from Sale and Leaseback 870 Sale of Jupiter Assets 630 -- -------- -------- Net Cash Used in Investing Activities (7,492) (9,763) -------- --------
Continued 5 6 JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (IN THOUSANDS) (UNAUDITED)
FOR THE NINE MONTHS ENDED -------------------------- OCTOBER 3, SEPTEMBER 27, 1998 1997 ---------- ------------- FINANCING ACTIVITIES: Principal Payments of Long-Term Debt (75,876) (7,100) Proceeds from Issuance of Long-Term Debt 70,384 5,500 Proceeds from Issuance of Common Stock -- 36 Dividends Paid -- (2,157) -------- ------ Net Cash Used in Financing Activities (5,492) (3,721) NET DECREASE IN CASH AND CASH EQUIVALENTS (1,048) 4,050 CASH AND CASH EQUIVALENTS Beginning of Period 2,284 1,748 -------- ------ End of Period $ 1,236 5,798 ======== ====== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash Paid (Received) During the Nine Months for: Interest $ 9,302 8,182 ======== ====== Income Taxes $ (3,444) (771) ======== ======
See notes to Condensed Consolidated Financial Statements Concluded 6 7 JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying condensed consolidated financial statements as of and for the three months and nine months ended October 3, 1998 and September 27, 1997 are unaudited. The October 3, 1998 statements include the accounts of Johnston Industries, Inc. ("Johnston"), its direct wholly owned subsidiary, Johnston Industries Alabama, Inc. ("JI Alabama") and its indirect wholly owned subsidiaries, Johnston Industries Composite Reinforcements, Inc. ("JICR") and Greater Washington Investments, Inc. ("GWI") (collectively, the "Company"). All significant intercompany balances have been eliminated in consolidation. The September 27, 1997 statements include the accounts of Johnston, JI Alabama, JICR, GWI and JI Alabama's former wholly owned subsidiary, T.J. Beall Company ("TJ Beall"). The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information in footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, the unaudited condensed consolidated financial statements reflect all adjustments which are necessary for a fair presentation. All such adjustments, other than those relating to restructuring and loss on impairment, are of a normal recurring nature. Operating results for the three months and nine months ended October 3, 1998 are not necessarily indicative of the results that may be expected for the entire year. The condensed consolidated financial statements included herein should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended January 3, 1998. 2. ACCOUNTING PRONOUNCEMENTS In February 1997, the Financial Accounting Standards Board issued SFAS 130 "Reporting Comprehensive Income." This statement establishes standards for reporting and display of comprehensive income and its components (revenues, gains, expenses, and losses) in a full set of general-purpose financial statements and is effective for financial statements for periods beginning after December 15, 1997. The Company has adopted this statement effective for the first quarter of 1998. For the three and nine month periods ended October 3, 1998 and September 27, 1997 there are no differences between comprehensive income and net income. In June 1997, the Financial Accounting Standards Board issued SFAS 131 "Disclosure about Segments of an Enterprise and Related Information." This statement establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports issued to shareholders. The Company is required to present the segment disclosures in the current fiscal year; however, disclosure in interim financial reports issued to shareholders is not required during the year of adoption. This statement is effective for financial statements for periods beginning after December 15, 1997. In March 1998, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position ("SOP") 98-1 "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." This statement, which provides guidance on accounting for the costs of computer software developed or obtained for internal use, defines "internal use," provides guidance for determination of capital and expense costs, and is effective for fiscal years 7 8 beginning after December 15, 1998, but earlier adoption is encouraged. The Company has adopted this statement effective for the first quarter of 1998. In February 1998, the Financial Accounting Standards Board issued SFAS No. 132, Employers' Disclosures about Pensions and Other Postretirement Benefits. This Statement revises employers' disclosures about pensions and other postretirement benefit plans. It does not change the measurement or recognition of those plans. This statement is effective for fiscal years beginning after December 31, 1997. In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments imbedded in other contracts, and for hedging activities. It requires that, at adoption, hedging relationships should be designated anew and that entities recognize all derivatives as either assets or liabilities in the statement of financial position and to measure those instruments at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. This statement is effective for all fiscal quarters of all fiscal years beginning after June 15, 1999. 3. DISCONTINUANCE OF THE VENTURE CAPITAL SEGMENT Concurrent with the acquisition of Jupiter National, Inc. (the "Jupiter Acquisition") in March 1996, the Company's management made the decision to discontinue the venture capital investment segment of Jupiter's operation. Through June 28, 1997, the segment was accounted for as discontinued operations, and accordingly, the net assets of the discontinued segment were recorded as an asset on the consolidated balance sheet and were expected to be disposed of by June 1997. During that period, the results of operations for Jupiter's venture capital investment activities have been recorded as discontinued operations. At June 28, 1997, the remaining portfolio investments were reclassified from net assets of discontinued operations to assets held for sale on the consolidated balance sheet. Beginning with the quarter ended June 28, 1997, the results of operations for these remaining portfolio investments have been reported as income from continuing operations in the consolidated statements of operations and prior periods presented have been restated accordingly. 4. T.J. BEALL COMPANY On March 25, 1996, the Company acquired all of the outstanding common stock of TJ Beall, a broker in cotton by-products located in West Point, Georgia, for shares of nonvoting convertible preferred stock with an estimated value of $3,250,000. In September 1997, an agreement was reached culminating in the sale of substantially all of the assets and current liabilities of TJ Beall to a member of the Beall family. In conjunction with the sale, the Company recorded a note receivable in the amount of $1,500,000 payable in annual installments of $300,000 plus interest at 10% per annum over a five year period. 5. RESTRUCTURING CHARGES AND LOSSES ON IMPAIRMENT During the Second Quarter of 1997, the Company announced its plan to cease manufacturing operations at its Langdale facility, close its outlet store in West Point, Georgia and realign its divisions. The Langdale facility had contained both weaving operations and yarn manufacturing operations. The yarn manufacturing operations were substantially eliminated while selected equipment and associated product offerings of the weaving operations were relocated to other Company facilities. The remainder of the weaving operation at the Langdale facility was closed. The Langdale facility has been retained as warehouse, distribution and potential future manufacturing space for JI Alabama's Fiber Products Division. The sale of the outlet store building closed during December 1997. Beginning in the third quarter of 1997 and continuing through the first quarter of 1998, severance reserves were accrued to restructuring costs as employees were notified of the elimination of their jobs. During the nine months ended October 3, 1998, the Company recorded restructuring charges totaling $96,000 which included $171,000 in severance costs 8 9 related to closure of the Langdale facility and the 1997 realignment of divisions less a favorable adjustment of $75,000 to the impairment reserve for Jupiter's former office building in Rockville, Maryland, which was sold in February 1998. 6. INVENTORIES Inventories consisted of the following at October 3, 1998 and January 3, 1998:
OCTOBER 3, 1998 JANUARY 3, 1998 --------------- --------------- Inventories-FIFO Cost Flow Assumption Finished Goods $ 33,747,000 $ 30,367,000 Work-In Process 9,267,000 10,581,000 Raw Materials and Supplies 16,497,000 13,607,000 ------------ ------------ 59,511,000 54,555,000 Less LIFO Reserve (3,575,000) (3,472,000) ------------ ------------ Inventories - LIFO Cost Flow Assumption $ 55,936,000 $ 51,083,000 ============ ============
7. LONG-TERM FINANCING AND SHORT-TERM BORROWINGS Long-term debt and short-term borrowings consisted of the following at October 3, 1998 and January 3, 1998:
OCTOBER 3, 1998 JANUARY 3, 1998 --------------- --------------- Term Loans $ 60,052,000 $ 63,040,000 Revolving Credit Loan 69,619,000 73,995,000 Purchase Money Mortgage Debt 935,000 1,000,000 Industrial Development Note (net of unamortized discount) 526,000 491,000 Other Loans (mortgage) -- 550,000 Capital Lease Obligations 2,560,000 -- ------------- ------------- Total 133,692,000 139,076,000 Less Current Maturities (5,406,000) (3,393,000) Less Revolving Credit Loan Classified as Current (69,619,000) (73,995,000) ------------- ------------- $ 58,667,000 $ 61,688,000 ============= =============
The Company has a credit agreement with a syndicate of lenders (the "Bank Credit Agreement"), which was entered into on March 28, 1996. The Bank Credit Agreement, as amended to date, provides aggregate loans of up to $160,000,000 including a revolving credit loan (the "Revolving Credit Facility") of up to $80,000,000, a term loan for $40,000,000 ("Term Loan A") and a term loan for an additional $40,000,000 ("Term Loan B"). The maturity date for all borrowings under the Bank Credit Agreement is July 1, 2000. As of October 3, 1998, the Company had outstanding borrowings under the Bank Credit Agreement of $129,671,000, and $9,739,000 unused under the Revolving Credit Facility net of $642,000 of standby letters of credit. Upon the sale in February 1998 of Jupiter's former office in Rockville, Maryland, the $550,000 mortgage associated with that property was discharged. Covenants and Restrictions Under the terms of the Bank Credit Agreement, substantially all assets are pledged as collateral for the borrowings under the Bank Credit Agreement. The Bank Credit Agreement requires the Company to 9 10 maintain certain financial ratios and specified levels of tangible net worth, places a limit on the Company's level of capital expenditures and its ability to effect certain types of mergers or acquisitions, and permits the Company to pay dividends on its Common Stock provided certain financial tests are met. Under these financial tests, at October 3, 1998, the Company was not permitted to declare or pay dividends. The Bank Credit Agreement has been amended several times to modify certain covenants, the latest amendments of which were executed on March 30, 1998 (the "March 1998 Amendment") and on July 10, 1998 (the "July 1998 Amendment"). The March 1998 Amendment modified certain covenants and required the Company to enter into certain cash management arrangements which were further defined in the July 1998 Amendment. Prior to the execution of the March 1998 Amendment, technical noncompliance with certain financial covenants was considered to be imminent. In addition to covenant modifications, the March 1998 Amendment also included increases in interest rates, effective April 5, 1998, ranging from 1/4% to 1% over the rates in effect prior to that date, revision of the final maturity date for all obligations under the Bank Credit Agreement and modifications to the scheduled repayment of term loans which decreased required payments for 1998 and 1999. All past events of noncompliance as described above have been waived by the syndicate of lenders who are parties to the Bank Credit Agreement. As of October 3, 1998, the Company was in compliance with the covenants under the Bank Credit Agreement. The Company continues to explore alternatives which would reduce the likelihood of future non-compliance with the covenants of the Bank Credit Agreement, including restructuring the long-term debt. Management believes that it will be successful in these efforts. However, no assurance can be given that an acceptable alternative can be agreed upon or that any amendment or restructuring can be achieved on terms acceptable to the Company. In connection with the March 1998 Amendment, approximately $480,000 of deferred costs were charged to Other - net during the first quarter of 1998. This amount represents the unamortized balance of the original loan costs, which were to be amortized over the term of the Bank Credit Agreement, while the new deferred loan costs of approximately $647,000 were capitalized in connection with the March 1998 Amendment and will be amortized over the remaining term of the Bank Credit Agreement. The March 1998 Amendment required the Company to adopt new cash management procedures which were defined by the July 1998 Amendment and adopted in the third quarter of 1998. The new procedures include the daily application of customer remittances received by Johnston's lockbox against the Revolving Credit Facility, which management believes will generally enhance the Company's availability under the Revolving Credit Facility. As a result of this lockbox arrangement and in compliance with the consensus opinion of the Emerging Issues Task Force Issue No. 95-22, "Balance Sheet Classification of Borrowings Outstanding under Revolving Credit Agreements that Include both a Subjective Acceleration Clause and a Lock-Box Arrangement," the revolving credit loan, which has a maturity date of July 1, 2000, has been classified as a current liability. The Bank Credit Agreement requires the Company to prepay the principal installments on Term Loan A and Term Loan B, in inverse order of the scheduled maturities, from the net cash proceeds from the sale or liquidation of significant assets. 8. EARNINGS PER SHARE Earnings per share is not presented on a diluted basis, as the effect of dilutive securities was either anti-dilutive due to net losses or immaterial for all periods presented. 10 11 9.INCOME TAXES The benefit for income taxes from continuing operations as computed under SFAS No. 109, "Accounting for Income Taxes", is comprised of the following for the nine months ended October 3, 1998 and September 27, 1997:
1998 1997 ---- ---- Federal: Current $(1,184,000) $(1,501,000) Deferred (647,000) (1,532,000) ----------- ----------- (1,831,000) (3,033,000) State: Current 1,000 (38,000) Deferred (63,000) (254,000) ----------- ----------- (62,000) (292,000) Benefit for income taxes $(1,893,000) $(3,325,000) =========== ===========
The reconciliation of the Company's effective income tax benefit rate to the Federal statutory rate from continuing operations of 34% for the nine months ended October 3, 1998 and September 27, 1997 follows:
1998 1997 ---- ---- Federal income tax benefit at statutory rate $(1,107,000) $(3,978,000) State income taxes, net of Federal tax benefit (41,000) (193,000) Amortization of Goodwill 159,000 851,000 Net Operating Loss Refund (10 year carryback) (920,000) -- Other - Net 16,000 (5,000) ----------- ----------- $(1,893,000) $(3,325,000) ----------- ----------- Effective rate 58.14% 28.4% =========== ===========
The effective tax rates in 1998 and 1997 were affected by the amortization of goodwill, which is not tax deductible. The 1998 tax rate also reflects recognition of a special tax refund as a result of a 10 year net operating loss carryback. 10. RELATED PARTY TRANSACTIONS Redlaw Industries, Inc. ("Redlaw"), a stockholder, is the commissioned sales agent for the Company for substantially all sales of the Company's products into Canada under the terms of a non-exclusive sales agency agreement. For the nine months ended October 3, 1998, there were no sales to Redlaw. As of October 3, 1998 commissions payable to Redlaw were $30,628. Johnston maintains inventory at a customer's warehouse in Ontario, Canada which is supervised by Redlaw. At October 3, 1998, there was approximately $77,434 of inventory located at the warehouse in Canada. 11 12 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The accompanying condensed consolidated financial statements for the three months and nine months ended October 3, 1998 and September 27, 1997 are unaudited. The October 3, 1998 statements include the accounts of Johnston Industries, Inc. ("Johnston"), its direct wholly owned subsidiary, Johnston Industries Alabama, Inc. ("JI Alabama") and its indirect wholly owned subsidiaries, Johnston Industries Composite Reinforcements, Inc. ("JICR") and Greater Washington Investments, Inc. ("GWI") (collectively, the "Company"). The September 27, 1997 statements include the accounts of Johnston, JI Alabama, JICR, GWI and JI Alabama's former indirect wholly owned subsidiary, T.J. Beall Company ("TJ Beall"). RESULTS OF CONTINUING OPERATIONS The results of operations for the three months ended October 3, 1998 marks the first quarterly period reporting net income since the three months ended March 27, 1997, and notwithstanding a decline in revenue, reflects continuing improvements resulting from a substantial realignment initiated in 1997. Revenue decline from the third quarter of 1997 is attributed to the elimination of unprofitable operations and product lines during the second half of 1997, and weakness in indirect exports resulting from the currency and financial instability in Russia and Eastern Europe. The third quarter also marked the first time that each operating division had a profitable quarter since prior to the March 1996 acquisitions of Jupiter National, Inc. and T.J. Beall. Consolidated gross margin has improved by one percentage point over the second quarter of 1998 and by six percentage points over the third quarter of 1997. In addition, the Company received a special federal income tax refund during the quarter, resulting in a one-time tax benefit of approximately $700,000. The Finished Fabrics Division has shown marked improvement as evidenced by profitable operating results in the quarter ended October 3, 1998, while JICR, the Company's fastest growing division, continued a trend of increasing sales in the first nine months of 1998. Net sales for third quarter 1998 decreased $8,916,000 (11.4%) from the third quarter 1997, but increased $508,000 (.7%) over the second quarter 1998. Net sales for the nine months ended October 3, 1998 decreased by $34,516,000 (13.6%) compared with the nine months ended September 27, 1997. Several factors contributed to the change from 1997 periods. Economic difficulties in Eastern Europe as noted above resulted in an approximately $3 to $4 million decrease in sales at the Greige Fabrics Division for the third quarter. Further, TJ Beall, which was sold in September of 1997, recorded sales of $4,949,000 and $13,910,000 for the three and nine months ended September 27, 1997. These declines in sales were partially offset by increases resulting from the fact that the normal plant shutdown for the week of July 4 fell in the second fiscal quarter for 1998 resulting in the third quarter 1998 having 13 weeks of sales and production as opposed to 12 weeks for the third quarter of 1997. An analysis of changes in net sales by market is as follows:
3rd Qtr 1998 YTD 1998 Incr/(Decr) from Incr/(Decr) from 3rd Qtr 1997 YTD 1997 ---------------- ---------------- Automotive 681,000 1,571,000 Industrial (1,361,000) (5,625,000) Home Furnishings (544,000) (10,694,000) Apparel (2,295,000) (2,913,000) Specialty Markets (5,286,000) (15,663,000) Miscellaneous (111,000) (1,192,000) ---------- ----------- Net Sales (8,916,000) (34,516,000) ========== ===========
12 13 - - - Sales of automotive fabrics for the quarter and for the nine months reflect an increase in demand for a long-standing product of the Company, which has been on the decline for several years. Additionally, sales of a relatively new automotive seat support fabric increased significantly during the quarter. - - - Sales of industrial fabrics for the three and nine months ended October 3, 1998 decreased 7.9% and 10.5% respectively as compared to the same periods in 1997. Sales of fabrics for footwear, filtration, rubber products and abrasives declined reflecting a softening of demand. - - - Sales of home furnishing fabrics declined by 1.5% and 8.2% from the levels reported for the three months and nine months ended September 27, 1997. Reduced indirect export sales, as noted above, contributed significantly to the decline in home furnishing sales during both the second and third quarters of 1998. Sales of certain discontinued window covering fabrics for 1998 are sharply reduced from the prior year. Decline in sales, particularly third quarter sales, of home furnishing fabrics has been mitigated in part by increased sales of greige (unfinished - for further processing) upholstery fabrics and top of the bed fabrics by the Greige Fabrics Division plus increased sales of napery by the Finished Fabrics Division. - - - The Greige Fabrics Division capitalized on certain short-term opportunities to sell apparel fabrics at attractive margins during 1997 and early 1998. Demand from these orders has now been filled and apparel activity has returned to a normal level. - - - Reduced sales to specialty markets reflect the disposition of TJ Beall in September 1997 as noted above, but also reflects discontinued sales yarn business formerly located at the Langdale facility, which was closed in 1997. Sales of $1,445,000 and $5,227,000 for yarn produced at Langdale were recorded for the three months and nine months ended September 27, 1997. Sales of composite reinforcement fabrics for the three and nine months ended October 3, 1998 grew by 40.1% and 35.6%, respectively, over levels recorded for the three and nine months ended September 27, 1997. - - - Sales of miscellaneous fabrics, which now represent less than 1% of total sales, showed declines from 1997 levels reflecting the Company's discontinuance of certain unprofitable products characterized by short runs and low margins. The Company's backlog of customer orders was $61,261,000 at October 3, 1998 compared to $69,447,000 at January 3, 1998 and $66,672,000 at September 27, 1997. The decline in order backlog compared to January 3, 1998 and September 27, 1997 reflects the weakness in demand resulting from the currency and economic conditions in Russia and Eastern Europe. The September 1998 backlog, as compared to September 1997, additionally reflects the absence of products discontinued by the Company in connection with the 1997 realignment. Gross margin, excluding depreciation, as a percentage of net sales for the three and nine months ended October 3, 1998 was 20.7% and 19.6%, respectively, compared to 13.7% and 17.0% for the same periods in 1997. The increases in gross margin reflect elimination of unprofitable products, increased manufacturing efficiencies and reductions in raw material prices mitigated somewhat by lower volumes due to weakness in the indirect export business. The 1997 realignment included closure of the Langdale facility, elimination of certain unprofitable product lines, and relocation of selected manufacturing equipment and products to the Southern Phenix Facility and to the Micolas Facility. During the first quarter of 1998, the Finished Fabrics Division incurred the negative impact of costs for administering the phase out of the discontinued products plus inefficiencies associated with absorption of the relocated production. The third quarter of 1998 reflects continued improvement as these transitional activities were substantially completed during the first quarter of 1998. Contributing in part to the improvement in margins was the reclassification of costs for corporate human resources functions, which were included in costs of sales for 1997, but have been included in general and administrative costs for 1998. For the three and nine months ended October 3, 1998, selling, general and administrative expenses decreased by $438,000 and $99,000, respectively, from the same periods in 1997. Beginning in April 1997 and continuing through April 1998, the Company incurred professional fees associated with the 1997 realignment. Although associated professional services were substantially concluded in the second quarter of 1998, the nine month periods ending October 3, 1998 and September 27, 1997 include comparable amounts for such professional services. Additionally, for the nine months ended October 3, 1998, approximately $700,000 was included in general and administrative expenses for corporate human resource functions which had been included in cost of sales for 1997. 13 14 During the Second Quarter of 1997, the Company announced its plan to cease manufacturing operations at its Langdale facility, close its outlet store in West Point, Georgia and realign its divisions. The Langdale facility had contained both weaving operations and yarn manufacturing operations. The yarn manufacturing operations were eliminated while selected equipment and associated product offerings of the weaving operations were relocated to other Company facilities. The remainder of the weaving operation at the Langdale facility was closed. The Langdale facility has been retained as a warehouse, distribution and potential future manufacturing space for JI Alabama's Fiber Products Division. The sale of the outlet store building closed during December 1997. Beginning in the third quarter of 1997 and continuing through the first quarter of 1998, severance reserves were accrued as restructuring costs as employees were notified of the elimination of their jobs. During the first nine months of 1998, the Company recorded restructuring charges totaling $96,000 which included $171,000 in severance costs related to closure of the Langdale facility and the 1997 realignment of divisions less a favorable adjustment of $75,000 to the impairment reserve for Jupiter's former office building in Rockville, Maryland which was sold in February 1998. For the three months and nine months ended October 3, 1998, depreciation and amortization expense was $5,117,000 and $15,404,000, respectively, representing decreases of $85,000 and $474,000 from the same periods in 1997. These declines are principally due to the reduction in depreciable assets, from the sale of the assets of TJ Beall in September 1997 and also from the closure of the Langdale facility, which was completed in the fourth quarter of 1997. The decline was partially offset by the impact of additional depreciation resulting from the 1997 and 1998 capital investment plans. Capital investment for the nine months ended October 3, 1998 was $7,578,000 compared to $8,065,000 million for the nine months ended September 27, 1997. Interest expense was $3,477,000 for the three months and $10,141,000 for the nine months ended October 3, 1998. Interest expense for the first nine months of 1998 represents only a minimal decrease of $10,000 from the level recorded for the same period in 1997. Changes in interest expense include both reduced average borrowings and increased average rates associated with the March 30, 1998 amendment to the Bank Credit Agreement, as discussed below. Obligations under the Company's Bank Credit Agreement at October 3, 1998 were $17,254,000 and $7,364,000 less than obligations at September 27, 1997 and January 3, 1998 respectively. Additionally, the $550,000 mortgage associated with Jupiter's former office in Rockville, Maryland, was discharged upon its sale in February 1998. In connection with the March 1998 amendment to the Company's Bank Credit Agreement, approximately $480,000 of deferred loan costs were charged to Other-net during the first quarter of 1998. This amount represents the unamortized balance of the original loan costs, which were to be amortized over the term of the Bank Credit Agreement, while the new deferred loan costs of approximately $647,000 were capitalized in connection with the March 1998 Amendment and are being amortized over the remaining term of the Bank Credit Agreement which now matures on July 1, 2000. A net amount of approximately $250,000 was recorded in Other-net during the second quarter of 1998 for insurance proceeds receivable as a result of storm damage at the Greige Fabrics Division's Opp Mill (see discussion below at Legal and Other Matters). DISCONTINUED OPERATIONS Concurrent with the acquisition of Jupiter National, Inc. (the "Jupiter Acquisition") in March 1996, the Company's management made the decision to discontinue the venture capital investment segment of Jupiter's operation. Through June 28, 1997, the segment was accounted for as discontinued operations, and accordingly, the net assets of the discontinued segment were recorded as an asset on the consolidated balance sheet and were expected to be disposed of by June 1997. During that period, the results of operations for Jupiter's venture capital investment activities were recorded as discontinued operations. At June 28, 1997, the remaining portfolio investments were reclassified from net assets of discontinued operations to assets held for sale on the consolidated balance sheet. Beginning with the quarter ended June 28, 1997, the results of operations for these remaining portfolio investments have been reported as income from continuing operations on the consolidated statements of operations and prior periods presented have been restated accordingly. 14 15 LIQUIDITY AND CAPITAL RESOURCES The Company's needs for capital resources have been filled through cash generated from operating activities and have been supported by availability of borrowings under its Bank Credit Agreement, which was entered into on March 28, 1996. The Bank Credit Agreement, as amended to date, provides aggregate loans of up to $160,000,000 including a revolving credit loan (the "Revolving Credit Facility") of up to $80,000,000, a term loan for $40,000,000 ("Term Loan A") and a term loan for an additional $40,000,000 ("Term Loan B"). The maturity date for all borrowings under the Bank Credit Agreement is July 1, 2000. As of October 3, 1998, the Company had outstanding borrowings under the Bank Credit Agreement of $129,671,000, and $10,039,000 unused under the Revolver net of $642,000 of standby letters of credit. Principal payments since January 3, 1998 have reduced the outstanding amount of the Revolver by $4,376,000. Upon the sale in February 1998, of Jupiter's former office in Rockville, Maryland, the $550,000 mortgage associated with that property was discharged. Under the terms of the Bank Credit Agreement, substantially all assets are pledged as collateral for the borrowings under the Bank Credit Agreement. The Bank Credit Agreement requires the Company to maintain certain financial ratios and specified levels of tangible net worth, places a limit on the Company's level of capital expenditures and its ability to effect certain types of mergers or acquisitions, and permits the Company to pay dividends on its Common Stock provided certain financial tests are met. Under these financial tests, at October 3, 1998, the Company was not permitted to declare and pay dividends. The Bank Credit Agreement has been amended several times to modify certain covenants, the latest amendments of which were executed on March 30, 1998 (the "March 1998 Amendment") and on July 10, 1998 (the "July 1998 Amendment"). The March 1998 Amendment modified certain covenants and required the Company to enter into certain cash management arrangements which were further defined in the July 1998 Amendment. Prior to the execution of the March 1998 Amendment, technical noncompliance with certain financial covenants was considered to be imminent. In addition to covenant modifications, the March 1998 Amendment also included increases in interest rates, effective April 5, 1998, ranging from 1/4% to 1% over the rates in effect prior to that date, revision of the final maturity date for all obligations under the Bank Credit Agreement and modifications to the scheduled repayment of term loans which decreased required payments for 1998 and 1999. All past events of noncompliance as described above have been waived by the syndicate of lenders who are parties to the Bank Credit Agreement. As of October 3, 1998, the Company was in compliance with the covenants under the Bank Credit Agreement. The Company continues to explore alternatives which would reduce the likelihood of future non-compliance with the covenants of the Bank Credit Agreement, including restructuring the long-term debt. Management believes that it will be successful in these efforts. However, no assurance can be given that an acceptable alternative can be agreed upon or that any amendment or restructuring can be achieved on terms acceptable to the Company. In connection with the March 1998 Amendment, approximately $480,000 of deferred costs were charged to Other - net during the first quarter of 1998. This amount represents the unamortized balance of the original loan costs, which were to be amortized over the term of the Bank Credit Agreement, while the new deferred loan costs of approximately $647,000 were capitalized in connection with the March 1998 Amendment and will be amortized over the remaining term of the Bank Credit Agreement. The March 1998 Amendment required the Company to adopt new cash management procedures which were defined by the July 1998 Amendment and adopted in the third quarter of 1998. The new procedures include the daily application of customer remittances received by Johnston's lockbox against the Revolving Credit Facility, which management believes will generally enhance the Company's availability under the Revolving Credit Facility. As a result of this lockbox arrangement and in compliance with the consensus opinion of the Emerging Issues Task Force Issue No. 95-22, "Balance Sheet Classification of Borrowings Outstanding under Revolving Credit Agreements that Include both a Subjective Acceleration Clause and a Lock-Box Arrangement," the revolving credit loan, which has a maturity date of July 1, 2000, has been classified as a current liability. 15 16 The Bank Credit Agreement requires the Company to prepay the principal installments on Term Loan A and Term Loan B, in inverse order of the scheduled maturities, from the net cash proceeds from the sale or liquidation of significant assets. During the quarter ended October 3, 1998, the Company entered into an agreement with Boeing Capital Corporation, a subsidiary of The Boeing Company, which provides for leasing of manufacturing equipment up to $10,000,000, which was subsequently expanded to $15,000,000. As of October 3, 1998, approximately $3,027,000 of equipment had been placed under the leasing program. Cash flow provided by operating activities plus proceeds from sale and leaseback under the Company's leasing program with Boeing Capital Corporation, as described above, have provided for capital reinvestment of approximately $7,500,000 plus reduction in obligations under the Bank Credit Agreement of $7,364,000. While total long-term financing and short-term borrowings have been reduced by approximately 10% over the last twelve months, the Company continues to be highly leveraged in comparison to periods preceding March of 1996. In consideration of the high levels of indebtedness, management has focused efforts on reduction of debt and associated debt service costs. Although available cash has been adequate to sustain the Company's operations, cash used for debt service and debt reduction under the Bank Credit Agreement and cash used in the Company's capital expenditure plan have strained the Company's available liquid assets. Management expects improvements in cash generation from improved operating results, from continued discipline in cost containment, reduction in inventories, judicious review of its short term capital expenditure plans, and use of leasing programs in lieu of cash purchases for portions of its capital investment plan. Although no assurance can be given that cash provided by operating and financing activities will be sufficient, Management believes that through careful planning and constraint of discretionary cash expenditures, cash generated by operations and cash available under the Bank Credit Agreement will be sufficient to satisfy the Company's liquidity requirements for at least the next year. ACCOUNTING PRONOUNCEMENTS In February 1997, the Financial Accounting Standards Board issued SFAS 130 "Reporting Comprehensive Income." This statement establishes standards for reporting and display of comprehensive income and its components (revenues, gains, expenses, and losses) in a full set of general-purpose financial statements and is effective for financial statements for periods beginning after December 15, 1997. The Company has adopted this statement effective for the first quarter of 1998. For the three and nine months ended October 3, 1998 and September 27, 1997, there are no differences between comprehensive income and net income. In June 1997, the Financial Accounting Standards Board issued SFAS 131 "Disclosure about Segments of an Enterprise and Related Information." This statement establishes standards for the way that public business enterprises report information about operating segments in annual financial statements and requires that those enterprises report selected information about operating segments in interim financial reports issued to shareholders. The Company is required to present the segment disclosures in the current fiscal year; however, disclosure in interim financial reports issued to shareholders is not required during the year of adoption. This statement is effective for financial statements for periods beginning after December 15, 1997. In March 1998, the Accounting Standards Executive Committee of the American Institute of Certified Public Accountants issued Statement of Position ("SOP") 98-1 "Accounting for the Costs of Computer Software Developed or Obtained for Internal Use." This statement, which provides guidance on accounting for the costs of computer software developed or obtained for internal use, defines "internal use," provides guidance for determination of capital and expensed costs, and is effective for fiscal years beginning after December 15, 1998, but earlier adoption is encouraged. The Company has adopted this statement effective for the first quarter of 1998. In February 1998, the Financial Accounting Standards Board issued SFAS No. 132, Employers' Disclosures about Pensions and Other Postretirement Benefits. This Statement revises employers' disclosures about pensions and other postreitrement benefit plans. It does not change the measurement or recognition of those plans. This statement is effective for fiscal years beginning after December 31, 1997. 16 17 In June 1998, the Financial Accounting Standards Board issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities." This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments imbedded in other contracts, and for hedging activities. It requires that, at adoption, hedging relationships should be designated anew and that entities recognize all derivatives as either assets or liabilities in the statement of financial position and to measure those instruments at fair value. The accounting for changes in the fair value of a derivative depends on the intended use of the derivative and the resulting designation. This statement is effective for all fiscal quarters of all fiscal years beginning after June 15, 1999. LEGAL AND OTHER MATTERS The Company is periodically involved in legal proceedings arising in the ordinary conduct of business. Management does not expect that such proceedings will have a material adverse effect on the Company's consolidated financial position or results of operations. During 1997, management became aware of certain industrial espionage activities that targeted the Company and several other textile manufacturers, allegedly carried out by agents of a large competitor. On October 8, 1998, the Company filed suit in Alabama seeking recourse for damages and losses resulting from these alleged activities. On Friday, April 17, 1998, a tornado struck the Company's Opp Mill in Opp, Alabama, damaging the structure's roof and outside walls as well as damaging certain inventory, electronic controls and production equipment contained within the facility. On October 2, 1998, a settlement was reached with the Company's insurance provider for property damage and business interruption. Payment was subsequently received during October. From time to time the Company receives unsolicited indications of interest relating to the acquisition of the Company or certain assets of the Company by others. While management and the Board of Directors reviews each offer in accordance with the appropriate discharge of their fiduciary duties to the shareholders of the Company, neither the Company or any of its operations are for sale as management does not believe that an appropriate value is likely to be received given current market conditions. YEAR 2000 INITIATIVES As a result of computer programs which historically were written using a two rather than four digit convention to define the year component of dates, a concern commonly known as the Year 2000 ("Year 2000") issue has arisen globally. Computer programs and equipment that use a two digit convention may not be able to differentiate between the 20th and 21st centuries (e.g. "00" could be either 1900 or 2000). This could result in system failures or miscalculations causing disruptions of operations, including, among other things, a temporary inability to process transactions, send invoices, or engage in similar normal business activities. The Company has reviewed significant systems which are not presently Year 2000 compliant. Two major software replacement projects remain for the Company, both of which involve replacing current systems with purchased systems that are Year 2000 compliant. A major software replacement project at the Company's Finished Fabrics Division is well underway and the initial phase of work to replace the major systems at its Fiber Products Division, which are considerably less sophisticated than the Finished Fabrics Systems, is presently underway. The Company screens all new equipment purchases and presently is reviewing its systems and operations to determine what systems imbedded in sophisticated production equipment or support equipment may be vulnerable to Year 2000 issues. This review is accompanied by a formal communication program with equipment vendors to certify that the systems are year 2000 compliant. Remediation steps, if any, will be implemented, though there can be no guarantee that vendors will successfully remediate the equipment systems and that any failure to timely remediate would not have a material adverse effect on the Company's systems. 17 18 As a result of the upgrades described above and assuming the remaining projects are completed in a satisfactory manner, management currently believes that the Year 2000 issue will not pose significant operational problems for the Company's computer systems. The Company anticipates completing the Year 2000 project no later than August 1999. Management believes that the cost of Year 2000 modifications will not have a material effect on results of operations. There can be no guarantee that the software replacement projects will be successful or that the vendors supplying software to the Company will provide new software releases that are Year 2000 compliant. In addition, there can be no assurances that there will not be problems identified when screening production and support equipment and ancillary systems and that such problems will not have a material effect on the operating results. RISKS AND UNCERTAINTIES Except for historical information contained herein, the matters set forth in this report are forward looking statements which are subject to certain risks and uncertainties that could cause actual results to differ materially from those in, or which could be expected based on, such forward looking statements. The Company's expectations regarding future sales and profits assume, among other things, reasonable continued growth in the general economy which affects demand for the Company's products, and reasonable stability in raw materials pricing, changes in which affect customer purchasing decisions as well as the Company's prices and margins. The costs and benefits of the Company's discontinuance of Jupiter venture capital investments may vary from the Company's expectations with respect to anticipated proceeds from the sale of assets. For a further discussion of risks and uncertainties associated with the Company's business, readers are referred to the cautionary statement set forth in Item 1 of the Company's annual report on Form 10-K for the year ended January 3, 1998, which cautionary statement is incorporated by reference herein. 18 19 JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS No reportable legal proceedings arose in the quarter ended October 3, 1998. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted for a vote of Security Holders during the quarter ended October 3, 1998. ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 10.29 Amendment # 5 dated July 10, 1998 to Bank Credit Agreement 11 Statements of Computation of Per Share Earnings 27 Financial Data Schedule (For SEC use only) 19 20 JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the undersigned has duly caused this report to be filed on its behalf by the undersigned hereto duly authorized. JOHNSTON INDUSTRIES, INC. Dated: November 17, 1998 By: /s/James J. Murray ------------------------------- James J. Murray Executive Vice President and Chief Financial Officer By: /s/James J. Murray ------------------------------- James J. Murray (Principal Accounting Officer) 20 EX-10.29 2 AMENDMENT #5 DATED JULY 10, 1998 1 EXHIBIT 10.29 AMENDMENT NO. 5 TO CREDIT AGREEMENT AMENDMENT NO. 5 dated as of July 10, 1998 by and among Johnston Industries, Inc., a Delaware Corporation ("Johnston"), Johnston Industries Alabama, Inc., an Alabama corporation formerly known as Opp and Micolas Mills, Inc. ("Johnston Alabama"), J.I. Georgia, Inc., a Georgia corporation formerly known as T.J. Beall Company ("JIG") and Johnston Industries Composite Reinforcements, Inc., an Alabama corporation ("JICR", and collectively with Johnston, Johnston Alabama and JIG, the "Borrowers" and each individually, a "Borrower"), Nationsbank, N.A., as Syndication Agent, The Chase Manhattan Bank, the successor by merger to The Chase Manhattan Bank, N.A., as Agent for the banks party hereto ("Banks") and as Collateral Monitoring Agent ("Agent"), to the Credit Agreement dated as of March 28, 1996 among Johnston, Wellington Sears Company ("Wellington"), Southern Phenix Textiles, Inc. ("Phenix"), Opp and Micolas Mills, Inc. ("Opp"), T.J. Beall Company ("TJB") and JICR, the banks named therein, The Chase Manhattan Bank, N.A., as Administrative Agent, Chase Securities, Inc., as Arranger and Nationsbank, N.A., as Syndication Agent, as amended by Amendment No. 1 dated as of June 28, 1996, Amendment No. 2 dated as of February 28, 1997, Amendment No. 3 dated as of December 18, 1997 and Amendment No. 4 dated as of March 28, 1998 (collectively, the "Credit Agreement"). All capitalized terms used herein but not otherwise defined herein shall have the meanings given them in the Credit Agreement. W I T N E S S E T H: WHEREAS, pursuant to the Credit Agreement, the Banks named therein made Revolving Credit Loans, Term Loans A and Term Loans B to Johnston, Wellington, Phenix, Opp, TJB and JICR, jointly and severally, in the aggregate principal amounts of $80,000,000, $40,000,000 and $40,000,000, respectively; and WHEREAS, pursuant to a letter agreement dated as of November 7, 1997 and further to Amendment No. 4 to the Credit Agreement referred to above, the Borrowers agreed to enter into a collateral monitoring arrangement for the benefit of the Banks; and WHEREAS, the Borrowers have agreed to enter into certain cash management arrangements with the Agent and to amend or otherwise modify certain provisions of the Credit Agreement for the purpose of facilitating and implementing the collateral monitoring arrangements, subject to the terms and conditions hereinafter set forth, and the Borrowers further wish to confirm and reaffirm their joint and several obligations under the Credit Agreement as amended hereby. NOW, THEREFORE, each Bank, the Agent, the Syndication Agent and each Borrower, on a joint and several basis, hereby agree as follows: 1. Amendment to Definitions. Section 1.01 of the Credit Agreement is amended hereby as follows: a. The definition of "Agent" is hereby amended in its entirety as follows: "`Agent shall mean Chase, as administrative agent and collateral monitoring agent for the Banks, appointed pursuant to ARTICLE X, and its successors, if any, in such capacity." b. The definition of "Collateral Security Documents" is hereby amended in its entirety as follows: 21 2 "`Collateral Security Documents' shall mean, collectively, the Security Agreement, the Intellectual Property Security Agreement, the Collateral Assignment, the Mortgages, the Environmental Indemnity, the Pledge Agreement, the Blocked Account Agreement and the Lockbox Account Agreement, as each have been or may from time to time be amended, restated, supplemented or modified, together with all documents executed and delivered in connection with any of the foregoing." c. The definition of "Interest Period" is hereby amended to delete clause (1) therefrom in its entirety and to substitute the following therefor: "(1) initially, the period commencing on the borrowing or conversion date with respect to a Eurodollar Loan, as the case may be, and ending 30, 60 or 90 days thereafter, as selected by the Borrowers; and". d. The definition of "Term Loan A" is hereby amended to delete the words "five year" in the first sentence thereof. e. The definition of "Term Loan B" is hereby amended to delete the words "seven year" in the first sentence thereof. f. The following defined terms are hereby added to Section 1.01 of the Credit Agreement: "Additional Reports" shall have the meaning given to such term in Section 5.02(h). "Amendment No. 5" shall mean Amendment No. 5 to the Credit Agreement dated as of July 10, 1998 and executed by the Borrowers, the Banks, the Agent and the Syndication Agent. "Blocked Account" shall mean the restricted depository accounts of the Borrowers set forth on Exhibit M and established and maintained at the bank identified on Exhibit M (or such other bank to which the Agent shall give its prior written consent), and subject to the terms and conditions of the Blocked Account Agreement. "Blocked Account Agreement" means the Blocked Account Agreement among the Borrowers, the bank identified on Exhibit M (or such other bank to which the Agent shall give its prior written consent) and the Agent, substantially in the form of Exhibit N attached hereto. "Collateral Account" shall mean restricted Account No. __________ of the Borrowers established and maintained at the Agent entitled "The Chase Manhattan Bank Funds Held as Collateral Account for the benefit of Johnston Industries" (i) into which all proceeds from the Blocked Accounts and the Lockbox Accounts shall be transferred on a daily basis in accordance with the terms of the Blocked Account Agreement and the Lockbox Account Agreement, respectively, and (ii) from which the proceeds therein shall be applied against the outstanding Revolving Credit Loans on a daily basis. "Collateral Activity Report" shall mean the collateral activity report provided by the Borrowers to the Agent on a daily basis pursuant to the terms hereof consisting of accounts receivable and inventory rollfoward and other information in the form of, and containing the detailed information requested in, Schedules 1 and 3 to Exhibit J annexed hereto. "Lockbox Accounts" shall mean the lockbox accounts of the Borrowers set forth on Exhibit M and maintained at the bank identified on Exhibit M (or such other bank to which the Agent shall give prior written consent), and subject to the terms and conditions of the Lockbox Account 22 3 Agreement. "Exempt Accounts" shall have the meaning given to such term in Section 7.01(v). "Lockbox Account Agreement" shall mean the Lockbox Account Agreement among the Borrowers, the Agent and the bank identified on Exhibit M (or such other bank to which the Agent shall give prior written consent), substantially in the form annexed hereto as Exhibit O. "Operating Account" shall mean Account No. ____________ of Johnston Industries, Inc. maintained at the Agent. "Pledged Account Letters" shall mean the Pledged Account Letter Agreement substantially in the form annexed hereto as Exhibit Q, issued by the Borrowers to each bank or other financial institution listed on Exhibit P at which an Exempt Account is maintained, and held by the Agent pursuant to the terms hereof. 2. Amendments to Section 2.02(a) and (b) - Making the Loans. a. Section 2.02(a) and (b) of the Credit Agreement are hereby amended by deleting said paragraphs in their entirety and substituting the following: "(a) Each Borrower agrees to give to the Agent by no later than 1:00 p.m. EST for all times prior to and including August 15, 1998 and 12:00 noon EST for all times thereafter, on each Business Day, an irrevocable written notice duly completed substantially in the form of Schedule 2 to Exhibit J annexed hereto (a "Notice of Borrowing") of its request, if any, for a Base Rate Loan. With respect to any requests for a Eurodollar Loan, the Borrowers shall deliver the Notice of Borrowing to the Agent by 10:00 a.m. three Working Days prior to the date of borrowing. The Notice of Borrowing shall specify (i) the proposed revolving credit borrowing date ("Revolving Credit Borrowing Date"), (ii) the principal amount of the Revolving Credit Loan requested, which shall be in an amount not less than $50,000.00 or an integral multiple of $10,000.00 in excess thereof for Base Rate Loans and not less than $3,000,000 or an integral multiple of $250,000.00 in excess thereof for Eurodollar Loans, and (iii) whether the Revolving Credit Loan is to be a Base Rate Loan or a Eurodollar Loan, and if a Eurodollar Loan, the Interest Period therefor. The proceeds in the Collateral Account shall be applied against due and outstanding Revolving Credit Loans on a daily basis by the Agent in the following order: first to the payment in full of the amounts due under the Base Rate Loans and second to the payment in full of the amounts due under the Eurodollar Loans. The Agent shall notify each Bank with a Revolving Credit Commitment by telefax of the amount of Revolving Credit Loans so repaid. The Agent shall additionally notify each such Bank by telefax of any request made by the Borrowers for a Revolving Credit Loan pursuant to any Notice of Borrowing timely received from a Borrower by 2:30 p.m. EST on the same Business Day as such Notice was received, together with such Bank's pro rata portion of the Revolving Credit Loan to be funded. Each Bank shall remit to the Agent its pro rata share of the requested Revolving Credit Loan in immediately available funds by no later than 4:00p.m. EST on such Business Day. No Revolving Credit Loan shall be made unless (i) the Notice of Borrowing has been received by the Agent from the Borrowers by 1:00 p.m. EST for all times prior to and including August 15, 1998 and 12:00 noon EST for all times thereafter on the day required, as specified above, (ii) the Collateral Activity Report as required by Section 5.02(f) and the Borrowing Base Certificate (as and when required by Section 5.02(g) and (h)) have been received by the Agent from the Borrowers by 11:00 a.m. EST, and (iii) the amount requested, when added to the then outstanding amount of the Loans, will not result in the Banks' Revolving Credit Loans exceeding the lesser of the Banks' aggregate Revolving Credit Commitment and the Borrowing Base in effect at such time. Each Notice of Borrowing, together with all supporting documents to be delivered in connection therewith, shall be made in writing, and signed by the person(s) authorized by the Borrowers to execute and deliver such Notice of Borrowing ("Authorized Signatory"), each such Authorized Signatory to be notified as such to the 23 4 Agent." "(b) Subject to the terms and conditions of this Agreement, any Revolving Credit Loans made available to the Borrowers pursuant to the terms hereof shall be made by crediting the Operating Account." b. Notwithstanding anything in this Paragraph 2 to the contrary, in no event shall the inclusion or exclusion of a specific category or type of Inventory, Receivable or other Collateral set forth in the forms of Borrowing Base Certificate, Collateral Activity Report or Additional Report annexed as an exhibit or schedule to this Amendment No. 5 or otherwise agreed to by the parties hereto be construed or interpreted as modifying the manner in which the Borrowing Base is to calculated, and the parties hereto acknowledge and agree that the Borrowing Base shall be calculated in accordance with the Credit Agreement as amended by this Amendment No. 5 or as hereinafter amended. 3. Amendment to Section 5.02 - Conditions Precedent to Each Revolving Credit Loan or Letter of Credit. Section 5.02 of the Credit Agreement is hereby amended by replacing the words "The Agent shall have timely received" with "The Agent shall have received by no later than 12:00 a.m. noon" in the first sentence of paragraph (a) thereof, by deleting the word "and" at the end of paragraph (d) thereof, and by adding to said Section the following new conditions: "(f) The Agent shall have received by no later than 11:00 a.m. EST on each Business Day a Collateral Activity Report, completed to the satisfaction of the Agent, and certified as complete and correct on behalf of the Borrowers by the Chief Financial Officer, Comptroller, Treasurer or Assistant Treasurer of Johnston." "(g) The Agent shall have received by no later than 11:00 a.m. EST on Tuesday of each week a Borrowing Base Certificate showing the Borrowing Base as of the close of business on the Friday of the immediately preceding week, each such Borrowing Base Certificate to be certified as complete and correct on behalf of the Borrowers by the Chief Financial Officer, Comptroller, Treasurer or Assistant Treasurer of Johnston, together with the information as is required to be delivered pursuant to Schedule 3 to Exhibit J and such other supporting documentation and additional reports with respect to the calculation of the Borrowing Base as the Agent shall reasonably request." "(h) The Agent shall have received by no later than 11:00 a.m. EST on the 15th day of each fiscal month a Borrowing Base Certificate showing the Borrowing Base as of the close of business on the last day of the immediately preceding fiscal month of the Borrowers, certified as complete and correct on behalf of the Borrowers by the Chief Financial Officer of Johnston, together with the information as is required to be delivered pursuant to Schedule 3 to Exhibit J and such other supporting documentation and additional reports with respect to the calculation of the Borrowing Base as the Agent shall reasonably request." "(i) The Agent shall have received by no later than 11:00 a.m. EST on Tuesday of each week a copy of the additional weekly reports as outlined in Schedule 3 to Exhibit J, together with such other supporting documentation and other reports as the Agent shall reasonably request ("Additional Reports"), such Additional Reports to be certified as complete and correct on behalf of the Borrowers by the Chief Financial Officer of Johnston." 4. Amendment to Section 7.01 - Affirmative Covenants. Section 7.01(b)(iv) is hereby amended deleting said paragraph and substituting it with the following: "(iv) weekly, by 11:00a.m. EST on Tuesday of each week, and monthly, by 11:00 a.m. EST on the 15th day of each fiscal month, a Borrowing Base Certificate, for the last day of the immediately preceding week and as of the close of business on the last day of the preceding fiscal month, 24 5 respectively, such Borrowing Base Certificate to reflect the most recent Receivables, Inventory and ineligibles balance of the Borrowers and certified as complete and correct on behalf of the Borrowers by the Chief Financial Officer, Comptroller, Treasurer or Assistant Treasurer of Johnston with respect to daily and weekly reports, and the Chief Financial Officer of Johnston with respect to monthly reports, together with the information as is required to be delivered pursuant to Schedule 3 to Exhibit J, and such other supporting documentation and additional reports with respect to the calculation of the Borrowing Base as the Agent shall reasonably request;". Section 7.01(b) is hereby further amended by deleting the word "and" from paragraph (xiv) thereof and adding the following additional reporting requirements: "(xvi) by 11:00 a.m. EST on each Business Day, copies of the completed Collateral Activity Report certified as complete and correct on behalf of the Borrowers by the Chief Financial Officer, Comptroller, Treasurer or Assistant Treasurer of Johnston; and" "(xvii) by 11:00 a.m. EST on Tuesday of each week, copies of the completed Additional Reports certified as complete and correct on behalf of the Borrowers by the Chief Financial Officer, Comptroller, Treasurer or Assistant Treasurer of Johnston and such other supporting documentation and additional reports with respect to the information required to be submitted in connection with the preparation of the Additional Report as the Agent shall reasonably request." Section 7.01 is hereby further amended to add thereto the following additional covenants: "(t) Blocked Account. Borrowers shall maintain at all times hereafter the Blocked Accounts identified on Exhibit M, to which the Borrowers shall have restricted or no access in accordance with the Blocked Account Agreement. Borrowers shall deliver to the Agent a duly executed Blocked Account Agreement prior to or simultaneously with the execution and delivery of Amendment No. 5." "(u) Lockbox Accounts. Borrowers shall maintain at all times hereafter the Lockbox Accounts identified on Exhibit M, to which the Borrowers shall have restricted or no access in accordance with the Lockbox Account Agreement, which agreement Borrowers shall cause to be executed and delivered to the Agent prior to or simultaneously with the execution and delivery of Amendment No. 5. "(v) Maintenance of Accounts; Exempt Accounts. Borrowers shall, at all times hereafter, maintain only the Lockbox Accounts and Blocked Accounts identified on Exhibit M as their lockbox and depository accounts, respectively, and only at the bank identified on Exhibit M (or such other bank to which the Agent shall give prior written consent). Borrowers shall cause such bank to (i) remit all payments and items in such Lockbox Accounts and Blocked Accounts to the Collateral Account on a daily basis by no later than 10:00 a.m. EST in accordance with the Lockbox Account Agreement and Blocked Account Agreement, respectively; provided that, so long as no Event of Default has occurred, the accounts set forth on Exhibit P, and the balances contained therein, shall be exempt from the Lockbox Account Agreement and Blocked Account Agreement, respectively, and from the obligations of Borrowers regarding Lockbox Accounts and Blocked Accounts (the "Exempt Accounts"), up to an aggregate amount not to exceed $400,000 at any one time on a cumulative basis, for, and provided further that such exempt amount shall be utilized only for, the payment of taxes, payroll, petty cash and similar expenses, and (ii) acknowledge and agree, as set forth in the Lockbox Account Agreement and the Blocked Account Agreement, that all payments and deposits made and items submitted to the Collateral Account are the sole and exclusive property of the Agent for the benefit of the Banks and that the bank identified on Exhibit M (or such other bank to which the Agent shall give prior written consent) has no right to setoff against the Blocked Accounts or Lockbox Accounts. The Borrowers shall cause any bank at which Lockbox Accounts and/or Blocked Accounts are from time to time 25 6 maintained pursuant to the terms hereof to execute and deliver, and agree to be bound by the terms and conditions set forth in, the Lockbox Account Agreement and the Blocked Account Agreement. Borrowers hereby acknowledge and agree that all payments and deposits made and items submitted to the Collateral Account will be the sole and exclusive property of the Agent for the benefit of the Banks." "(w) Books and Records; Inspection; Collateral Monitoring. (i) Without limiting the generality of any provision herein relating to the subject matter of this clause (i), each Borrower will keep proper books and records and accounts in which full, true and accurate entries in conformity with GAAP and all requirements of law shall be made of all transactions and activities in relation to its businesses, and will permit the Agent or any authorized representatives of the Agent or professionals (including consultants, accountants, lawyers, appraisers and investment bankers) retained by the Agent (for the purposes hereof, any such Person hereinafter referred to as an "Authorized Agent"), at any time, whether at the Agent's request or upon the request of the Required Banks, to conduct evaluations and appraisals of the Borrowers' practices in the computation of the Borrowing Base and the assets included in the Borrowing Base (including the schedules thereto), the Collateral Activity Report and the Additional Reports, and pay the reasonable fees and expenses associated therewith (including, without limitation, the reasonable fees and expenses associated with the services performed by the Agent's Collateral Agent Services Group or an outside auditor acceptable to the Agent or the Required Banks); provided, however, that such Persons shall not be entitled to conduct such evaluations and appraisals of assets more frequently than twice per year, unless (x) a Default or an Event of Default has occurred and is continuing, or (y) the Agent or the Required Banks determines that any Material Adverse Effect or material adverse change in the condition, affairs or operations (financial or otherwise) has occurred with respect to any of the Borrowers, the Inventory or Receivables practices or the performance of such Collateral, and that as a result of such Event of Default, Material Adverse Effect or material adverse change, more frequent evaluations or appraisals are required to effectively monitor the Borrowing Base, in which case the Borrowers shall permit such Persons to conduct such evaluations and appraisals at such reasonable times and as often as may reasonably be requested, in each case so long as any Loans shall remain outstanding; (ii) in connection with any evaluation or appraisal relating to the computation of the Borrowing Base, the Borrowers agree to maintain such additional reserves for the purposes of computing the Borrowing Base in respect of Eligible Receivables and Eligible Inventory and make such other adjustments to its Borrowing Base (i.e., including Eligible Receivables and Eligible Inventory in the Borrowing Base) as the Agent or the Required Banks shall reasonably require based upon the results of such evaluation or appraisal; and (iii) the Borrowers shall provide the Agent with such other information, reports and data, and furnish the Agent with such assistance, as may be reasonably required from time to time by the Agent, or as requested by the Required Banks, concerning the Borrower's Receivables, Inventory and other assets, in such manner and detail as shall be satisfactory to the Agent. 5. Amendment to Section 7.02 - Negative Covenants. Section 7.02 is hereby amended by adding the following negative covenant: "(r) Lockbox and Blocked Accounts. Create, establish or otherwise maintain any lockbox, depository or other accounts at any bank or other financial institution other than the Lockbox Accounts and Blocked Accounts set forth on Exhibit M and the Exempt Accounts set forth on Exhibit P, at the bank(s) identified on Exhibit M and Exhibit P respectively (or such other bank(s) to which the Agent shall give prior written consent), or allow, permit or otherwise cause the aggregate amount in the Exempt Accounts to exceed $400,000 at any one time, on a cumulative basis." 6. Representations, Warranties and Covenants of the Borrowers. Each Borrower hereby represents and warrants to each Bank that on and as of the date hereof (i) the representations and warranties of the Borrowers 26 7 contained in the Credit Agreement and any other Loan Document delivered in connection therewith to which it is a party are true and correct and apply to the Borrowers hereto with the same force and effect as though made on and as of the date hereof, (ii) the Borrowers are in compliance with all covenants contained in the Credit Agreement (as amended hereby), and (iii) no Default or Event of Default has occurred and is continuing under the Credit Agreement (as amended hereby) or any other Loan Document delivered in connection therewith to which it is a party, after giving effect to this Amendment. To the extent any claim or off-set may exist as of the date hereof, each Borrower, on behalf of itself and its successors and assigns, hereby forever and irrevocably (a) releases each Bank, the Agent and the Syndication Agent and their respective officers, representatives, agents, attorneys, employees, successors and assigns (collectively, the "Released Parties"), from any and all claims, demands, damages, suits, cross-complaints and causes of action of any kind and nature whatsoever, whether known or unknown and wherever and howsoever arising, and (b) waives any right of off-set such Borrower may have against any of the Released Parties. 7. Conditions Precedent to Amendment No. 5. The obligation of the Banks and the Agent to enter into this Amendment shall be subject to the Agent having received from the Borrowers, prior to or simultaneously with the execution and delivery of this Amendment, the following: (a) Lockbox Account Agreement, duly executed by the Borrowers and the bank identified on Exhibit M (or such other bank to which the Agent shall give prior written consent); (b) Blocked Account Agreement, duly executed by the Borrowers and the bank identified on Exhibit M (or such other bank to which the Agent shall give its prior written consent); and (c) Pledged Account Letters, duly executed by the Borrowers. 8. Pledged Account Letters. The Borrowers agree that the Pledged Account Letters, to be executed and delivered to the Agent simultaneously with this Amendment, shall be held by the Agent until (i) a Default or an Event of Default has occurred and is continuing, or (ii) the occurrence of a Material Adverse Change, as determined by the Required Banks. In either case, upon such event or occurrence, the Agent may, and upon the request of the Required Banks shall, release the Pledged Account Letters to the banks or other financial institutions to which each such Letter has been addressed, and the Borrowers each hereby expressly authorize such release by the Agent. 9. Credit Agreement in Full Force and Effect. Except as expressly modified hereby, the Credit Agreement shall remain unchanged and in full force and effect as executed and each Borrower hereby confirms and reaffirms all of the terms and conditions of the Credit Agreement. 10. Entire Understanding. The Credit Agreement and this Amendment contain the entire understanding of and supersede all prior agreements, written and verbal, among the Banks, the Agent, the Syndication Agent and the Borrowers with respect to the subject matter hereof and shall not be modified except in writing executed by the parties hereto. 11. Governing Law. This Amendment shall be governed by and construed in accordance with the laws of the State of New York without giving effect to its conflict of laws principles. 12. Exhibits. The Exhibits listed on the Exhibit List attached to this Amendment No. 5, including the forms thereof annexed hereto, are hereby added to and incorporated into the Credit Agreement. 27 8 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized, as of the date first above written. THE BORROWERS: JOHNSTON INDUSTRIES, INC. JOHNSTON INDUSTRIES ALABAMA, INC. By: By: ------------------------------ ------------------------------ Name: Name: Title: Title: J.I. GEORGIA, INC. JOHNSTON INDUSTRIES COMPOSITE REINFORCEMENTS, INC. By: By: ------------------------------ ------------------------------ Name: Name: Title: Title: THE AGENT: THE CHASE MANHATTAN BANK By: ------------------------------ Name Title: THE SYNDICATION AGENT: NATIONSBANK, N.A. By: ------------------------------ Name: Title: THE BANKS: THE CHASE MANHATTAN BANK NATIONSBANK, N.A. By: By: ------------------------------ ------------------------------ Name: Name: Title: Title: REGIONS BANK COMERICA BANK By: By: ------------------------------ ------------------------------ Name: Name: Title: Title: 28 9 VAN KAMPEN AMERICAN CAPITAL THE SUMITOMO BANK, LIMITED PRIME RATE INCOME TRUST By: By: ------------------------------ ------------------------------ Name: Name: Title: Title: By: ------------------------------ Name: Title: MERRILL, LYNCH, PIERCE, FENNER & SMITH INCORPORATE DDK ACQUISITION PARTNERS, L.P By: By: ------------------------------ ------------------------------ Name: Name: Title: Title: CORESTATES BANK, N.A. By: ------------------------------ Name: Title: 29 EX-11 3 STATEMENTS OF COMPUTATION OF PER SHARE EARNINGS 1 JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES EXHIBIT 11 - STATEMENT OF COMPUTATION OF PER SHARE EARNINGS The weighted average number of common and common share equivalents on a primary basis are as follows:
FOR THE FOR THE FOR THE FOR THE THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS ENDED ENDED ENDED ENDED OCTOBER 3, SEPTEMBER 27, OCTOBER 3, SEPTEMBER 27, 1998 1997 1998 1997 ------------ ------------- ----------- ------------- Weighted average common shares outstanding 10,742,772 10,726,272 10,742,772 10,503,139 Shares issued from assumed exercise of incentive stock options (1) (2) -- -- -- -- Shares issued from assumed exercise of nonqualified stock options (1) (2) -- -- -- -- ----------- ------------ ------------ ------------ Weighted average number of common and common equivalent shares outstanding as adjusted 10,742,772 10,726,272 10,742,772 10,503,139 =========== ============ ============ ============ Income (Loss) from continuing operations $ 140,000 $ (3,289,000) $ (1,363,000) $ (8,374,000) Income from discontinued operations -- -- -- 126,000 ----------- ------------ ------------ ------------ Net Income (Loss) 140,000 (3,289,000) (1,363,000) (8,248,000) Dividends on Preferred Stock -- -- -- 81,000 ----------- ------------ ------------ ------------ Net Income available to (Loss) attributable to common stockholders $ 140,000 $ (3,289,000) $ (1,363,000) $ (8,329,000) =========== ============ ============ ============ Earnings (Loss) per common share-basic: Income (Loss) from continuing operations $ .01 $ (.31) $ (.13) $ (.80) Discontinued operations .-- .-- .-- .01 ----------- ------------ ------------ ------------ Net Income (Loss) per common share-basic $ .01 $ (.31) $ (.13) $ ( .79) =========== ============ ============ ============ - - -----------------------------------------------------------------------------------------------------------------------
(1) Shares issued from assumed exercise of options included the number of incremental shares which result from applying the "treasury stock method" for options. (2) For the three months and nine months ended October 3, 1998 and September 27, 1997, common shares from assumed exercise of stock options are not presented as they are antidilutive due to net losses or immaterial for all periods presented. 30 EX-27 4 FINANCIAL DATA SCHEDULE
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JOHNSTON INDUSTRIES, INC. AND SUBSIDIARIES FINANCIAL STATEMENTS AS OF OCTOBER 3, 1998 AND FOR THE NINE MONTHS THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1998 OCT-03-1998 1,236,000 0 41,557,000 1,738,000 55,936,000 108,319,000 241,314,000 136,299,000 229,691,000 104,438,000 128,286,000 0 0 1,246,000 46,471,000 229,691,000 218,474,000 218,474,000 175,639,000 175,639,000 15,500,000 627,000 10,141,000 (3,256,000) (1,893,000) (1,363,000) 0 0 0 (1,363,000) (.13) (.13)
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