Attached files

file filename
EX-14 - EX-14 - POINDEXTER J B & CO INCa09-35916_1ex14.htm
EX-12 - EX-12 - POINDEXTER J B & CO INCa09-35916_1ex12.htm
EX-21 - EX-21 - POINDEXTER J B & CO INCa09-35916_1ex21.htm
EX-32.1 - EX-32.1 - POINDEXTER J B & CO INCa09-35916_1ex32d1.htm
EX-31.1 - EX-31.1 - POINDEXTER J B & CO INCa09-35916_1ex31d1.htm
EX-32.2 - EX-32.2 - POINDEXTER J B & CO INCa09-35916_1ex32d2.htm
EX-31.2 - EX-31.2 - POINDEXTER J B & CO INCa09-35916_1ex31d2.htm
EX-10.17 - EX-10.17 - POINDEXTER J B & CO INCa09-35916_1ex10d17.htm

Table of Contents

 

 

 

United States

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

 

FORM 10-K

 

(Mark one)

 

x      ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended December 31, 2009

 

OR

 

o         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 333-123598

 

J.B. POINDEXTER & CO., INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

76-0312814

(State or other jurisdiction of

 

(I.R.S. Employer Identification No.)

incorporation or organization)

 

 

 

600 Travis

Suite 200

Houston, Texas 77002

(Address of principal executive offices)

(Zip Code)

 

(713)  655-9800

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:  None

 

Name of each exchange which registered:  None

 

Securities registered pursuant to Section 12(g) of the Act:  None

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes  o  No x

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.  Yes  x  No o

 

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  o

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).   Yes  o  No  o

 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  (Check One):

 

o – Large accelerated filer

 

o – Accelerated filer

 

 

 

x – Non-accelerated filer

 

o – Smaller reporting company

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)  Yes  o  No  x

 

The aggregate market value of the voting and non-voting common equity held by non-affiliates as of March 31, 2010 was $0.00.

 

As of March 31, 2010, the registrant had 3,059 shares of common stock issued and outstanding.

 

Documents incorporated by reference. None

 

 

 



Table of Contents

 

J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES

 

Table of Contents

 

PART I

 

 

 

Item 1.

Business

3

Item 1A.

Risk Factors

12

Item 1B.

Unresolved Staff Comments

16

Item 2.

Properties

17

Item 3.

Legal Proceedings

18

Item 4.

Submission of Matters to a Vote of Security Holders

18

 

 

 

PART II

 

 

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and IssuerPurchases of Equity Securities

18

Item 6.

Selected Financial Data

19

Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

Item 7A.

Quantitative and Qualitative Disclosure About Market Risk

34

Item 8.

Financial Statements and Supplementary Data

35

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

61

Item 9A.

Controls and Procedures

61

Item 9B.

Other Information

62

 

 

 

Part III

 

 

Item 10.

Directors, Executive Officers and Corporate Governance

62

Item 11.

Executive Compensation

63

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

70

Item 13.

Certain Relationships and Related Transactions, and Director Independence

70

Item 14.

Principal Accountant Fees and Services

71

 

 

 

Part IV

 

 

Item 15.

Exhibits and Financial Statement Schedules

73

 

2



Table of Contents

 

PART I

 

Item 1.                                                           Business

 

Overview

 

J.B. Poindexter & Co., Inc. operates primarily transportation-related manufacturing businesses. Our operating subsidiaries or business units are Morgan Truck Body, LLC (“Morgan”), Morgan Olson, LLC (“Morgan Olson”), Truck Accessories Group, LLC (“Truck Accessories”), EFP, LLC (“EFP”), MIC Group, LLC (“MIC Group”), Federal Coach, LLC (“Federal Coach”), and Eagle Specialty Vehicles, LLC (“Eagle Coach”). Eagle Coach and Federal Coach comprise the Specialty Vehicle Group. The Specialty Vehicle Group, MIC Group and EFP comprise our Specialty Manufacturing Division (“Specialty Manufacturing”).

 

Unless the context otherwise requires, the “Company,” “we,” “our” or “us” refers to J.B. Poindexter & Co., Inc. (“JBPCO”) together with its operating subsidiaries. We are wholly owned by John B. Poindexter.

 

We operate our business in four different segments: Morgan, Morgan Olson, Truck Accessories and Specialty Manufacturing. Please see Note 3 of our financial statements included herein for a description of financial information by segments.

 

Morgan

 

We believe Morgan is the leading United States manufacturer of commercial truck bodies for medium-duty trucks based upon estimated market share and total 2009 sales volume. Morgan generally manufactures products for medium-duty trucks having a gross vehicular weight rating of between 10,001 pounds (Class 3) and 33,000 pounds (Class 7). Trucks equipped with Morgan’s products are commonly used in a wide variety of applications, including general freight deliveries, moving and storage, and distribution of refrigerated consumables. Morgan also offers service programs for its truck bodies.

 

Morgan reaches a broad base of customers in the United States and Canada through its sales force and its more than 200 authorized distributors and Morgan authorized service centers. Its customers include rental companies, truck dealers, leasing companies and companies that operate fleets of delivery vehicles. Through nine manufacturing plants and eight service facilities in strategic locations throughout North America, Morgan can provide timely product delivery and service to its customers.

 

The principal products Morgan manufactures and sells are:

 

·                  dry freight bodies that are typically fabricated with prepainted aluminum or fiberglass-reinforced plywood panels or Morganplate® panels, a composite panel, hardwood floors and various door configurations to accommodate end-user loading and unloading requirements;

 

·                  refrigerated van bodies fabricated with insulated aluminum or fiberglass-reinforced plywood panels that accommodate controlled temperature and refrigeration needs of end users;

 

·                  aluminum or fiberglass-reinforced plywood cutaway van bodies that are installed only on cutaway chassis (a chassis and cutaway cab) and are available with or without access to the cargo area from the cab; and

 

·                  stake bodies, which are flatbeds with various configurations of removable sides.

 

Morgan manufactures its products to customer specifications and installs its products on truck chassis supplied by its customers.

 

3



Table of Contents

 

Customers and sales.  Morgan principally generates revenue through three sources:

 

·                  sales of truck bodies to commercial divisions of leasing companies, companies with fleets of delivery vehicles and to truck dealers and distributors for ultimate sale or lease to end users such as retailers, building supply companies, contractors, delivery companies and food distribution companies (“Commercial” sales);

 

·                  sales of truck bodies to national consumer rental companies that then become available for rent to the general public (“Consumer Rental” sales); and

 

·                  sales of parts and service.

 

Morgan’s net sales constituted 31% of JBPCO’s consolidated net sales in 2009, 33% in 2008 and 42% in 2007.  Morgan generates sales of truck bodies through its sales force directly to large end-user customers, including Penske and Ryder, and to distributors and truck dealers. Commercial sales of truck bodies constituted 80% of Morgan’s net sales in 2009, 78% in 2008 and 83% in 2007.

 

Morgan has an independent authorized distributor network of 41 distributors nationwide. Most distributors sell a wide variety of trucks and related equipment to truck dealers and end users. Generally, distributors sell Morgan products in a specified territory with limited exclusivity.  Morgan also sells its products directly to truck dealers, selling to approximately 460 dealers in 2009.

 

Consumer Rental sales are composed of sales to companies that maintain large fleets of one-way and local hauling vehicles available for rent to the general public. Morgan makes these sales through a bid process and negotiation directly with these companies through its sales force. Primary Consumer Rental customers include Penske and U-Haul.  Morgan negotiates contracts for Consumer Rental sales annually, usually in late summer to early fall, with products to be shipped during the first half of the following year. These sales are seasonal, with substantially all product shipments occurring in the first six months of the year. Consumer Rental sales tend to be the most volatile and price-sensitive aspect of Morgan’s business and depend on factors such as product mix and delivery schedules. Consumer Rental sales constituted 11% of Morgan’s net sales in 2009, 15% in 2008 and 11% in 2007.

 

Morgan’s two largest customers, Penske and Ryder, together have historically represented approximately 45% to 55% of Morgan’s total net sales. Each has been Morgan’s customer for approximately 25 years and we believe relations with each are good. Sales to these customers represented 17% of JBPCO’s consolidated net sales in 2009, 16% in 2008 and 22% in 2007.  Accounts receivable from these customers were $2.8 million and $2.9 million at December 31, 2009 and 2008, respectively.

 

Morgan also builds truck bodies and installs them on chassis acquired under a bailment pool agreement with General Motors Acceptance Corporation.  Pool program sales were approximately $0.2 million and $1.0 million for the years ended December 31, 2009 and 2008, respectively.

 

Morgan offers limited service programs at its own service facilities and its authorized distributors. Service sales constituted 6% of Morgan’s net sales in 2009, 5% in 2008 and 5% in 2007.

 

Morgan also sells its products in Canada and Mexico.  In 2009, foreign sales (primarily in Canada) represented approximately 6% of Morgan’s net sales and 2% of JBPCO’s consolidated net sales.

 

Manufacturing and supplies.  Morgan, which is headquartered in Morgantown, Pennsylvania, operates manufacturing, body mounting, and parts and service facilities in Arizona, California, Florida, Georgia, Pennsylvania, Texas, Wisconsin and Ontario, Canada. Morgan has sales, service and body mounting facilities in Colorado, Florida, Georgia, Pennsylvania, Texas, Wisconsin, and Ontario, Canada. Many of Morgan’s domestic manufacturing facilities are ISO 9001-2000 certified.

 

4



Table of Contents

 

Generally, Morgan engineers its products to the specifications of the customer. Typically, the customer places an order and arranges for a truck chassis manufacturer to deliver the truck chassis to Morgan. Morgan manufactures and installs the body on the customer-owned chassis and the customer or Morgan arranges for delivery of the completed truck. Morgan’s production cycle ranges from three to seven days for dry freight products and up to 28 days for more complex refrigerated products.  Delays in chassis deliveries can disrupt Morgan’s operations and can increase its working capital requirements.

 

Because contracts for Consumer Rental sales are entered into in the summer or fall but production does not begin generally until the following January, Morgan typically has a significant backlog of Consumer Rental sales orders at the end of each year that are produced and shipped through June of the following year. In addition, Morgan typically maintains a significant backlog of Commercial sales. Morgan’s backlog at December 31, 2009 was $73.1 million compared to $47.6 million at December 31, 2008. Morgan expects to complete all of the orders in its 2009 year-end backlog during 2010.

 

Morgan provides limited warranties against construction defects in its products. These warranties generally allow for the replacement or repair of defective parts or workmanship for up to five years following the date of sale. Warranty costs have not had a material adverse effect on its business.

 

Morgan maintains an inventory of raw materials necessary to build truck bodies according to customers’ orders. Because Morgan usually manufactures its products to customer orders, it does not maintain substantial inventories of finished goods.

 

Morgan’s principal raw materials include aluminum, steel, fiberglass-reinforced plywood and hardwood. Morgan acquires raw materials from a variety of sources and has not experienced significant shortages of materials. However, there are a limited number of suppliers of fiberglass-reinforced plywood, an important truck body material. While Morgan has not experienced a disruption in supply or a shortage of fiberglass-reinforced plywood, such a disruption or shortage could occur in the future. Morgan may not be able to replace its existing supply of fiberglass-reinforced plywood on acceptable terms or at all. To manage its supply costs, Morgan occasionally enters into long-term supply contracts on principal materials to secure prices for up to one year if considered necessary.  Morgan has taken advantage of the combined purchasing power of our companies, thereby generating savings on raw materials common to our businesses.

 

Industry.  Industry revenue and growth depend primarily on the demand for delivery vehicles in the general freight, moving and storage, parcel delivery and food distribution industries, all of which are affected by general economic conditions. Replacement of older vehicles in fleets represents an important revenue source.  Replacement cycles are approximately six to seven years, depending on vehicle types. During economic downturns, replacement orders are often deferred or, in some cases, older vehicles are retired without replacement. During periods of economic growth, as customers decide to increase their capital expenditures, sales of delivery trucks grow as customers make purchases they deferred in prior years and expand their fleets.

 

The federally mandated emission standards for diesel engines were changed effective January 1, 2007 and will change again in 2010.  These standards require a reduction in the amount of pollutants allowed to be released during the operation of the diesel engine included with the truck chassis that Morgan is provided by its customers and have increased the cost of the chassis to Morgan’s customers and changed the economics of operating the truck. Historically, approximately 90% of Morgan truck bodies are installed on chassis with diesel engines.  We believe that the 2007 change to the emission standards changed Morgan’s customers’ buying patterns in 2007 as the inventory of chassis manufactured before the change were rapidly consumed throughout 2007.  We cannot predict how our operations will be affected in 2010 as a result of the uncertain impact that the change will have on Morgan’s customers’ operations.

 

Competition.  The truck body manufacturing industry is highly competitive. Morgan competes with three national manufacturers: Supreme Industries, Inc., Kidron, a division of Specialized Vehicles Corporation, and America’s Body Company, some of which may be larger and have more resources than Morgan. There are a large number of smaller manufacturers that are regionally focused. Competitive factors in the industry include product quality,

 

5



Table of Contents

 

delivery time, geographic proximity of manufacturing facilities to customers, warranty terms, service and price. We believe customers value Morgan’s high-quality products, competitive pricing and delivery times.

 

Morgan Olson

 

Morgan Olson is one of two major manufacturers of step vans servicing the United States and Canada. Step vans are specialized vehicles designed for multiple-stop delivery applications and they enable the driver of the vehicle to easily access the cargo area of the vehicle from inside the cab. Step vans are made to customer specifications for use in parcel, food, vending, uniform, linen and other delivery applications. Morgan Olson’s step van bodies are installed on International (Workhorse), Ford and Freightliner truck chassis for light- and medium-duty trucks with gross vehicular weight ratings between 10,001 and 33,000 pounds (Class 3-7) with body sizes ranging from 11 to 30 feet.  Morgan Olson is headquartered in Sturgis, Michigan, where it has manufacturing and service parts distribution facilities.

 

Morgan Olson’s net sales constituted 13%, 15% and 14% of JBPCO’s consolidated net sales in 2009, 2008 and 2007, respectively.

 

Customers and sales.  Customers purchase step vans through dealers and distributors and from Morgan Olson through its direct sales force. Two customers, United Parcel Service of America, Inc. and FedEx, purchase the majority of step vans produced in the United States. The United States Postal Service has historically been a major buyer of step vans; however, it has not placed a significant order for new step vans since the completion of the prior contract in early 2004 that Morgan Olson participated in with two chassis manufacturers. Morgan Olson’s end-user customers include these customers along with Frito-Lay, Inc., Bimbo Bakeries, W.B. Mason, ARAMARK Corporation and others. The preferences and purchasing decisions of these customers dramatically affect the results of operations of Morgan Olson.

 

Morgan Olson also sells step van body service parts through its dealers and distributors and directly to customers. Morgan Olson is a major supplier of service parts for long-lived vehicles manufactured by it for the United States Postal Service under an agreement of indefinite term that is reviewed annually. The United States Postal Service has the right to terminate the agreement for its convenience at any time.  We believe Morgan Olson’s relationship with the United States Postal Service is satisfactory however, there can be no assurance that the parts supply agreement will continue.

 

Morgan Olson offers aftermarket support through its Service Parts Department for step vans manufactured by Morgan Olson and dry freight vans manufactured by Morgan.  The Service Parts business allows Morgan and Morgan Olson to consolidate their parts support functions, with dedicated fabrication, warehousing and shipping facilities.  This service provides fleet customers with a full range of parts and parts assemblies for their vehicles. Morgan Olson Service Parts and the Morgan Service and Repair Centers offer combined support that we believe gives both companies a competitive advantage.

 

Morgan Olson has one customer, United Parcel Service of America, Inc., that accounted for approximately 31%, 44% and 37% of Morgan Olson’s net sales during 2009, 2008 and 2007, respectively.  Accounts receivable from this customer were $0.1 million and $4.2 million at December 31, 2009 and 2008, respectively.

 

Manufacturing and supplies.  Morgan Olson has ISO 9000 certified manufacturing and parts distribution facilities in Sturgis, Michigan.

 

Generally, Morgan Olson manufactures its products to customer specifications. Typically, the customer places an order and arranges for a truck chassis manufacturer to deliver a truck chassis to Morgan Olson. Morgan Olson manufactures the complete truck body, including the installation of windows, doors, instrument panels, seating, wiring, painting and decal application. The customer arranges for delivery of the completed truck.  Morgan Olson’s production cycle varies from 8 to 15 days.  Delays in chassis deliveries can disrupt Morgan Olson’s operations and can increase its working capital requirements.

 

6



Table of Contents

 

At December 31, 2009, Morgan Olson’s total backlog was $38.1 million, compared to $18.2 million at December 31, 2008. We expect that Morgan Olson will fill all 2009 backlog orders in 2010.

 

Morgan Olson provides a limited warranty against construction defects in its products. These warranties generally provide for the replacement or repair of defective parts or workmanship for up to five years following the date of sale. Warranty costs have not had a material adverse effect on its business.

 

Morgan Olson maintains an inventory of raw materials necessary to build step van bodies. Because Morgan Olson manufactures its products to customer orders, it does not maintain substantial inventories of finished goods. Principal raw materials include steel and aluminum, and raw materials are acquired from a variety of sources that have not experienced significant shortages. Morgan Olson has taken advantage of the combined purchasing power of our companies, including Morgan, thereby generating savings on raw materials common to our businesses.

 

Industry.  Industry revenue and growth depend primarily on the demand for delivery vehicles, which is affected by general economic conditions. Because of the concentration of customers in the industry, the demand for delivery vehicles is significantly influenced by the requirements of the United Parcel Service of America, Inc., FedEx and potentially the United States Postal Service. Replacement of older vehicles in fleets represents an important revenue source, with replacement cycles varying, depending on vehicle types and usage. During economic downturns, replacement orders are often deferred or, in some cases, older vehicles are retired without replacement. During periods of economic growth, as customers decide to increase their capital expenditures, sales of delivery trucks grow as customers make purchases that were deferred in prior years and expand their fleets.

 

The federally mandated emission standards for diesel engines were changed effective January 1, 2007 and will change again in 2010. Morgan Olson’s operations were not significantly affected in 2007; however, we cannot predict whether our operations will be affected in 2010 as a result of the uncertain impact that the change will have on our customers’ operations.

 

Competition.  The step van body manufacturing industry is highly competitive. Morgan Olson competes with one other major manufacturer of step van bodies, Utilimaster, which may have more resources than Morgan Olson. Competitive factors in the industry include product quality, delivery time, warranty terms, aftermarket service and price.

 

Truck Accessories

 

We believe Truck Accessories, which is headquartered in Elkhart, Indiana, is the leading manufacturer of hard pickup truck caps and tonneaus for the combined United States and Canadian market. Truck Accessories markets its cap and tonneau products under the brand names Leer, Century, Raider, LoRider, BoxTop and Pace Edwards.   Truck Accessories also markets window and door components under the State Wide name.

 

Caps and tonneaus provide an engineered, stylized enclosure for the bed of pickup trucks, transforming them into lockable weather-protected storage areas. Truck Accessories’ truck caps and tonneaus offer customers a variety of designs and features, including a number of distinctive styles, allowing them to customize the look and utility of their pickup trucks.  The Truck Accessories product line of truck caps and tonneaus ranges from standard to premium and is differentiated by features, styling and brand name.  Pace Edwards offers a variety of retractable hard tonneau covers that can be mechanically retracted into an integrated storage canister behind the pickup truck cab.  State Wide manufactures windows and doors used by Truck Accessories, other cap manufacturers and horse trailer manufacturers in the assembly of their products.

 

Key pickup truck cap features include shape and design, color and finish, window configurations, roof racks, glass tint, trim, and interior features such as lighting, carpeting and special storage options. Tonneaus also offer a range of styling, storage and convenience alternatives.  Caps and tonneaus can be designed to target specific customers.  For example, Leer, Century and Raider offer lifestyle-equipped caps for hunters, fishermen and outdoors enthusiasts that are styled and designed, through storage features and product appearance, to appeal to these customers. Through

 

7



Table of Contents

 

Truck Accessories’ multiple lines of caps and tonneaus, each with numerous features and options, we believe Truck Accessories is the industry leader in engineering, product innovation and styling.

 

Truck Accessories’ net sales constituted 24% of JBPCO’s consolidated net sales in 2009, 19% in 2008 and 20% in 2007.

 

Customers and sales.  Most of Truck Accessories’ truck caps and tonneaus are purchased by individuals, small businesses and fleet operators through a network of over 1,800 independent, nonexclusive dealers.

 

Pace Edwards’ retractable tonneau covers are sold primarily through automotive accessory warehouse distributors.  State Wide sells directly to manufacturers through its dedicated sales team.

 

Truck Accessories also sells its products in Canada and Europe. In 2009, foreign sales (primarily in Canada) represented approximately 17% of Truck Accessories’ net sales and 4% of JBPCO’s consolidated net sales.

 

Manufacturing and supplies.  The design and manufacture of Truck Accessories’ products takes place at eight manufacturing facilities located in California, Indiana (five), Pennsylvania and Washington.

 

Typical product delivery times range from one to two weeks from the time of order. Truck Accessories operates a fleet of tractor units and trailers for the efficient and timely delivery of its products to its dealers.

 

Truck Accessories provides a warranty period, exclusive to the original truck owner, which is, in general but with exceptions, one year for parts, five years for paint and lifetime for structure.  Warranty costs have not had a material adverse effect on its business in recent years.

 

Truck Accessories obtains raw materials and components from a variety of sources. The most important are resin, fiberglass, paint, aluminum, locks and automotive-quality glass.  Truck Accessories and three other of our companies have committed to purchase principally all of their paint requirements through 2014 from one supplier at favorable prices.  As a result of its size and purchasing power, Truck Accessories has maintained a stable supply of materials and components on favorable terms and to date has not experienced significant shortages of these items.

 

Truck Accessories’ products are typically manufactured upon receipt of an order from its customers.  Consequently, its backlog represents approximately two weeks of production. Truck Accessories’ backlog was $2.6 million at December 31, 2009 compared to $2.2 million at December 31, 2008.

 

Industry.  Sales of caps and tonneaus, in general, correspond to the level of new pickup truck sales in the United States and Canada. In 2009, we estimate that 18% to 20% of new pickup trucks were equipped with caps and tonneaus. Based on Truck Accessories’ market share in the United States and Canada of approximately 48%, we estimate that approximately 9% of new pickup trucks are equipped with Truck Accessories’ caps and tonneaus. Factors influencing the automotive industry, including general economic conditions, customer preferences, new model introductions, interest rates and fuel costs, directly influence Truck Accessories’ business.  Cap and tonneau sales are seasonal, with sales typically being higher in the spring and fall than in the winter and summer.

 

Competition.  The pickup truck fiberglass cap and tonneau industry is highly competitive. Truck Accessories competes with one other national competitor, A.R.E., Inc., and a number of smaller companies that are regionally focused. Competitive factors include design, features, delivery times, product availability, warranty terms, quality and price.  Based on the number of products and features it offers, and its ability to quickly supply product for newly introduced pickup truck models, we believe Truck Accessories is the industry leader in product design and available accessory options.

 

Specialty Manufacturing

 

Specialty Manufacturing is comprised of Specialty Vehicle Group, MIC Group and EFP, and its sales made up 33% of JBPCO’s consolidated net sales in 2009, 34% in 2008 and 25% in 2007.  Specialty Vehicle Group represents

 

8



Table of Contents

 

approximately 27% of Specialty Manufacturing’s 2009 net sales and is comprised of Federal Coach and Eagle Coach.  Specialty Vehicle Group manufactures funeral coaches, limousines and specialized transit buses.  In late 2009, Specialty Vehicle Group decided to consolidate its two funeral and limousine manufacturing operations into one facility.  This consolidation is expected to be completed in 2010.  As part of this decision to consolidate, Specialty Vehicle Group decided to exit the specialized bus business and sold this product line and related assets, including certain equipment, inventory and intangible assets on December 31, 2009.  See Note 6 of Notes to the Consolidated Financial Statements.

 

MIC Group represents approximately 59% of Specialty Manufacturing’s 2009 net sales and provides manufacturing services for customers requiring precision machining of metal parts and machining and casting services with a concentration of customers in the oil and gas exploration and development services industry.  During 2007, MIC Group acquired three machining operations, each of which also has a customer concentration in the oil and gas services industry.  The three acquired operations are located in Duncan, Oklahoma, Brenham, Texas and Houston, Texas.

 

EFP represents approximately 14% of Specialty Manufacturing’s 2009 net sales and manufactures and sells expandable polystyrene and polypropylene foam, engineered to customer specifications for use by the automotive, medical, electronics, food, furniture, bath and plumbing, and appliance industries as packaging, shock-absorbing components and material-handling products, including temperature-controlled containers.

 

Products.   Specialty Vehicle Group manufactures a full line of funeral coaches, limousines and specialized buses.  We estimate that Specialty Vehicle’s funeral product sales represent approximately 41% of the domestic funeral coach market.   On December 31, 2009, Specialty Vehicle Group exited the specialized bus business and sold the assets related to these operations.

 

MIC Group is a contract manufacturer that produces precision metal parts used in energy exploration and production, aerospace and other industries and performs machining and casting services for manufacturers of metal parts and components.

 

EFP manufactures and sells material-handling and protective packaging products including shock-absorbing packaging material, reusable trays, and containers that are used for transporting components and the protection of those products. EFP also fabricates block and sheet products used by the Recreational Vehicle industry for producing sidewalls and doors and by the construction industry for insulation and commercial roofing applications. Additionally, EFP manufactures a line of temperature-controlled shipping containers for the protection of temperature-sensitive products such as food and medical products.

 

Customers and sales.  Specialty Vehicle Group manufactures and sells its line of funeral coaches, limousines and specialized buses to end users, such as livery companies, funeral directors and approximately 40 authorized dealers.  Its largest customer represented approximately 1% of the total net sales of Specialty Manufacturing in 2009, 3% in 2008 and 3% in 2007.

 

Specialty Vehicle Group also sells its products in Canada and Belgium.  In 2009, foreign sales represented approximately 2% of Specialty Manufacturing’s net sales and 1% of JBPCO’s consolidated net sales.

 

MIC Group sells products to international oilfield service companies and a variety of businesses in various industries. Two oilfield service customers, Schlumberger Limited and Halliburton Company, represented approximately 39% of the total sales of Specialty Manufacturing in 2009, 42% in 2008 and 28% in 2007.

 

EFP’s customers include manufacturers from a wide range of industries that require special packaging materials for protecting their products.

 

Manufacturing and supplies.  Specialty Manufacturing’s operations are located in Alabama, Arkansas, Indiana, Oklahoma, Ohio, Tennessee, Texas (three), Malaysia and Mexico. Its facilities in Alabama, Oklahoma and the three Texas plants are ISO 9000 certified and its facility in Indiana is ISO 9000, ISO 14001 and ISO/TS 16949 certified.

 

9



Table of Contents

 

Specialty Vehicle Group engineers its products to its own specifications as well as those of chassis manufacturers in order to maintain the original equipment manufacturer’s warranty.  Specialty Vehicle Group takes delivery of a truck chassis or a modified sedan, usually manufactured by the Cadillac division of General Motors or the Lincoln division of Ford, and modifies it to its specifications.  Bus bodies were built on truck chassis and funeral coaches and limousines are manufactured from a modified sedan by removing part of the interior, lengthening the body and building the required vehicle.  The production process typically takes between four and six weeks.  Specialty Vehicle Group utilizes metals, polymer resins, wood, fiberglass, and petrochemical-based products including paints, plastics, sealants and lubricants.

 

MIC Group performs a broad range of services including computer-controlled precision machining and welding, electrical discharge machining, electron beam welding, trepanning, gun drilling, investment casting and electro mechanical assembly services. MIC Group utilizes ferrous and nonferrous materials including stainless steel, alloy steels, nickel-based alloys, titanium, brass, beryllium-copper alloys and aluminum.

 

EFP’s products are manufactured from a variety of materials including expandable polystyrene, polypropylene, polyethylene and resins which are subject to cost fluctuations based on changes to the price of oil and benzene in the international markets.

 

The Specialty Vehicle Group provides a warranty on its products for a period of 48 months or 50,000 miles on the section of the body and parts manufactured for funeral coaches and funeral limousines, 36 months or 50,000 miles on the body and parts manufactured for bus bodies, and 48 months or 100,000 miles on the portion of the body and parts manufactured for limousines.  MIC Group and EFP do not provide warranties on their products.  Warranty costs have not had a material adverse effect on Specialty Manufacturing’s business.

 

Specialty Manufacturing’s backlog at December 31, 2009 was $36.1 million compared to $81.3 million at December 31, 2008.  Materials are obtained from a variety of sources and Specialty Manufacturing has not experienced significant shortages in materials.

 

Industry.  Specialty Vehicle Group’s funeral products are used by funeral operators.  Sales generally increase with the introduction of new models by the chassis manufacturers.  VIP limousines and small to medium-sized buses are purchased by livery companies whose operations are influenced by the general economy.

 

MIC Group’s services are used by companies involved in oil and gas exploration as well as automotive and aerospace. The demand for equipment and services supplied to the oilfield service industry is directly related to the level of worldwide oil and gas drilling activity which is influenced by the price of oil and natural gas.  The price of a barrel of oil as of December 31, 2009 was approximately $79.36 compared to $44.60 as of December 31, 2008.

 

The majority of EFP’s products are manufactured for use by companies in the automotive, electronics, furniture, construction, appliance and other industries. It also manufactures products used as thermal insulators for the medical and healthcare industry.  Economic conditions that affect these industries will subsequently affect EFP’s operations.

 

Competition.  Specialty Vehicle Group competes with one major manufacturer of funeral coaches and with other businesses engaged in the manufacture of limousines and specialized transit buses.

 

MIC Group competes with other businesses engaged in the machining, casting and manufacturing of parts and equipment utilized in the oil and gas exploration, aerospace and other industries.

 

EFP competes with a large number of other producers of molded, expandable plastic products.

 

Some of Specialty Manufacturing’s competitors may be larger and have more resources.  Price, delivery times, technological expertise, design and capacity are the primary competitive factors in Specialty Manufacturing’s industries.

 

10



Table of Contents

 

JBPCO (Corporate)

 

The members of the JBPCO (Corporate) office have historically provided strategic direction and support to the business units.  This role has been expanded to include procurement programs that take advantage of common raw material and component purchases across all of our business units on improved economic terms and the expansion of information technology resources to develop initiatives across all business units to reduce costs and improve data management.

 

Trademarks and patents

 

We own rights to certain presentations of Truck Accessories’ Leer brand name, which we believe are valuable because we believe that Leer is recognized as being a leading brand name.  We own rights to the Federal Coach and Eagle Coach names.  We also own rights to certain other trademarks and trade names, including certain presentations of Morgan’s name. Although these and other trademarks and trade names used by us help customers differentiate our product lines from those of competitors, we believe that the trademarks or trade names themselves are less important to customers than the quality of the products and services. Our subsidiaries, principally Morgan, EFP and Eagle Coach, hold, directly or indirectly through subsidiaries, patents on certain products and components used in their manufacturing processes. We do not believe that the loss of any one patent would have a material adverse effect on us.

 

Employees (“team members”)

 

At December 31, 2009, we had 2,890 full-time team members and an average of 2,850 full-time team members throughout the year.  Team members are unionized only at EFP’s Decatur, Alabama facility, where approximately 60 team members are a party to a contract expiring in August 2012. We believe that relations with our team members are good.

 

Environmental matters

 

Our operations are subject to a variety of federal, state and local environmental and health and safety statutes and regulations, including those relating to emissions to the air, discharges to water, treatment, storage and disposal of waste, and remediation of contaminated sites. In certain cases, these requirements may limit the productive capacity of our operations. Certain laws, including the Federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (“Superfund”) impose strict, and under certain circumstances, joint and several, liability for costs to remediate contaminated sites upon designated responsible parties including site owners or operators and persons who dispose of wastes at, or transport wastes to, such sites. Some of our operations also require permits which may restrict our activities and which are subject to renewal, modification or revocation by issuing authorities. In addition, we generate nonhazardous wastes, which are also subject to regulation under applicable environmental laws.

 

From time to time, we have received notices of noncompliance with respect to our operations which have typically been resolved by investigating the alleged noncompliance, correcting any noncompliant conditions and paying fines, none of which individually or in the aggregate has had a material adverse effect on us.   Further, we cannot ensure that we have been or will be at all times in compliance with all of these requirements, including those related to reporting or permit restrictions, or that we will not incur material fines, penalties, costs or liabilities in connection with such requirements or a failure to comply with them.  We expect that the nature of our operations will continue to make us subject to increasingly stringent environmental regulatory standards. Although we believe we have made sufficient capital expenditures to maintain compliance with existing laws and regulations, future expenditures may be necessary, as compliance standards and technology change or as unanticipated circumstances arise. Unforeseen and significant expenditures required to comply with new or more aggressively enforced requirements or newly discovered conditions, for example, could limit expansion or otherwise have a material adverse effect on our business and financial condition.  For a description of currently outstanding environmental issues, see Note 16 of Notes to Consolidated Financial Statements.

 

11



Table of Contents

 

Reports to Security Holders

 

Since all of the Company’s equity securities are privately held, the Company is not required by the SEC’s proxy rules or regulations, or stock exchange requirements, to send an annual report to security holders. Nonetheless, the Company will send to each security holder annually a copy of its Annual Report on Form 10-K and quarterly a copy of each Quarterly Report on Form 10-Q.

 

Item 1A.                                                  Risk Factors

 

An investment in our securities is subject to a number of risks. An investor should carefully consider the following risk factors in evaluating such an investment. Any of the following risks, as well as other risks and uncertainties that we do not know about now or that we do not think are important, could seriously harm our business and financial results and cause the value of our securities to decline, which in turn could cause investors to lose all or part of their investment.

 

Our businesses are highly cyclical. A continuation of the economic downturn could adversely affect our ability to generate cash and make required payments on our debt.

 

The success of our business depends on general economic conditions and such factors as:

 

·                  corporate profitability;

·                  interest rates;

·                  retail financing;

·                  fuel costs;

·                  consumer preferences;

·                  consumer spending patterns;

·                  sales of truck chassis and new pickup trucks; and

·                  levels of oil and gas exploration activity.

 

In addition, we sell our products to customers in inherently cyclical industries, such as the trucking industry and the energy services industry, which experience significant downturns from time to time. As a result of the continuing economic recession that began in late 2007, we have experienced substantially lower sales across all our transportation businesses, namely Morgan, Morgan Olson, Truck Accessories and the Specialty Vehicle component of Specialty Manufacturing.  In 2008, our energy-related machining business, which is a component of Specialty Manufacturing, experienced a substantial increase in sales, including increased sales from the three related strategic acquisitions made in 2007.  However, the price of oil decreased from $91.73 a barrel at December 31, 2007 to $44.60 a barrel at December 31, 2008.  Because of this decrease in the price of oil, sales at our energy-related machining business began to decline in the second half of 2008 and continued to decline in 2009. Although the price per barrel of oil increased to $79.36 at December 31, 2009, sales were substantially lower in 2009 as demand for machining services remained weak.  Our combined operations generated cash of $28.8 million in 2009, and as of December 31, 2009 we had cash and cash equivalents on hand of $54.2 million and approximately $48.0 million available to borrow under our revolving credit facility.

 

The recent economic downturn has resulted in a significant decrease in our sales and could materially and adversely affect our operating cash flows and our ability to make required payments on our debt if prolonged.

 

Demand for our truck body products depends largely on the replacement cycle of delivery trucks.

 

Morgan and Morgan Olson produce and sell truck bodies for new delivery trucks, primarily in the general freight, moving and storage, parcel delivery and distribution industries. Demand for these products is driven by customers

 

12



Table of Contents

 

replacing older vehicles in their delivery truck fleets, and these customers often decide to postpone their purchases of new delivery trucks during economic downturns. If economic conditions or other factors, including longer useful lives of delivery trucks, cause our customers to reduce their capital expenditures and decrease investments in new delivery trucks, our sales could be materially and adversely affected. As a result, our ability to generate cash and make required payments on our debt could be negatively impacted.

 

The cyclicality of pickup truck sales could cause a decline in Truck Accessories’ sales.

 

Truck Accessories’ sales depend heavily on sales of new pickup trucks in North America. New pickup trucks sales in the United States and Canada decreased 29.3% from 2008 to 1.6 million units during 2009. January 2010 projections by industry associations indicate a 10% to 15% improvement in 2010 to an estimated 1.8 million units.   A decline in pickup truck sales would cause a decline in Truck Accessories’ sales, which could materially and adversely reduce Truck Accessories’ ability to generate cash and could reduce our ability to make required payments on our debt. Sales of pickup trucks are characterized by periodic fluctuations in demand due to, among other things, changes in general economic conditions, interest rates, fuel costs, new model introductions, consumer spending levels and consumer preferences.

 

We have a substantial amount of debt outstanding and may incur more debt, which could hurt our business prospects, limit cash flow available from our operations and prevent us from fulfilling our obligations under the 8.75% senior notes (“8.75% Notes”) and our other debt obligations.

 

We are significantly leveraged and will continue to be significantly leveraged.  We had $19.4 million of stockholder’s equity at December 31, 2009 and long-term debt of $205.2 million, including $199.8 million in aggregate principal amount of 8.75% Notes due 2014 and $5.4 million of capital lease obligations.  We had $48.6 million of secured debt availability under our revolving credit facility and we may be able to incur substantially more debt in the future.

 

We may not be able to compete favorably in our industries.

 

We experience direct competition in all of our product lines and some competitors have greater financial and other resources than we have. We face competition from existing competitors with entrenched positions and we could face competition from new ones. Changes in the nature of the industries in which we operate could produce competition from new sources. Increased competition may have a material adverse effect on our business, cash flows and ability to make required payments on our debt by reducing our sales or profit margins.

 

Most of our businesses rely on a small number of customers, the loss of any of which could have a material adverse effect on us.

 

Four of our businesses rely on a small number of customers to generate significant revenues.

 

·                  Morgan’s two largest customers, Penske and Ryder, together accounted for 54% of Morgan’s net sales in 2009, 48% in 2008 and 55% in 2007 and accounted for 17% of JBPCO’s consolidated net sales during 2009, 16% in 2008 and 22% in 2007.

 

·                  One customer accounted for 31% of Morgan Olson’s net sales during 2009, 44% in 2008 and 37% in 2007.

 

·                  Two customers accounted for 39% of Specialty Manufacturing’s net sales during 2009, 42% in 2008 and 28% in 2007 and accounted for 13% of JBPCO’s consolidated net sales in 2009, 14% in 2008 and 7% in 2007.

 

13



Table of Contents

 

·                  Our top ten customers accounted for 39% of JBPCO’s consolidated net sales in 2009, 44% in 2008 and 41% in 2007.

 

Because of the relative importance of large customers and the degree of concentration in the industries we serve, we are subject to additional risk. We may not be able to maintain these customer relationships or maintain our historical levels of sales to these customers. Because of the size and importance of these customers, these customers may be able to exert pressure on us to lower our prices, which may reduce our profit margins and operating cash flow. If one or more of these customers were to experience financial difficulties, our ability to collect receivables from it or generate new sales to it would be materially and adversely affected.

 

Disruptions in delivery of truck or car chassis to us could impact the profitability of our business.

 

Morgan and Morgan Olson mount their truck bodies on customer-owned truck chassis delivered from truck chassis manufacturers.  Specialty Vehicle Group converts car chassis supplied by General Motors and Ford into products for its customers.  If truck and car chassis manufacturers or their suppliers experience disruptions in their businesses, resulting from plant closures or other cost-cutting initiatives, lack of cash resources, bankruptcy proceedings or other potential causes, Morgan, Morgan Olson and Specialty Vehicle Group may be unable to sell or deliver their products. Work stoppages or slowdowns experienced by the large truck and car manufacturers that supply chassis could result in delays or slowdowns in our ability to deliver products to our customers.

 

Environmental and health and safety liabilities and requirements could require us to incur material costs.

 

Our operations are subject to a variety of federal, state and local environmental and health and safety statutes and regulations, including those relating to emissions to the air, discharges to water, treatment, storage and disposal of waste, and remediation of contaminated sites. In certain cases, these requirements may limit the productive capacity of our operations. Laws, including Superfund legislation, impose strict, and under certain circumstances, joint and several, liability for costs to remediate contaminated sites upon designated responsible parties including site owners or operators and persons who dispose of wastes at, or transport wastes to, such sites.

 

From time to time we have received notices of noncompliance with respect to our operations which have typically been resolved by investigating the alleged noncompliance, correcting any noncompliant conditions and paying fines. We have from time to time been identified as a potentially responsible party at various Superfund sites, which, based on available information, we do not anticipate will result in any material liability. However, new environmental requirements or more aggressive enforcement of existing ones or discovery of presently unknown conditions could require material expenditures or result in liabilities which could limit expansion or otherwise have a material adverse effect on our business, financial condition, operating cash flows and our ability to make required payments on our debt.

 

For a description of current environmental issues, see Note 16 of Notes to Consolidated Financial Statements.

 

We may incur material losses and costs as a result of product liability and warranty claims that may be brought against us.

 

We face an inherent risk of exposure to product liability claims if the use of our products results, or is alleged to result, in personal injury and/or property damage. If we manufacture a defective product, we may experience material product liability losses and we may incur significant costs to defend product liability claims. We also could incur significant costs in correcting any defects, lose sales and suffer damage to our reputation. Our product liability insurance coverage may not be adequate for the liabilities we could incur and may not continue to be available on terms acceptable to us.

 

We also are subject to product warranty claims in the ordinary course of our business. If we produce poor-quality products or use defective materials we may incur unforeseen costs in excess of what we have reserved in our

 

14



Table of Contents

 

financial statements. These costs could have a material adverse effect on our business, operating cash flows and ability to make required payments on our debt.

 

We depend on the services of key management personnel, the loss of whom would materially harm us.

 

Our ability to compete successfully and implement our business strategy depends on the efforts of our senior management personnel, including those of John Poindexter, our Chairman of the Board, President and Chief Executive Officer.  The loss of the services of any of these individuals could have a material adverse effect on our business. We do not maintain key-man life insurance policies on any of our executives.

 

We may be unable to realize our business strategy of improving operating performance and generating cost reductions.

 

We have either implemented or plan to implement strategic initiatives designed to improve our operating performance. The failure to achieve the goals of these initiatives could have a material adverse effect on our business. We may decide to make significant expenditures in an effort to streamline or improve our operations, including combining some of our operations at existing facilities, but may be unable to successfully implement or realize the expected benefits of these initiatives. We also may not be able to sustain improvements made to date. We may decide to alter or discontinue some aspects of our strategy and may adopt alternative or additional strategies, which may not be in the best interests of our note holders.

 

We may not be able to consummate future acquisitions or successfully integrate acquisitions into our business.

 

Our business strategy includes growing through strategic acquisitions of other businesses with complementary products, manufacturing capabilities or geographic markets. We may not be able to continue to identify attractive acquisition opportunities or successfully acquire identified targets.  If we fail to integrate acquired businesses successfully into our existing businesses or incur unforeseen expenses in consummating acquisitions we could incur unanticipated expenses and losses.

 

We must successfully integrate acquired businesses into our operations to take full advantage of projected benefits from those acquired businesses. The integration of future acquisitions into our operations could result in operating difficulties and divert management and financial resources that would otherwise be available for the development and maintenance of our existing operations. Our ability to make acquisitions may be constrained by our ability to obtain additional financing and by the provisions of the indenture governing our outstanding 8.75% Notes and by the terms of our revolving credit facility.

 

Acquisitions involve a number of special risks, including:

 

· unexpected losses of key employees or customers of the acquired business;

· conforming the standards, processes, procedures and controls of the acquired business with those of our existing operations;

· coordinating our product and process development;

· hiring additional management and critical personnel; and

· increasing the scope, geographic diversity and complexity of our operations.

 

Acquisitions could result in our incurrence of additional debt and contingent liabilities, including environmental, tax, pension and other liabilities. These liabilities could have a material adverse effect on our business, our ability to generate cash and our ability to make required payments on our debt.

 

If we are unable to meet future capital requirements, our competitive position may be adversely affected.

 

15



Table of Contents

 

As a manufacturer, we are required to expend significant amounts of capital for engineering, development, tooling and other costs. Generally we seek to recover these costs through revenue generation, but we may be unsuccessful due to competitive pressures and other market constraints. We expect to fund capital expenditures through operating cash flows, borrowings under our revolving credit facility and other sources of borrowing such as capital leases, but we may not have adequate funds or borrowing availability to make all the necessary capital expenditures. If we are unable to make necessary capital expenditures, our business and our competitive position may be materially and adversely affected.

 

As a privately held company, we are subject to less stringent corporate governance requirements than a company with public equity. This provides less protection to our investors.

 

While we are subject to certain requirements of the Sarbanes-Oxley Act of 2002, we are not subject to many of its provisions, including rules requiring us to have independent directors or an audit committee composed of independent directors. Two of our three directors, John Poindexter, our President and CEO, and Stephen Magee, the chairman of the Audit Committee of our board of directors, are not independent. We are not subject to the same corporate governance standards as a company with public equity or a company listed on a national exchange and our security holders do not have the protections provided by having independent directors or audit committee members.

 

Item 1B.                                                  Unresolved Staff Comments

 

None.

 

16



Table of Contents

 

Item 2.                                                           Properties

 

We own or lease the following manufacturing, office and sales facilities as of December 31, 2009:

 

Location

 

Principal use

 

Approximate
square feet

 

Owned
or leased

 

Lease
expiration

 

Morgan:

 

 

 

 

 

 

 

 

 

Ehrenberg, Arizona

 

Manufacturing

 

119,000

 

Owned

 

 

Riverside, California

 

Manufacturing/service

 

62,000

 

Leased

 

2013

 

Atlanta, Georgia

 

Parts & service

 

20,000

 

Leased

 

2012

 

Rydal, Georgia

 

Manufacturing

 

85,000

 

Owned

 

 

Ephrata, Pennsylvania

 

Manufacturing

 

51,000

 

Leased*

 

2015

 

New Morgan, Pennsylvania

 

Manufacturing

 

62,900

 

Leased

 

2010

 

Morgantown, Pennsylvania

 

Manufacturing/service

 

261,000

 

Leased*

 

2015

 

Morgantown, Pennsylvania

 

Office/warehouse

 

110,000

 

Leased

 

2015

 

Corsicana, Texas

 

Manufacturing/service

 

63,000

 

Leased*

 

2015

 

Janesville, Wisconsin

 

Manufacturing/service

 

166,000

 

Leased

 

2015

 

Denver, Colorado

 

Parts & service

 

15,000

 

Leased

 

2012

 

Lakeland, Florida

 

Parts & service

 

47,000

 

Leased

 

2010

 

Tampa, Florida

 

Parts & service

 

24,000

 

Leased

 

2010

 

Brampton, Ontario, Canada

 

Office & manufacturing

 

35,000

 

Leased

 

2013

 

Morgan Olson:

 

 

 

 

 

 

 

 

 

Sturgis, Michigan

 

Office & manufacturing

 

384,000

 

Owned

 

 

Truck Accessories:

 

 

 

 

 

 

 

 

 

Woodland, California

 

Manufacturing

 

65,000

 

Leased

 

2012

 

Elkhart, Indiana

 

Office & research

 

23,500

 

Owned

 

 

Elkhart, Indiana

 

Manufacturing

 

132,500

 

Leased

 

2010

 

Elkhart, Indiana

 

Office & manufacturing

 

80,000

 

Owned

 

 

Elkhart, Indiana

 

Manufacturing

 

75,000

 

Leased

 

2013

 

Elkhart, Indiana

 

Manufacturing

 

150,000

 

Leased

 

2011

 

Elkhart, Indiana

 

Manufacturing

 

17,250

 

Leased

 

2012

 

Chickasha, Oklahoma

 

Warehouse

 

9,700

 

Leased

 

2010

 

Milton, Pennsylvania

 

Manufacturing/retail

 

103,000

 

Leased

 

2012

 

Clackamas, Oregon

 

Retail

 

12,700

 

Leased

 

2013

 

Centralia, Washington

 

Manufacturing

 

45,950

 

Owned

 

 

Specialty Manufacturing:

 

 

 

 

 

 

 

 

 

Amelia, Ohio

 

Office & manufacturing

 

54,100

 

Leased

 

2011

 

Brenham, Texas

 

Office & manufacturing

 

125,000

 

Owned

 

 

Brenham, Texas

 

Office & manufacturing

 

151,000

 

Owned

 

 

Decatur, Alabama

 

Manufacturing

 

175,000

 

Leased

 

2012

 

Duncan, Oklahoma

 

Office & manufacturing

 

53,000

 

Leased

 

2012

 

Elkhart, Indiana

 

Office & manufacturing

 

211,600

 

Owned

 

 

Fort Smith, Arkansas

 

Office & manufacturing

 

170,000

 

Leased

 

2010

 

Houston, Texas

 

Office & manufacturing

 

97,000

 

Leased

 

2012

 

Selangor Darul Ehsan, Malaysia

 

Office & manufacturing

 

30,000

 

Leased

 

2012

 

Monterrey, Mexico

 

Manufacturing

 

38,000

 

Leased

 

2011

 

Nashville, Tennessee

 

Manufacturing

 

40,900

 

Leased

 

2010

 

JBPCO (Corporate):

 

 

 

 

 

 

 

 

 

Houston, Texas

 

Office

 

10,000

 

Leased

 

2019

 

 


*Effective December 12, 2008, these facilities were sold to and leased back from an entity owned by John Poindexter. See Note 17 of Notes to Consolidated Financial Statements.

 

17



Table of Contents

 

We believe that our facilities are adequate for our current needs and are capable of being utilized at higher capacities to supply increased demand, if necessary.  All owned properties are pledged as collateral against our revolving credit facility.

 

Item 3.

Legal Proceedings

 

We are involved in various lawsuits, which arise in the ordinary course of business. In the opinion of management, the ultimate outcome of known lawsuits will not have a material adverse effect on us.

 

Item 4.

Submission of Matters to a Vote of Security Holders

 

The sole shareholder of the Company signed a consent dated December 1, 2009 electing the following members of the board of directors for the ensuing year: John B. Poindexter, Stephen P. Magee and William J. Bowen.

 

PART II

 

Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

 

The registrant’s common equity is privately held and not publicly traded.  As of March 31, 2010, John Poindexter owned all of the registrant’s issued and outstanding common equity.  The Company has never paid cash dividends.

 

The covenants in the indenture regarding the 8.75% Notes and the loan agreement for the Company’s revolving credit facility both restrict the Company’s ability to pay dividends on its common equity.

 

The Company has no securities authorized for issuance under equity compensation plans.

 

18



Table of Contents

 

Item  6.                                                        Selected Financial Data

 

The following tables set forth selected consolidated financial data and other data concerning J.B. Poindexter & Co., Inc. for each of the last five years.  The selected financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and related Notes thereto.

 

 

 

Year ended December 31,

 

(Dollars in Millions)

 

2005

 

2006

 

2007

 

2008

 

2009

 

Operating data:

 

 

 

 

 

 

 

 

 

 

 

Net sales

 

$

668.1

 

$

795.4

 

$

792.2

 

$

706.4

 

$

480.6

 

Cost of sales

 

593.1

 

701.1

 

707.2

 

610.8

 

420.1

 

Gross profit

 

75.0

 

94.3

 

85.0

 

95.6

 

60.5

 

Selling, general and administrative expenses

 

50.0

 

63.0

 

64.9

 

66.3

 

49.0

 

Closed and excess facility costs

 

0.4

 

2.7

 

0.2

 

0.8

 

0.6

 

Gain on repurchase of 8.75% Notes

 

 

 

 

(0.4

)

(0.2

)

Other expense (income)

 

0.1

 

(0.2

)

(0.3

)

(0.8

)

0.2

 

Operating income

 

24.5

 

28.8

 

20.2

 

29.7

 

10.9

 

Interest expense

 

18.5

 

18.9

 

18.7

 

18.5

 

18.2

 

Interest income

 

(1.7

)

(1.7

)

(0.8

)

(0.4

)

(0.2

)

Income tax provision (benefit)

 

2.6

 

3.4

 

3.1

 

4.8

 

(2.2

)

Net income (loss)

 

$

5.1

 

$

8.2

 

$

(0.8

)

$

6.8

 

$

(4.9

)

Ratio of earnings to fixed charges(a)

 

1.4x

 

1.5x

 

1.1x

 

1.5x

 

0.6x

 

 

 

 

 

 

 

 

 

 

 

 

 

Other data:

 

 

 

 

 

 

 

 

 

 

 

EBITDA(b)

 

$

37.9

 

$

43.8

 

$

43.5

 

$

48.6

 

$

28.7

 

Consolidated Coverage Ratio(c)

 

2.1

 

2.4

 

2.3

 

2.6

 

1.6

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance sheet data (at year end):

 

 

 

 

 

 

 

 

 

 

 

Working capital

 

$

114.9

 

$

112.3

 

$

83.3

 

$

99.2

 

$

99.4

 

Total assets

 

$

273.2

 

$

292.4

 

$

297.2

 

$

295.9

 

$

286.0

 

Total debt

 

$

205.4

 

$

207.6

 

$

213.6

 

$

207.4

 

$

205.2

 

Stockholder’s equity

 

$

9.7

 

$

18.3

 

$

18.3

 

$

23.8

 

$

19.4

 

 


(a)          For the purpose of calculating the ratio of earnings to fixed charges, earnings consist of net income (loss) plus income taxes and fixed charges (excluding capitalized interest). Fixed charges consist of interest expense, amortization of debt issuance costs and the estimated portion of rental expenses deemed a reasonable approximation of the interest factor.

 

(b)         “EBITDA” is net income from continuing operations increased by the sum of interest expense, income taxes, depreciation and amortization and other noncash items for those operations defined as restricted subsidiaries in the indenture pertaining to the 8.75% Notes.  EBITDA is not included herein as operating data and should not be construed as an alternative to operating income (determined in accordance with accounting principles generally accepted in the United States) as an indicator of the Company’s operating performance.  The Company has included EBITDA because it is relevant for determining compliance under the indenture and because the Company understands that it is one measure used by certain investors to analyze the Company’s operating cash flow and historical ability to service its indebtedness.  The following are the components of the Company’s EBITDA:

 

19



Table of Contents

 

 

 

Year ended December 31,

 

(Dollars in Millions)

 

2005

 

2006

 

2007

 

2008

 

2009

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss)

 

$

5.1

 

$

8.2

 

$

(0.8

)

$

6.8

 

$

(4.9

)

Income tax provision (benefit)

 

2.6

 

3.4

 

3.1

 

4.8

 

(2.2

)

Interest expense

 

18.5

 

18.9

 

18.7

 

18.5

 

18.2

 

Depreciation and amortization

 

10.4

 

12.0

 

15.1

 

17.7

 

17.0

 

Noncash charges

 

0.4

 

1.1

 

 

0.8

 

0.6

 

Pro forma effect of acquisitions

 

0.9

 

0.2

 

7.4

 

 

 

 

 

$

37.9

 

$

43.8

 

$

43.5

 

$

48.6

 

$

28.7

 

 

(c)          “Consolidated Coverage Ratio” is the ratio of EBITDA to interest expense of the Company and its subsidiaries that guarantee the 8.75% Notes.  Among other things, it is used in the indenture to limit the amount of indebtedness that the Company may incur.  All the Company’s subsidiaries are restricted under the terms of the indenture and guarantee the 8.75% Notes.

 

20



Table of Contents

 

Item 7.                                                         Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

Overview

 

The current economic recession has affected all of our businesses but primarily our transportation-related businesses which began to experience lower demand for their products in the third quarter of 2007 that continued through 2008 and 2009.  We reacted and are continuing to react to these conditions by increasing market share at the expense of weaker competitors and reducing both direct and indirect costs through improved manufacturing processes and the reduction of general and administrative costs.  Our employee headcount was approximately 2,900 as of December 31, 2009 compared to 3,500 and 4,200 at December 31, 2008 and 2007, respectively.  In contrast to the previous economic downturn during 2001 and 2002, oil and gas exploration activity increased in 2008 compared to the prior year which along with three strategic acquisitions in 2007 provided significant additional net sales and operating income to our Specialty Manufacturing Division.  However, as the price of oil decreased from $91.73 per barrel at December 31, 2007 to $44.60 per barrel at December 31, 2008, sales at our energy-related machining business remained soft in 2009 even though the price per barrel of oil gradually increased throughout 2009 to $79.36 per barrel at December 31, 2009.

 

During the year ended December 31, 2007, MIC Group acquired three manufacturing businesses that specialize in providing services to the oil and gas exploration and production industry, primarily large multinational oilfield services companies.  MIC Group has combined them with its operations.  MIC Group acquired Richard’s Manufacturing Co., Inc. (“MIC Duncan”) effective April 30, 2007, Tarlton Supply Company (“MIC Tarlton”) effective August 23, 2007, and Machine and Manufacturing I, Inc. (“MIC Houston”) effective September 4, 2007.  The results of operations for these businesses for the period of time subsequent to their acquisition are included in the results of operations of the Specialty Manufacturing Division for the years ended December 31, 2009, 2008 and 2007.

 

The following table shows our net sales, operating income and operating income as a percentage of net sales for each segment for the years ended December 31, 2009, 2008 and 2007.

 

 

 

Year ended December 31,

 

(Dollars in Millions)

 

2009

 

2008

 

2007

 

Net Sales

 

 

 

 

 

 

 

Morgan

 

$

146.9

 

$

233.9

 

$

332.9

 

Morgan Olson

 

61.6

 

104.4

 

110.3

 

Truck Accessories

 

115.6

 

131.9

 

155.6

 

Specialty Manufacturing

 

157.9

 

238.3

 

195.2

 

Eliminations

 

(1.4

)

(2.1

)

(1.8

)

Consolidated

 

$

480.6

 

$

706.4

 

$

792.2

 

Operating Income (Loss)

 

 

 

 

 

 

 

Morgan

 

$

1.4

 

$

4.0

 

$

15.4

 

Morgan Olson

 

2.6

 

5.4

 

(2.7

)

Truck Accessories

 

7.9

 

2.4

 

3.2

 

Specialty Manufacturing

 

2.9

 

25.9

 

13.7

 

JBPCO (Corporate)

 

(3.9

)

(8.0

)

(9.4

)

Consolidated

 

$

10.9

 

$

29.7

 

$

20.2

 

Operating Margin Percentage

 

 

 

 

 

 

 

Morgan

 

1.0

%

1.7

%

4.6

%

Morgan Olson

 

4.2

%

5.2

%

(2.4

)%

Truck Accessories

 

6.8

%

1.8

%

2.1

%

Specialty Manufacturing

 

1.9

%

10.9

%

6.9

%

Consolidated

 

2.3

%

4.2

%

2.5

%

 

21



Table of Contents

 

The following is a discussion of the key components of our results of operations:

 

Source of revenues.  We derive revenues from:

 

·                  Morgan’s sales of truck bodies, parts and services;

 

·                  Morgan Olson’s sales of step van truck bodies, parts and services;

 

·                  Truck Accessories’ sales of pickup truck caps and tonneaus and trailer door and window components; and

 

·                  Specialty Manufacturing’s sales of manufacturing services to customers requiring precision machining of metal parts and casting services and specialty vehicles, including funeral coaches, buses and limousines, contract manufacturing services, packaging and other products.

 

Discounts, returns and allowances.  Our gross sales are reduced by discounts we provide to customers and returns and allowances in the ordinary course of our business.  We provide discounts as deemed necessary to generate sales volume and remain price competitive. Discounts include payment term discounts and discretionary discounts from list price.

 

Cost of sales.  Cost of sales represents the costs directly associated with manufacturing our products and generally varies with the volume of products produced. The components of cost of sales are materials, labor and overhead including transportation costs. We have experienced significant fluctuations in transportation costs and in the cost of materials, such as aluminum, steel, fiberglass reinforced plywood, lumber, fiberglass resin and plastic beads, over the previous year that have affected our operating profit margins.  However, increased prices we charge for our products and the cost to transport them mitigated the impact of rising prices on our financial condition and results of operations. The benefit of lower raw material and transportation costs are also mitigated by any decrease in the prices we charge for our products necessary to remain competitive.  We have entered into supply contracts for some materials at a fixed price for up to one year and in some cases prepurchased bulk quantities of materials to reduce rising prices as deemed necessary in the current economic environment.  We increasingly source materials from overseas to take advantage of lower prices.   Overhead costs are allocated to production based on labor costs and include the depreciation and amortization costs associated with the assets used in manufacturing including rent associated with manufacturing and indirect labor and other costs.

 

Selling, general and administrative expenses.  Selling, general and administrative expenses are made up of the costs of selling our products and administrative costs related to information technology, accounting, finance, human resources, procurement and engineering. Costs include personnel and related costs, including travel, equipment and facility rent expense not associated with manufacturing activities, and professional services such as audit fees. Selling, general and administrative expenses also include our costs at corporate headquarters to manage and provide support to our operating subsidiaries.

 

Other income and expense.  Income and expenses that we incur during the year that are nonrecurring in nature and not directly comparable to the prior year are included in other income and expense or are separately identified.

 

Critical accounting policies and estimates

 

The discussion and analysis of financial condition and the results of operations are based upon our consolidated financial statements, which have been prepared in conformity with accounting principles generally accepted in the United States.  The preparation of these consolidated financial statements requires the use of estimates that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The estimates, including those related to warranties offered on products, self-insurance reserves, bad debts, inventory obsolescence, investments, intangible assets and goodwill, income taxes, financing operations, workers’ compensation insurance and contingent liabilities, are evaluated continually. The estimates are based on

 

22



Table of Contents

 

historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

 

We believe the following are the most critical accounting policies used in the preparation of our financial statements.

 

Revenue recognition.  Revenue is recognized upon shipment of the product to customers, except for Morgan and Morgan Olson where revenue is recognized when title transfers to the customer upon final body assembly, quality inspection and customer notification. We classify amounts billed to customers related to shipping and handling as revenue. The costs associated with shipping and handling revenue are included in cost of sales.

 

Warranties.  Reserves for costs associated with fulfilling warranty obligations offered on Morgan, Morgan Olson, Truck Accessories and Specialty Vehicles Group products are established based on historical experience and an estimate of future claims. Increases in the incidence of product defects would result in additional reserves being required in the future and would reduce income in the period of such determination.

 

Self-insurance reserves.  We utilize a combination of insurance coverage and self-insurance programs for property, casualty, workers’ compensation and healthcare insurance. We use internally determined development factors to record a fully developed self-insurance reserve to cover the self-insured portion of these risks based on known facts and historical industry and company trends. Changes in the assumptions used could result in a different self-insurance reserve.

 

Income taxes.  We estimate our income taxes in each of the jurisdictions in which we operate. This process involves estimating our current tax exposure and assessing temporary differences resulting from the differing treatment of items for tax and financial reporting purposes. These differences result in deferred tax assets and liabilities, which are included in the consolidated balance sheet. We then assess the likelihood that the deferred tax assets will be recovered from future taxable income and, to the extent recovery is not likely, a valuation allowance is established thereby reducing the deferred tax asset. When an increase in this allowance within a period is recorded, we include an expense in the tax provision in the consolidated statements of operations. Management’s judgment is required in determining the provision for income taxes, deferred tax assets and liabilities, and any valuation allowance recorded against the net deferred tax assets. We had alternative minimum tax credit carryforward deferred tax assets of approximately $0.8 million at December 31, 2009 and 2008, for U.S. federal income tax purposes, which may be carried forward indefinitely.  At December 31, 2009 and 2008, we had a state tax net operating loss carryforward deferred tax asset of $3.7 million and $3.9 million, respectively, and at December 31, 2009 and 2008, we had recorded a valuation allowance of $2.1 million and $2.5 million, respectively, against the portion of which realization is uncertain.  We had Canadian tax net operating loss carryforward deferred tax asset of $1.3 million and $1.5 million as of December 31, 2009 and 2008, respectively. As of December 31, 2009 and 2008, we had recorded a valuation allowance of $1.3 million and $1.5 million, respectively, against this deferred tax asset for which realization is uncertain.  Canadian net operating losses of $4.3 million were carried back to prior years. The remaining Canadian net operating loss carryforwards expire at various dates ranging from 1 to 20 years. While our deferred tax assets, net of the valuation allowance, are considered realizable, actual amounts could be reduced if future taxable income is not achieved.

 

In June 2006, the Financial Accounting Standards Board (“FASB”) issued guidance that clarifies the accounting for uncertainty in income taxes and prescribes a recognition threshold and measurement attribute for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return and also provides guidance on various related matters such as derecognition, interest and penalties, and disclosure.  In connection with the adoption of this guidance, we recognized an increase of approximately $0.2 million to our net tax liabilities primarily related to uncertain state income tax positions, net of a federal tax benefit, which was accounted for as a reduction to retained earnings as of January 1, 2007. As of January 1, 2007, we had approximately $1.6 million of unrecognized state tax liabilities, and a corresponding federal tax benefit of $0.4

 

23



Table of Contents

 

million, which included $0.3 million of interest and penalties.  During 2007, we recorded an additional provision for uncertain state tax positions of $1.0 million, and a corresponding federal tax benefit of $0.3 million, related to prior year state tax positions and an additional provision for uncertain state tax positions of $0.3 million, and a corresponding federal tax benefit of $0.1 million, related to current year state tax positions. During 2008, we recorded a reduction in the provision for uncertain state tax position of $0.3 million, and a corresponding federal tax increase of $0.1 million, related to prior year state tax positions and an additional provision for uncertain state tax positions of $0.2 million, and a corresponding federal tax benefit of $0.1 million, related to current year state tax positions.  During 2009, we recorded a reduction in the provision for uncertain state tax positions of $0.7 million, and a corresponding federal tax increase of $0.3 million, related to prior year state tax positions, an additional provision for uncertain state tax positions of $0.1 million, and a corresponding federal tax benefit of $0.1 million, related to current year state tax positions and payments of $0.4 million for settlement of recorded liabilities related to prior year state tax positions.  As of December 31, 2009 and 2008, we had approximately $1.8 million and $2.8 million, respectively, of unrecognized tax benefits related primarily to uncertain state tax liabilities, and a corresponding federal benefit of $0.5 million and $0.8 million, respectively, including approximately $0.5 million and $0.8 million, respectively, of possible interest and the consequential late payment penalties for each period, if assessed, of which $1.3 million and $2.0 million, respectively, if recognized, would reduce our income tax provision in future periods.

 

Inventory valuation.  Our inventories mainly consist of raw materials, vehicles prior to conversion, supplies and work-in-progress. Because we primarily produce products to our customers’ orders, we maintain a relatively small stock of finished goods inventories. Inventories are stated at the lower of cost (first-in, first-out method) or market. We record reserves against the value of inventory based upon our determination that the inventory is not usable in our products. These reserves are estimates, which could vary significantly, either favorably or unfavorably, from actual requirements if future economic conditions, customer inventory levels or competitive conditions differ from our expectations.

 

Accounts receivable.  We provide credit to our customers in the ordinary course of business. We are not aware of any significant credit risks related to our customer base and do not generally require collateral or other security to support customer receivables.  Specialty Vehicle Group sells to certain customers on extended terms and retains title to the vehicle until payment is complete. The carrying amount of our accounts receivable approximates the fair value of the receivables because of their short-term nature with payment typically due within 30 days of transfer of title to the product. We establish an allowance for doubtful accounts on a case-by-case basis when we believe that we are unlikely to receive payment in full of amounts owed to us. We make a judgment in these cases based on available facts and circumstances and we may record a reserve against a customer’s account receivable. We reevaluate the reserves and adjust them as we obtain more information regarding the account. The collectability of trade receivables could be significantly reduced if there is a greater than expected rate of defaults or if one or more significant customers experience financial difficulties or are otherwise unable to make required payments.

 

Goodwill, identified intangibles and long-lived assets impairment.  We perform a test of our goodwill and indefinite-lived intangible assets for potential impairment annually as of October 1.  The fair values of our reporting units for testing goodwill are based on various valuation methods, including multiples of earnings derived from information and analysis of recent acquisitions in the marketplace for companies with similar operations and discounted cash flow analysis. Changes in the assumptions used in the fair value calculation could result in an estimated reporting unit fair value that is below the carrying value, which may give rise to an impairment of our goodwill.  In addition to the annual review, we also test for impairment of our long-lived assets, goodwill and intangible assets should events or circumstances indicate a potential reduction in the fair value of those assets below their carrying value.  Lastly, on an annual basis, we determine that the remaining lives of identified amortizable intangible assets continue to be appropriate.

 

24



Table of Contents

 

Comparison of 2009 to 2008

 

Sales.  Our consolidated net sales decreased $225.8 million, or 32.0%, to $480.6 million for 2009 compared to $706.4 million for 2008.

 

·                  Morgan’s net sales decreased $87.0 million, or 37.2%, to $146.9 million for 2009 compared to $233.9 million for 2008. General economic conditions continued to deteriorate in 2009 evidenced by lower demand for Class 3-7 truck bodies on already depressed levels.  Sales of truck bodies to the commercial divisions of leasing companies, companies with fleets of delivery vehicles, truck dealers and distributors, or Commercial sales, which represented 80.3% of Morgan’s net sales in 2009 compared to 78.4% percent in the prior year, decreased $65.6 million, or 35.8%, to $117.8 million on a 38.4% decline in unit shipments. Consumer Rental sales decreased $19.1 million, or 53.3%, on a 58.5% decrease in unit shipments. The average price of a Consumer Rental truck body increased 12.6% due to decreased shipments of smaller units.  The average price per Commercial unit increased 12.6% compared to prior year.  The introduction of Portable Storage Units contributed $1.4 million for the year.  Other sales including sales of parts and services decreased $4.0 million, or 27.0%, to $10.7 million compared to $14.7 million last year.

 

·                  Morgan Olson’s net sales decreased $42.8 million, or 41.0%, to $61.6 million for 2009 compared to $104.4 million for 2008.  Step van sales declined $33.6 million, or 43.0%, on a 48.4% decrease in unit shipments for 2009.  Step van sales to customers with large fleets of vehicles were down $33.4 million, or 63.8%, compared to the prior year.  Service parts sales and delivery income decreased $9.2 million due mainly to a one-time service parts purchase of $5.5 million by the United States Postal Service in the prior period and decreased delivery income on lower service part sales.

 

·                  Truck Accessories’ net sales decreased $16.3 million, or 12.3%, to $115.6 million for 2009 compared to $131.9 million for 2008.   Sales of pickup truck caps and tonneaus decreased by 13.5% to approximately 117,000 units as new pickup truck sales in the United States and Canada decreased 29.3% from last year.  Sales of new pickup trucks were 1.6 million units during 2009.

 

·                  Specialty Manufacturing’s net sales decreased by $80.4 million, or 33.7%, to $157.9 million for 2009 compared to $238.3 million for 2008.  Sales to customers in the energy services business decreased 40.1% to $93.0 million compared to $155.1 million in 2008 as demand for machining services continued to decline as the price per barrel of oil remained significantly lower throughout the year compared to its high in 2008.  Demand for specialty vehicles including funeral coaches, buses and limousines declined as sales of those products decreased $14.3 million, or 25.0%, to $42.9 million compared to $57.2 million for 2008.   Sales of plastics-based packaging products decreased $4.0 million, or 15.3%, to $22.1 million.

 

Backlog.  Consolidated backlog was $149.9 million as of December 31, 2009 compared to $149.2 million as of December 31, 2008.

 

·                  Morgan’s backlog at December 31, 2009 was $73.1 million compared to $47.6 million at December 31, 2008. The increase in backlog was due to commercial rental orders of $22.5 million compared to $0.1 million in the prior year.

 

·                  Morgan Olson’s backlog was $38.1 million at December 31, 2009 compared to $18.2 million at December 31, 2008.  The increase was due primarily to two retail orders of $12.6 million.

 

·                  Truck Accessories’ backlog of approximately two weeks of production was $2.6 million at December 31, 2009 compared to $2.2 million as of December 31, 2008.

 

25



Table of Contents

 

·                  Specialty Manufacturing’s backlog at December 31, 2009 decreased $45.2 million to $36.1 million compared to $81.3 million at December 31, 2008.  The backlog of machining services decreased $46.8 million over last year as demand from customers in the energy services industry continued to decline.

 

Cost of sales and gross profit.  Our consolidated cost of sales decreased by $190.7 million, or 31.2%, to $420.1 million for 2009 compared to $610.8 million for 2008. Consolidated gross profit decreased by $35.1 million, or 36.7%, to $60.5 million (12.6% of net sales) for 2009 compared to $95.6 million (13.5% of net sales) for 2008.  Material, labor and overhead costs made up 48.3%, 14.1% and 25.0%, respectively, of cost of sales during 2009 and 50.3%, 14.1% and 22.0%, respectively, during 2008.

 

·                  Morgan’s gross profit decreased by $7.0 million, or 34.4%, to $13.4 million (9.1% of its net sales) for 2008 compared to $20.4 million (8.7% of its net sales) for 2008.  Although gross profit declined on lower sales, gross profit as a percentage of sales increased due to management focus on cost control that improved efficiencies in material and labor partially offset by lower overhead absorption on lower production volumes.

 

·                  Morgan Olson’s gross profit decreased by $5.2 million, or 40.8%, to $7.6 million (12.3% of its net sales) for 2009 compared to $12.8 million (12.3% of its net sales) for 2008.  Gross profit margin remained the same as favorable product pricing and improved manufacturing processes were offset by lower absorption of overhead on lower production volumes.

 

·                  Truck Accessories’ gross profit increased by $3.5 million, or 22.7%, to $19.5 million (16.9% of its net sales) for 2009 compared to $16.0 million (12.1% of its net sales) for 2008.  In spite of decreased sales, gross profit margin increased due to continuous improvements in labor productivity and materials management.  Overhead costs as a percentage of sales also decreased as a result of management’s aggressive cost reduction efforts.  Material and labor costs as a percentage of net sales decreased to 36.8% and 14.5% in 2009 compared to 39.8% and 15.0% in 2008, respectively.  Overhead expenses as a percentage of net sales decreased to 31.8% in 2009 compared to 33.1% in 2008.

 

·                  Specialty Manufacturing’s gross profit decreased $26.5 million, or 57.0%, to $20.0 million (12.7% of its net sales) for 2009 compared to $46.5 million (19.5% of its net sales) for 2008.  The decrease in gross profit was at the machining services business which decreased $25.2 million, or 63.2%, and at Specialty Vehicles Group which decreased $2.2 million, or 47.8%, from last year.  Gross profit at the plastics-based packaging products business increased $0.8 million, or 37.2%, as a result of new products and improved materials management.

 

Selling, general and administrative expenses.  Our consolidated selling, general and administrative expenses decreased $17.3 million, or 25.7%, to $49.0 million (10.2% of net sales) for 2009 compared to $66.3 million (9.4% of net sales) for 2008.

 

·                  Morgan’s selling, general and administrative expenses decreased $4.9 million, or 28.3%, to $12.2 million (8.3% of its net sales) for 2009 compared to $17.1 million (7.3% of its net sales) for 2008 primarily due to lower personnel costs as a result of a 16.7% reduction in headcount as well as lower commissions and management incentive bonuses on decreased sales.

 

·                  Morgan Olson’s selling, general and administrative expenses decreased by $2.4 million, or 32.2%, to $5.0 million (8.1% of its net sales) for 2009 compared to $7.4 million (7.1% of its net sales) for 2008 due primarily to lower personnel costs resulting from a 26.5% reduction in headcount and lower commissions on decreased sales.

 

·                  Truck Accessories’ selling, general and administrative expenses decreased by $1.7 million, or 12.7%, to $11.7 million (10.1% of its net sales) for 2009 from $13.4 million (10.2% of its net sales) for 2008.  The

 

26



Table of Contents

 

decrease was primarily due to lower personnel costs on a 24.7% reduction in headcount partially offset by higher management incentive bonuses.

 

·                  Specialty Manufacturing’s selling, general and administrative expenses decreased by $4.1 million, or 19.0%, to $15.9 million (10.1% of its net sales) for 2009 from $20.0 million (8.4% of its net sales) for 2008. The decrease was primarily due to a 14.5% headcount reduction resulting in a decrease in sales commissions, management salaries, wages and incentive bonuses.

 

·                  Corporate selling, general and administrative expenses decreased by $4.3 million, or 51.2%, to $4.1 million for 2009 from $8.4 million for 2008.  The decrease was due primarily to $1.4 million of worker’s compensation and general liability insurance claims that occurred in the prior period and a $1.2 million decrease in management salaries, wages and incentive bonuses.

 

Closed and excess facility costs. Specialty Manufacturing completed the closure of its facility in Milwaukee, Wisconsin in 2009.  Lease payments and personnel related costs related to the closure were $0.5 million. An additional $0.1 million of noncash charges related to the write down of property, plant and equipment was recorded.

 

Gain on repurchase of 8.75% Notes. As of December 31, 2009, the Company had purchased $0.4 million of its 8.75% Notes on the open market and recognized a gain of $0.2 million on the transaction.

 

Other expense (income).  Specialty Vehicle Group sold its specialized bus business and recorded a $0.6 million loss on the sale on December 31, 2009.  The allocation of goodwill associated with the bus business accounted for $550,000 of the loss.   Morgan recognized $0.2 million as income on the deferred gain of $1.9 million resulting from the sale of three of its manufacturing properties to Poindexter Properties, LLC, an entity owned by the Company’s sole shareholder, in 2008.  Specialty Manufacturing’s machining business recognized $0.2 million from the sale of assets.

 

Operating income.  Due to the effect of the factors summarized above, consolidated operating income decreased by $18.8 million, or 63.4%, to $10.9 million (2.3% of net sales) for 2009 from $29.7 million (4.2% of net sales) for 2008.

 

·                  Morgan’s operating income decreased by $2.6 million, or 64.0%, to $1.4 million (1.0% of its net sales) for 2009 compared to $4.0 million (1.7% of its net sales) for 2008.

 

·                  Morgan Olson’s operating income decreased by $2.8 million, or 52.6%, to $2.6 million (4.2% of its net sales) for 2009 from $5.4 million for 2008 (5.2% of its net sales).

 

·                  Truck Accessories’ operating income increased by $5.4 million, or 226.2%, to $7.8 million (6.8% of its net sales) for 2009 compared to $2.4 million (1.8% of its net sales) for 2008.

 

·                  Specialty Manufacturing’s operating income decreased by $23.0 million, or 88.7%, to $2.9 million (1.9% of its net sales) for 2009 compared to $25.9 million (10.9% of its net sales) for 2008.

 

·                  Corporate expenses decreased $4.1 million to $3.9 million for 2009 compared to $8.0 million for 2008.

 

Interest expense (income).   Interest expense decreased $0.3 million, or 1.8%, to $18.2 million (3.8% of net sales) for 2009 compared to $18.5 million (2.6% of net sales) for 2008.  Interest income was $0.2 million and $0.4 million for 2009 and 2008 respectively.

 

Income taxes provision (benefit). The effective income tax provision (benefit) rate was 31% and 41% of income before income taxes for 2009 and 2008, respectively.  The income tax benefit for 2009 differs from amounts computed based on the federal statutory rate largely as a result of state taxes in certain tax jurisdictions.  The income tax provision for 2008 differs from amounts computed based on the federal statutory rate as a result of

 

27



Table of Contents

 

state taxes of $1.4 million, a $0.8 million increase in the valuation allowance for foreign net operating loss carryforwards, offset by a $1.1 million reduction in the valuation allowance against capital loss carryforwards and $0.3 million of research and development credits.

 

Comparison of 2008 to 2007

 

Sales.  Our consolidated net sales decreased $85.8 million, or 10.8%, to $706.4 million for 2008 compared to $792.2 million for 2007.  Excluding businesses acquired during 2007, consolidated net sales decreased $137.7 million, or 17.9%, to $629.8 million for 2008.

 

·                  Morgan’s net sales decreased $99.0 million, or 29.7%, to $233.9 million for 2008 compared to $332.9 million for 2007.  Demand for Classes 3-7 truck bodies continued at depressed levels during 2008 as a result of the deterioration in general economic conditions.  Sales of truck bodies to the commercial divisions of leasing companies, companies with fleets of delivery vehicles, truck dealers and distributors, or Commercial sales, which represented 78.4% of Morgan’s net sales in 2008 compared to 83.0% percent in 2007, decreased $93.5 million, or 33.8%, to $183.4 million on a 38.8% decline in unit shipments.  Consumer Rental sales decreased $0.8 million, or 2.1%, on a 3.6% increase in unit shipments.  The average price of a Consumer Rental truck body declined 5.5% due to increased shipments of smaller units.  Other sales including sales of parts and services decreased $5.5 million, or 27.1%, to $14.7 million compared to $20.1 million for 2007.

 

·                  Morgan Olson’s net sales decreased $5.6 million, or 5.3%, to $104.4 million for 2008 compared to $110.3 million for 2007.  Step van sales declined $10.9 million, or 12.3%, on a 12.8% decrease in unit shipments for 2008.  Step van sales to customers with large fleets of vehicles were down $13.6 million, or 67.0%, compared to the prior year.  The decrease in step van sales was partially offset by a $6.3 million increase in parts and service sales to $23.0 million, compared to $16.7 million in 2007, due to an atypical $5.7 million service parts purchase by the United States Postal Service in the second quarter of 2008.

 

·                  Truck Accessories’ net sales decreased $23.7 million, or 15.2%, to $131.9 million for 2008 compared to $155.6 million for 2007.   Shipments of caps and tonneaus decreased by 22.1% to approximately 135,000 units as new pickup trucks sales in the United States and Canada decreased 26.3% from 2007.  Sales of new pickup trucks declined to 2.2 million units during 2008.

 

·                  Specialty Manufacturing’s net sales increased by $43.2 million, or 22.1%, to $238.3 million for 2008 compared to $195.2 million for 2007.  Sales to customers in the energy services business excluding acquisitions increased 10.0% to $78.5 million compared to $71.3 million in 2007.  Acquisitions added an additional $51.9 million of sales in 2008.  Demand for specialty vehicles including funeral coaches, buses and limousines declined as sales of those products decreased $13.2 million, or 18.8%, to $57.2 million compared to $70.4 million.   Sales of plastics-based packaging products decreased $2.6 million, or 9.1%, to $26.1 million.  Because of the recent large decrease in the price per barrel of oil, which price per barrel has continued to be well below the price per barrel at the end of 2007, it was likely that demand for the services of our energy-related machining business, which softened in the second half of 2008, would continue to soften in 2009.

 

Backlog.  Consolidated backlog was $149.2 million as of December 31, 2008 compared to $219.3 million as of December 31, 2007.

 

·                  Morgan’s backlog at December 31, 2008 was $47.6 million compared to $62.0 million at December 31, 2007. The decrease in backlog was due to the continued industrywide reduction in demand for truck bodies.

 

28



Table of Contents

 

·                  Morgan Olson’s backlog was $18.2 million at December 31, 2008 compared to $43.5 million at December 31, 2007.  The decrease was due primarily to a decrease in demand from customers that operate large fleets.

 

·                  Truck Accessories’ backlog of approximately two weeks of production was $2.2 million at December 31, 2008 compared to $3.6 million as of December 31, 2007.

 

·                  Specialty Manufacturing’s backlog at December 31, 2008 decreased $28.9 million to $81.3 million compared to $110.2 million at December 31, 2007.  The backlog of machining services decreased $25.4 million over the prior year due to lower demand from customers in the energy services industry in the second half of 2008.

 

Cost of sales and gross profit.  Our consolidated cost of sales decreased by $96.4 million, or 13.6%, to $610.8 million for 2008 compared to $707.2 million for 2007. Consolidated gross profit increased by $10.7 million, or 12.6%, to $95.6 million (13.5% of net sales) for 2008 compared to $84.9 million (10.7% of net sales) for 2007.  Material, labor and overhead costs made up 50.3%, 14.1% and 22.0%, respectively, of cost of sales during 2008 and 53.7%, 15.2% and 20.3%, respectively, during 2007.  Excluding businesses acquired in 2007, our 2008 cost of sales was $554.5 million and gross profit was $75.3 million (13.6% of net sales) compared to $686.6 million and $80.0 million (11.8% of net sales) in 2007.

 

·                  Morgan’s gross profit decreased by $13.4 million, or 39.8%, to $20.4 million (8.7% of its net sales) for 2008 compared to $33.8 million (10.2% of its net sales) for 2007.  The decline in gross profit margin was due to increased overhead costs as a result of decreased absorption of overhead on lower production volume, partly offset by a decrease in material and labor costs as a percentage of net sales.  Morgan’s manufacturing headcount was reduced by 23.0% during 2008.

 

·                  Morgan Olson’s gross profit increased by $8.6 million, or 206.2%, to $12.8 million (12.3% of its net sales) for 2008 compared to $4.2 million (3.8% of its net sales) for 2007.  Improved manufacturing processes implemented by the new management team put in place late 2007 eliminated significant amounts of material waste and overtime labor costs.

 

·                  Truck Accessories’ gross profit declined by $0.2 million, or 1.0%, to $16.0 million (12.1% of its net sales) for 2008 compared to $16.1 million (10.4% of its net sales) for 2007.  The gross profit margin increased due to improvements in labor productivity and materials management.  Material and labor costs as a percentage of net sales decreased to 39.8% and 15.0% in 2008 compared to 41.8% and 16.8% in 2007, respectively.  Overhead expenses as a percentage of net sales increased to 33.1% in 2008 compared to 31.1% in 2007 as a result of lower absorption of overhead on lower production volume along with higher delivery costs.

 

·                  Specialty Manufacturing’s gross profit increased $15.8 million, or 51.3%, to $46.5 million (19.5% of its net sales) for 2008 compared to $30.8 million (15.8% of its net sales) for 2007.  The gross profit increase at the machining services business included $16.2 million from acquisitions made during 2007, partly offset by a $3.6 million decline in gross profit at the Specialty Vehicle Group and the packaging business due primarily to lower production volumes.

 

Selling, general and administrative expenses.  Our consolidated selling, general and administrative expenses increased $1.4 million, or 2.2%, to $66.3 million (9.4% of net sales) for 2008 compared to $64.9 million (8.2% of net sales) for 2007.  Excluding businesses acquired in 2007, selling, general and administrative expenses decreased $1.0 million in 2008.

 

·                  Morgan’s selling, general and administrative expenses decreased $1.7 million, or 8.9%, to $17.1 million (7.3% of its net sales) for 2008 compared to $18.7 million (5.6% of its net sales) for 2007 primarily due to

 

29



Table of Contents

 

lower personnel costs from a 22% reduction in headcount as well as lower commissions on decreased sales.

 

·                  Morgan Olson’s selling, general and administrative expenses increased by $0.5 million, or 7.8%, to $7.4 million (7.1% of its net sales) for 2008 compared to $6.9 million (6.2% of its net sales) for 2007 due primarily to increased sales commissions.

 

·                  Truck Accessories’ selling, general and administrative expenses increased by $0.5 million, or 4.1%, to $13.4 million (10.2% of its net sales) for 2008 from $12.9 million (8.3% of its net sales) for 2007.  The increase was primarily due to currency transaction gains of $0.9 million in 2007 not repeated in 2008.  Truck Accessories’ manufacturing operations in Canada were terminated in 2007.

 

·                  Specialty Manufacturing’s selling, general and administrative expenses increased by $3.1 million, or 19.0%, to $20.1 million (8.4% of its net sales) for 2008 from $17.0 million (8.7% of its net sales) for 2007. The increase was due to incremental costs of $2.6 million from the businesses acquired in 2007, increased sales commissions and executive incentive payments of $1.4 million offset by a decrease of $0.9 million on a 22% headcount reduction at the Specialty Vehicle Group.

 

·                  Corporate selling, general and administrative expenses decreased by $1.1 million, or 11.2%, to $8.4 million for 2008 from $9.5 million for 2007.  The decrease was due primarily to reduction of manufacturing process consulting expenses of $0.9 million.

 

Closed and excess facility costs. During 2008, Specialty Manufacturing decided on a plan to vacate one of its plants and move production to its other manufacturing plants and as a result recognized $0.7 million of noncash charges related to the write-down of property, plant and equipment.  Also, Truck Accessories adopted a plan to combine two of its manufacturing facilities located in Elkhart, Indiana and recognized $0.1 million of noncash charges related to the impairment in value of certain property, plant and equipment.  During 2007, Specialty Manufacturing’s packaging business closed its plant in Tennessee due to the loss of business resulting from the elimination of a product by a major customer.  Costs associated with the closure were $0.2 million.

 

Gain on repurchase of 8.75% Notes. As of December 31, 2008, the Company had purchased $0.8 million of its 8.75% Notes on the open market and recognized a $0.4 million gain on the transaction.

 

Other income.  Morgan sold its minority interest in a truck dealership in Canada that was acquired with the purchase of Morgan Canada in 2004 and recognized a gain of $0.4 million.  Specialty Manufacturing received insurance proceeds of $0.4 million arising from a storm damage claim in 2007.

 

In 2008, the Company evaluated the carrying value of long-lived assets of its business units and, through a third-party analysis, determined that Federal Coach had an impairment of its acquired intangibles of $0.3 million that was recorded as a reduction in other income.

 

Operating income.  Due to the effect of the factors summarized above, consolidated operating income increased by $9.5 million, or 47.2%, to $29.7 million (4.2% of net sales) for 2008 from $20.2 million (2.5% of net sales) for 2007.

 

·                  Morgan’s operating income decreased by $11.4 million, or 74.3%, to $4.0 million (1.7% of its net sales) for 2008 compared to $15.4 million (4.6% of its net sales) for 2007.

 

·                  Morgan Olson’s operating income increased by $8.1 million, or 302.0%, to $5.4 million for 2008 from a loss of $2.7 million for 2007.

 

·                  Truck Accessories’ operating income decreased by $0.8 million, or 24.8%, to $2.4 million (1.8% of its net sales) for 2008 compared to $3.2 million (2.1% of its net sales) for 2007.

 

30



Table of Contents

 

·                  Specialty Manufacturing’s operating income increased by $12.2 million, or 88.7%, to $25.9 million (10.9% of its net sales) for 2008 compared to $13.7 million (7.0% of its net sales) for 2007.  Acquisitions contributed $15.2 million of operating income during the year.

 

·                  Corporate expenses decreased $1.5 million to $8.0 million for 2008 compared to $9.5 million for 2007.

 

Interest expense (income).   Interest expense decreased $0.2 million, or 1.1%, to $18.5 million (2.6% of net sales) for 2008 compared to $18.7 million (2.4% of net sales) for 2007.  We earned $0.4 million of interest income on our cash and cash equivalents during 2008 compared to $0.9 million during 2007 as a result of the decrease in cash and cash equivalents during the year.

 

Income taxes. The effective income tax rate was 41% and 134% of income before income taxes for 2008 and 2007, respectively.  The income tax provision for 2008 differed from amounts computed based on the federal statutory rate as a result of state taxes of $1.4 million, a $0.8 million increase in the valuation allowance for foreign net operating loss carryforwards, offset by a $1.0 million reduction in the valuation allowance against capital loss carryforwards and $0.3 million of research and development credits. The income tax provision for 2007 differed from amounts computed based on the federal statutory rate as a result of state and foreign taxes, a $0.8 million increase in the valuation allowance and a $0.9 million increase in reserves for uncertain tax positions.

 

Liquidity and capital resources

 

Historically, we have funded our operations with cash available from the proceeds of our 8.75% Notes, cash generated from operations and borrowings under our revolving credit facility, as needed.  Working capital at December 31, 2009 was $99.4 million compared to $99.2 million at December 31, 2008.  Our cash and cash equivalents increased $17.9 million as a result of cash provided by operating activities of $29.2 million reduced by cash used in investing activities of $9.8 million and cash used in financing activities of $1.7 million.  Due to the decrease in business activity as a result of the continued general decline in economic activity in 2009, working capital, excluding cash and cash equivalents, decreased $17.7 million with a decrease in accounts receivable of $7.8 million, a decrease in inventories of $13.0 million and an increase in accounts payable of $1.1 million.  Average accounts receivable days sales outstanding at December 31, 2009 were approximately 27 compared to 22 at December 31, 2008 and inventory turns during 2009 were approximately 7.0 compared to 8.5 during 2008.  Excluding vehicle chassis at Specialty Vehicle Group (vehicle chassis remain in inventory for extended periods of time and amounted to $8.0 million and $6.2 million at December 31, 2009 and 2008, respectively) inventory turns were 7.6 and 9.0 for 2009 and 2008, respectively.

 

Operating cash flows.  Operating activities during 2009 generated cash of $29.2 million compared to $45.5 million in 2008 and $30.8 million in 2007.  The decrease in net cash generated by operating activities during 2009 was due primarily to an $18.8 million decrease in operating income.

 

The increase in cash from operating activities during 2008 compared to 2007 was due primarily to a $9.5 million increase in operating income, a $3.1 million increase in cash from liquidation of working capital and a $2.6 million increase in depreciation and amortization.

 

Investing cash flows.  Net cash used in investing activities increased $1.3 million in 2009 compared to 2008 primarily because in the prior year, Morgan sold three of its manufacturing properties to Poindexter Properties, LLC for $7.1 million (see Note 17 to the Consolidated Financial Statements).  Capital expenditures during 2009 were $11.3 million and were comprised mainly of machinery and equipment of $4.8 million for Specialty Manufacturing, new product molds of $2.2 million for Truck Accessories and $2.4 million of equipment related to a Company-wide Enterprise Resource Planning project.  We acquired approximately $1.2 million of equipment under capital leases that were not included in capital expenditures. As of December 31, 2009, we had no significant open commitments for capital expenditures.

 

31



Table of Contents

 

Financing cash flows.  Net cash used by financing activities totaled $1.7 million in 2009 compared to $6.1 million in 2008.  The decrease is due to reduced borrowings and lower capital expenditures in 2009.  During 2009, we repaid $0.4 million of our revolver borrowings as well as $1.3 million of long-term debt and capital lease commitments.

 

Our Revolving Credit Agreement was scheduled to expire on March 15, 2010; however neither party to the agreement gave notice of termination and it automatically was extended for an additional year ending on March 15, 2011.

 

At December 31, 2009, the Consolidated Coverage Ratio, as defined in the indenture relating to our 8.75% Notes, was 1.6 to 1.0. As a result, we are limited in our ability to incur additional indebtedness.  The Indenture Agreement permits certain exceptions with respect to capitalized lease obligations and other arrangements that are incurred for the purpose of financing all or part of the purchase price or cost of construction or improvements of property used in our business.  Already existing obligations and any amounts available to be drawn on our existing revolving credit agreement are not subject to this limitation.

 

The revolving credit facility provides for available borrowings of up to $50.0 million in revolving loans. Available borrowings are subject to a borrowing base of eligible accounts receivable, inventory, machinery and equipment, and real estate. Borrowings under our revolving credit facility are collateralized by substantially all of our assets and the assets of our existing subsidiaries. Our revolving credit facility also includes a sub-facility for up to $15.0 million of letters of credit. As of December 31, 2009, we had $38,000 of borrowings under the facility, $1.4 million of letters of credit outstanding and our borrowing base would have supported debt borrowings of the entire $50.0 million under our revolving credit facility.

 

In addition, the revolving credit facility includes covenants that place various restrictions on us, including limitation on our ability to:

 

·                  incur additional debt;

 

·                  create or become subject to liens or guarantees;

 

·                  make investments or loans;

 

·                  pay dividends or make distributions;

 

·                  prepay the 8.75% Notes or other debt;

 

·                  merge with other entities or make acquisitions or dissolve;

 

·                  sell assets;

 

·                  change fiscal year or amend organizational documents or terms of any subordinated debt;

 

·                  enter into leases; and

 

·                  enter into transactions with affiliates.

 

We believe that we will have adequate resources to meet our working capital and capital expenditure requirements consistent with past trends and practices for at least the next twelve months. Additionally, we believe that our cash and borrowing availability under the revolving credit facility will satisfy our cash requirements for the coming year, given our anticipated capital expenditures, working capital requirements and known obligations. Our ability to make payments on our debt, including the 8.75% Notes, and to fund planned capital expenditures will depend on our ability to generate cash in the future. This is subject to general economic conditions, other factors influencing the industries in which we operate and circumstances that are beyond our control.  We cannot be certain that we will

 

32



Table of Contents

 

generate sufficient cash flows, and if we do not, we may have to engage in other activities such as the sale of assets to meet our cash requirements.

 

Off-balance-sheet arrangements

 

We have no off-balance-sheet arrangements.

 

Commitments and capital expenditures

 

We have entered into an agreement with a major paint manufacturer under which Truck Accessories, Morgan, Morgan Olson and Specialty Vehicle Group are committed to buy principally all of their automotive paint for five years ending October 2014.  We receive favorable pricing in return for the commitment and estimate that we will purchase approximately $4.7 million of paint products during 2010 under this agreement.  We occasionally commit to the purchase of aluminum based on expected levels of future production and at December 31, 2009, Morgan and Morgan Olson had a combined commitment of $7.0 million to buy aluminum through 2010.  We did not have any material commitments to acquire new capital equipment as of December 31, 2009.

 

Certain cash contractual obligations of ours as of December 31, 2009 are summarized in the table below.

 

Obligations (Dollars in millions)

 

Total

 

Less than
1 year

 

1-3
years

 

4-5
years

 

After 5
years

 

8.75% Notes, excluding interest

 

$

198.8

 

$

 

$

 

$

198.8

 

$

 

Operating leases

 

27.8

 

8.7

 

12.0

 

4.5

 

2.6

 

Capital leases

 

6.4

 

2.3

 

3.3

 

0.8

 

 

Total

 

$

233.0

 

$

11.0

 

$

15.3

 

$

204.1

 

$

2.6

 

 

The Company has recorded a long-term liability of approximately $1.8 million as of December 31, 2009 related to uncertain tax positions.  Given the uncertainty of these positions, the company has not reflected obligations in the above table.

 

Other matters

 

We are significantly leveraged and will continue to be significantly leveraged. We had $19.4 million and $23.8 million of stockholder’s equity at December 31, 2009 and 2008, respectively. We operate in cyclical businesses and the markets for our products are highly competitive. In addition, we have two customers that accounted for 21% of 2009 consolidated net sales and our top ten customers accounted for 39% of our 2009 consolidated net sales.

 

We continually evaluate, depending on market conditions, the most efficient use of our capital and contemplate various strategic options, which may include, without limitation, restructuring our business, indebtedness or capital structure. Accordingly, we or our subsidiaries may from time to time consider, among other things, purchasing, refinancing or otherwise retiring certain outstanding indebtedness (whether in the open market or by other means), public or private issuances of debt or equity securities, joint venture transactions, acquisitions or dispositions, new borrowings, tender offers, exchange offers or any combination thereof, although there can be no assurances that such financing sources will be available on commercially reasonable terms. Additionally, there can be no assurances that these strategic options, if pursued, will be consummated or, if consummated, what effect they will have on us.

 

Historically, inflation has not materially affected our business.  We believe that we have the ability to increase our selling prices to levels necessary to offset the raw material cost inflation.

 

We implemented further price increases at Morgan, Truck Accessories and Specialty Manufacturing during 2007, 2008 and 2009 but cannot predict the impact, if any, of future raw material price increases on our profitability.  Recent economic conditions have resulted in declines in raw material prices but we cannot predict the effect that this

 

33



Table of Contents

 

will have on the selling price of our manufactured products.  Operating expenses, such as salaries and team member benefits, are subject to normal inflationary pressures.

 

During 2008, Poindexter Properties, LLC, which is wholly owned by Mr. Poindexter, purchased three real estate properties from Morgan for approximately $7.1 million in cash and is leasing the properties back to Morgan.  Morgan recorded a deferred gain of approximately $1.9 million in this transaction of which $230 was recorded as income in 2009.  The transaction was financed by an independent lender and the properties were sold for prices determined by an independent appraisal.

 

Beginning in July 2006, Mr. Poindexter began receiving a salary from the Company.  Effective July 31, 2008, Mr. Poindexter ceased receiving a salary from the Company and we paid $0.5 million in fees to Southwestern Holdings, Inc. (“Southwestern”) for the services of Mr. Poindexter during 2009.

 

Southwestern was a named insured under the Company’s general liability and excess umbrella insurance policies during 2007 when Southwestern became the defendant in a suit for damages resulting from a vehicle accident not involving the Company’s assets or any of its team members.  The lawsuit was settled during 2008 and Southwestern paid the amount of the self-insured reserve of $0.3 million.  Southwestern is no longer a named insured under the Company’s general liability policy effective July 1, 2007.  Any increased premiums under the Company’s umbrella policy incurred in the future by the Company by reason of the settlement will be reimbursed by Southwestern.

 

Recently issued accounting standards

 

The effect of recently issued accounting standards on the Company is addressed in Note 2 of Notes to Consolidated Financial Statements.

 

Item 7A.                                                  Quantitative and Qualitative Disclosure About Market Risks

 

We are subject to certain market risks, including interest rate risk and foreign currency risk. The adverse effects of potential changes in these market risks are discussed below.  See the Notes to Consolidated Financial Statements elsewhere in this 10-K for a description of our accounting policies and other information related to these financial instruments.

 

Variable-rate debt.  From time to time, we borrow funds under our revolving credit facility. The interest rates on the revolving credit facility are based upon a spread above either the prime interest rate or the London Interbank Offered Rate (LIBOR), which rate used is determined at our option.  At December 31, 2009 and 2008, we had $38,000 and $0.4 million of revolver borrowings outstanding, respectively.

 

Fixed-rate debt.  As of December 31, 2009, the Company had $198.8 million of 8.75% Notes outstanding, with an estimated fair value of approximately $168.0 million and $181.1 million based upon the traded value at December 31, 2009 and March 15, 2010, respectively. Market risk, estimated as the potential increase in fair value resulting from a hypothetical 1.0% decrease in interest rates, was approximately $6.9 million as of December 31, 2009.

 

Foreign currency.  Morgan has a manufacturing plant in Canada that during 2009 generated sales of approximately $7.9 million for the year. The functional currency of Morgan’s Canadian operations is the Canadian dollar.  Specialty Manufacturing has one plant in Mexico and one in Malaysia; however, the functional currency is the U.S. dollar.  We do not currently employ risk management techniques to manage potential exposure to foreign currency fluctuations.

 

34



Table of Contents

 

Item  8.                                                        Financial Statements and Supplementary Data

 

J.B. Poindexter & Co., Inc. and Subsidiaries

 

 

 

Report of Independent Registered Public Accounting Firm

36

Financial Statements:

 

Consolidated Balance Sheets

37

Consolidated Statements of Operations

38

Consolidated Statements of Stockholder’s Equity

39

Consolidated Statements of Cash Flows

40

Notes to Consolidated Financial Statements

41

 

35



Table of Contents

 

Report of Independent Registered Public Accounting Firm

 

Board of Directors and Stockholder of
J.B. Poindexter & Co., Inc.

 

We have audited the accompanying consolidated balance sheets of J.B. Poindexter & Co., Inc. and subsidiaries (Company) as of December 31, 2009 and 2008, and the related consolidated statements of operations, stockholder’s equity, and cash flows for each of the three years in the period ended December 31, 2009.  These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

 

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal controls over financial reporting.  Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of J.B. Poindexter & Co., Inc. and subsidiaries as of December 31, 2009 and 2008, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2009 in conformity with U.S. generally accepted accounting principles.

 

/s/ CROWE HORWATH LLP

 

South Bend, Indiana
March 31, 2010

 

36



Table of Contents

 

J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

 

 

 

December 31,

 

 

 

2009

 

2008

 

Assets

 

 

 

 

 

Current assets

 

 

 

 

 

Cash and cash equivalents

 

$

   54,176

 

$

  36,251

 

Accounts receivable, net

 

34,982

 

42,668

 

Inventories, net

 

52,718

 

68,071

 

Deferred income taxes

 

1,368

 

2,123

 

Income tax receivable

 

6,356

 

4,589

 

Prepaid expenses and other

 

2,590

 

2,715

 

Total current assets

 

152,190

 

156,417

 

Property, plant and equipment, net

 

70,073

 

73,699

 

Goodwill

 

35,000

 

35,550

 

Intangible assets, net

 

15,836

 

17,147

 

Other assets

 

12,865

 

13,125

 

Total assets

 

$

285,964

 

$

295,938

 

Liabilities and stockholder’s equity

 

 

 

 

 

Current liabilities

 

 

 

 

 

Current portion of long-term debt

 

$

    2,259

 

$

    2,574

 

Borrowings under revolving credit facility

 

38

 

417

 

Accounts payable

 

27,661

 

26,825

 

Accrued compensation and benefits

 

6,431

 

8,718

 

Other accrued liabilities

 

16,420

 

18,731

 

Total current liabilities

 

52,809

 

57,265

 

Noncurrent liabilities

 

 

 

 

 

Long-term debt, less current portion

 

202,935

 

204,411

 

Deferred income taxes

 

3,818

 

2,869

 

Employee benefit obligations and other

 

6,966

 

7,605

 

Total noncurrent liabilities

 

213,719

 

214,885

 

Stockholder’s equity

 

 

 

 

 

Common stock, par value $0.01 per share (3,059 shares issued and outstanding)

 

 

 

Capital in excess of par value of stock

 

19,486

 

19,486

 

Accumulated other comprehensive income (loss)

 

290

 

(254

)

Retained earnings (accumulated deficit)

 

(340

)

4,556

 

Total stockholder’s equity

 

19,436

 

23,788

 

Total liabilities and stockholder’s equity

 

$

285,964

 

$

295,938

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

37



Table of Contents

 

J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands)

 

 

 

Years ended December 31,

 

 

 

2009

 

2008

 

2007

 

Net sales

 

$

480,647

 

$

706,409

 

$

792,161

 

Cost of sales

 

420,146

 

610,799

 

707,244

 

Gross profit

 

60,501

 

95,610

 

84,917

 

Selling, general and administrative expense

 

48,961

 

66,290

 

64,914

 

Closed and excess facility costs

 

642

 

788

 

166

 

Gain on repurchase of 8.75% Notes

 

(186

)

(416

)

 

Other expense (income)

 

224

 

(733

)

(323

)

Operating income

 

10,860

 

29,681

 

20,160

 

Interest expense

 

18,163

 

18,491

 

18,698

 

Interest income

 

(197

)

(410

)

(877

)

Income (loss) from operations before income taxes

 

(7,106

)

11,600

 

2,339

 

Income tax provision (benefit)

 

(2,210

)

4,810

 

3,124

 

Net income (loss)

 

$

(4,896

)

$

6,790

 

$

(785

)

 

The accompanying notes are an integral part of these consolidated financial statements.

 

38



Table of Contents

 

J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDER’S EQUITY

(Dollars in Thousands)

 

For the years ended December 
31, 2009, 2008 and 2007

 

Shares of
common
stock

 

Common
stock and
paid-in
capital

 

Retained
earnings
(accumulated

deficit)

 

Accumulated
other
comprehensive
income (loss)

 

Total

 

January 1, 2007

 

3,059

 

$

19,486

 

$

(1,228

)

$

76

 

$

18,334

 

Adjustment for adoption of accounting for uncertainty in income taxes

 

 

 

(221

)

 

(221

)

Net loss

 

 

 

(785

)

 

(785

)

Translation adjustment

 

 

 

 

941

 

941

 

Comprehensive income

 

 

 

 

 

 

 

 

 

156

 

December 31, 2007

 

3,059

 

19,486

 

(2,234

)

1,017

 

18,269

 

Net income

 

 

 

6,790

 

 

6,790

 

Translation adjustment

 

 

 

 

(1,271

)

(1,271

)

Comprehensive income

 

 

 

 

 

 

 

 

 

5,519

 

December 31, 2008

 

3,059

 

19,486

 

4,556

 

(254

)

23,788

 

Net loss

 

 

 

(4,896

)

 

(4,896

)

Translation adjustment

 

 

 

 

544

 

544

 

Comprehensive loss

 

 

 

 

 

 

 

 

 

(4,352

)

December 31, 2009

 

3,059

 

$

19,486

 

$

(340

)

$

290

 

$

19,436

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

39



Table of Contents

 

J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Dollars in Thousands)

 

 

 

Years ended December 31,

 

 

 

2009

 

2008

 

2007

 

Cash flows from operating activities:

 

 

 

 

 

 

 

Net income (loss)

 

$

(4,896

)

$

6,790

 

$

(785

)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

 

16,998

 

17,658

 

15,063

 

Amortization of debt issuance costs

 

584

 

691

 

791

 

Gain on redemption of 8.75% Notes

 

(186

)

(416

)

 

Provision for excess and obsolete inventory

 

1,181

 

2,218

 

1,796

 

Provision for doubtful accounts receivable

 

154

 

1,181

 

64

 

Loss (gain) on sale of property, plant and equipment

 

355

 

199

 

(81

)

Deferred income tax provision

 

1,529

 

3,036

 

616

 

Impairment of intangible assets

 

 

300

 

 

Other

 

177

 

127

 

(178

)

Change in assets and liabilities, net of the effect of business acquisitions and dispositions:

 

 

 

 

 

 

 

Accounts receivable

 

7,820

 

8,594

 

17,571

 

Inventories

 

12,998

 

9,179

 

7,635

 

Prepaid expenses and other

 

300

 

(93

)

(533

)

Accounts payable

 

1,100

 

(4,715

)

(4,256

)

Accrued income taxes

 

(1,668

)

1,076

 

(4,414

)

Other accrued liabilities

 

(7,224

)

(355

)

(2,520

)

Net cash provided by operating activities

 

29,222

 

45,470

 

30,769

 

Cash flows from investing activities:

 

 

 

 

 

 

 

Acquisition of businesses, net of cash acquired

 

 

(233

)

(41,673

)

Proceeds from disposition of business, property, plant and equipment

 

1,811

 

7,135

 

89

 

Purchase of property, plant and equipment

 

(11,320

)

(14,719

)

(14,312

)

Issuance of insurance collateral deposits

 

(315

)

(736

)

(348

)

Other

 

 

 

455

 

Net cash used in investing activities

 

(9,824

)

(8,553

)

(55,789

)

Cash flows from financing activities:

 

 

 

 

 

 

 

Net proceeds from revolving credit facility

 

(379

)

(3,321

)

3,637

 

Payments of long-term debt and capital leases

 

(1,346

)

(2,758

)

(2,177

)

Net cash provided by (used in) financing activities

 

(1,725

)

(6,079

)

1,460

 

Translation impacts

 

252

 

(1,271

)

940

 

Change in cash and cash equivalents

 

17,925

 

29,567

 

(22,620

)

Cash and cash equivalents, beginning of year

 

36,251

 

6,684

 

29,304

 

Cash and cash equivalents, end of year

 

$

54,176

 

$

36,251

 

$

6,684

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

40



Table of Contents

 

J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

 

1.                   Organization & Business

 

J.B. Poindexter & Co., Inc. (“JBPCO”) and its subsidiaries or business units (the “Subsidiaries” or “business units” and together with JBPCO, the “Company”) operate primarily manufacturing businesses principally in North America. JBPCO is owned and controlled by John Poindexter.

 

The Company acquired three businesses during the three years ended December 31, 2009 (see Note 4).

 

The Company’s operating segments are as follows:

 

Morgan Truck Body, LLC (“Morgan”) manufactures truck bodies in the United States and Canada for dry freight and refrigerated trucks and vans (excluding those made for pickup trucks and tractor-trailer trucks).  Morgan’s operations include its Canadian subsidiary Morgan Canada (f/k/a Commercial Babcock, Inc.).  The truck bodies are attached to truck chassis provided by its customers.  Customers include truck rental and leasing companies, truck dealers and companies that operate fleets of delivery vehicles. The principal raw materials used by Morgan include steel, aluminum, fiberglass-reinforced plywood, hardwoods and lubricants acquired from a variety of sources.

 

Morgan Olson, LLC (“Morgan Olson”) manufactures step van bodies for parcel, food, newspaper, uniform, linen and other delivery applications. Step vans are specialized vehicles designed for multiple-stop applications and enable the driver of the truck to easily access the cargo area. Morgan Olson manufactures the complete truck body, including the fabrication of the body, the installation of windows, doors, the instrument panel, seating and wiring and finishing the truck with paint and decal application. The step van bodies are installed on truck chassis provided by Morgan Olson’s customers. The principal raw materials used by Morgan Olson include steel and aluminum and a variety of automotive components.

 

Truck Accessories Group, LLC (“Truck Accessories”) manufactures pickup truck caps and tonneau covers, which are fabricated enclosures that fit over the open beds of pickup trucks, converting the beds into weatherproof storage areas. Truck Accessories’ brands include Leer, Century, Raider, Pace Edwards, and State Wide Aluminum.  The principal raw materials used by Truck Accessories are resin, fiberglass, paint, glass and manufactured components such as locks and gas struts.

 

Specialty Manufacturing Division (“Specialty Manufacturing”) is comprised of the Specialty Vehicle Group, MIC Group, LLC (“MIC Group”) and EFP, LLC (“EFP”). The Specialty Vehicle Group is comprised of Federal Coach, LLC (“Federal Coach”) and Eagle Specialty Vehicles, LLC (“Eagle Coach”).  The Specialty Vehicle Group manufactures funeral coaches, limousines and specialty buses.  The Specialty Vehicle Group purchases vehicle chassis from the major automotive manufacturers’ dealers for modification and sale to its customers.  Effective December 31, 2009, Specialty Vehicle Group exited the specialized bus business and sold its bus line (See Note 6).  MIC Group acquired three companies during 2007. Effective April 30, August 23 and September 4, 2007, it acquired MIC Duncan (f/k/a Richard’s Manufacturing Co., Inc.), MIC Tarlton (f/k/a Tarlton Supply Company) and MIC Houston (f/k/a Machine and Manufacturing I, Inc.), respectively.  Effective December 31, 2008, these companies were merged into MIC Group.  MIC Group is a manufacturer, investment caster and assembler of precision metal parts for use in the worldwide oil and gas exploration, automotive and aerospace industries and other general industries. EFP molds, fabricates and markets expandable foam products used for packaging and thermal insulation by various industries. The principal raw materials used by Specialty Manufacturing are ferrous and nonferrous materials including stainless steel, alloy steels, nickel-based alloys, titanium, brass, beryllium-copper alloys, aluminum, expandable polystyrene, polypropylene, polyethylene and other resins.

 

41



Table of Contents

 

J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

 

2.                   Summary of Significant Accounting Policies

 

Principles of Consolidation.  The consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States.  All intercompany accounts and transactions have been eliminated in consolidation.

 

Cash and Cash Equivalents.  Cash and all highly liquid investments with a maturity of three months or less at the date of purchase, including short-term deposits and government agency and corporate obligations, are classified as cash and cash equivalents.  At times, the Company has maintained deposits in financial institutions in excess of federally insured limits.

 

Revenue Recognition.  Revenue is recognized upon shipment of the product to customers, except for Morgan and Morgan Olson where revenue is recognized when title transfers to the customer upon final body assembly, quality inspection and customer notification.  Amounts billed to customers related to shipping and handling are classified as revenue.  The costs associated with the shipping and handling revenue are included in cost of sales.

 

Accounts Receivable.  The Company sells to customers on terms customary in its industries and typically extends its customers 30-day payment terms.  Interest is charged on accounts receivable in cases where there is an economic reason for extended terms.  Discounts are allowed for early payment but only if economically justified based on the cost of capital.  Accounts receivable is stated net of an allowance for doubtful accounts of $1,028 and $1,740 at December 31, 2009 and 2008, respectively.  The Company establishes an allowance for doubtful accounts receivable on a case-by-case basis when it believes that the required payment of specific amounts owed is unlikely to occur.  The activity in the allowance for doubtful accounts for the years ended December 31 was:

 

 

 

2009

 

2008

 

2007

 

Balance at the beginning of the year

 

$

1,740

 

$

1,182

 

$

1,547

 

Provision for losses

 

154

 

1,181

 

64

 

Charge-offs

 

(620

)

(576

)

(301

)

Recoveries

 

(246

)

(47

)

(128

)

Balance at the end of the year

 

$

1,028

 

$

1,740

 

$

1,182

 

 

The carrying amounts of trade accounts receivable approximate fair value because of the short maturity of those instruments.  The Company is not aware of any significant credit risks related to its customer base and does not generally require collateral or other security to support customer receivables.

 

Inventories.  Inventories are stated at the lower of cost or market.  Cost is determined by the first-in, first-out (FIFO) method.

 

Property, Plant and Equipment.  Property, plant and equipment, including property under capital leases, are stated at cost.  The cost of property under capital leases is the lower of the present value of the future minimum lease payments or fair value at the inception of the lease.  Depreciation and amortization is computed by using the straight-line method over the estimated useful lives of the applicable assets or over the shorter of the lease term or the estimated useful life of leasehold improvements.  The cost of maintenance and repairs is charged to operating expense as incurred and the cost of major replacements and significant improvements is capitalized.

 

Goodwill and Intangible Assets.  Goodwill and intangible assets with indefinite useful lives are not amortized, but are evaluated at least annually for impairment or more frequently if facts and circumstances indicate that the assets may be impaired.  Intangible assets that are determined to have finite lives are amortized on a straight-line basis over the period in which we expect to receive economic benefit.  See Note 7 for further discussion on goodwill and intangible assets.

 

42



Table of Contents

 

J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

 

Debt Issuance Costs.  Debt issuance costs are amortized using the effective interest method over the term of the related debt, which ranges from four to ten years.  Amortization of debt issuance costs is included in interest expense.

 

Evaluation of Impairment of Long-Lived Assets.  The Company evaluates the carrying value of long-lived assets whenever significant events or changes in circumstances indicate the carrying value of these assets may be impaired.  The Company evaluates potential impairment of long-lived assets by comparing the carrying value of the assets to the expected net future cash flows resulting from the use of the assets.  As indicated in Note 7, the Company recorded impairment charges in 2008.

 

Warranty.  Morgan provides product warranties for periods of up to five years.  Morgan Olson provides a warranty period, which is one year or 12,000 miles for components, three years or 36,000 miles for paint, and five years or 50,000 miles for the van body structure.  Truck Accessories provides a warranty period, exclusive to the original truck owner, which is, in general but with exclusions, one year for parts, five years for paint and lifetime for structure.  The Specialty Vehicle Group provides a warranty on its products for a period of 48 months or 50,000 miles on the section of the body and parts manufactured for funeral coaches and funeral limousines, 36 months or 50,000 miles on the body and parts manufactured for bus bodies, and 48 months or 100,000 miles on the section of the body and parts manufactured for limousines.  The remaining operations of Specialty Manufacturing do not provide a warranty on their products.  A provision for warranty costs is included in cost of sales when goods are sold based on historical experience and estimated future claims.  The Company had accrued warranty costs of $3,481 and $3,631 at December 31, 2009 and 2008, respectively.  The activity in the accrued warranty cost accounts for the years ended December 31 was:

 

 

 

2009

 

2008

 

2007

 

Balance at the beginning of the year

 

$

3,631

 

$

4,343

 

$

4,185

 

Provision for losses

 

1,354

 

1,739

 

3,002

 

Charge-offs

 

(1,504

)

(2,451

)

(2,844

)

Balance at the end of the year

 

3,481

 

3,631

 

4,343

 

Less: Short-term

 

1,687

 

1,246

 

2,089

 

Long-term

 

$

1,794

 

$

2,385

 

$

2,254

 

 

Advertising and Research and Development Expense.  The Company expenses advertising costs and research and development (“R&D”) costs as incurred.  During the years ended December 31, 2009, 2008 and 2007, advertising expense was $1,749, $3,324 and $3,606, respectively, and R&D expense was $1,192, $2,298 and $3,476, respectively.

 

Income Taxes.  The provision (benefit) for income taxes is based on income recognized for financial statement purposes and includes the effects of temporary and permanent differences between such income and that recognized for tax return purposes.  Deferred tax assets and liabilities are computed based on the difference between the financial statement and income tax bases of assets and liabilities using the enacted tax rates.  The Company considers the earnings in its Canadian operations to be permanently invested and as such has not provided for deferred taxes related to potential distributions of those earnings.  The amount of undistributed earnings at December 31, 2009 was not material.

 

The Company’s management believes that it is more likely than not that current and long-term deferred tax assets will reduce future income tax payments.  Should the Company determine that it is more likely than not unable to realize all or part of the net deferred tax asset in the future, a valuation allowance, necessary to reduce the deferred tax asset to the amount that is more likely than not to be realized,  would reduce income in the period such determination was made.

 

43



Table of Contents

 

J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

 

The Company accounts for uncertain tax positions and reports a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in a tax return.  The Company recognizes interest and penalties, if any, related to unrecognized tax benefits in income tax expense.

 

Self-Insurance Reserves.  The Company utilizes a combination of insurance coverage and self-insurance programs for property, casualty, workers’ compensation and healthcare insurance.  The Company records a fully developed self-insurance reserve to cover the self-insured portion of these risks based on known facts and historical industry trends.  Changes in management’s assumptions may result in a different self-insurance reserve.

 

Contingent Liabilities.  Reserves are established for estimated environmental and legal loss contingencies when a loss is probable and the amount of the loss can be reasonably estimated.  Revisions to contingent liabilities are reflected in income in the period in which different facts or information become known or circumstances change that affect the previous assumptions with respect to the likelihood or amount of loss.  Reserves for contingent liabilities are based upon the assumptions and estimates regarding the probable outcome of the matter.  Should the outcome differ from the assumptions and estimates, revisions to the estimated reserves for contingent liabilities would be required.

 

Comprehensive Income. Comprehensive income consists of net income (loss) and other comprehensive income (loss).  Other comprehensive income (loss) consists of foreign currency translation adjustments, which are also recognized as a separate component of equity.

 

Translation of Foreign Financial Statements.  Assets and liabilities of foreign operations are translated at year-end rates of exchange, and the income statements are translated at the average rates of exchange for the year.  Gains or losses resulting from translating foreign currency financial statements are accumulated in a separate component of stockholder’s equity until the foreign operations are sold or substantially liquidated.  Gains or losses resulting from foreign currency transactions (transactions that require settlement in a currency other than the Company’s functional currency) are included in net income (loss).

 

Fair Value of Financial Instruments.  The Company’s financial instruments consist of cash and cash equivalents, receivables and debt.  Fair values of cash and cash equivalents and receivables approximate carrying values for these financial instruments since they are relatively short-term in nature.  The carrying amount of debt, except for the Company’s 8.75% Notes (see Note 10), approximates the fair value due either to length of maturity or existence of variable interest rates that approximate prevailing market rates.  The fair value of the Company’s 8.75% Notes is determined under the provisions of applicable guidance, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.

 

Use of Estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.  Significant estimates subject to change include the valuation of goodwill and other intangible assets, the allowances for doubtful accounts, shrinkage and excess and obsolete inventory, the valuation of deferred tax assets, and the allowances for self-insurance risks, warranty claims, and environmental claims.

 

Subsequent Events. The Company has evaluated subsequent events through the filing date of this Form 10-K and has determined that there were no subsequent events to recognize or disclose in these financial statements.

 

Recent Accounting Pronouncements.  In December 2007, the Financial Accounting Standards Board (“FASB”) issued new guidance for the accounting for Business Combinations which establishes principles and requirements for how an acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, any noncontrolling interest in the acquire, and the goodwill acquired.  It also establishes disclosure requirements to enable the evaluation of the nature and financial effects of the business combination. 

 

44



Table of Contents

 

J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

 

This statement was effective for us beginning in fiscal 2009.  The adoption of this guidance did not have a material impact on our consolidated financial statements.

 

In December 2007, the FASB issued guidance for the accounting for Noncontrolling Interest in Consolidated Financial Statements which establishes accounting and reporting standards for ownership interests in subsidiaries held by parties other than the parent, the amount of consolidated net income attributable to the parent and to the noncontrolling interests, changes in a parent’s ownership interest, and the valuation of retained noncontrolling equity investments when a subsidiary is deconsolidated.  It also establishes disclosure requirements that clearly identify and distinguish between the interests of the parent and the interests of the noncontrolling owners.  This statement was effective for us beginning in fiscal 2009.  The adoption of this guidance did not have a material impact on our consolidated financial statements.

 

In May 2009, the FASB issued guidance that establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued.  The pronouncement provides: (a) the period after the balance sheet date during which management of a reporting entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financial statements; (b) the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its financial statements; and (c) the disclosures that an entity should make about events or transactions that occurred after the balance sheet date.  The guidance was effective prospectively for interim or annual periods ending after June 15, 2009.  The adoption of the guidance for the quarter ended June 30, 2009 did not have a material impact on the Company’s financial position, results of operations and liquidity, and related disclosures.

 

In June 2009, the FASB issued guidance that establishes the FASB Accounting Standards Codification TM (“Codification”) as the single source of authoritative U.S. generally accepted accounting principles (“U.S. GAAP”) recognized by the FASB to be applied by nongovernmental entities.  Rules and interpretive releases of the SEC under authority of federal securities laws are also sources of authoritative U.S. GAAP for SEC registrants.  The guidance and the Codification are effective for financial statements issued for interim and annual periods ending after September 15, 2009.  The Codification became effective for the Company during its interim period ending September 30, 2009 and its adoption did not have a material impact on its consolidated financial statements.

 

3.                                  Segment Data

 

The Company operates and manages its subsidiaries within the separate business segments described in Note 1.  The Company evaluates performance and allocates resources based on the operating income of each segment.  The accounting policies of the reportable business segments are the same as those described in the summary of significant accounting policies.

 

The following is a summary of the business segment data for the years ended December 31:

 

Net Sales

 

2009

 

2008

 

2007

 

Morgan

 

$

146,902

 

$

233,893

 

$

332,926

 

Morgan Olson

 

61,593

 

104,437

 

110,291

 

Truck Accessories

 

115,607

 

131,871

 

155,564

 

Specialty Manufacturing

 

157,925

 

238,337

 

195,163

 

Eliminations

 

(1,380

)

(2,129

)

(1,783

)

Net Sales

 

$

480,647

 

$

706,409

 

$

792,161

 

 

45



Table of Contents

 

J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

 

Operating Income

 

2009

 

2008

 

2007

 

Morgan

 

$

1,421

 

$

3,953

 

$

15,384

 

Morgan Olson

 

2,565

 

5,415

 

(2,680

)

Truck Accessories

 

7,839

 

2,403

 

3,196

 

Specialty Manufacturing

 

2,937

 

25,895

 

13,726

 

JBPCO (Corporate)

 

(3,902

)

(7,985

)

(9,466

)

Operating Income

 

$

10,860

 

$

29,681

 

$

20,160

 

 

Depreciation and Amortization Expense

 

2009

 

2008

 

2007

 

Morgan

 

$

1,921

 

$

2,054

 

$

2,506

 

Morgan Olson

 

761

 

1,027

 

1,210

 

Truck Accessories

 

4,057

 

4,191

 

4,237

 

Specialty Manufacturing

 

10,141

 

10,281

 

7,028

 

JBPCO (Corporate)

 

118

 

105

 

82

 

Depreciation and Amortization Expense

 

$

16,998

 

$

17,658

 

$

15,063

 

 

Total Assets as of December 31,

 

2009

 

2008

 

 

 

Morgan

 

$

39,819

 

$

43,897

 

 

 

Morgan Olson

 

19,311

 

23,752

 

 

 

Truck Accessories

 

58,371

 

62,230

 

 

 

Specialty Manufacturing

 

112,712

 

131,329

 

 

 

JBPCO (Corporate)

 

55,751

 

34,730

 

 

 

Identifiable Assets

 

$

285,964

 

$

295,938

 

 

 

 

Capital Expenditures

 

2009

 

2008

 

2007

 

Morgan

 

$

1,276

 

$

735

 

$

1,361

 

Morgan Olson

 

361

 

799

 

958

 

Truck Accessories

 

2,200

 

3,070

 

5,044

 

Specialty Manufacturing

 

5,034

 

9,176

 

6,671

 

JBPCO (Corporate)

 

2,449

 

939

 

278

 

Capital Expenditures

 

$

11,320

 

$

14,719

 

$

14,312

 

 

Morgan had two customers (truck leasing and rental companies) that accounted for, on a combined basis, approximately 54%, 48% and 55% of Morgan’s net sales during 2009, 2008 and 2007, respectively.  Accounts receivable from these customers totaled $2,816 and $2,850 at December 31, 2009 and 2008, respectively.

 

Morgan Olson had one customer that accounted for approximately 31%, 44% and 37% of Morgan Olson’s net sales during 2009, 2008 and 2007, respectively.  Accounts receivable from this customer were $123 and $4,196 at December 31, 2009 and 2008, respectively.

 

Specialty Manufacturing has two customers in the international oilfield service industry that accounted for approximately 39%, 42% and 28% of Specialty Manufacturing’s net sales during 2009, 2008 and 2007,

 

46



Table of Contents

 

J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

 

respectively.  Accounts receivable from these customers totaled $4,882 and $6,228 at December 31, 2009 and 2008, respectively.

 

The Company, on a consolidated basis, had five customers that accounted for approximately 33%, 37% and 36% of total net sales during 2009, 2008 and 2007, respectively.  Accounts receivable from these customers totaled $7,821 and $12,615 at December 31, 2009 and 2008, respectively.  These were customers of Morgan, Morgan Olson and Specialty Manufacturing.

 

The Company’s operations are located principally in the United States.  However, Morgan has operations located in Canada and Specialty Manufacturing has operations in Mexico and Malaysia.  Long-lived assets relating to these foreign operations were $9,168 and $8,231 at December 31, 2009 and 2008, respectively.  Consolidated net sales included $31,881, $31,888 and $29,706 in 2009, 2008 and 2007, respectively, of sales to customers outside the United States.

 

JBPCO (Corporate) operating expenses for all periods comprise the costs of the parent company office and personnel who provide strategic direction and support to the subsidiary companies.  JBPCO (Corporate) costs were $3,902, $7,985 and $9,466 for 2009, 2008 and 2007, respectively.

 

4.           Acquisitions

 

During 2007, MIC Group acquired all of the common stock of Richard’s Manufacturing Co., Inc. (“MIC Duncan”), a precision machining business located in Duncan, Oklahoma, Tarlton Supply Company (“MIC Tarlton”), a precision machining and assembly business located in Brenham, Texas, and Machining and Manufacturing I, Inc. (“MIC Houston”), a precision machining business located in Houston, Texas. MIC Duncan, MIC Tarlton and MIC Houston were acquired on April 30, August 23 and September 4, 2007, respectively.  MIC Group continues to utilize the purchased assets in the same manner as prior to the acquisition and the operating results of the acquisitions have been included in the consolidated financial statements since the respective acquisition date.  MIC Duncan, MIC Tarlton and MIC Houston were accounted for as a purchase and the aggregate cash purchase prices were $12,635, $18,668 and $10,603, respectively.  During 2008, MIC Group paid the former owner of MIC Tarlton $233 (see Note 7) of additional purchase price related to taxes payable by the owner.

 

The following summarizes the estimated fair value of the assets acquired and liabilities assumed at the date of the acquisitions:

 

 

 

MIC Duncan

 

MIC Tarlton

 

MIC Houston

 

 

 

April 30, 2007

 

August 23, 2007

 

September 4, 2007

 

Accounts receivable

 

$

755

 

$

2,793

 

$

 

Inventories

 

1,305

 

8,394

 

3,457

 

Other current assets

 

226

 

66

 

 

Property, plant and equipment

 

3,397

 

6,502

 

4,431

 

Goodwill

 

3,843

 

1,567

 

326

 

Acquired intangibles

 

3,890

 

2,430

 

2,575

 

Current liabilities

 

(781

)

(3,049

)

(186

)

Other long-term liabilities

 

 

(35

)

 

 

 

$

12,635

 

$

18,668

 

$

10,603

 

 

The combined results of operations of the Company for the years ended December 31, 2009, 2008 and 2007 including MIC Duncan, MIC Tarlton and MIC Houston as if acquired on the first day of the year of their acquisition on an unaudited pro forma basis would be as follows:

 

47



Table of Contents

 

J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

 

 

 

2009

 

2008

 

2007

 

Net sales

 

$

480,647

 

$

706,409

 

$

827,536

 

Operating income

 

10,860

 

29,681

 

25,930

 

Net income

 

(4,896

)

6,790

 

2,530

 

 

5.                                      Inventories

 

Consolidated net inventories consisted of the following:

 

 

 

December 31,

 

 

 

2009

 

2008

 

Raw materials

 

$

24,946

 

$

33,081

 

Work in process

 

14,894

 

24,553

 

Finished goods

 

12,878

 

10,437

 

Total inventories

 

$

52,718

 

$

68,071

 

 

Inventories are stated net of an allowance for excess and obsolete inventory of $3,391 and $3,166 at December 31, 2009 and 2008, respectively.  The activity in the allowance for excess and obsolete inventory accounts for the years ended December 31 was:

 

 

 

2009

 

2008

 

2007

 

Balance at the beginning of the year

 

$

3,166

 

$

1,707

 

$

1,919

 

Provision for losses

 

1,181

 

2,218

 

1,796

 

Charge-offs

 

(956

)

(759

)

(1,748

)

Recoveries

 

 

 

(260

)

Balance at the end of the year

 

$

3,391

 

$

3,166

 

$

1,707

 

 

6.             Property, Plant and Equipment

 

Property, plant and equipment, as of December 31, 2009 and 2008, consisted of the following:

 

 

 

Range of
Useful Lives
in Years

 

2009

 

2008

 

Land

 

 

$

3,079

 

$

3,079

 

Buildings and improvements

 

5-25

 

24,576

 

24,505

 

Machinery and equipment

 

3-10

 

128,978

 

134,231

 

Furniture and fixtures

 

2-10

 

14,648

 

15,235

 

Transportation equipment

 

2-10

 

5,543

 

5,958

 

Leasehold improvements

 

3-10

 

8,187

 

7,564

 

Construction in progress

 

 

8,680

 

6,432

 

 

 

 

 

193,691

 

197,004

 

Accumulated depreciation and amortization

 

 

 

(123,618

)

(123,305

)

Property, plant and equipment, net

 

 

 

$

70,073

 

$

73,699

 

 

Machinery and equipment included approximately $14,150 and $13,628 of equipment at cost recorded under capital leases as of December 31, 2009 and 2008, respectively, and accumulated depreciation of approximately $7,118 and $5,516 at December 31, 2009 and 2008, respectively.

 

48



Table of Contents

 

J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

 

In 2009 and 2008, the Company capitalized $485 and $417, respectively, of interest costs incurred related to constructed assets in progress.

 

During 2009, the Company decided to consolidate the two Specialty Vehicle Group funeral and limousine manufacturing facilities and combine their production in the Amelia, Ohio plant.  As part of the decision to consolidate, the Company sold its specialized bus business and related assets, including equipment, inventory and intangible assets on December 31, 2009 for total proceeds of $1,375, which resulted in a net loss on sale of $584 recorded in other income on the consolidated financial statements.   The allocation of goodwill associated with the bus business accounted for $550 of the loss.

 

The Company decided to close and consolidated one of Specialty Manufacturing machining plants into another of its manufacturing facilities, resulting in a write-down of the carrying value of the assets by $677 in 2008.   The Company also combined two of its Truck Accessories manufacturing facilities located in Elkhart, Indiana, resulting in a write-down of the carrying value of the assets by $111 in 2008.

 

Depreciation expense was $15,299, $16,064, and $13,899 and included $1,688, $1,725, and $1,374 for assets recorded under capital leases for the years ended December 31, 2009, 2008 and 2007, respectively.

 

7.       Goodwill, Intangibles and Other Assets

 

Goodwill represents the excess of costs over fair value of net assets of businesses acquired.  The Company paid a premium over the fair value of net tangible and identifiable intangible assets acquired for reasons such as the profitable expansion of its business, strategic fit, economies of scale and the value of an assembled workforce, among others.  Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite life are not amortized but instead tested for impairment at least annually.

 

The Company completed its annual impairment review effective October 1, 2009, 2008 and 2007, which indicated that there was a $300 impairment in the carrying value of Federal Coach’s trade name recognized in 2008.  The fair value of our reporting units is based on various valuation methods, including acquisition multiples of earnings and discounted cash flow analysis.

 

Intangible assets with estimable useful lives are amortized over their respective estimated useful lives and are reviewed for impairment when events indicate their carrying amount may not be recoverable from future undiscounted cash flows.

 

The Company records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets may be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets.

 

The Company sold its specialized bus business on December 31, 2009 and allocated $550 of goodwill associated with the business sold.  Net sales related to the specialized bus business were $9,504, $11,337 and $18,805 in 2009, 2008 and 2007, respectively, and approximated 2.0%, 1.6%, and 2.4% of consolidated net sales in 2009, 2008 and 2007, respectively.

 

At December 31, 2009, goodwill was $7,408, $14,884 and $12,708 for the Morgan, Truck Accessories and Specialty Manufacturing reporting units, respectively.

 

49



Table of Contents

 

J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

 

The changes in the carrying amount of goodwill for the years ended December 31, 2009 and 2008 were:

 

 

 

Morgan

 

Truck
Accessories

 

Specialty
Manufacturing

 

Total

 

Balance, December 31, 2007

 

$

7,408

 

$

14,884

 

$

13,025

 

$

35,317

 

Changes to goodwill during the year

 

 

 

233

 

233

 

Balance, December 31, 2008

 

7,408

 

14,884

 

13,258

 

35,550

 

Changes to goodwill during the year

 

 

 

(550

)

(550

)

Balance, December 31, 2009

 

$

7,408

 

$

14,884

 

$

12,708

 

$

35,000

 

 

Goodwill recognized in the MIC Tarlton acquisition is expected to be deductible for income tax purposes.

 

Intangible assets and the related accumulated amortization as of December 31, 2009 and 2008 were:

 

December 31, 2009:

 

 

 

 

 

Cost

 

 

 

 

 

Useful Lives
in Years

 

Morgan

 

Truck
Accessories

 

SMG

 

Total

 

Accumulated
Amortization

 

Amortizable intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer base

 

5-20

 

$

1,760

 

$

2,556

 

$

10,430

 

$

14,746

 

$

3,605

 

Noncompete agreements

 

5

 

216

 

 

663

 

879

 

646

 

Supplier relationship

 

10

 

 

 

3,228

 

3,228

 

1,374

 

Patents

 

2

 

 

300

 

 

300

 

300

 

 

 

 

 

1,976

 

2,856

 

14,321

 

19,153

 

5,925

 

Unamortizable intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade names

 

 

1,112

 

616

 

880

 

2,608

 

 

Balance, December 31, 2008

 

 

 

$

3,088

 

$

3,472

 

$

15,201

 

$

21,761

 

$

5,925

 

 

December 31, 2008:

 

 

 

 

 

Cost

 

 

 

 

 

Useful Lives
in Years

 

Morgan

 

Truck
Accessories

 

SMG

 

Total

 

Accumulated
Amortization

 

Amortizable intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Customer base

 

5-20

 

$

1,522

 

$

2,556

 

$

10,400

 

$

14,478

 

$

2,383

 

Noncompete agreements

 

5

 

187

 

 

663

 

850

 

421

 

Supplier relationship

 

10

 

 

 

3,218

 

3,218

 

1,052

 

Patents

 

2

 

 

300

 

 

300

 

300

 

 

 

 

 

1,709

 

2,856

 

14,281

 

18,846

 

4,156

 

Unamortizable intangible assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

Trade names

 

 

961

 

616

 

880

 

2,457

 

 

Balance, December 31, 2009

 

 

 

$

2,670

 

$

3,472

 

$

15,161

 

$

21,303

 

$

4,156

 

 

The amortization of intangible assets was $1,700, $1,594 and $1,164 for the years ended December 31, 2009, 2008 and 2007, respectively.  Estimated amortization expense for each of the subsequent five years ending December 31 is $1,627— 2010, $1,566— 2011, $1,378— 2012, $1,073— 2013 and $1,073— 2014.

 

50



Table of Contents

 

J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

 

Other assets as of December 31, 2009 and 2008 consisted of the following:

 

 

 

 

 

2009

 

2008

 

 

 

Amortization
Period in
Years

 

Accumulated
Amortization

 

Net Book
Value

 

Accumulated
Amortization

 

Net
Book

Value

 

Other Assets:

 

 

 

 

 

 

 

 

 

 

 

Debt issuance costs

 

4-10

 

$

4,078

 

$

2,376

 

$

3,495

 

$

2,960

 

Insurance cash collateral deposit

 

 

 

7,592

 

 

7,277

 

Other

 

 

 

2,897

 

 

2,888

 

Total

 

 

 

$

4,078

 

$

12,865

 

$

3,495

 

$

13,125

 

 

The amortization of debt issuance costs was $584, $691, and $791 for the years ended December 31, 2009, 2008 and 2007, respectively.  Estimated amortization of debt issuance costs for each of the subsequent five years ending December 31 is $559 — 2010, $559 — 2011, $559 — 2012, $559 — 2013 and $139 - 2014.

 

The Company created a trust in favor of its insurance carrier to secure its liabilities under its self-insured, casualty insurance program including workers’ compensation insurance.  The liabilities were previously secured by an irrevocable standby letter of credit that was cancelled upon the initial deposit of $5,520 into the trust.  During the years ended December 31, 2009 and 2008, the Company contributed an additional $315 and $750, respectively, to the trust.

 

8.         Floor Plan Notes Payable

 

The Company has a floor plan financing agreement with Ford Motor Credit Company for financing part of its chassis inventory at Federal Coach and Eagle Coach.  Floor plan notes payable reflect the monetary value of the chassis that are in the Company’s possession as of December 31, 2009 and 2008.  These obligations are reflected on the accompanying balance sheet as accounts payable, a current liability.

 

The total amount financed under these agreements was $791 and $1,395 as of December 31, 2009 and 2008, respectively.  These borrowings bear interest at the prime rate plus 150 basis points on balances outstanding over 90 days.  As of December 31, 2009 and 2008, the weighted average interest rate on all outstanding floor plan notes payable was 0.2% and 0.4%, respectively.  The average interest rate on the liabilities that bear interest was 6.8% and 4.9% at December 31, 2009 and 2008, respectively.

 

9.             Revolving Credit Facility

 

On March 15, 2004, concurrently with the 8.75% Notes offering discussed in Note 10, the Company entered into a revolving credit agreement (the “Revolving Credit Facility”) that expired March 15, 2008.  The Revolving Credit Facility automatically renews for a twelve-month period after March 15 of each year unless notice is provided at least 90 days prior to expiration by either party.  It was renewed for a twelve-month period ending March 15, 2011.  The Revolving Credit Facility currently provides for borrowings by the Company of up to $50,000.  The Revolving Credit Facility allows the Company to borrow funds up to the lesser of $50,000 or an amount based on the sum of: 1) advance rates applied to the total amounts of eligible accounts receivable and inventories of the subsidiaries and 2) up to $20,000 collateralized by the fixed assets of the Company.  The advance rates are 85% for eligible accounts receivable and 60% for eligible inventory, as defined.  Borrowings against inventory may not exceed $20,000.  The Company is entitled to borrow up to an additional $20,000 against fixed assets not to exceed the maximum amount of credit under the facility.  The Revolving Credit Facility includes a subfacility for up to $15,000 of letters of credit.

 

51



Table of Contents

 

J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

 

The Revolving Credit Facility provides for borrowing at variable rates of interest, based on either LIBOR (London Interbank Offered Rate, which was 1.0% at December 31, 2009) plus a margin of 1.75% or the bank’s base rate (the greater of the Federal Funds Rate plus 0.5% or its prime rate, which was 3.25% at December 31, 2009).  Interest is payable monthly including a fee of 0.375% on the portion of the $50,000 total commitment that remains unused during the period.  The Subsidiaries are also guarantors of the 8.75% Notes defined in Note 10.

 

The Revolving Credit Facility contains provisions allowing the lender to accelerate the repayment of debt upon the occurrence of an event the lender determines to represent a material adverse change.  The Revolving Credit Facility also contains restrictive covenants, which, among other things, restrict the use of proceeds from the sale of assets, the ability of the Company to incur additional debt or pay dividends, and certain other corporate activities.  In addition, the Company is subject to a financial covenant requiring it to maintain a minimum fixed charge coverage ratio, as defined, of 1.0 to 1.0 should availability fall below $10,000.  At December 31, 2009, the Company was in compliance with all covenants of the Revolving Credit Facility. In the event that the Company’s borrowing availability is below $20,000, the Company’s cash balances will become restricted.

 

At December 31, 2009 and 2008, the Company had borrowings of $38 and $417, respectively, and $1,358 in standby letters of credit (see Note 16) at December 31, 2009, and had unused gross borrowing availability of $48,604 at December 31, 2009.

 

10.          Long-Term Debt and 8.75% Notes Offering

 

Long-term debt as of December 31, 2009 and 2008 consisted of:

 

 

 

2009

 

2008

 

8.75% Notes due 2014, plus unamortized premium of $1.0 million at December 31, 2009

 

$

199,839

 

$

200,491

 

Obligations under capital leases

 

5,355

 

6,494

 

Total long-term debt

 

205,194

 

206,985

 

Less current portion

 

2,259

 

2,574

 

Long-term debt, less current portion

 

$

202,935

 

$

204,411

 

 

On March 15, 2004, the Company completed a note offering of $125,000, 8.75% Notes due in 2014 (the “8.75% Notes”) with interest payable semiannually.  On May 17, 2004 and January 21, 2005, the Company completed offers to sell an additional $30,000 and $45,000, respectively, of the 8.75% Notes.  The additional $30,000 of 8.75% Notes were issued at par and the $45,000 of 8.75% Notes were issued at a 5% premium.  The additional 8.75% Notes were issued on the same terms as the original issue.  Net proceeds from the additional offerings of approximately $46,400 increased the Company’s cash and short-term investments.  The 8.75% Notes mature on March 15, 2014 and bear interest at an annual rate of 8.75% payable each September 15 and March 15 to the holders of record on September 1 and March 1 immediately preceding the interest payment date.  On May 11, 2005, the Company completed an offer to exchange (“2005 Exchange Offer”) $200 million principal amount of its 8.75% Notes which had been registered under the Securities Act for any and all of its outstanding unregistered 8.75% Notes.

 

The 8.75% Notes are subordinated to borrowings under the Revolving Credit Facility (see Note 9) and other secured indebtedness to the extent of the assets securing the debt.  Also, the Company’s obligations under the 8.75% Notes are guaranteed by each wholly owned subsidiary of the Company (the “Subsidiary Guarantors”).  Each guarantee is a senior unsecured obligation of the Subsidiary providing such Guarantee.  The Subsidiary Guarantors are also borrowers under the Revolving Credit Facility (see Note 9).

 

52



Table of Contents

 

J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

 

The Company has the option to redeem the 8.75% Notes at any time on or after March 15, 2010, at a defined premium plus accrued and unpaid interest to the date of redemption.  On February 5 and February 9, 2009, the Company purchased $150 and $250, respectively, of the 8.75% Notes on the open market, resulting in a gain of $186.

 

The 8.75% Notes’ indenture includes covenants that limit the ability of the Company to: incur additional debt, including sale and leaseback transactions; pay dividends or distributions on its capital stock or repurchase capital stock; issue stock of subsidiaries; make certain investments; create liens on its assets to secure debt; enter into transactions with affiliates; merge or consolidate with another company; and transfer and sell assets.  As noted, the indenture contains a covenant to limit the incurrence of additional indebtedness as measured by its Consolidated Coverage Ratio, as defined.  The Company and its subsidiaries are prohibited from incurring additional indebtedness when the Consolidated Coverage ratio falls below 2.0 to 1.0.  The Indenture Agreement permits certain exceptions with respect to capitalized lease obligations and other arrangements that are incurred for the purpose of financing all or part of the purchase price or cost of construction or improvements of property used in the business of the Company or its subsidiaries.  Already existing obligations and any amounts available to be drawn under the Company’s existing revolving credit agreement are not subject to this limitation.   For the twelve months ended December 31, 2009, the Company’s consolidated coverage ratio was approximately 1.6 to 1.00; below the level required by the Indenture Agreement.  Therefore, until the ratio improves to the 2.0 to 1.0 level, the Company will be prohibited from incurring additional or new indebtedness, except as permitted in the Indenture.  At December 31, 2009, the Company had $48.6 million of current availability under the Company’s existing revolving credit agreement, borrowing under which is unaffected by noncompliance with the consolidated coverage ratio of the indenture.

 

The Company estimates the fair value of the 8.75% Notes at December 31, 2009 and 2008 was approximately $168,000 and $95,000, respectively, based on their market values at those dates compared to a recorded amounts of $199,839 and $200,491 at December 31, 2009 and 2008, respectively.

 

The Company’s obligation under capital leases is due in varying maturity dates through 2014.  The capital leases are collateralized by certain equipment with a net book value of approximately $7,031 and $8,112 at December 31, 2009 and 2008, respectively.

 

Maturities.  Aggregate principal payments on long-term debt based on scheduled maturities for the next five years as of December 31, 2009 are as follows:

 

2010

 

$

2,259

 

2011

 

2,025

 

2012

 

1,294

 

2013

 

525

 

2014

 

199,091

 

 

 

$

205,194

 

 

53



Table of Contents

 

J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

 

11.          Operating Leases

 

The Company leases certain manufacturing facilities and equipment under noncancelable operating leases certain of which contain renewal options.  The future minimum lease payments subsequent to December 31, 2009 are as follows

 

2010

 

$

8,675

 

2011

 

6,852

 

2012

 

5,148

 

2013

 

2,668

 

2014

 

1,836

 

2015 and thereafter

 

2,615

 

Total minimum lease payments

 

$

27,830

 

 

Total rental expense included in continuing operations under all operating leases was approximately $10,042, $9,711 and $9,485 for the years ended December 31, 2009, 2008 and 2007, respectively.

 

12.          Supplemental Cash Flow Information

 

The supplemental cash flow information for the years ended December 31, 2009, 2008 and 2007 was as follows:

 

 

 

2009

 

2008

 

2007

 

Cash paid for interest

 

$

18,187

 

$

18,371

 

$

18,688

 

Cash paid (refunded) for income taxes, net of foreign refunds

 

(2,037

)

508

 

6,875

 

Noncash investing and financing activities:

 

 

 

 

 

 

 

Capital lease obligations for machinery and equipment

 

1,219

 

438

 

4,635

 

 

13.          Income Taxes

 

The income tax provision consists of the following for the years ended December 31, 2009, 2008 and 2007:

 

 

 

2009

 

2008

 

2007

 

Current:

 

 

 

 

 

 

 

Federal

 

$

(4,497

)

$

1,478

 

$

970

 

State

 

564

 

1,162

 

1,509

 

Foreign

 

19

 

(866

)

29

 

 

 

(3,914

)

1,774

 

2,508

 

 

 

 

 

 

 

 

 

Deferred:

 

 

 

 

 

 

 

Federal

 

1,732

 

1,733

 

466

 

State

 

(28

)

411

 

158

 

Foreign

 

 

892

 

(8

)

 

 

1,704

 

3,036

 

616

 

Income tax provision

 

$

(2,210

)

$

4,810

 

$

3,124

 

 

54



Table of Contents

 

J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

 

The following table reconciles the differences between the federal statutory income tax rate and the effective tax rate for the years ended December 31, 2009, 2008 and 2007:

 

 

 

2009

 

2008

 

2007

 

 

 

Amount

 

%

 

Amount

 

%

 

Amount

 

%

 

Tax provision at federal statutory income tax rate

 

$

(2,415

)

34

%

$

3,944

 

34

%

$

796

 

34

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net impact of change in valuation allowance

 

(169

)

2

 

(304

)

(2

)

827

 

35

 

Nondeductible expenses

 

107

 

(2

)

127

 

1

 

201

 

9

 

State income taxes, net of federal income tax benefit

 

599

 

(8

)

1,440

 

12

 

304

 

13

 

Uncertain state tax positions related to prior years

 

(343

)

5

 

(211

)

(2

)

668

 

29

 

Uncertain state tax positions related to current year

 

93

 

(1

)

111

 

1

 

219

 

9

 

Foreign income taxes, at rate different than federal rate

 

(47

)

1

 

(93

)

(1

)

19

 

1

 

Other

 

(34

)

 

(204

)

(2

)

90

 

4

 

Provision (benefit) for income taxes and effective tax rates

 

$

(2,210

)

31

%

$

4,810

 

41

%

$

3,124

 

134

%

 

The domestic and foreign components of income (loss) before income taxes were:

 

 

 

2009

 

2008

 

2007

 

Domestic

 

$

(7,758

)

$

14,195

 

$

4,374

 

Foreign

 

652

 

(2,595

)

(2,035

)

Total

 

$

(7,106

)

$

11,600

 

$

2,339

 

 

Deferred income taxes are based on the estimated future tax effects of differences between the financial statements and tax basis of assets and liabilities given the provisions of the enacted tax laws.  The net deferred tax assets and liabilities as of December 31, 2009 and 2008 were:

 

 

 

2009

 

2008

 

Current deferred tax asset:

 

 

 

 

 

Allowance for doubtful accounts

 

$

187

 

$

437

 

Employee benefit accruals and reserves

 

473

 

395

 

Uncertain state tax positions tax benefit

 

509

 

814

 

Other

 

199

 

477

 

Total current deferred tax asset

 

1,368

 

2,123

 

 

 

 

 

 

 

Long-term deferred tax asset:

 

 

 

 

 

Tax credit and state operating loss carryforwards

 

5,960

 

6,135

 

Warranty liabilities

 

1,254

 

1,316

 

Other

 

2,449

 

2,696

 

Valuation allowance

 

(3,384

)

(3,977

)

Total long-term deferred tax asset

 

6,279

 

6,170

 

 

55



Table of Contents

 

J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

 

 

 

2009

 

2008

 

Long-term deferred tax liabilities:

 

 

 

 

 

Depreciation and amortization

 

(9,394

)

(8,333

)

Other

 

(703

)

(706

)

Total long-term deferred tax liability

 

(10,097

)

(9,039

)

Net long-term deferred tax liability

 

(3,818

)

(2,869

)

Net deferred tax liability

 

$

(2,450

)

$

(746

)

 

The Company had alternative minimum tax credit carryforward deferred tax assets of approximately $800 at December 31, 2009 and 2008 for U.S. federal income tax purposes, which may be carried forward indefinitely.

 

During 2009, the Company generated federal net operating losses of approximately $4,373 and had recognized a current income tax refund receivable at December 31, 2009 related to the carryback of these losses. Additionally, at December 31, 2009 and 2008, the Company had state tax net operating loss carryforwards of approximately $67,000 and $72,000, respectively, and recognized a deferred tax asset of approximately $3,700 and $3,900, respectively. The state net operating loss carryforwards expire at varying dates ranging from 1 to 20 years.  At December 31, 2009 and 2008, the Company had recorded a valuation allowance of approximately $2,100 and $2,500, respectively, against this deferred tax asset as it was uncertain as to whether it would be realized.  The Company had Canadian net operating losses of approximately $4,100 and $4,700 as of December 31, 2009 and 2008, respectively, and recognized a deferred tax asset of approximately $1,300 and $1,500, respectively.  At December 31, 2009 and 2008, the Company recorded a valuation allowance of approximately $1,300 and $1,500, respectively, against this deferred tax asset as it was uncertain as to whether it would be realized.  Canadian net operating losses will be carried forward for up to 20 years, with a significant majority being greater than 10 years.

 

As of December 31, 2009 and December 31, 2008, the Company had $1,821 and $2,802, respectively, of tax liabilities related to uncertain state income tax liabilities, or $1,312 and $1,988, respectively, net of a federal tax benefit of $509 and $814, respectively.  The Company recognizes interest and penalties related to unrecognized tax benefits in income tax expense.  The tax liability includes $511 and $824 of interest and penalties at December 31, 2009 and 2008, respectively.  If these uncertain tax positions are favorably resolved, $1,312 would reduce our income tax provision in future periods.  A reconciliation of the beginning and ending unrecognized tax liability is as follows:

 

 

 

Liability for
Unrecognized Tax
Benefits

 

Balance at January 1, 2007

 

$

1,637

 

Additions based on tax positions related to prior years

 

955

 

Additions based on tax positions related to current year

 

348

 

Balance at December 31, 2007

 

2,940

 

Releases related to prior years due to expiration of statutes, net of additions based on tax positions related to prior years

 

(311

)

Additions based on tax positions related to current year

 

173

 

Balance at December 31, 2008

 

$

2,802

 

Releases related to prior years due to expiration of statutes, including settlements related to prior years

 

(1,123

)

Additions based on tax positions related to current year

 

142

 

Balance at December 31, 2009

 

$

1,821

 

 

56



Table of Contents

 

J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

 

We are subject to U.S. federal income tax as well as income tax in Canada and multiple state jurisdictions. We have substantially concluded all U.S. federal income tax matters for years through 2005.  Substantially all material state and local income tax matters have been concluded for fiscal years through 2005.  Currently, we are under audit by Revenue Canada for tax years 2001 through 2004 and the Internal Revenue Service for tax year 2006.  The Company has provided for any known potential exposures for these examinations.

 

14.    Common Stock

 

As of December 31, 2009 and 2008, there were 100,000 shares authorized and 3,059 shares issued and outstanding of JBPCO common stock with a par value of $.01 per share.  JBPCO was incorporated in Delaware.  No other classes of common stock, preferred stock or common stock equivalents exist.

 

15.    Employee Benefit Plans

 

Employee Incentive Plans.  The Company has an Annual Management Incentive Plan for executives at the parent company and at each of the business units to provide for the earning of annual bonuses based upon the attainment of performance-based goals. Eligible participants are entitled to receive a bonus if the business unit (or the Company) attain at least 80% of the operating income target.  Individual bonuses are then allocated among the eligible employees based upon their individual achievement of stated performance objectives including working capital performance objectives. The Company incurred expenses related to this plan totaling $2,444, $3,877 and $2,378 for the years ended December 31, 2009, 2008 and 2007, respectively.

 

The Company has a Long-Term Performance Plan (“LTPP”) designed to align the interests and the Company’s long-term financial performance goals with the most senior executives in the Company.  Each element of the LTPP has a three-year duration and awards are paid only at the end of the three-year cycle, depending upon performance versus established budgeted financial goals.  The Company incurred expenses related to this plan totaling $349, $733 and $136 for the years ended December 31, 2009, 2008 and 2007, respectively.

 

JBPCO 401(k) Defined Contribution Plan. The JBPCO-sponsored 401(k) savings plan allows participating employees to contribute through salary deductions up to 100% of gross compensation and provides for Company matching contributions up to 1% of the first 5% or 3% of the first 6% of employee contribution depending on the profitability of the business unit, as well as the opportunity for an annual discretionary contribution.  The Company decreased the matching percentage to 1% of the first 5% from 3% of the first 6%, for certain business units, during 2008 and 2009.  The Company has not made discretionary contributions.  Vesting in the Company matching contribution is 20% per year over the first five years.  The Company incurred related employer matching contribution and administrative expenses of $632, $1,702 and $2,009 during the years ended December 31, 2009, 2008 and 2007, respectively.

 

Defined Benefit Plan. Truck Accessories assumed future sponsorship of a defined benefit plan (the “Plan”) covering hourly employees at its Gem Top division that was sold with all the employees terminated effective February 28, 2003.  The Plan was frozen effective March 31, 1996 and at December 31, 2009 the Plan was underfunded by approximately $117 compared to being underfunded by approximately $160 in 2008.  The Company’s funding policy for the Plan is to make the minimum annual contributions required by applicable regulations.  Minimum contributions for the 2009 plan year totaled $35.

 

57



Table of Contents

 

J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

 

The Plan has invested its assets through a group annuity contract with an insurance company.  The targeted composition is set by the Company and is reallocated periodically.  The long-term portfolio is chosen based on the duration of the Plan’s individual population and is set toward funding for benefits payable in the future.  The fair value of the Plan’s assets was $456 and $307 as of December 31, 2009 and 2008, respectively.  The pension expense (benefit) recognized was $24, $(4) and $5 for the years ended December 31, 2009, 2008 and 2007, respectively.  Based on the immateriality of the Plan, management does not believe expanded disclosure is necessary.

 

16.                               Commitments and Contingencies

 

Claims and Lawsuits.  The Company is involved in certain claims and lawsuits arising in the normal course of business.  In the opinion of management, the ultimate resolution of these matters will not have a material adverse effect on the financial position or results of operations and cash flows of the Company.

 

Letters of Credit and Other Commitments.  The Company had $1,358 in standby letters of credit outstanding at December 31, 2009, primarily securing the Company’s chassis bailment pool programs.  The Company holds funds in a trust for the benefit of its casualty insurance carrier of $7,592 to secure the Company’s insurance programs.  Income from the trust accrues to the Company.

 

The Company has a five-year agreement that expires October 1, 2014 with a key supplier, whereby it exclusively purchases inventory from this supplier in return for favorable pricing.  The Company estimates that it will purchase approximately $4.7 million from this supplier in 2010.

 

Consigned Chassis Inventories.  The Company obtains vehicle chassis for certain units produced at Morgan directly from the chassis manufacturer under a bailment pool agreement with General Motors Acceptance Corporation.  Chassis are obtained directly from the manufacturer based on orders from customers, which are typically manufacturer dealers.  The agreements generally provide that the Company is restricted to producing certain conversions or up-fittings on these chassis.  The manufacturer does not transfer the certificate of origin to the Company and, accordingly, the Company accounts for the chassis as consigned inventory belonging to the manufacturer.  Under these agreements, if the chassis is not delivered to a customer within a specified timeframe, the Company is required to pay a finance charge based on the value of the chassis.  The finance charges incurred on consigned chassis inventories included in interest expense in the consolidated statements of income totaled $28, $27 and $49 for the years ended December 31, 2009, 2008 and 2007, respectively.  Total consigned chassis inventory was $121 and $930 at December 31, 2009 and 2008, respectively.

 

Environmental Matters. The Company’s operations are subject to a variety of federal, state and local environmental and health and safety statutes and regulations, including those relating to emissions to the air, discharges to water, treatment, storage and disposal of waste, and remediation of contaminated sites. In certain cases, these requirements may limit the productive capacity of its operations. Certain laws, including the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, impose strict and, under certain circumstances, joint and several liability for costs to remediate contaminated sites upon designated responsible parties including site owners or operators and persons who dispose of wastes at, or transport wastes to, such sites. Some of the Company’s operations also require permits which may restrict its activities and which are subject to renewal, modification or revocation by issuing authorities. In addition, the Company generates nonhazardous wastes, which are also subject to regulation under applicable environmental laws.

 

From time to time, the Company has received notices of noncompliance with respect to its operations, which typically have been resolved by investigating the alleged noncompliance, correcting any noncompliant conditions and paying fines, none of which individually or in the aggregate has had a material adverse effect on the Company.  The Company cannot ensure that it has been or will be at all times in compliance with all of these requirements, including those related to reporting or permit restrictions, or that it will not incur material fines, penalties, costs or

 

58



Table of Contents

 

J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

 

liabilities in connection with such requirements or a failure to comply with them.  Additionally, the Company expects that the nature of its operations will continue to make it subject to increasingly stringent environmental regulatory standards. Although the Company believes it has made sufficient capital expenditures to maintain compliance with existing laws and regulations, future expenditures may be necessary as compliance standards and technology change or as unanticipated circumstances arise. Unforeseen and significant expenditures required to comply with new or more aggressively enforced requirements or newly discovered conditions could limit expansion or otherwise have a material adverse effect on the Company’s business and financial condition.

 

In February 2009, Morgan Olson voluntarily reported to the Environmental Protection Agency (“USEPA”) potential noncompliance with the reporting requirements applicable to certain chemicals under the Federal Emergency Planning and Community Right-to-know Act (“EPCRA”).  In March 2009, Morgan Olson filed with the USEPA additional EPCRA reports for certain chemicals and modified previously filed EPCRA reports for other chemicals used in operations during calendar years 2004 through 2007.  Action by the USEPA is probable, however, the financial impact of such enforcement action, if any, is unlikely to be material.

 

In July 2005, Morgan notified the USEPA that it was investigating its compliance with the filing requirements of Section 313 of the EPCRA, and regulations promulgated thereunder. All necessary reports were completed and filed with the USEPA by August 31, 2005.  A letter from the USEPA requesting additional information was received in December 2006 and a response submitted. Action by the USEPA is probable and the financial impact of such enforcement action, if any, cannot be estimated but could be material.

 

17.                               Related-Party Transactions

 

The Company is party to a Management Services Agreement with Southwestern Holdings, Inc. (“Southwestern”), a corporation owned by Mr. Poindexter.  The services agreement was suspended effective June 30, 2006 when Mr. Poindexter became an employee of the Company and reinstated effective July 31, 2008 when Mr. Poindexter ceased being an employee of the Company.  Pursuant to the Management Services Agreement, Southwestern provides services to the Company, including those of Mr. Poindexter.  The Company pays Southwestern a base fee of approximately $45 per month for these services, subject to annual automatic increases based upon the consumer price index.  The Company paid Southwestern $534, $222 and $0 during 2009, 2008 and 2007, respectively, for all these services.

 

Southwestern was a named insured under the Company’s general liability and excess umbrella insurance policies during 2007 when Southwestern became the defendant in a suit for damages resulting from a vehicle accident not involving the Company’s assets or any of its team members.  The lawsuit was settled during 2008 and Southwestern paid the amount of the self-insured reserve of $250.  Southwestern is no longer a named insured under the Company’s general liability policy effective July 1, 2007.  Any increased premiums under the Company’s umbrella policy incurred in the future by the Company by reason of the settlement will be reimbursed by Southwestern.

 

Effective December 12, 2008, Morgan sold and leased back three of its manufacturing facilities to Poindexter Properties, LLC, a company owned by Mr. Poindexter.  The properties, located in Morgantown and Ephrata, Pennsylvania and Corsicana, Texas, were sold at their appraised value of $7,135.  Morgan recorded a gain on the sale of $1,854 that has been deferred and included in other current and noncurrent liabilities in the accompanying consolidated balance sheet and will be recognized as income over the term of the leases with $230 recognized as income in 2009.  Morgan paid rent of $932 and $51 for the use of the properties for the years ended December 31, 2009 and 2008, respectively.

 

59



Table of Contents

 

J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(Dollars in Thousands)

 

18.                               Selected Quarterly Information (Unaudited)

 

The Company’s accounting records are maintained on the basis of four 13-week quarters.  Shown below are the selected unaudited quarterly data.

 

 

 

March
31, 2009

 

June
30, 2009

 

September
30, 2009

 

December
31, 2009

 

Net sales

 

$

139,671

 

$

122,671

 

$

108,767

 

$

109,538

 

Cost of sales

 

120,902

 

107,270

 

95,277

 

96,697

 

Gross profit

 

18,769

 

15,401

 

13,490

 

12,841

 

Selling, general and administrative expenses

 

14,376

 

11,886

 

11,433

 

11,266

 

Closed and excess facility costs

 

 

642

 

 

 

Gain on redemption of 8.75% Notes

 

(186

)

 

 

 

Other expense (income)

 

(95

)

 

(204

)

523

 

Operating income

 

4,674

 

2,873

 

2,261

 

1,052

 

Interest expense, net

 

4,455

 

4,686

 

4,405

 

4,420

 

Income tax provision (benefit)

 

334

 

(1,399

)

155

 

(1,300

)

Net loss

 

$

(115

)

$

(414

)

$

(2,299

)

$

(2,068

)

Depreciation and amortization

 

$

4,342

 

$

4,570

 

$

4,190

 

$

3,896

 

Amortization of debt issuance costs

 

$

164

 

$

140

 

$

140

 

$

140

 

 

 

 

March
31, 2008

 

June
30, 2008

 

September
30, 2008

 

December
31, 2008

 

Net sales

 

$

184,236

 

$

208,235

 

$

167,178

 

$

146,760

 

Cost of sales

 

164,306

 

178,946

 

142,286

 

125,261

 

Gross profit

 

19,930

 

29,289

 

24,892

 

21,499

 

Selling, general and administrative expenses

 

15,827

 

16,187

 

17,720

 

16,556

 

Closed and excess facility costs

 

 

 

 

788

 

Gain on redemption of 8.75% Notes

 

 

 

 

(416

)

Other expense (income)

 

168

 

(342

)

(454

)

(105

)

Operating income

 

3,935

 

13,444

 

7,626

 

4,676

 

Interest expense, net

 

4,565

 

4,623

 

4,118

 

4,775

 

Income tax provision (benefit)

 

188

 

3,498

 

1,371

 

(247

)

Net income (loss)

 

$

(818

)

$

5,323

 

$

2,137

 

$

148

 

Depreciation and amortization

 

$

4,489

 

$

4,550

 

$

4,323

 

$

4,296

 

Amortization of debt issuance costs

 

$

196

 

$

146

 

$

165

 

$

184

 

 

60



Table of Contents

 

Item 9.                                                           Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

 

None.

 

Item 9A.                                                  Controls and Procedures

 

Management’s Conclusions Regarding Effectiveness of Disclosure Controls and Procedures

 

As of December 31, 2009, the Company conducted an evaluation, under the supervision and participation of management including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934).  Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective.

 

Changes in Internal Control Over Financial Reporting

 

There have been no changes in our internal control over financial reporting that occurred during the year ended December 31, 2009 that have materially affected, or are likely to materially affect, our internal controls over financial reporting.

 

Management’s Report on Internal Control Over Financial Reporting

 

Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) of the Securities Exchange Act of 1934.  Internal control over financial reporting provides reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles.

 

The Company’s internal control over financial reporting includes policies and procedures that: pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and disposition of the Company’s assets; provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that the Company’s receipts and expenditures are being made only in accordance with authorizations of management; and provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements.

 

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management of the Company has assessed the effectiveness of the Company’s internal control over financial reporting based on criteria established in the Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

 

Management’s assessment included an evaluation of the design of the Company’s internal control over financial reporting and testing of the operational effectiveness of the Company’s internal control over financial reporting.  Based on this assessment, management identified no material weaknesses in the Company’s internal controls as of December 31, 2009 and management believes that its internal control over financial reporting are effective.

 

This annual report does not include an attestation report of the Company’s independent registered public accounting firm regarding internal control over financial reporting.  Management’s report was not subject to attestation by the Company’s independent registered public accounting firm pursuant to temporary rules of the

 

61



Table of Contents

 

Securities and Exchange Commission that permit the Company to provide only management’s report in the annual report.

 

Item 9B.                                                  Other Information

 

None.

 

PART III

 

Item 10.                                                    Directors, Executive Officers and Corporate Governance

 

The Company’s directors and executive officers are set forth below. All directors hold office until the next annual meeting or until their successors are duly elected and qualified. The executive officers are appointed by the Board of Directors annually and serve at the discretion of the Board of Directors.

 

Name

 

Age

 

Position

John B. Poindexter

 

65

 

Chairman of the Board, President and Chief Executive Officer

Stephen P. Magee

 

62

 

Director

William J. Bowen

 

88

 

Director

Robert Preston

 

58

 

Chief Operating Officer

David Kay

 

61

 

Chief Financial Officer

Larry T. Wolfe

 

61

 

Vice President Administration and Assistant Secretary

 

John B. Poindexter has served as Chairman of the Board of Directors since 1988 and Chief Executive Officer since 1994.  He was President from November 2002 until September 2005 and again from November 2006 to present.

 

Stephen P. Magee has served as Director since the Company was formed in 1988, as Treasurer from 1988 to 2001 and as Chief Financial Officer from 1994 to 2001. Mr. Magee also serves as Chairman of the Audit Committee of the Board of Directors.

 

William J. Bowen has served as Director since 1988.  Mr. Bowen retired in 1992 as Chairman of the Board of Transco Energy Company, a diversified energy company based in Houston, Texas. Mr. Bowen served as Chief Executive Officer of Transco Energy from 1974 until his retirement from that position in 1987. Mr. Bowen serves on the Company’s Audit Committee.

 

Robert Preston became the Chief Operating Officer in February 2010.  Previously, Mr. Preston served as the President of Eastman Chemical’s Asia Pacific company based in Shanghai.

 

David Kay became the Chief Financial Officer in November 2009.  Prior to joining the Company, Mr. Kay served as Chief Financial Officer at Freight Car America in Chicago, Illinois and Gibraltar Industries, Inc in Buffalo, New York.

 

Larry T. Wolfe has served as Vice President of Administration since May 1995. He previously served as Vice President of Human Resources and Administrative Services for Transco Energy Company.

 

Audit Committee

 

The Audit Committee is a standing committee of the Board of Directors. The primary purpose of the Committee is to assist the Board of Directors in fulfilling its oversight responsibility relating to (1) the integrity of our financial statements and financial reporting process and our systems of internal accounting and financial controls; (2) the annual independent audit of our financial statements, the engagement of the independent auditors and the evaluation of the independent auditors’ qualifications, independence and performance; and (3) the compliance by the Company with legal and regulatory requirements, including disclosure controls and procedures. The

 

62



Table of Contents

 

Committee also reviews the Company’s critical accounting policies, annual and quarterly reports on Form 10-K and Form 10-Q, and earnings releases before they are published. The Committee has sole authority to engage, evaluate and replace the independent auditor. The Committee also has the authority to retain special legal, accounting and other consultants it deems necessary in the performance of its duties. The Committee meets regularly with our management and independent auditors to discuss internal controls and financial reporting process and also meets regularly with the independent auditor in private.

 

The current members of the Audit Committee are Messrs. Magee (chairman) and Bowen. Since the Company is not a publicly traded company on a listed exchange, the Board of Directors has not designated a member of the Audit Committee as an “audit committee financial expert” who is independent as the term is used in Item 7(d)(3)(iv) of Schedule 14A under the Exchange Act.

 

Other Significant Persons

 

Although not an executive officer, each of the following persons is an officer of the referenced subsidiary or division thereof and is an important contributor to operations:

 

Name

 

Age

 

Position

Nelson Byman

 

63

 

President of MIC Group

Jim Donohue

 

53

 

President of Truck Accessories

Norbert Markert

 

49

 

President of Morgan Truck Body

Michael Ownbey

 

58

 

President of Morgan Olson

 

Nelson Byman became President of MIC Group in June 1998. Previously, Mr. Byman was Vice President/General Manager of a domestic division of Weatherford/Enterra, a manufacturer of oilfield-related equipment.

 

Jim Donohue was named President of Truck Accessories in July 2008. Previously, Mr. Donohue spent nine years in general management positions with Unison Engine and Smiths Aerospace following a nineteen year career with SKF Group.

 

Norbert Markert became President and Chief Operating Officer of Morgan in November 2005.  Previously, he served two years as President of Autoliv of North America after having been President of Pilkington Automotive North America for four years.

 

Michael Ownbey became President of Morgan Olson in December 2007.  Prior to joining Morgan Olson, Mr. Ownbey was Vice President of Operations for Honda Motor Company’s largest subsidiary in North America, Yachiyo Manufacturing of Alabama, LLC.

 

Code of Ethics

 

The Board of Directors has adopted a code of ethics that applies to its executive officers. Management does not believe that a code of ethics is a substitute for an obligation to always act in an honest and ethical fashion.  The code of ethics is included as an Exhibit to this Form 10-K.

 

Item 11.                 Executive Compensation

 

Overview of Compensation Program

 

The Chairman of the Board of Directors (the “Chairman”) along with other Board members and Company senior executives (for the purpose of this discussion, the “Committee”) has the responsibility for establishing, implementing and monitoring adherence to the Company’s compensation program.  The Committee ensures that the total compensation paid to executives is fair, reasonable and competitive.

 

63



Table of Contents

 

Compensation Practices and Objectives

 

The Committee believes that the most effective executive compensation program is one that is designed to reward the achievement of specific goals and which aligns the executive’s interests with those of the Company. The Committee evaluates both performance and compensation to ensure that it maintains its ability to attract and retain superior employees in key positions and that compensation provided to key employees remains competitive relative to the compensation paid to executives at similar companies.  To that end, the Committee believes executive compensation provided by the Company to its executives, including the named executive officers, should include a combination of competitive base salaries and performance-driven incentive plans.

 

Role of Executive Officers in Compensation Decisions

 

The Committee participates in compensation assessments and recommendations for the executive officers of the Company and the Chairman reserves the right of final approval.  The Chairman further reserves the right to exercise discretion in modifying any recommended adjustments or awards.

 

Setting Executive Compensation

 

The Committee has structured the Company’s annual and long-term incentive-based executive compensation to motivate executives to achieve the financial goals set by the Company and reward executives for achieving such goals.  In furtherance of these objectives, the Committee periodically engages the services of outside executive compensation consultants to provide relevant market data and alternatives to consider when making compensation decisions.

 

In making compensation decisions, the Committee compares the total compensation opportunity of executives as compared to a nationwide survey of similar-sized companies from a cross section of manufacturing industries.  This data is updated annually and is presented to the Company by a third-party firm expressed as 25th, 50th and 75th percentiles.  The Company strives to manage the base and incentive compensation to the 50th percentile which is further influenced by individual performance, Company performance and an executive’s length of service.

 

A significant portion of total compensation is provided as incentive compensation realized by the executives as a result of the Company achieving established objectives.  Historically, incentive awards were reflective of both the Company’s achievement of established objectives and the individual executive’s performance.

 

2009 Executive Compensation Components

 

For the fiscal year ended December 31, 2009, the principal components of compensation for named executive officers were:

 

·                  Base salary

·                  Performance-based annual incentive compensation

·                  Performance-based long-term incentive compensation

 

The Company does not provide any executives with any form of non-cash compensation such as retirement plans or perquisites.

 

Base Salary

 

The Company provides executive officers with a base salary to compensate them for services rendered during the fiscal year.  Salary ranges for each executive are determined based on their position and responsibility and by using market data.  The Company strives to manage an executive’s base salary compensation to the 50th percentile of the market data provided by an outside consultant.  Salary levels are typically considered annually as

 

64



Table of Contents

 

part of the Company’s performance review process as well as upon a promotion or other change in job responsibility.  Merit-based increases for executives are a result of recommendations made by the Committee and subject to the final approval of the Chairman.

 

Performance-Based Annual Incentive Plan

 

The Annual Management Incentive Plan (the “Annual Plan”) was established in the mid-1990s to provide an annual incentive opportunity to executives throughout the Company.  The purpose of the Annual Plan is to align the interests of the executives with the financial performance at either their business unit or the parent.  At the beginning of each calendar year, the Chairman reviews and approves each participant’s eligibility in the Annual Plan and incentive target which is expressed as a percent of base salary earnings for the year.

 

Participants in the Annual Plan at the parent level have their performance measured by the consolidated earnings performance of the Company in relationship to the earnings budget established at the beginning of each calendar year.  Participants in the Annual Plan at the business unit level have their performance measured by a combination of their business unit’s performance to an established earnings budget and the management of working capital targets.  Performance to the earnings budget accounts for 75% to 80% of the incentive award and the management of working capital accounts for 20% to 25%.  However, if the earnings budget is not achieved at least at the threshold level, no incentive awards are paid.

 

The threshold level is set at 80% of budgeted earnings.  Once the annual audit is complete and the earnings performance verified at both the parent and business unit level by the Company’s outside auditors, the percent of performance to budget is established.  If the performance exceeds 80%, that number is squared to determine what percent of a participant’s award is paid. (Example:  If 90% earnings performance is achieved, then 90% x 90% = 81% of a participant’s incentive target award is paid.)  The Annual Plan maximum payout is achieved when the earning’s performance is 130% of budgeted earnings and 169% of a participant’s incentive target.

 

In any calendar year where performance falls below the threshold performance level, the Committee may make modest discretionary awards to certain Annual Plan participants to reward exceptional individual contributions.

 

In 2008, the income thresholds under the Annual Plan were reduced to offset negative industry trends that were not anticipated when the grants under the Annual Plan were established, resulting in greater awards under the Annual Plan than would have been the case if those adjustments had not been made.

 

Long-Term Performance Plan

 

The Long-Term Performance Plan (“LTPP”) was established in 1999 and was designed to align the interests and performance goals of the most senior executives in the Company with the long-term financial performance of the Company.  Each element of the LTPP has a three-year duration and awards are paid only at the end of the three-year cycle, depending upon consolidated financial performance versus established budgets.

 

Each year, the Committee designates participants in the LTPP and provides them with a letter which outlines their participation, their targeted award and the performance criteria.  Because of the three-year cycle, a regular participant in the LTPP will have three cycles in progress simultaneously, one cycle will be in its first year, one in the second year and one in the third year.  Targeted participant awards are expressed as a percent of their base annual salary at the end of the three-year cycle.

 

Performance of the LTPP is determined by the cumulative Profit Before Tax (“PBT”) financial performance of the Company over each three-year period as measured against the budgeted PBT for the same time period.  Threshold performance is achieved when the Company’s cumulative PBT achieves 80% of budgeted PBT for the same period.  A scale is used to determine a participant’s award so that at the threshold, or 80% performance, a participant receives 20% of the established award.  The maximum award is achieved when PBT is 130% or greater than plan which, based on the scale, equates to a payment of 200% of a participant’s established award. 

 

65



Table of Contents

 

Awards are paid at the conclusion of each three-year cycle, following the audit of the Company’s results of operations.

 

For any calendar year that the Company’s performance fails to reach at least the 80% threshold level, an 80% achievement factor is used for that year.  The Chairman has the authority to modify a participant’s award, once the Company’s performance has become known for the three-year cycle, between 80% to 200% of the calculated award, to recognize a participant’s individual performance and contribution.  The Board has the authority to amend, modify or cancel the Plan at any time.

 

Nonqualified Deferred Compensation Plan

 

The Company sponsors a nonqualified deferred compensation plan that allows eligible employees to elect to tax defer any portion of their annual compensation.  There is no Company match and deferred amounts are invested in funds managed by an independent investment company.  The funds earn market rates of return and are subject to normal market risk.  The funds are not subject to a trust arrangement and therefore may not be available in the future to pay the liability to the employee.  Deferred amounts are eligible to be distributed to participants after their separation from the Company.

 

401(k) Plan

 

The Company sponsors a 401(k) savings plan that allows participating employees to contribute a portion of their gross compensation up to 100% and provides for Company matching contributions up to 1% of the first 5% or 3% of the first 6% of employee contribution, depending on the financial performance of the business unit, as well as the opportunity for an annual discretionary contribution.  The Company decreased the matching percentage to 1% of the first 5% from 3% of the first 6% for certain business units during 2008 and 2009.  The Company has not made a discretionary contribution to date.  Vesting in the Company’s matching contribution is 20% per year over the first five years of employment.

 

Perquisites and Other Personal Benefits

 

The Company does not provide any form of perquisite, executive benefit program or personal benefits to any of the named executives or any other senior management member at the parent or business unit level.

 

Compensation Committee Interlocks and Insider Participation

 

The members of the Committee are Messrs. Poindexter, Magee and Wolfe.  Mr. Wolfe is an officer of the Company.  See Item 13. Certain Relationships and Related Transactions, and Director Independence, for a description of certain transactions between the Company and Messrs. Poindexter and Magee.

 

COMMITTEE REPORT

 

The Committee of the Company has reviewed and discussed this Compensation Discussion and Analysis and, based on such review and discussion, the Committee recommended to the Board that this Compensation Discussion and Analysis be included in this 10-K.

 

The Committee

 

John Poindexter — Chairman, President & CEO

Stephen Magee — Member, Board of Directors

Larry Wolfe — Vice President of Administration and Secretary

David Kay — Chief Financial Officer

 

66



Table of Contents

 

The following table sets forth certain information regarding the compensation paid to the Company’s Principal Executive Officer, the Company’s Principal Financial Officer, the Company’s three most highly compensated executive officers (including executive officers of the Company’s business units) other than the Principal Executive Officer and Principal Financial Officer for each of the last three completed fiscal years (collectively, the “named officers”).

 

Summary Compensation Table

 

Name and principal position

 

Year

 

Salary

 

Non-Equity
Incentive Plan
Compensation

 

All Other
Compensation

 

Total

 

John B. Poindexter(a)

 

2009

 

 

 

$

533,714

 

$

533,714

 

Principal Executive Officer

 

2008

 

$

340,984

 

 

$

6,900

 

$

347,884

 

 

 

2007

 

$

593,016

 

 

$

6,750

 

$

599,766

 

 

 

 

 

 

 

 

 

 

 

 

 

David Kay(b)

 

2009

 

 

 

$

21,600

 

$

21,600

 

Principal Financial Officer

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Robert Whatley(c)

 

2009

 

$

180,221

 

 

$

2,452

 

$

182,673

 

Principal Financial Officer

 

2008

 

$

230,844

 

$

65,000

 

$

10,452

 

$

306,296

 

 

 

2007

 

$

220,377

 

$

48,000

 

$

6,750

 

$

275,127

 

 

 

 

 

 

 

 

 

 

 

 

 

Norbert Markert(d)

 

2009

 

$

345,762

 

$

147,870

 

$

3,300

 

$

496,932

 

President, Morgan

 

2008

 

$

359,298

 

$

340,662

 

$

204,772

 

$

904,732

 

 

 

2007

 

$

337,012

 

$

132,184

 

$

164,086

 

$

633,282

 

 

 

 

 

 

 

 

 

 

 

 

 

Nelson Byman(e)

 

2009

 

$

302,548

 

$

212,083

 

$

6,432

 

$

521,063

 

President, Specialty Manufacturing

 

2008

 

$

289,116

 

$

344,453

 

$

6,900

 

$

640,469

 

 

 

2007

 

$

248,654

 

$

216,015

 

$

40,525

 

$

505,194

 

 

 

 

 

 

 

 

 

 

 

 

 

Jim Donohue(f)

 

2009

 

$

340,000

 

$

226,563

 

$

10,511

 

$

577,074

 

President, Truck Accessories Group

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mike Ownbey(g)

 

2008

 

$

234,428

 

$

210,000

 

$

50,312

 

$

494,740

 

President, Morgan Olson

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Larry Wolfe(h)

 

2007

 

$

270,000

 

$

155,000

 

$

6,750

 

$

431,750

 

Vice President of Administration

 

 

 

 

 

 

 

 

 

 

 

 


(a) Mr. Poindexter received a salary from the Company for July 2006 until July 31, 2008. He does not receive a bonus and does not participate in either the Annual Plan or LTPP. Through June 2006, Mr. Poindexter was compensated through a Management Services Agreement between Southwestern Holdings, Inc. and the Company. (Southwestern Holdings, Inc. is owned by Mr. Poindexter.) For all services, the Company paid Southwestern Holdings, Inc. $533,714, $222,380 and $0 in 2009, 2008 and 2007 respectively. The Company matched $6,750 of Mr. Poindexter’s contributions to the Company’s 401(k) Plan in 2007.

 

(b) Mr. Kay received $21,600 in 2009.  He did not receive a bonus and does not participate in either the Annual Plan or LTPP.

 

(c) Mr. Whatley received a salary of $180,221 for 2009 and the Company matched $2,452, $10,542, and $6,750 of Mr. Whatley’s contributions to the Company’s 401(k) Plan in 2009, 2008 and 2007, respectively.  Mr. Whatley resigned his position as Principal Financial Officer of the Company effective October 30, 2009.

 

(d) Mr. Markert was paid $32,302 pursuant to the Annual Plan that was accrued in 2009 but paid in 2010 and received a payment of $115,568 under the LTPP. The Company matched $3,300, $7,301, and $8,081 of Mr. Markert’s contributions to the Company’s 401(k) Plan in 2009, 2008 and 2007, respectively.

 

67



Table of Contents

 

(e) Mr. Byman was paid $84,208 pursuant to the Annual Plan that was accrued in 2009 but paid in 2010 and received a payment of $127,875 under the LTPP. The Company matched $6,432, $6,900, and $6,750 of Mr. Byman’s contributions to the Company’s 401(k) Plan in 2009, 2008 and 2007, respectively.

 

(f) Mr. Donohue was paid $226,563 pursuant to the Annual Plan that was accrued in 2009 but paid in 2010.  Mr. Donohue did not receive a payment under the LTPP in 2009.  The Company matched $3,283 and $767 of Mr. Donohue’s contributions to the Company’s 401(k) Plan in 2009 and 2008, respectively.

 

(g) Mr. Ownbey was paid $210,000 pursuant to the Annual Plan that was accrued in 2009 but paid in 2010.  Mr. Ownbey did not receive a payment under the LTPP in 2009.  Mr. Ownbey did not participate in the Company’s 401(k) Plan in 2009, 2008 and 2007.

 

(h) Mr. Wolfe was paid $51,625 pursuant to the Annual Plan that was accrued in 2009 but paid in 2010 and received a payment of $105,468 under the LTPP. The Company matched $2,468, $11,900 and $6,750 of Mr. Wolfe’s contributions to the Company’s 401(k) Plan in 2009, 2008 and 2007, respectively.

 

Estimated Future Payouts Under

Non-Equity Incentive Plan Awards

 

Name

 

Grant Date

 

Plan

 

Threshold

 

Target

 

Maximum

 

John B. Poindexter(a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Norbert Markert(b)

 

January 1, 2010

 

Annual Plan

 

$

110,644

 

$

172,881

 

$

292,169

 

 

 

January 1, 2010

 

LTPP

 

$

52,572

 

$

262,860

 

$

525,720

 

 

 

 

 

 

 

 

 

 

 

 

 

Nelson Byman(c)

 

January 1, 2010

 

Annual Plan

 

$

96,815

 

$

151,274

 

$

255,653

 

 

 

January 1, 2010

 

LTPP

 

$

46,500

 

$

232,500

 

$

465,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Larry Wolfe(d)

 

January 1, 2010

 

Annual Plan

 

$

64,979

 

$

101,529

 

$

171,584

 

 

 

January 1, 2010

 

LTPP

 

$

38,350

 

$

191,750

 

$

383,500

 

 

 

 

 

 

 

 

 

 

 

 

 

Jim Donohue(e)

 

January 1, 2010

 

Annual Plan

 

$

108,800

 

$

170,000

 

$

287,300

 

 

 

January 1, 2011

 

LTPP

 

$

51,000

 

$

255,000

 

$

510,000

 

 

 

 

 

 

 

 

 

 

 

 

 

Bill Flint(f)

 

January 1, 2010

 

Annual Plan

 

$

71,429

 

$

111,608

 

$

188,618

 

 

 

January 1, 2011

 

LTPP

 

$

34,050

 

$

170,250

 

$

340,500

 

 

 

 

 

 

 

 

 

 

 

 

 

Mike Ownbey(g)

 

January 1, 2010

 

Annual Plan

 

$

77,051

 

$

120,392

 

$

203,462

 

 

 

January 1, 2012

 

LTPP

 

$

36,750

 

$

183,750

 

$

367,500

 

 


(a) Mr. Poindexter is not eligible to participate in either the Annual Plan or the LTPP.

 

(b) Mr. Markert was granted an award under the Annual Plan with an earnings target of $5.6 million for Morgan for 2009. He was eligible for the threshold amount if Morgan reached 80% of that target and for the maximum amount if Morgan reached 130% of that target. During 2009, Mr. Markert received $115,568 under the LTPP for the three years ended December 31, 2009.  During 2009, Mr. Markert was given a performance target under the LTPP that makes him eligible for an award beginning in 2010.  The PBT earnings target for 2009 was $15.5 million.  The target PBT for the remaining years in the cycle will be determined at a later date.

 

(c) Mr. Byman was granted an award under the Annual Plan with an earnings target of $23.9 million for MIC Group for 2009. He was eligible for the threshold amount if MIC Group reached 80% of that target and for the maximum amount if MIC Group reached 130% of that target.  During 2010, Mr. Byman received $127,875 under

 

68



Table of Contents

 

the LTPP for the three years ended December 31, 2009.  During 2009, Mr. Byman was given a performance target under the LTPP that makes him eligible for an award beginning in 2010 at the same threshold and maximum percentages.  The PBT earnings target for 2009 was $15.5 million.  The target PBT for the remaining years in the cycle will be determined at a later date.

 

(d) Mr. Wolfe was granted an award under the Annual Plan with an earnings target of $33.5 million for the Company for 2009. He was eligible for the threshold amount if the Company reached 80% of that target and for the maximum amount if it reached 130% of that target. During 2009, Mr. Wolfe received $105,468 under the LTTP plan for the three years ended December 31, 2009.  During 2009, Mr. Wolfe was given a performance target under the LTTP that makes him eligible for an award beginning in 2010.  The adjusted PBT earnings target for 2009 was $15.5 million.  The target PBT for the remaining years in the cycle will be determined at a later date.

 

(e) Mr. Donohue was granted an award under the Annual Plan with an earnings target of $6.8 million for Truck Accessories for 2009. He was eligible for the threshold amount if the Company reached 80% of that target and for the maximum amount if it reached 130% of that target. During 2009, Mr. Donohue was given a performance target under the LTTP that makes him eligible for an award beginning in 2011.  The adjusted PBT earnings target for 2009 was $15.5 million.  The target PBT for the remaining years in the cycle will be determined at a later date.

 

(f) Mr. Flint was granted an award under the Annual Plan with an earnings target of $1.6 million for Specialty Vehicle Group for 2009. He was eligible for the threshold amount if the Company reached 80% of that target and for the maximum amount if it reached 130% of that target. During 2009, Mr. Flint was given a performance target under the LTTP that makes him eligible for an award beginning in 2011.  The adjusted PBT earnings target for 2009 was $15.5 million.  The target PBT for the remaining years in the cycle will be determined at a later date.

 

(g) Mr. Ownbey was granted an award under the Annual Plan with an earnings target of $2.9 million for Morgan Olson for 2009. He was eligible for the threshold amount if the Company reached 80% of that target and for the maximum amount if it reached 130% of that target. During 2009, Mr. Ownbey was given a performance target under the LTTP that makes him eligible for an award beginning in 2012.  The adjusted PBT earnings target for 2009 was $15.5 million.  The target PBT for the remaining years in the cycle will be determined at a later date.

 

Nonqualified Deferred Compensation

 

Mr. Byman and Mr. Wolfe were the only two named executives to elect to defer a portion of their annual compensation under the Nonqualified Deferred Compensation Plan.  The balance of Mr. Byman’s account at December 31, 2009 and 2008 was $322,879 and $199,940, respectively.  The balance of Mr. Wolfe’s account at December 31, 2009 and 2008 was $108,482 and $78,007, respectively.

 

Director’s Compensation

 

Directors who are officers or employees do not receive fees for serving as directors. The Company pays $20,000 per year as director’s fees to each outside director. Additionally, Mr. Magee receives $8,000 per year as Chairman of the Audit Committee of the Board of Directors.

 

Name

 

Fees Earned or
Paid in Cash

 

Non-Equity Incentive
Plan Compensation

 

All Other
Compensation

 

Total

 

 

 

 

 

 

 

 

 

 

 

William J. Bowen

 

$

20,000

 

 

 

$

20,000

 

 

 

 

 

 

 

 

 

 

 

Stephen Magee(a)

 

$

28,000

 

 

$

32,000

 

$

60,000

 

 


(a) Mr. Magee is not an employee of the Company and the amount in the All Other Compensation column represents payments made to him as an independent contractor on a variety of consulting assignments.

 

69



Table of Contents

 

Item 12.                                                    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

The following table sets forth information regarding beneficial ownership of the Company’s common stock as of December 31, 2009.  No class of the Company’s securities is registered pursuant to Section 13 or 15(d) of the Exchange Act.

 

Directors, officers and 5% stockholders

 

Title of Class

 

Beneficial
number of
shares

 

Ownership
percent of
class

 

John Poindexter (director and named executive officer)

 

Common Stock

 

3,059

 

100

%

All other directors and executive officers as a group (6 persons)

 

 

 

 

 

Mr. Poindexter has sole voting power with respect to all shares of common stock that he beneficially owns and is the only person who beneficially owns common stock.  His address is 600 Travis St., Suite 200, Houston, Texas 77002.

 

The Company has not reserved any equity shares for issuance under any equity compensation plans.

 

Item 13.                 Certain Relationships and Related Transactions, and Director Independence

 

Of the Company’s three directors, only Mr. Bowen is independent under NASDAQ’s independence standards. Mr. Magee is chairman of the audit committee and is not independent under the standards applicable to audit committee members by the SEC or NASDAQ.

 

The Company is party to a Management Services Agreement with Southwestern Holdings, Inc., (“Southwestern”) which is owned by Mr. Poindexter and of which Mr. Magee, one of the Company’s directors, serves as President.  The Management Services Agreement was suspended effective June 30, 2006 when Mr. Poindexter became an employee of the Company and reinstated effective July 31, 2008 when Mr. Poindexter ceased being an employee of the Company.  Pursuant to the Management Services Agreement, Southwestern provided services to the Company, including those of Mr. Poindexter. The Company paid to Southwestern approximately $45,000 per month for these services, subject to annual automatic increases based upon the consumer price index. The Company may pay a discretionary annual bonus to Southwestern or raise the annual increases above normal adjustments subject to certain limitations. For all services, the Company paid Southwestern $533,714 in 2009, $222,380 in 2008 and $0 in 2007.

 

Southwestern was a named insured under the Company’s general liability and excess umbrella insurance policies during 2007 when Southwestern became the defendant in a suit for damages resulting from a vehicle accident not involving the Company’s assets or any of its team members.  The lawsuit was settled during 2008 and Southwestern paid the amount of the self-insured reserve of $250,000.  Southwestern is no longer a named insured under the Company’s general liability policy effective July 1, 2007.  Any increased premiums under the Company’s umbrella policy incurred in the future by the Company by reason of the settlement will be reimbursed by Southwestern.

 

Effective December 12, 2008, one of the Company’s subsidiaries sold and leased back three of its manufacturing facilities to Poindexter Properties, LLC, a company owned by Mr. Poindexter.  The properties, located in Morgantown and Ephrata, Pennsylvania and Corsicana, Texas, were sold at their appraised value of $7,135,000.  The Company subsidiary paid rent of $932,000 to Poindexter Properties, LLC for the use of the properties in 2009.

 

Mr. Magee provided the Company consulting services in 2007, 2008 and 2009. The Company paid $235,600, $228,000 and $60,000 in 2007, 2008 and 2009, respectively, for director’s fees and for consulting services.  In addition, the Company reimbursed Mr. Magee for related business expenses.

 

70



Table of Contents

 

The Company does not have an established procedure for the review, approval or ratification of related-party transactions. Prior to entering into any such transaction, however, the executive officers of the Company determine whether the transaction is permitted by the terms of the Company’s 8.75% Notes indenture, the credit facility agreement and other relevant contractual obligations.

 

Item 14. Principal Accountant Fees and Services

 

The following table sets forth the fees billed to us by our independent auditors, Crowe Horwath, LLP (“CH”):

 

 

 

2009

 

2008

 

2007

 

Audit Fees

 

$

337,760

 

$

326,930

 

$

350,000

 

Audit-related Fees

 

63,925

 

 

51,875

 

Tax Fees

 

 

 

 

Other Fees

 

 

 

208,225

 

Total Fees

 

$

401,685

 

$

326,930

 

$

610,100

 

 

Audit Fees.

 

Audit fees are the charges billed by CH during the year in connection with the conclusion of the prior year audit and the current year audit of our consolidated financial statements as well as reviews of our quarterly reports on Form 10-Q.

 

Audit-related fees are the charges billed by CH for assurance and related services, including accounting advice related to the restatement of the Company’s 2006 consolidated financial statements and other matters.

 

Other fees were comprised mainly of assistance with due diligence conducted on the Company’s acquisitions during the year.

 

These fees were preapproved by the Audit Committee under the procedures described below.

 

Preapproval Procedures

 

The Company’s Audit Committee is responsible for the engagement of the independent auditors and for approving, in advance, all auditing services and permitted non-audit services to be provided by the independent auditors. The Audit Committee maintains a policy governing the engagement of independent auditors that is intended to maintain the independence from the Company of the independent auditors. In adopting this policy, the Company’s Audit Committee considered the various services that independent auditors have historically performed or may be needed to perform for the Company. Under this policy, which is subject to review and re-adoption annually by the Audit Committee:

 

·                                          The Audit Committee approves the performance by the independent auditors of audit-related services, subject to restrictions in certain cases, based on the Audit Committee’s determination that this action would not be likely to impair the independence of the independent auditors from the Company;

 

·                                          The Company’s management must obtain the specific prior approval of the Company’s Audit Committee for each engagement of the independent auditors to perform any auditing or permitted non-audit services; provided however, that specific prior approval by the Company’s Audit Committee is not required for any auditing services that are within the scope of a preapproved engagement and that are consistent with other services provided by the auditor in the past; and provided further that specific prior approval is not required for permitted non-audit services that:

 

(i)                                     in the aggregate do not total more than $25,000;

 

71



Table of Contents

 

(ii)                                  were not recognized by the Company at the time of the engagement to be non-audit services; and

 

(iii)                               are promptly brought to the attention of the Company’s Audit Committee and approved by the Audit Committee in accordance with this policy prior to the completion of the audit.

 

·                                          The performance by the independent auditors of certain types of services (bookkeeping or other services related to the accounting records or financial statements of the Company; financial information systems design and implementation; appraisal or valuation services, fairness opinions or contribution-in-kind reports; actuarial services; internal audit outsourcing services; management functions or human resources; broker or dealer, or investment adviser or investment banking services; legal services and expert services unrelated to the audit; and any other service that the applicable federal oversight regulatory authority determines, by regulation, is impermissible) is prohibited due to the likelihood that their independence would be impaired.

 

Any approval required under this policy must be provided by the Company’s Audit Committee, by the chairman of the Audit Committee in office at the time, or by any other Audit Committee member to whom the Audit Committee has delegated that authority. The Company’s Audit Committee will not delegate its responsibilities to approve services performed by the independent auditors to any member of management.

 

The standard applied by the Company’s Audit Committee in determining whether to grant approval of an engagement of the independent auditors is whether the services to be performed, the compensation to be paid for such services and other related factors are consistent with the independent auditor’s independence under guidelines of the Securities and Exchange Commission and applicable professional standards. Relevant considerations include, but are not limited to, whether the work product is likely to be subject to, or implicated in, audit procedures during the audit of the Company’s financial statements; whether the independent auditors would be functioning in the role of management or in an advocacy role; whether performance of the service by the independent auditors would enhance the Company’s ability to manage or control risk or improve audit quality; whether performance of the service by the independent auditors would increase efficiency because of their familiarity with the Company’s business, personnel, culture, systems, risk profile and other factors; and whether the amount of fees involved, or the proportion of the total fees payable to the independent auditors in the period that is for tax and other non-audit services, would tend to reduce the ability of the independent auditors to exercise independent judgment in performing the audit.

 

72



Table of Contents

 

Part IV

 

Item 15.   Exhibits and Financial Statement Schedules

 

1.             Financial Statements:

 

The following financial statements are included within the text of this report:

 

Financial Statement

 

Consolidated Balance Sheets as of December 31, 2009 and 2008

Consolidated Statements of Income for the years ended December 31, 2009, 2008 and 2007

Consolidated Statements of Stockholder’s Equity for the years ended December 31, 2009, 2008 and 2007

Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007

Notes to Consolidated Financial Statements

 

2.             Financial Statement Schedules:

 

Valuation and Qualifying Accounts disclosures have been incorporated in the Notes to Consolidated Financial Statements.

 

3.             Exhibits

 

The following exhibits are included with this report:

 

Exhibit
Number

 

Description

 

 

 

3.1 (1)

 

Second Restated Certificate of Incorporation of J.B. Poindexter & Co., Inc. dated January 21, 1994.

 

 

 

3.2 (2)

 

Certificate of First Amendment to the Second Restated Certificate of Incorporation of J.B. Poindexter & Co., Inc. dated December 29, 1994.

 

 

 

3.3 (2)

 

Amended and Restated Bylaws of J.B. Poindexter & Co., Inc. dated July 29, 1994

 

 

 

4.1(4)

 

Indenture dated as of March 15, 2004, with respect to J.B. Poindexter & Co., Inc.’s 8.75% Senior Notes due 2014, among J.B. Poindexter & Co., Inc., the subsidiary guarantors named therein and Wilmington Trust Company, as trustee.

 

 

 

4.2(5)

 

Form of 8.75% Senior Notes due 2014.

 

 

 

4.3(5)

 

Form of Senior Note Guarantee of 8.75% Senior Notes due 2014.

 

 

 

4.4(5)

 

First Supplemental Indenture dated December 14, 2004, to the Indenture dated as of March 15, 2004, with respect to J.B. Poindexter & Co., Inc.’s 8.75% Senior Notes due 2014, among J.B. Poindexter & Co., Inc., the subsidiary guarantors named therein and Wilmington Trust Company, as trustee.

 

 

 

4.5(4)

 

Registration Rights Agreement dated March 15, 2004, among J.B. Poindexter & Co., Inc.,

 

73



Table of Contents

 

 

 

certain guarantors listed therein, J.P. Morgan Securities Inc. and certain initial purchasers listed therein.

 

 

 

4.6(5)

 

Registration Rights Agreement dated May 17, 2004, among J.B. Poindexter & Co., Inc., certain guarantors listed therein and J.P. Morgan Securities Inc.

 

 

 

4.7(5)

 

Registration Rights Agreement dated January 27, 2005, among J.B. Poindexter & Co., Inc., certain guarantors listed therein and J.P. Morgan Securities Inc.

 

 

 

4.8(7)

 

Second Supplemental Indenture dated June 10, 2005, to the Indenture dated as of March 15, 2004, with respect to J.B. Poindexter & Co., Inc.’s 8.75% Senior Notes due 2014, among J.B. Poindexter & Co., Inc., the subsidiary guarantors named therein and Wilmington Trust Company, as trustee.

 

 

 

4.9(8)

 

Third Supplemental Indenture dated January 9, 2006, to the Indenture dated as of March 15, 2004, with respect to J.B. Poindexter & Co., Inc.’s 8.75% Senior Notes due 2014, among J.B. Poindexter & Co., Inc., the subsidiary guarantors named therein and Wilmington Trust Company, as trustee.

 

 

 

4.10(8)

 

Fourth Supplemental Indenture dated April 17, 2006, to the Indenture dated as of March 15, 2004, with respect to J.B. Poindexter & Co., Inc.’s 8.75% Senior Notes due 2014, among J.B. Poindexter & Co., Inc., the subsidiary guarantors named therein and Wilmington Trust Company, as trustee.

 

 

 

4.11(9)

 

Fifth Supplemental Indenture dated September 30, 2006, to the Indenture dated as of March 15, 2004, with respect to J.B. Poindexter & Co., Inc.’s 8.75% Senior Notes due 2014, among J.B. Poindexter & Co., Inc., the subsidiary guarantors named therein and Wilmington Trust Company, as trustee.

 

 

 

4.12(10)

 

Sixth Supplemental Indenture dated September 4, 2007, to the Indenture dated as of March 15, 2004, with respect to J.B. Poindexter & Co., Inc.’s 8.75% Senior Notes due 2014, among J.B. Poindexter & Co., Inc., the subsidiary guarantors named therein and Wilmington Trust Company, as trustee.

 

 

 

4.13(11)

 

Seventh Supplemental Indenture dated December 31, 2008, to the Indenture dated as of March 15, 2004, with respect to J.B. Poindexter & Co., Inc.’s 8.75% Senior Notes due 2014, among J.B. Poindexter & Co., Inc., the subsidiary guarantors named therein and Wilmington Trust Company, as trustee.

 

 

 

10.1(4)

 

Loan and Security Agreement dated March 15, 2004, among J.B. Poindexter & Co., Inc., certain subsidiaries thereof, certain other loan parties signatories thereto and LaSalle Bank National Association, a national banking association, for itself, as a lender, and as the agent for the lenders.

 

 

 

10.2(4)

 

First Amendment to Loan and Security Agreement dated May 13, 2004, among J.B. Poindexter & Co., Inc., certain subsidiaries thereof, certain other loan parties signatories thereto and LaSalle Bank National Association, a national banking association, for itself, as a lender, and as the agent for the lenders.

 

 

 

10.3(5)

 

Limited Consent and Second Amendment to Loan and Security Agreement dated November 3, 2004, among J.B. Poindexter & Co., Inc., certain subsidiaries thereof, certain other loan parties signatories thereto and LaSalle Bank National Association, a national banking association, for itself, as a lender, and as the agent for the lenders.

 

74



Table of Contents

 

10.4(5)

 

Third Amendment to Loan and Security Agreement dated January 20, 2005, among J.B. Poindexter & Co., Inc., certain subsidiaries thereof, certain other loan parties signatories thereto and LaSalle Bank National Association, a national banking association, for itself, as a lender, and as the agent for the lenders.

 

 

 

10.5(4)

 

Sales Agreement dated October 1, 2004 between E. I. du Pont de Nemours and Company and Morgan Trailer Mfg. Co.

 

 

 

10.6(4)

 

Sales Agreement dated October 1, 2004 between E. I. du Pont de Nemours and Company and Truck Accessories Group, Inc.

 

 

 

10.7 (1)

 

Form of Incentive Plan for certain employees of the subsidiaries of J.B. Poindexter & Co., Inc.

 

 

 

10.8 (1)

 

Morgan Trailer Mfg. Co. Long-Term Management Equity Appreciation Program dated May 10, 1990.

 

 

 

10.9(5)

 

Management Services Agreement dated as of May 23, 1994, between J.B. Poindexter & Co., Inc. and Southwestern Holdings, Inc.

 

 

 

10.10 (3)

 

Management Services Agreement effective as of December 19, 2003, between J.B. Poindexter & Co., Inc., Morgan Trailer Mfg. Co., and Morgan Olson.

 

 

 

10.11 (6)

 

Fourth Amendment to Loan and Security Agreement dated April 25, 2005, among J.B. Poindexter & Co., Inc., certain subsidiaries thereof, certain other loan parties signatories thereto and LaSalle Bank National Association, a national banking association, for itself, as a lender, and as the agent for the lenders.

 

 

 

10.12 (9)

 

Limited Consent, Joinder and Fourth Omnibus Amendment dated October 10, 2006, among J.B. Poindexter & Co., Inc., certain subsidiaries thereof, certain other loan parties signatories thereto and LaSalle Bank National Association, a national banking association, for itself, as a lender, and as the agent for the lenders.

 

 

 

10.13(10)

 

10.13 Limited Consent, Joinder and Fifth Omnibus Amendment dated April 30, 2007, among J.B. Poindexter & Co., Inc., certain subsidiaries thereof, certain other loan parties signatories thereto and LaSalle Bank National Association, a national banking association, for itself, as a lender, and as the agent for the lenders.

 

 

 

10.14(10)

 

Limited Consent, Joinder and Sixth Omnibus Amendment dated August 22, 2007, among J.B. Poindexter & Co., Inc., certain subsidiaries thereof, certain other loan parties signatories thereto and LaSalle Bank National Association, a national banking association, for itself, as a lender, and as the agent for the lenders.

 

 

 

10.15(10)

 

Limited Consent, Joinder and Seventh Omnibus Amendment dated September 4, 2007, among J.B. Poindexter & Co., Inc., certain subsidiaries thereof, certain other loan parties signatories thereto and LaSalle Bank National Association, a national banking association, for itself, as a lender, and as the agent for the lenders.

 

 

 

10.16(11)

 

Limited Consent, Joinder and Eight Omnibus Amendment dated October 7, 2008, among J.B. Poindexter & Co., Inc., certain subsidiaries thereof, certain other loan parties signatories thereto and Bank of America, a national banking association, for itself, as a lender, and as the agent for the lenders.

 

75



Table of Contents

 

10.17*

 

Limited Consent, Joinder and Ninth Omnibus Amendment dated January 14, 2010, among J.B. Poindexter & Co., Inc., certain subsidiaries thereof, certain other loan parties signatories thereto and Bank of America, a national banking association, for itself, as a lender, and as the agent for the lenders.

 

 

 

12*

 

Computation of Ratio of Earnings to Fixed Charges

 

 

 

14*

 

Code of Ethics

 

 

 

21*

 

List of subsidiaries of J.B. Poindexter & Co., Inc.

 

 

 

31.1*

 

Rule 13(a)-14(a)/15d-14(a) Certificate of the Chief Executive Officer

 

 

 

31.2*

 

Rule 13(a)-14(a)/15d-14(a) Certificate of the Chief Financial Officer

 

 

 

32.1*

 

Section 1350 Certificate of the Chief Executive Officer

 

 

 

32.2*

 

Section 1350 Certificate of the Chief Financial Officer

 


#                                         Management contracts or compensatory plans.

*                                         Filed herewith.

 

(1)                                 Incorporated by reference to J.B. Poindexter & Co., Inc.’s Registration Statement on Form S-1 (No. 33-75154) as filed with the SEC on February 10, 1994.

(2)                                 Incorporated by reference to J.B. Poindexter & Co., Inc.’s Annual Report on Form 10-K for the year ended December 31, 1994, as filed with the SEC on March 31, 1995.

(3)                                 Incorporated by reference to J.B. Poindexter & Co., Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003, as filed with the SEC on November 14, 2003.

(4)                                 Incorporated by reference to J.B. Poindexter & Co., Inc.’s Registration Statement on Form S-4 (No. 333-123598) as filed with the SEC on March 25, 2005.

(5)                                 Incorporated by reference to J.B. Poindexter & Co., Inc.’s Registration Statement as amended on Form S-4A (No. 333-123598) as filed with the SEC on April 7, 2005.

(6)                                 Incorporated by reference to J.B. Poindexter & Co., Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005, as filed with the SEC on November 14, 2005.

(7)                                 Incorporated by reference to J.B. Poindexter & Co., Inc.’s Annual Report on Form 10-K for the year ended December 31, 2005, as filed with the SEC on March 31, 2006.

(8)                                 Incorporated by reference to J.B. Poindexter & Co., Inc.’s Quarterly Report on Form 10-Q/A for the quarter ended September 30, 2006, as filed with the SEC on September 5, 2007.

(9)                                 Incorporated by reference to J.B. Poindexter & Co., Inc.’s Annual Report on Form 10-K for the year ended December 31, 2006, as filed with the SEC on April 2, 2007.

(10)                          Incorporated by reference to J.B. Poindexter & Co., Inc.’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007, as filed with the SEC on November 20, 2007.

(11)                          Incorporated by reference to J.B. Poindexter & Co., Inc.’s Annual Report on Form 10-K for the year ended December 31, 2008, as filed with the SEC on March 31, 2009.

 

76



Table of Contents

 

SIGNATURES

 

Pursuant to the requirements of Section 13 or 15(d) 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.

 

 

J.B. POINDEXTER & CO., INC.

 

 

 

 

 

 

Date: March 31, 2010

By

  /s/ John B. Poindexter

 

John B. Poindexter, Chairman of the Board,

 

Chief Executive Officer and President

 

(Principal Executive Officer)

 

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

 

Date: March 31, 2010

By

  /s/ John B. Poindexter

 

John B. Poindexter, Chairman of the Board,

 

Chief Executive Officer and President

 

(Principal Executive Officer)

 

 

 

Date: March 31, 2010

By

  /s/ Stephen Magee

 

Stephen P. Magee, Director

 

 

 

Date: March 31, 2010

By

  /s/ William J. Bowen

 

William J. Bowen, Director

 

 

 

Date: March 31, 2010

By

  /s/ David Kay

 

David Kay, Chief Financial Officer

 

(Principal Financial and Accounting Officer)

 

77