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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, 2010

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)

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 o  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 404 of Regulation S-T  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):

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 April 13, 2011 was $0.00.

As of April 13, 2011, the registrant had 3,059 shares of common stock issued and outstanding.

Documents incorporated by reference. None

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

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PART I

Item 1.                    Business

This document includes statements that are, or may be deemed to be, ‘‘forward-looking statements.’’ These forward-looking statements can be identified by the use of forward-looking terminology, including the terms ‘‘believes,’’ ‘‘estimates,’’ ‘‘anticipates,’’ ‘‘expects,’’ ‘‘intends,’’ ‘‘may,’’ ‘‘will’’ or ‘‘should’’ or, in each case, their negative or other variations or comparable terminology.  These forward-looking statements include all matters that are not historical facts.  They appear in a number of places throughout this document and include statements regarding our intentions, beliefs or current expectations concerning, among other things, our results of operations, financial condition, liquidity, prospects, growth, strategies and the industries in which we operate.

These forward-looking statements are made based upon our expectations and beliefs concerning future events impacting us and therefore involve a number of risks and uncertainties.  By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future.  We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and developments in the industries in which we operate may differ materially and adversely from the forward-looking statements contained in this document.

You should read carefully the items described in ‘‘Risk Factors’’ in Item 1A of this document to better understand the risks and uncertainties inherent in our business and underlying any forward-looking statements.

Any forward-looking statements that we make in this document refer only to our opinions prevailing on the date of such statement, and we undertake no obligation to review, revise or update such statements.  Comparisons of results for current and prior periods are not intended to express future trends or indications of future performance; such comparisons should only be viewed as historical in nature.

Overview

J.B. Poindexter & Co., Inc. designs, manufactures and markets commercial truck bodies, step vans, pickup truck caps and tonneaus, funeral coaches and limousines, specialty oil and gas industry equipment, and expanded foam packaging.  The company operates under a semi-decentralized business model with six business units reported in four operating segments:

Unless the context otherwise requires, the “Company,” “we,” “our” or “us” refers to J.B. Poindexter & Co., Inc. (“JBPCO” or “Parent”) together with its operating subsidiaries.  Our six business units are overseen by a corporate executive team at the Parent located in Houston, Texas.  All of the business units’ headquarters are located outside Houston, Texas.  The company is wholly owned by John B. Poindexter.

For the year ended December 31, 2010, our revenues were approximately $553 million, of which 36% were derived from Morgan, 15% from Morgan Olson, 22% from Truck Accessories and 27% from Specialty Manufacturing.  Please see Note 2 of our financial statements included herein for a description of financial information by segment.

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Accomplishments in 2010

Our strategic goals are to grow revenues faster than our competitors, and to increase net income and net cash provided by operating activities faster than revenues.  We believe operational excellence, upgrading executive talent and internal process improvements will help us achieve our goals.

Over the last several years the Company has embarked upon a focused profit improvement strategy with five key initiatives:

·                  Upgrade executive talent at the Parent and at each business unit.

·                  Execute lean manufacturing principles.

·                  Globalize and diversify sources of procurement.

·                  Rationalize and consolidate facilities.

·                  Divest unprofitable lines of business.

Guided by these initiatives, the Company during 2010 enhanced its Parent management team by adding new positions and upgrading others.  Business units progressed in their lean implementation programs and are delivering efficiency improvements while global and diversified sourcing has become ingrained in the Company’s culture.  The Company completed its facility rationalization program in 2010 with the successful consolidation of Specialty Vehicle Group’s Fort Smith, Arkansas facility into Specialty Vehicle Group’s Amelia, Ohio facility, a curtailment of costly and inefficient activities at EFP’s Elkhart, Indiana facility and the finalization of the sale of MIC’s Milwaukee facility.  Divestiture of uneconomic lines of business positively impacted the Company as MIC canceled a highly unprofitable customer contract in the fourth quarter of 2010, Specialty Vehicle Group benefitted from the sale of its loss making transit bus business and EFP exited a number of marginal product lines.

These improvements and others produced a 128% operating income improvement in three of our four segments which were unfortunately offset by a decline in operating income at MIC Group, a business unit of Specialty Manufacturing.

Specifically in 2010 we:

·                  Realized an improvement in operating income of 128% or $14.8 million from $11.6 million in 2009 to $26.4 million in 2010, in three of our four segments.

·                  Increased our operating margin as a percentage of sales in the three segments noted above to 6.5% in 2010 from 3.6% in 2009 as a result of cyclical factors in the industries in which we compete and, more meaningfully, operating improvements.

·                  Improved working capital performance by reducing accounts receivable days outstanding to 24 days from 27 days and inventory turnover to 8 from 7 turns per year.

·                  Maintained cash reserves of $58 million and an available revolver of $49 million ($50 million of untapped revolver less $1 million of insurance letters of credit).

·                  Developed new products that incorporate the voice of our customers, provide differentiation from competition and strengthen our position as a leader in innovation.  Examples include Morgan Olson’s development of a composite vehicle on an all-electric chassis and Morgan’s “Green” initiative for light-duty truck bodies that are more fuel-efficient to operate.

·                  Increased international lower-cost-country sourcing by 450%, which improved operating income by $2 million in 2010 compared to 2009.

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·                  Upgraded key positions on the Parent staff including the newly created positions of Chief Operating Officer, Vice President of Operational Improvement and Vice President of International Development.

Shortcomings in 2010

Early in the third quarter, Parent management recognized the onset of a deterioration in the earnings of MIC, the largest component of the Specialty Manufacturing segment.  This deterioration, ultimately a $7.7 million reduction in operating income compared to the year ended 2009, which itself was a cyclically depressed year, was primarily attributable to: (1) startup costs of a new facility in Malaysia; (2) poor management practices; (3) inappropriately priced contracts; and (4) operational inefficiencies.  Our Parent executive team became intensively involved in MIC and has, among other things:

·                  Replaced, or is replacing, most senior management personnel at MIC.

·                  Canceled unprofitable contracts and established new product quoting techniques.

·                  Reduced operating costs in Malaysia.

·                  Increased prices where mandated by inadequate margins.

·                  Improved lean manufacturing and purchasing procedures.

·                  Transferred Parent executives to permanent positions at MIC.

Due to the changes above, we expect MIC’s operating income to significantly improve in 2011.

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 2010 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 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 six 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® or composite panels, and 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.

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

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 rental to the general public (“Consumer Rental” sales); and

·             sales of parts and services.

Morgan’s revenues constituted 36% of JBPCO’s consolidated revenues in 2010, 31% in 2009 and 33% in 2008.  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 79% of Morgan’s revenues in 2010, 80% in 2009 and 78% in 2008.

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 2010.

Consumer Rental sales are composed of sales to companies that maintain large fleets of one-way and local hauling vehicles available for rental to the general public. Morgan makes these sales through a bidding process and negotiation directly with these companies through its sales force.  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 profitability depends on factors such as product mix and delivery schedules. Consumer Rental sales constituted 14% of Morgan’s revenues in 2010, 11% in 2009 and 15% in 2008.

Morgan’s two largest customers have historically represented approximately 45% to 60% of Morgan’s total revenues.  Both have been Morgan’s customer for approximately 25 years and we believe our relations with both are good.  Sales to these customers represented 20% of JBPCO’s consolidated revenues in 2010, 17% in 2009 and 16% in 2008.  Accounts receivable from these customers were $2.3 million and $2.8 million at December 31, 2010 and 2009, respectively.

Morgan offers limited service programs at its service facilities and its authorized distributors. Service sales constituted 5% of Morgan’s revenues in 2010, 5% in 2009 and 5% in 2008.

Morgan also sells its products in Canada and Mexico.  In 2010, foreign sales (primarily in Canada) represented approximately 6% of Morgan’s revenues and 2% of JBPCO’s consolidated revenues.

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, Georgia, Pennsylvania, Texas, Wisconsin, and Ontario, Canada.

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

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and installs the body on the customer-owned chassis and the customer or Morgan arranges for delivery of the completed truck.

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, 2010 was $86.7 million compared to $73.1 million at December 31, 2009. Morgan expects to complete all of the orders in its 2010 year-end backlog during 2011.

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 Morgan’s business.

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.  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 four business segments.

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 previously deferred and expand their fleets.

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.  There are also a large number of smaller manufacturers that are regionally focused. Competitive factors in the industry include product quality, delivery time, geographic proximity of manufacturing facilities to customers, warranty terms, service and price.

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 revenues constituted 15%, 13% and 15% of JBPCO’s consolidated revenues in 2010, 2009 and 2008, 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. Morgan Olson’s customers include these customers along with

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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 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.  There can be no assurance, however, 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., which accounted for approximately 41%, 31% and 44% of Morgan Olson’s revenues during 2010, 2009 and 2008, respectively.  Accounts receivable from this customer were $0.1 million at both December 31, 2010 and 2009.

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.

At December 31, 2010, Morgan Olson’s total backlog was $8.9 million, compared to $38.1 million at December 31, 2009. We expect that Morgan Olson will fill all 2010 backlog orders in 2011.

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 four business segments.

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 previously deferred and expand their fleets.

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Competition.  Although Morgan Olson competes with one other major manufacturer of step van bodies, the step van body manufacturing industry is highly competitive.  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 fiberglass and aluminum 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 beds 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 withdrawn into an integrated storage enclosure 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 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’ revenues constituted 22% of JBPCO’s consolidated revenues in 2010, 24% in 2009 and 19% in 2008.

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 2010, foreign sales (primarily in Canada) represented approximately 20% of Truck Accessories’ revenues and 4% of JBPCO’s consolidated revenues.

Manufacturing and supplies.  The design and manufacture of Truck Accessories’ products takes place at eight manufacturing facilities located in California (two), Indiana (four), 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 with some 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 negotiated prices.  As a result of its size and purchasing power, Truck Accessories has maintained a stable supply of

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materials and components on terms we believe to be favorable and 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 $2.7 million at December 31, 2010 compared to $2.6 million at December 31, 2009.

Industry.  Sales of caps and tonneaus, in general, correspond to the level of new pickup truck sales in the United States and Canada. In 2010, we estimate that 16% to 18% 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 8% 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’ sales volume.  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 and EFP, and its sales made up 27% of JBPCO’s consolidated revenues in 2010, 33% in 2009 and 34% in 2008.

Specialty Vehicle Group represents approximately 21% of Specialty Manufacturing’s 2010 revenues and is comprised of Federal Coach and Eagle Coach.  Specialty Vehicle Group manufactures funeral coaches, limousines and specialized transit buses.  Specialty Vehicle Group consolidated its two funeral coach and limousine manufacturing operations into one facility in 2010.  As part of this decision to consolidate, Specialty Vehicle Group decided to exit the specialized transit bus business and sold this product line and related assets, including certain equipment, inventory and intangible assets on December 31, 2009.  See Note 4 of Notes to the Consolidated Financial Statements.

MIC represents approximately 62% of Specialty Manufacturing’s 2010 revenues and provides manufacturing services for customers requiring precision machining of metal parts and casting services, with a concentration of customers in the oil and gas exploration and production services industry.

EFP represents approximately 17% of Specialty Manufacturing’s 2010 revenues and manufactures and sells expandable polystyrene and polypropylene foam, engineered to customer specifications for use by the medical, electronics, food, furniture, plumbing, and appliance industries.

Products.   Specialty Vehicle Group manufactures a full line of funeral coaches and limousines.  We estimate that Specialty Vehicle’s funeral product sales represent approximately 46% of the domestic funeral coach market.   On December 31, 2009, Specialty Vehicle Group exited the specialized transit bus business and sold the assets related to these operations.

MIC 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

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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 and limousines to end users, such as livery companies, funeral directors and approximately 24 authorized dealers.  Its largest customer represented approximately 4% of the total revenues of Specialty Manufacturing in 2010, 1% in 2009 and 3% in 2008.  Specialty Vehicle Group also sells its products in Canada and Europe.  In 2010, foreign sales represented approximately 3% of Specialty Manufacturing’s revenues and 1% of JBPCO’s consolidated revenues.

MIC 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 44% of the total sales of Specialty Manufacturing in 2010, 39% in 2009 and 42% in 2008.

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, Indiana, Oklahoma, Ohio, Tennessee, Texas (three), Malaysia and Mexico. Its facilities in Alabama, Oklahoma, Texas and Mexico are ISO 9000 certified and its facility in Indiana is ISO 9000, ISO 14001 and ISO/TS 16949 certified.

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 modified sedan, usually manufactured by the Cadillac division of General Motors or the Lincoln division of Ford, and modifies it to its specifications.    Specialty Vehicle Group utilizes metals, polymer resins, wood, fiberglass, and petrochemical-based products including paints, plastics, sealants and lubricants.

MIC 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 electromechanical assembly. MIC 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 formerly manufactured for bus bodies, and 48 months or 100,000 miles on the portion of the body and parts manufactured for limousines.  Warranty costs have not had a material adverse effect on Specialty Manufacturing’s business.

Specialty Manufacturing’s backlog at December 31, 2010 was $67.3 million compared to $36.1 million at December 31, 2009.  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’s services are used by companies involved in oil and gas exploration and production 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.

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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 almost immediately affect EFP’s operations.

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

MIC 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.

JBPCO (Parent)

The Parent has historically provided strategic direction and support to the business units.  This role has been expanded to include coordination and direction over lean activities, international sourcing activities and the expansion of information technology resources to develop initiatives across all business.

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, 2010, we had 2,800 full-time team members and an average of 3,022 full-time team members throughout the year.  Team members are unionized only at EFP’s Decatur, Alabama facility, where approximately 35 team members are parties 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 concerning, without limitation, water quality and air quality, which may restrict our activities and which are subject to renewal, modification or revocation by issuing authorities. In addition, we generate hazardous wastes, which are also subject to regulation under applicable environmental laws.

The Clean Water Act imposes strict controls on the discharge of pollutants into the navigable waters of the United States.  The Clean Water Act also provides for civil, criminal and administrative penalties for any unauthorized discharge of hazardous substances in reportable quantities and imposes liability for the costs of removal and

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remediation of an unauthorized discharge.  Many states have laws that are analogous to the Clean Water Act and also require remediation of accidental releases in reportable quantities.  Both the Clean Water Act and many related state statutes and regulations require permit authorizations for certain operations.  We hold all of the required permits pertaining to our operations under the Clean Water Act and its state counterparts.

The Clean Air Act limits the ambient air discharge of certain materials deemed to be hazardous and establishes a federal air quality permitting program for such discharges.  Many states have laws and programs that are analogous to the Clean Air Act.  We hold and maintain all of the required air quality permits applicable to our operations.  In addition, the EPA has promulgated, under the Clean Air Act, emissions standards for heavy-duty vehicles that may increase the cost of heavy-duty trucks manufactured after 2010.  These standards may negatively impact the market for new heavy-duty trucks, which may negatively impact the market for our products.

On December 15, 2009, the EPA officially published its “Endangerment Finding,” an official finding that emissions of carbon dioxide, methane and other greenhouse gases (GHGs) present an endangerment to human health and the environment because emissions of such gases are, according to the EPA, contributing to warming of the Earth’s atmosphere and other climatic changes. The Endangerment Finding allows the agency to proceed with the adoption and implementation of regulations that would restrict emissions of GHGs under existing provisions of the CAA. The agency has proceeded to promulgate and implement regulations concerning this Finding, including the Light Duty Vehicle Rule, which sets more stringent emissions standards for vehicles, and the Tailoring Rule, which requires new and modified large emitting sources of greenhouse gases to use the Best Available Control Technology to reduce greenhouse gas emissions.  These rules could negatively impact the market for our products because of either increased fuel costs due to carbon regulations or increased engine manufacturing costs.  Moreover, lawsuits have been filed seeking to require individual companies to reduce GHG emissions from their operations. These and other lawsuits relating to GHG emissions may result in decisions by state and federal courts and agencies that could impact our operations.

The Resource Conservation and Recovery Act regulates the generation, transportation, storage, treatment and disposal of hazardous and nonhazardous wastes and requires states to develop programs to ensure the safe disposal of wastes.  We believe that all of the wastes that we generate are handled in all material respects in compliance with the Resource Conservation and Recovery Act and analogous state statutes and regulations.

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 14 of Notes to Consolidated Financial Statements.

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.

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Item 1A.                 Risk Factors

You should carefully consider the following risks in addition to the other information included in this report.  Each of these risks could adversely affect our business, operating results and financial condition, as well as adversely affect the value of an investment in our securities.

Our businesses are highly cyclical. A continuation of the present 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.

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 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. 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 we 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 our 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 $17.6 million of stockholder’s equity at December 31, 2010 and long-term debt of $203.5 million, including $199.6 million in aggregate principal amount of 8.75% Notes due 2014 and $3.9 million of capital lease obligations.  We had $48.6 million of secured debt availability under our revolving credit facility.

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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 together accounted for 56%, 54% and 48% of Morgan’s revenues during 2010, 2009 and 2008, respectively, and accounted for 20%, 17% and 16% of JBPCO’s consolidated revenues during 2010, 2009 and 2008, respectively.

·                  One customer accounted for 41%, 31% and 44% of Morgan Olson’s revenues during 2010, 2009 and 2008, respectively, and accounted for 6%, 7% and 7% of JBPCO’s consolidated revenues during 2010, 2009 and 2008, respectively.

·                  Two customers accounted for 44%, 39% and 42% of Specialty Manufacturing’s revenues during 2010, 2009 and 2008, respectively, and accounted for 12%, 13% and 14% of JBPCO’s consolidated revenues in 2010, 2009 and 2008, respectively.

·                  Our top ten customers accounted for 45%, 39% and 44% of JBPCO’s consolidated revenues in 2010, 2009 and 2008, respectively.

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.

Future operations could be affected by interruptions of production beyond our control.

Our business, financial condition or results of operations may be adversely affected by certain events that we cannot anticipate or that are beyond our control, such as earthquakes, fires, floods, hurricanes, wars, terrorist attacks, computer viruses, pandemics, breakdowns or impairments of our information system or communication network, or other natural disasters or national emergencies that could curtail production at our facilities and may cause delayed deliveries and canceled orders.  Even if the facilities are not directly affected by such events, we could be affected by interruptions at our suppliers.  Such suppliers may be less likely to be able to quickly recover from such events and may be subject to additional risks such as financial problems that limit their ability to conduct their operations.  In addition, global supply disruptions, such as those caused by political or other dislocations, could lead to shortages of materials used in our products. These could delay or increase the cost of our products and result in an adverse effect on our future profitability.

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

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

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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 14 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 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.

Insurance coverage may be inadequate to cover all significant risk exposures.

We may be exposed to liabilities that are unique to our products.  While we maintain insurance for certain risks, the amount of our insurance coverage may not be adequate to cover all claims or liabilities, and we may be forced to bear substantial costs resulting from risks and uncertainties of our business.  It is also not possible to obtain insurance to protect against all operational risks and liabilities.  The failure to obtain adequate insurance coverage on terms favorable to us, or at all, could have a material adverse effect on our business, financial condition or results of operations.

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

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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 we 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 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 dated as of March 15, 2004, as amended (the “Indenture”), 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.

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.

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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. Both of our 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.

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Item 2.                    Properties

We own or lease the following manufacturing, office and sales facilities as of December 31, 2010:

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*Effective December 12, 2008, these facilities were sold to and leased back from an entity owned by John Poindexter.  See Note 15 of Notes to Consolidated Financial Statements.

**Effective December 17, 2010, these facilities were sold to and leased back from an entity owned by John Poindexter.  See Note 15 of Notes to Consolidated Financial Statements.

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.                                                        (Removed and Reserved)

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, 2011, 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 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.

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Item 6.                    Selected Financial Data

The selected financial data shown below for each of the five years in the period ended December 31, 2010 has been derived from the Consolidated Financial Statements of the Company.  The following data should be read in conjunction with the Consolidated Financial Statements and related Notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this Form 10-K.

(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.  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:

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(c)            “Consolidated Coverage Ratio” is the ratio of EBITDA to interest expense.  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.

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

Management’s Discussion and Analysis

The following discussion should be read in conjunction with the Company’s Consolidated Financial Statements and the related notes thereto that appear in this Annual Report on Form 10-K.

The Company has determined its reportable segments in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 820, Segment Reporting. The Company evaluates the performance of its reportable segments based on operating income, which is defined as income before interest expense, other income, net, and income taxes. Reportable segment operating income and segment operating margin (defined as segment operating income divided by segment revenues) are indicative of short-term operational performance and ongoing profitability. Management closely monitors the operating income and operating margin of each business segment to evaluate past performance and identify actions required to improve profitability.

Overview and Description of 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’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 our Canadian subsidiary 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

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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, LowRider, BoxTop and 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”) 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 and limousines.  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 transit bus business and sold its specialized transit bus business (see Note 4).  MIC 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.

The following table shows our revenues, operating income and operating income as a percentage of revenues for each segment for the years ended December 31, 2010, 2009 and 2008.

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;

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·             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 revenues 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 revenues.  Cost of revenue represents the costs directly associated with manufacturing our products and generally varies with the volume of products produced. The components of cost of revenue 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 pellets, 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 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 and administrative expenses.  Selling and administrative expenses are made up of the costs of selling our products and administrative costs related to information technology, accounting, finance and human resources.  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.

Year Ended December 31, 2010 Compared with Year Ended December 31, 2009

Revenues.  Our consolidated revenues increased $73.0 million, or 15.2%, to $553.6 million for 2010 compared to $480.6 million for 2009.

·             Morgan’s revenues increased $50.5 million, or 34.4%, to $197.4 million for 2010 compared to $146.9 million for 2009.  The increase was attributable to unit sales volume.  The volume increase was attributable to improvement in general economic conditions related to the Class 3-7 truck market positively impacting demand for both commercial and consumer-related customers.

·             Morgan Olson’s revenues increased $24.2 million, or 39.4%, to $85.8 million for 2010 compared to $61.6 million for 2009.  The increase reflects higher sales volume with no price increases in the period.  The volume increase was due to improved demand for step vans from commercial fleet customers, partially offset by lower shipments to retail customers and lower part sales.

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·             Truck Accessories’ revenues increased $8.3 million, or 7.2%, to $123.9 million for 2010 compared to $115.6 million for 2009.   This increase reflects higher sales volume of $3.5 million (3.0%) and price increases of $4.8 million (4.1%).  The volume increase was due to improvement in demand for truck caps and tonneaus attributable to improvement in demand for pickup trucks in the United States and Canada.

·             Specialty Manufacturing’s revenues decreased by $9.5 million, or 6.0%, to $148.4 million for 2010 compared to $157.9 million for 2009.  This decrease reflects lower sales volume of $3.6 million (2.3%) and price decreases of $5.9 million (3.7%).  The price decrease was primarily attributable to price declines in oil and gas machined products at MIC.  The volume decrease is primarily attributable to the Specialty Vehicle Group’s exit from the specialty transit bus business at the end of 2009.

Backlog.  Consolidated backlog was $165.6 million as of December 31, 2010 compared to $149.9 million as of December 31, 2009, an increase of $15.7 million or 10.5%.

·             Morgan’s backlog at December 31, 2010 was $86.7 million compared to $73.1 million at December 31, 2009, an increase of $13.6 million or 18.6%.  The increase in backlog was primarily due to commercial rental orders of $32.9 million compared to $22.5 million in the prior year.

·             Morgan Olson’s backlog was $8.9 million at December 31, 2010 compared to $38.1 million at December 31, 2009, a decrease of $29.2 million or 76.6%.  The decrease was due to the timing of fleet orders of $15.4 million and two large retail orders of $12.6 million received at the end of 2009 that were not replicated at the end of 2010.

·             Truck Accessories’ backlog was $2.7 million at December 31, 2010 compared to $2.6 million as of December 31, 2009, an increase of $0.1 million or 3.8%.

·             Specialty Manufacturing’s backlog was $67.3 million at December 31, 2010 compared to $36.1 million at December 31, 2009, an increase of $31.2 million or 86.4%.  The backlog of machining services increased $36.4 million over last year as demand from customers in the energy services industry increased.

Gross profit.  Gross profit increased by $11.2 million, or 18.5%, to $71.7 million for 2010 compared to $60.5 million for 2009, and as a percentage of revenues improved to 12.9% in 2010 compared to 12.6% in 2009.  The increase in gross profit primarily reflects operational improvements attributable to the continuing implementation of lean techniques and improved procurement activities at Morgan, Morgan Olson and Truck Accessories offset by operational inefficiencies and a significantly underpriced contract undertaken by MIC in 2010.

Selling and administrative expenses.  Our consolidated selling and administrative expenses increased $4.7 million, or 9.7%, to $53.7 million for 2010 compared to $49.0 million for 2009.  This increase reflects the additions of key personnel at the Parent, increased amortization of previously capitalized software cost and increased benefits costs.  As a percentage of revenues, selling and administrative expenses improved to 9.7% of revenues in 2010 compared to 10.2% in 2009 due to the leverage of higher revenues and cost reductions partially offset by cost increases at the Parent.

Closed and excess facility costs. Specialty Manufacturing completed the closure of its facility in Fort Smith, Arkansas at a cost of $0.9 million.  An additional $0.1 million of noncash charges related to the 2009 closure of Specialty Manufacturing’s Milwaukee, Wisconsin facility was recorded in 2010.

Loss (gain) on sale lease-back of real estate:  During 2010, Poindexter Properties, LLC purchased six of our real estate properties and is leasing the properties back to us.  Three of the six properties included in the transaction were sold for an aggregated loss of $2.8 million as the sale prices, based on appraised values, were less than the book values of the assets.  The loss was recognized at the time of the transaction.  The remaining three properties were sold for an aggregated gain of $3.6 million.  The gain of $3.6 million has been deferred and will be

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recognized as income over the life of the leases.  During the years ended December 31, 2010 and 2009, the Company recognized $0.3 million as income on the deferred gain of $1.9 million originating from a 2008 sale lease-back arrangement with Poindexter Properties, LLC.

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

Other expense (income).  Other expense of $0.1 million in 2010 consisted of various nonrecurring charges.  In 2009, other expense was primarily attributable to the loss on the sale of the specialized transit bus business by Specialty Vehicle Group.

Operating income.  Operating income increased $3.5 million, or 32%, to $14.4 million in 2010 compared to $10.9 million in 2009, and as a percentage of revenues improved to 2.6% in 2010 compared to 2.3% in 2009.  Operating income in 2010 reflects charges of $1.0 million for facility closure expense associated with Specialty Manufacturing’s plant closure activities.

·             Morgan’s operating income increased by $7.4 million, or 644%, to $8.6 million in 2010 compared to $1.2 million in 2009, and as a percentage of revenues improved to 4.4% in 2010 compared to 0.7% in 2009.  The increase in operating income and operating income as a percentage of revenues is primarily attributable to operational improvements including labor efficiency, material procurement and expense controls in manufacturing overhead, and selling and administrative expenses.

·             Morgan Olson’s operating income increased by $2.5 million, or 96%, to $5.1 million in 2010 compared to 2.6 million in 2009, and as a percentage of revenues improved to 5.9% in 2010 compared to 4.2% in 2009.  The increase in operating income and operating income as a percentage of revenue is primarily attributable to operational improvements including labor efficiency, material procurement and expense controls in manufacturing overhead, and selling and administrative expenses.

·             Truck Accessories’ operating income increased by $4.8 million, or 61%, to $12.7 million in 2010 compared to $7.9 million in 2009, and as a percentage of revenues improved to 10.2% in 2010 compared to 6.8% in 2009.  The increase in operating income and operating income as a percentage of revenues is primarily attributable to operational improvements including labor efficiency, material procurement and expense controls in manufacturing overhead, and selling and administrative expenses.

·             Specialty Manufacturing incurred an operating loss of $1.8 million and operating margins of negative 1.2% in 2010 compared to operating income of $2.9 million and operating margin of 1.9% in 2009.  The decline in year-over-year performance was primarily attributable to MIC.  In 2010, MIC undertook a new contract which was significantly underpriced and poorly managed. This contract, in addition to operational inefficiencies and management deficiencies at MIC and the Specialty Vehicle Group plant closing costs of $1.0 million, was responsible for the majority of the decline in Specialty Manufacturing’s operating income.

·             Corporate Parent expenses increased $6.6 million to $10.2 million for 2010 compared to $3.6 million for 2009.  The increase is primarily attributable to additions of key executive personnel, including our Chief Operating Officer, Vice President of International Business Development and Vice President of Operational Improvement, increased depreciation of prior years’ capitalized enterprise resource planning costs, and the recognition of a $2.8 million loss on sale of real estate related to the 2010 sale lease-back arrangement with Poindexter Properties, LLC offset by $0.3 million recognition of deferred gain of $1.9 million originating from the 2008 sale lease-back arrangement with Poindexter Properties, LLC.

Interest expense (income).  Interest expense decreased $0.3 million, or 1.6%, to $17.9 million (3.2% of revenues) for 2010 compared to $18.2 million (3.8% of revenues) for 2009.  Interest income was $0.1 million and $0.2 million for 2010 and 2009, respectively.

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Income tax provision (benefit).  The effective income tax provision (benefit) rate was 42% and 31% of income before income taxes for 2010 and 2009, respectively.  The income tax provision for 2010 differs from amounts computed based on the federal statutory rate as a result of state and foreign taxes in certain tax jurisdictions, research and development credits, and releases of reserves for uncertain tax positions due to expiration of statutes and settlements. 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.

Year Ended December 31, 2009 Compared with Year Ended December 31, 2008

Revenues.  Our consolidated revenues decreased $225.8 million, or 32.0%, to $480.6 million for 2009 compared to $706.4 million for 2008.

·             Morgan’s revenues decreased $87.0 million, or 37.2%, to $146.9 million for 2009 compared to $233.9 million for 2008. This decrease reflects lower volume of $84.7 million (36.2%) and price decreases of $2.3 million (1.0%).  General economic conditions continued to deteriorate in 2009 evidenced by lower demand for Class 3-7 truck bodies on already depressed levels.

·             Morgan Olson’s revenues decreased $42.8 million, or 41.0%, to $61.6 million for 2009 compared to $104.4 million for 2008.  The decrease reflects lower volume with no price increases in the period.  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 parts sales.

·             Truck Accessories’ revenues decreased $16.3 million, or 12.3%, to $115.6 million for 2009 compared to $131.9 million for 2008.  This decrease reflects lower volume of $18.7 million (14.2%) and price increases of $2.4 million (1.8%).  This decrease is primarily attributable to lower sales of pickup trucks in the United States and Canada due to deteriorating economic conditions in 2009.

·    Specialty Manufacturing’s revenues decreased by $80.4 million, or 33.7%, to $157.9 million for 2009 compared to $238.3 million for 2008.  This decrease reflects lower volume of $52.6 million (22.1%) and price decreases of $27.8 million (11.7%).  This decrease in volume was primarily attributable to the deterioration of general economic conditions and declining oil prices.  The decrease in price was primarily attributable to price decrease at MIC driven by large oil and gas equipment suppliers imposing industrywide price concessions on suppliers in response to steep declines to the price of oil in 2009 compared to 2008.

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.

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·             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 the prior year as demand from customers in the energy services industry continued to decline.

Gross Profit.  Gross profit decreased by $35.1 million, or 36.7%, to $60.5 million in 2009 compared to $95.6 million for 2008, and as a percentage of revenues decreased to 12.6% in 2009 compared to 13.5% in 2008.  The decrease in gross profit primarily reflects the volume declines discussed above.  The decrease in gross profit percent is attributable to the loss of volume leverage and price reductions at MIC.

Selling and administrative expenses.  Our consolidated selling and administrative expenses decreased $17.3 million, or 26.1%, to $49.0 million for 2009 compared to $66.3 million for 2008, and as a percentage of revenues increased to 10.2% in 2009 compared to 9.4% in 2008.  The decrease in selling and administrative expenses was primarily attributable to the reduction in headcount and management incentives.  The increase in selling and administrative expenses as a percent of revenue was attributable to the loss of volume leverage.

Closed and excess facility costs. Specialty Manufacturing completed the closure of its facility in Milwaukee, Wisconsin in 2009 at a cost of $0.6 million.

Loss (gain) on sale lease-back of real estate:  We recognized $0.3 million as income on the deferred gain of $1.9 million resulting from the sale of three of our manufacturing properties to Poindexter Properties, LLC, an entity owned by our sole shareholder, in 2008.

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

Other expense (income).  The sale of the Specialty Vehicle Group specialized transit bus business was responsible for a $0.6 million loss.  The allocation of goodwill associated with the bus business accounted for $0.5 million of the loss.  Specialty Manufacturing’s machining business recognized $0.2 million from the sale of assets.

Operating income.  Operating income decreased $18.8 million, or 63.4%, to $10.9 million in 2009, compared to $29.7 million in 2008, and as a percentage of revenues decreased to 2.3% in 2009 compared to 4.2% in 2008.  The decrease in operating income was primarily attributable to lower revenues brought on by deteriorating economic conditions.  The decrease in operating income as a percentage of sales was primarily attributable to reduced sales and price decreases at MIC.

·             Morgan’s operating income decreased by $2.9 million, or 72.5%, to $1.1 million in 2009 compared to $4.0 million in 2008, and as a percentage of revenues decreased to 0.8% in 2009 compared to 1.7% in 2008.  The decline in operating income was primarily attributable to the reduction in revenues caused by deteriorating economic conditions in the Class 3-7 truck market.  The decrease in operating income as a percentage of revenues was attributable to reduced sales and declining prices.

·             Morgan Olson’s operating income decreased by $2.8 million, or 52.6%, to $2.6 million in 2009 compared to $5.4 million in 2008, and as a percentage of revenues decreased to 4.2% in 2009 compared to 5.2% in 2008.  The decrease in operating income and operating income as a percentage to revenues was primarily attributable to reduced sales due to lower demand for Class 3-7 trucks attributable to deteriorating economic conditions.

·             Truck Accessories’ operating income increased by $5.4 million, or 226.2%, to $7.8 million in 2009 compared to $2.4 million in 2008, and as a percentage of revenues increased to 6.8% in 2009 compared to 1.8% in 2008.  The increase in operating income and operating income as a percent of revenues was primarily attributable to operational improvements and price increases partially offset by reduced sales.

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·             Specialty Manufacturing’s operating income decreased by $23.0 million, or 88.7%, to $2.9 million in 2009 compared to $25.9 million in 2008, and as a percentage of revenues decreased to 1.9% in 2009 compared to 10.9% in 2008.  The decrease in operating income and operating income as a percentage of revenues was primarily attributable to price decreases at MIC driven by customers in the oil and gas equipment supply business demanding lower prices in response to a significant decline in oil prices.

·             Corporate Parent expenses decreased $4.4 million to $3.6 million in 2009 compared to $8.0 million in 2008.  The decrease was primarily attributable to reductions in headcount, salaries and incentive compensation.

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

Income tax 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 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.

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, 2010 was $112.9 million compared to $99.4 million at December 31, 2009.  Our cash and cash equivalents increased $4.2 million as a result of cash provided by operating activities of $3.9 million, cash provided by investing activities of $2.0 million and reduced by cash used in financing activities of $1.7 million.  Working capital, excluding cash and cash equivalents, increased $9.4 million as a result of an increase in accounts receivable of $1.2 million, an increase in inventories of $10.7 million, an increase in prepaid expenses of $0.3 million, reduced by an increase in current payables and accruals of $4.2 million.  Average accounts receivable days sales outstanding at December 31, 2010 were approximately 24 compared to 27 at December 31, 2009 and inventory turns during 2010 were approximately 7.8 compared to 7.0 during 2009.  Excluding vehicle chassis at Specialty Vehicle Group (vehicle chassis remain in inventory for extended periods of time and amounted to $9.5 million and $8.0 million at December 31, 2010 and 2009, respectively) inventory turns were 9.2 and 7.6 for 2010 and 2009, respectively.

Operating cash flows.  Operating activities during 2010 generated cash of $3.9 million compared to $29.2 million in 2009 and $45.5 million in 2008.  The decrease in net cash generated by operating activities during 2010 was due primarily to a $10.7 million investment in inventories compared to a reduction of inventories of $13.0 million in 2009 and a $1.2 million increase in accounts receivable compared to a $7.8 million decrease in 2009.

The decrease in net cash generated by operating activities during 2009 compared to 2008 was due primarily to the $18.8 million decrease in operating income.

Investing cash flows.  Net cash generated by investing activities in 2010 was $2.0 million compared to cash used of $9.8 million and $8.6 million in 2009 and 2008, respectively.  The increase of $11.8 million in 2010 compared to 2009 was primarily due to the Morgan, Morgan Olson, Truck Accessories Group and Specialty Manufacturing sale of six of its manufacturing properties to Poindexter Properties, LLC for $15.0 million (see Note 15 in the “Notes to Consolidated Financial Statements”).  Capital expenditures during 2010 were $14.8 million and were comprised mainly of machinery and equipment of $7.0 million for Specialty Manufacturing, new product molds of $2.1 million for Truck Accessories Group and $2.9 million of equipment related to a Company-wide Enterprise

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Resource Planning project.  We acquired approximately $0.7 million of equipment under capital leases that were not included in capital expenditures. As of December 31, 2010, we had no significant open commitments for capital expenditures.

Financing cash flows.  Net cash used by financing activities totaled $1.7 million in both 2010 and 2009 compared to $6.1 million in 2008.

Our Revolving Credit Agreement was scheduled to terminate on March 15, 2010; however, neither party to the agreement gave notice of termination.  The Agreement was amended and extended on December 13, 2010 with a new termination date of March 14, 2012.

At December 31, 2010, the Consolidated Coverage Ratio, as defined in the Indenture relating to our 8.75% Notes, was 1.9 to 1.0 which was less than the indenture debt incurrence covenant of 2.0 to 1.0.  As a result, we are limited in our ability to incur additional indebtedness.  The Indenture 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, 2010, we had no borrowings under the facility, $1.3 million of letters of credit outstanding and our borrowing base would have supported debt borrowings of $48.7 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 12 months. Additionally, we believe that our cash and borrowing availability under the revolving credit facility will satisfy our cash requirements for 2011, given our

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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 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 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 estimate that we will purchase approximately $5.2 million of paint products during 2011 under this agreement.  We occasionally commit to the purchase of aluminum based on expected levels of future production and at December 31, 2010, Morgan and Morgan Olson had commitments of $3.4 million to buy aluminum through 2011.  We did not have any material commitments to acquire new capital equipment as of December 31, 2010.

Certain cash contractual obligations of ours as of December 31, 2010 are summarized in the table below.

The Company has recorded a long-term liability of approximately $0.9 million as of December 31, 2010 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 $17.6 million of stockholder’s equity at December 31, 2010 and 2009. We operate in cyclical businesses and the markets for our products are highly competitive. In addition, we have two customers that accounted for 20% of 2010 consolidated revenues and our top ten customers accounted for 45% of our 2010 consolidated revenues.

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.

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Recent economic conditions have resulted in fluctuations in raw material prices, but we cannot predict the effect that this will have on the selling price of our manufactured products.  Operating expenses, such as salaries and employee 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 the Company for approximately $7.1 million in cash and is leasing the properties back to the Company.  The Company recorded a gain on the sale of $1.9 million that has been deferred and will be recognized as income over the term of the leases, of which $265 was recorded as income in both 2010 and 2009.  The transaction was financed by an independent lender and the properties were sold for prices determined by an independent appraisal.

During 2010, Poindexter Properties, LLC purchased six real estate properties from the Company for approximately $15.0 million in cash and is leasing the properties back to the Company.  Three of the properties included in the transaction were sold for an aggregate loss of $2.8 million as the sales prices, based on appraised values, were less than the book value of the assets.  The aggregate loss was recognized as of the transaction date as loss on sale lease-back of real estate.  The remaining three properties were sold for an aggregated gain of $3.6 million.  The gain of $3.6 million has been deferred and will be recognized as income over the life of the leases.  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 each of 2010 and 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 employees.  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 on the Company of recently issued accounting standards on the Company is addressed in Note 1 of Notes to Consolidated Financial Statements.

Critical accounting policies and estimates

This 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 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.

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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 revenue.

Warranties.  Reserves for costs associated with fulfilling warranty obligations offered on Morgan, Morgan Olson, Truck Accessories and Specialty Vehicle 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 assess our uncertain income tax positions on an annual basis and make adjustments accordingly (see Note 11 of our Consolidated Financial Statements for a summary of this activity).

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.

Inventory valuation.  Our inventories consist mainly 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.

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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.

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.  The Company had no revolver borrowings outstanding at December 31, 2010 and 2009.

Fixed-rate debt.  As of December 31, 2010, the Company had $198.8 million of 8.75% Notes outstanding, with an estimated fair value of approximately $199.3 million and $200.8 million based upon the traded value at December 31, 2010 and March 15, 2011, 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, 2010.

Foreign currency.  Morgan has a manufacturing plant in Canada that during 2010 generated sales of approximately $8.1 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.

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Item  8.                   Financial Statements and Supplementary Data

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

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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, 2010 and 2009, 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, 2010.  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, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2010 in conformity with U.S. generally accepted accounting principles.

/s/ CROWE HORWATH LLP

South Bend, Indiana
April 13, 2011

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

CONSOLIDATED BALANCE SHEETS

(Dollars in Thousands)

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

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

CONSOLIDATED STATEMENTS OF OPERATIONS

(Dollars in Thousands)