UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal quarter ended March 28, 2003
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File Number 0-25246
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Brown Jordan International, Inc.
(Exact name of registrant as specified in its charter)
FLORIDA 63-1127982
- - ------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1801 NORTH ANDREWS AVENUE, POMPANO BEACH, FLORIDA 33069
- - -----------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(954) 960-1100
--------------
(Registrant's telephone number, including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[x] Yes [ ] No
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). [ ] Yes [X] No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock as of the latest practicable date.
Class Shares Outstanding at May 12, 2003
- - --------------- -----------------------------------
$ .01 par value 1,000
Brown Jordan International, Inc.
INDEX
PART I. FINANCIAL INFORMATION Page
----
Item 1. Financial Statements
Consolidated Balance Sheets as of March 28, 2003
(unaudited) and December 31, 2002 3
Consolidated Statements of Operations for the three
months ended March 28, 2003 and March 29, 2002 (unaudited) 4
Consolidated Statements of Cash Flows for the three
months ended March 28, 2002 and March 29, 2003 (unaudited) 5-6
Notes to Consolidated Financial Statements 7-12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13-21
Item 3. Quantitative and Qualitative Disclosures about
market risk
21
Item 4. Controls and Procedures 21
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 22
Item 2. Submission of Matters to a Vote of
Security Holders 22
Item 3. Signatures and certifications
Signatures 23
Certifications 24-27
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements
Brown Jordan International, Inc. and
Subsidiaries Consolidated Balance Sheets
March 28, December 31,
($000's) 2003 2002
------------------ ------------------
(unaudited)
Assets
Cash and cash equivalents $ 4,397 $ 7,927
Accounts receivable, net 91,203 76,379
Refundable income taxes - 4,012
Inventories 30,546 28,238
Prepaid and other current assets 10,590 10,856
----------------- ------------------
Total current assets 136,736 127,412
Property, plant and equipment 27,033 28,682
Customer relationships, net 19,889 20,504
Trademarks 25,335 25,335
Goodwill, net 91,253 91,253
Other assets, net 8,623 8,907
----------------- ------------------
Total assets $308,869 $302,093 (841)
================= ==================
Liabilities and Stockholder's Deficit
Current portion of long-term debt $ 10,325 $ 9,700
Accounts payable 29,064 18,153
Accrued interest 5,324 4,917
Other accrued liabilities 17,435 21,223
----------------- ------------------
Total current liabilities 62,148 53,993
Long-term debt, net of current portion 274,827 273,329
Other non-current liabilities 6,071 6,381
Deferred income taxes 3,968 4,016
----------------- ------------------
Total liabilities 347,014 337,719
Commitments and contingencies
Stockholder's Deficit
Common stock -- par value $.01 per share
1,000 shares authorized, issued and outstanding
at March 28, 2003 and December 31, 2002 - -
Additional paid in capital 162,041 162,041
Accumulated deficit (197,434) (194,638)
Accumulated other comprehensive loss (2,752) (3,029)
----------------- -------------------
Total stockholder's deficit (38,145) (35,626)
----------------- -------------------
Total liabilities and stockholder's deficit $308,869 $302,093
================= ===================
The accompanying notes are an integral part of these financial statements.
Brown Jordan International, Inc. and Subsidiaries
Consolidated Statements of Operations
(Unaudited)
For the Three Months Ended
-------------------------------------------
March 28, March 29,
($000's) 2003 2002
--------------------- --------------------
Net Sales $ 103,102 $ 124,919
Cost of Sales 84,000 97,894
--------------------- --------------------
Gross profit 19,102 27,025
Selling, general and
administrative expense 13,646 13,413
Amortization 702 697
--------------------- --------------------
Operating income 4,754 12,915
Interest expense 9,024 8,172
--------------------- --------------------
(Loss) income before provision for income taxes (4,270) 4,743
and cumulative effect of change in accounting
principle
(Benefit) provision for income taxes (1,474) 1,867
--------------------- --------------------
(Loss) income before cumulative effect of change (2,796) 2,876
in accounting principle
Cumulative effect of change in accounting - (201,247)
principle, net of tax
--------------------- --------------------
Net loss $ (2,796) $ (198,371)
===================== ====================
The accompanying notes are an integral part of these financial statements.
BROWN JORDAN INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
Three Months Ended
---------------------------------------------
---------------------------------------------
($000's) March 28, March 29,
2003 2002
--------------------- ---------------------
--------------------- ---------------------
Cash flows from operating activities:
Net loss $ (2,796) $(198,371)
Adjustments to reconcile net loss to net
cash used in operating activities:
Cumulative effect of change in accounting
principle, net of tax - 201,247
Depreciation and amortization 2,166 2,142
Provision for (reduction of)allowance for doubtful accounts 81 (149)
Provision for excess
and obsolete inventory 236 443
Loss on sale of assets 177 -
Changes in operating assets and liabilities:
Accounts receivable (14,905) (10,342)
Refundable income taxes 4,012 -
Inventories (2,544) (2,337)
Prepaid expenses and other current assets 266 301
Other assets (214) 202
Accounts payable 10,911 5,995
Accrued interest 404 (3,289)
Other accrued liabilities (3,636) 2,556
Deferred income taxes (233) -
---------------------------------------------
---------------------------------------------
Net cash used in operating activities (6,075) (1,602)
Cash flows from investing activities:
Capital expenditures (386) (869)
Cash proceeds from sale of property, plant and equipment 931 102
---------------------------------------------
---------------------------------------------
Net cash provided by (used in) investing activities 545 (767)
Cash flows from financing activities:
Net borrowings under revolving credit agreements 3,875 4,001
Payments on long-term debt (1,875) -
---------------------------------------------
---------------------------------------------
Net cash provided by financing activites 2,000 4,001
Net (decrease) increase in cash and cash equivalents (3,530) 1,632
Cash and cash equivalents at beginning of period 7,927 5,107
---------------------------------------------
---------------------------------------------
Cash and cash equivalents at end of period $ 4,397 $ 6,739
=============================================
=============================================
Three Months Ended
-----------------------------------
March 28, March 29,
($000's) 2003 2002
------------- ------------
Supplemental Disclosures:
Cash paid for interest $ 7,667 $ 10,397
Cash paid for income taxes 3,962 261
The accompanying notes are an integral part of these financial statements.
BROWN JORDAN INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
March 28, 2003
1. NAME CHANGE, BUSINESS AND ORGANIZATION
NAME CHANGE
On April 23, 2002, the Board of Directors voted to change the name of WinsLoew
Furniture, Inc. ("WinsLoew") to Brown Jordan International, Inc. ("BJI" or the
"Company").
BJI is a wholly-owned subsidiary of a new holding company called WLFI Holdings,
Inc. ("Holdings"), a Florida corporation.
Affiliates of Trivest Partners, L. P. ("Trivest") are majority shareholders of
Holdings. Trivest, Holdings and the Company have certain common shareholders,
officers and directors.
BUSINESS
BJI is comprised of companies engaged in the design, manufacture and
distribution of casual, contract and hospitality and ready-to-assemble ("RTA")
furniture to the retail and contract channel. BJI's furniture products are
distributed primarily through independent manufacturer's representatives, and
are constructed of extruded and tubular aluminum, wrought iron, cast aluminum,
woven materials and teak. These products are distributed through fine patio
stores, department stores, national accounts and full line furniture stores
nationwide. Our site amenity products are constructed of expanded mesh and sheet
steel and marketed through representatives and catalog distribution. BJI's
contract and hospitality seating products are distributed through the contract
channel to a customer base, which includes architectural design firms,
restaurant and hospitality chains. BJI's RTA products include promotionally
priced coffee and end tables, wall units and rolling carts. Distribution of RTA
furniture products is through the retail channel to national accounts, catalog
wholesalers and specialty retailers.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements of Brown Jordan
International, Inc. and subsidiaries are for interim periods and do not include
all disclosures provided in the annual consolidated financial statements. These
unaudited consolidated financial statements should be read in conjunction with
the annual consolidated financial statements and notes thereto contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 2002, as
filed with the Securities and Exchange Commission.
All material intercompany balances and transactions have been eliminated. The
preparation of the consolidated financial statements requires the use of
estimates in the amounts reported. Actual results may differ from those
estimates.
In the opinion of the Company, the accompanying unaudited consolidated financial
statements contain all adjustments (which are of a normal recurring nature)
necessary for a fair presentation of the results for the interim periods. The
results of operations are presented for the Company's first quarter, which is
from January 1, 2003 through March 28, 2003. The results of operations for this
period are not necessarily indicative of the results to be expected for the full
year.
GOODWILL
Under the purchase method of accounting for acquisitions, goodwill represents
the excess of the purchase price over the fair value of the net assets acquired.
Goodwill is capitalized and through December 31, 2001 was amortized on a
straight-line basis over its estimated useful life which was 40 years. Effective
with the Company's adoption of Statement of Financial Accounting Standards
("SFAS") No. 142, "Goodwill and Other Intangible Assets", on January 1, 2002,
goodwill is no longer subject to amortization. Instead, goodwill is subject to
an annual assessment for impairment in value by applying a fair-value based
test.
Any impairment loss for goodwill arising from the initial adoption of SFAS No.
142 is reported as change in accounting principle. During the fourth quarter,
the Company completed its Step 2 assessment of goodwill and recorded a
transition impairment adjustment of $201.2 million, net of tax. The impairment
has been accounted for as a cumulative effect of a change in accounting
principle and has been recorded effective January 1, 2002.
RECLASSIFICATION
Certain prior period balances have been reclassified to conform with current
period presentation.
STOCK OPTIONS
As permitted by Statement of Financial Accounting Standards No.123 (SFAS 123),
the Company has elected to follow Accounting Principles Board Opinion No. 25,
"Accounting For Stock Issued to Employees" and its interpretations in accounting
for its stock options and other stock-based employee compensation awards. Under
provisions of APB No.25, no compensation expense has been recognized for stock
option grants as the exercise prices are at or greater than the fair value of
shares at the date of the grant. Pro forma information regarding net income as
calculated under the fair value provisions of SFAS 123 is as follows:
Three Months Ended
----------------------------------------
($000's) March 28, 2003 March 29, 2002
----------------- -------------------
Net loss as reported $(2,796) $(198,371)
Pro forma stock based compensation expense, net
of tax 37 37
----------------- -------------------
Pro forma net loss $(2,833) $(198,408)
================= ===================
Expected dividend yield zero zero
Expected stock price volatility 25% 25%
Risk-free interest rate 5.00% 4.68%
Expected life of options in years 10 10
On December 31, 2002, FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation - Transition and Disclosure ("Statement 148"). Statement 148 amends
SFAS No. 123, Accounting for Stock-Based Compensation ("Statement 123"), to
provide alternative methods of transition to Statement 123's fair value method
of accounting for stock-based employee compensation. Statement 148 also amends
the disclosure provisions of Statement 123 and Accounting Principles Board
Opinion No. 28, "Interim Financial Reporting," to require disclosures in the
summary of significant accounting policies of the effects of an entity's
accounting policy with respect to stock-based employee compensation on reported
net income and earnings per share in annual and interim financial statements.
Statement 148 does not amend Statement 123 to require companies to account for
employee stock options using the fair value method. The Company adopted the
disclosure provisions required in Statement 148.
3. Inventories
Inventories consisted of the following:
($000's))
March 28, December 31,
2003 2002
---------- ------------
Raw materials $25,836 $21,497
Work in process 1,380 2,667
Finished Goods 3,330 4,074
------- -------
$30,546 $28,238
======= =======
4. Operating Segments
The Company has two segments organized and managed based on the market channel
into which the Company's products are sold.
The Company evaluates performance and allocates resources based on gross profit.
The accounting policies for each segment are consistent with those set forth in
the Company's Annual Report on Form 10-K for the year ended December 31, 2002.
There are no intersegment sales or transfers. The Company has no significant
export revenues.
Three Months Ended
-------------------------------------------------
March 28, March 29
($000's) 2003 2002
------------------------ ------------------------
Net sales:
Retail channel $ 79,591 $ 103,017
Contract channel 23,511 21,902
------------------------ ------------------------
Total net sales $ 103,102 $ 124,919
======================== ========================
Gross profit:
Retail channel $ 12,647 $ 20,053
Contract channel 6,455 6,972
------------------------ ------------------------
Total gross profit $ 19,102 $ 27,025
======================== ========================
Depreciation and amortization:
Retail channel $ 125 $ 137
Contract channel 249 251
Shared 1,792 1,754
------------------------ ------------------------
Total depreciation and amortization $ 2,166 $ 2,142
======================== ========================
Expenditures for long lived assets:
Retail channel $ 16 $ 34
Contract channel 90 10
Shared 280 825
------------------------ ------------------------
Total expenditures for long lived assets $ 386 $ 869
======================== ========================
Segment assets:
Retail Channel $ 49,583 $ 63,488
Contract Channel 36,487 35,880
Shared 222,799 239,556
----------------------- -----------------------
Total consolidated assets $ 308,869 338,924
======================= =======================
5. DERIVATIVES
On January 1, 2001 the Company adopted SFAS No. 133, "Accounting For Derivative
Instruments and Hedging Activities," as amended by SFAS No. 137 and No. 138.
The Company enters into short term currency forward contracts to hedge currency
exposures associated with the purchase of certain raw materials and the funding
of foreign operations. At March 28, 2003, there were no forward contracts
outstanding.
On August 6, 2001 the Company entered into an interest rate swap agreement to
fix the interest rate on $100 million principal amount of variable rate debt
outstanding under the Senior Credit Facility. The interest rate swap is designed
to fix the adjusted LIBOR interest rate at 5.09% on $100 million through March
31, 2004 and on $80 million from March 31, 2004 to March 31, 2005.
As of March 28, 2003, the fair value of the swap was recorded as a liability of
$6,071,000 with an offsetting entry to other comprehensive loss, net of taxes of
$2,752,000. The portion of ineffectiveness of the hedge, as determined by the
change in variable cash flows of the interest rate swap to the Senior Credit
Facility, has been expensed in interest expense.
From the period of January 1, 2003 through March 28, 2003, the 3-month LIBOR
interest rate decreased approximately 9.5 basis points. While the Company's
interest on LIBOR-based borrowing decreased during this period, the fair value
of the interest rate swap decreased also. Future movements in interest rates,
particularly the 3-month LIBOR rate, will correspondingly impact the Company's
cash interest expense and the fair value of the swap.
6. Long Term-Debt
Senior Credit Facility
In connection with the acquisition of the entity formerly known as Brown Jordan
International, the Company entered into a new senior credit facility
("Facility") provided by a syndicate of financial institutions. The facility,
which matures in March 2006, provides for borrowings of up to $215 million, is
collateralized by substantially all of the assets of the Company and is secured
by a pledge of the capital stock of all the Company's domestic subsidiaries. The
facility consists of a revolving line of credit ("Revolver") (maximum of $50
million) and a term loan (aggregate of $165 million). The revolving line of
credit allows the Company to borrow funds up to a certain percentage of eligible
inventories and accounts receivable. The Term Loan has an applicable interest
rate at March 28, 2003 of 7.0% and a maturity date of March 31, 2006.
The facility contains customary covenants and restrictions on the Company's and
its subsidiaries' ability to issue additional debt or engage in certain
activities and includes customary events of default. In addition, the facility
specifies that the Company must meet or exceed defined fixed charge and interest
coverage ratios and must not exceed defined leverage ratios.
As of December 31, 2002 the Company was not in compliance with the Maximum
Consolidated Total and Senior Leverage Ratios and the Interest Coverage Ratio as
defined in the Senior Credit Facility. The lender's agent and the requisite
lenders waived these violations of covenants pursuant to the terms contained in
the Second Amendment to the Credit Agreement and Limited Waiver ("Second
Amendment"). The Second Amendment, dated March 19, 2003, changed certain
covenant requirements, established the applicable LIBOR margin at 5.0% for the
term debt and 4.5% for the revolver debt, until the later of March 31, 2004 or
the delivery of the audited 2003 financial statements. The revolving credit
portion of the facility was also reduced from $60 million to $50 million. The
Company was in compliance with all covenants set forth in the Second Amendment
as of March 28, 2003.
Under a Guaranty Agreement between the senior bank group and Trivest,
Trivest agreed to guarantee fund the Company up to $13.4 million of the
Company's obligations to pay interest on the subordinated indebtedness, in the
event that the Company does not make its subordinated debt interest payment or
is not in compliance with the fixed charge covenant as defined in the Second
Amendment. The Second Amendment allowed the Company to become liable for its
obligations under the Trivest Reimbursement Agreement pursuant to a
subordination agreement between Trivest and the senior bank group. The Trivest
Reimbursement Agreement obligates the Company to reimburse Trivest for any funds
paid by it pursuant to the Guaranty agreement between Trivest and the bank
group.
Senior Subordinated Notes and Warrants
In 2001 the Company issued 105,000 units consisting of $105 million
aggregate principal amount at maturity of 12.75% senior subordinated notes due
2007 ("Notes") and warrants to purchase an aggregate of 24,129 shares of its
capital stock.
During the three months ended March 28, 2003, the Indenture was amended to
allow for the indebtedness of the Company that is structurally senior to the
Notes to be issued to Trivest should the Guaranty be called upon by either the
senior bank group or voluntarily called by Trivest to avoid a default under the
Senior Credit Facility.
7. Statement of Comprehensive Loss
The components of other comprehensive loss
and total comprehensive loss
for the three months ended March 28, 2003
and March 29, 2002 are as follows:
($000's) Three Months Ended
March 28, March 29,
2003 2002
--------------------------------------
Net loss $(2,796) $(198,371)
Change in fair value
of interest rate swap,
net of taxes 277 (592)
--------------------------------------
Comprehensive loss $(2,519) $(198,963)
======================================
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
On April 23, 2002, the Board of Directors voted to change the name of
WinsLoew Furniture, Inc. ("WinsLoew") to Brown Jordan International, Inc. ("BJI"
or the "Company").
GENERAL
BJI is comprised of companies engaged in the design, manufacture and
distribution of casual, contract and hospitality and ready-to-assemble ("RTA")
furniture to the retail and contract channel. BJI's furniture products are
distributed primarily through independent manufacturer's representatives, and
are constructed of extruded and tubular aluminum, wrought iron, cast aluminum,
woven materials and teak. These products are distributed through fine patio
stores, department stores, national accounts and full line furniture stores
nationwide. Our site amenity products are constructed of expanded mesh and sheet
steel and marketed through representatives and catalog distribution. BJI's
contract and hospitality seating products are distributed through the contract
channel to a customer base, which includes architectural design firms,
restaurant and hospitality chains. BJI's RTA products include promotionally
priced coffee and end tables, wall units and rolling carts. Distribution of RTA
furniture products is through the retail channel to national accounts, catalog
wholesalers and specialty retailers.
RESULTS OF OPERATIONS
The following table sets forth net sales, gross profit and gross margin as
a percent of net sales for the three months ended March 28, 2003 and March 29,
2002 for each of the Company's market channels (in thousands, except for
percentages):
Three Months Ended
March 28, 2003 March 29, 2002
-------------------------------------------------------------------------------------------------
Net Sales Gross Profit Gross Margin Net Sales Gross Profit Gross Margin
-------------------------------------------------------------------------------------------------
Retail Channel $ 79,591 $12,647 15.9% $103,017 $20,053 19.5%
Contract Channel 23,511 6,455 27.5% 21,902 6,972 31.8%
----------------- ---------------- ------------- ----------------- ---------------- -------------
$103,102 $19,102 18.5% $124,919 $27,025 21.6%
See Note 4 to Consolidated Financial Statements for more information concerning
the Company's segments.
The following table sets forth certain information relating to the Company's
operations expressed as a percentage of the Company's net sales.
Three Months Ended
---------------------------------------------
March 28, 2003 March 29, 2002
--------------------- ----------------------
Gross profit 18.5% 21.6%
Selling, general and
administrative expense 13.2% 10.7%
Amortization 0.7% 0.6%
Operating income 4.6% 10.3%
Interest expense 8.8% 6.5%
(Benefit) provision for
income taxes (1.4%) 1.5%
Cumulative effect of change
in accounting principle 0.0% 161.1%
Net loss (2.7%) (158.8%)
COMPARISON OF THREE MONTHS ENDED MARCH 28, 2003 AND MARCH 29, 2002
Net Sales. Consolidated net sales decreased $21.8 million or 17.5% in the
first quarter of 2003, or 17.5% to $103.1 million compared to $124.9 million in
for the same period of 2002. Net sales in the retail channel decreased $23.4
million or 22.7%, while sales in the contract channel increased $1.6 million or
7.3% as compared to the same period of 2002. Retail channel sales decreased in
the first quarter of 2003 compared to the same period of 2002 as a result of
lower shipments to national accounts in the first quarter due to the timing of
the shipments. Shipments to specialty accounts were lower due to concerns about
dealer inventory levels and concerns of the impending war in the Middle East.
Order levels in excess of industry averages lead an increased opening backlog in
2003 as compared to 2002, resulting in increased shipments during the first
quarter of 2003 as compared to the same period of 2002.
Gross Profit. Gross profit decreased $7.9 million in the first quarter of
2003 or 29.3% to $19.1 million compared to $27.0 million in the first quarter of
2002. The overall decrease in gross margin experienced in the first quarter of
2003 was primarily due to lower sales volume as discussed above. In addition the
retail channel gross profit was down as a percent of net sales due to an
unfavorable product mix sold to national account customers, overall lower sales
volume resulting in fixed costs accounting for a greater percentage of net sales
and to a lesser extent an unfavorable product mix to specialty customers. The
contract channel experienced a decrease in gross margin as a percentage of net
sales primarily due to fixed manufacturing costs accounting for a greater
percentage of net sales due to lower sales volume as discussed above and to a
lesser extent an unfavorable product mix.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses increased $0.2 million or 1.7% from $13.4 million in the
first quarter of 2002 to $13.6 million in 2003 primarily due to increased legal
and professional services expenses along with a loss incurred with the sale of
certain assets, partially offset by a decrease in compensation expense.
Amortization. Amortization expense of $0.7 million in the first quarter of 2003
relating to the amortization of certain intangible assets was consistent with
the same period for the prior year.
Operating Income. As a result of the above, operating income decreased from
$12.9 million in the first quarter of 2002 (10.3% of net sales) to $4.8 million
(4.6% of net sales) in the same period of 2003.
Interest Expense. Interest expense increased $.9 million in the first quarter of
2003 to $9.0 million from $8.2 million in the same period of 2002, primarily due
to an increase in interest rate margins under the terms of the Company's Senior
Credit Facility as a result of the Company not being in compliance with certain
financial covenants at December 31, 2002 (see Note 6 of the accompanying Notes
to Consolidated Financial Statements). This increase in interest expense was
partially offset by a lower outstanding debt balance.
(Benefit)Provision for Income Taxes. The effective tax rate in the first quarter
of 2003 was a benefit of 37.2% compared to a tax expense of 39.4% for the same
period of the prior year and is greater than the federal statutory rate due to
the effect of state income taxes.
Cumulative effect of change in accounting principle. As of January 1, 2002
the Company implemented the provisions of SFAS No. 142. The Company recorded a
cumulative effect of change in accounting principle to reflect the impairment of
goodwill of $201.2 million, net of tax. This adjustment was recorded effective
January 1, 2002.
SEASONALITY AND QUARTERLY INFORMATION
Sales of retail specialty products are typically higher in the second
quarter of each year as a result of high retail demand for casual furniture
preceding the summer months. Sales of retail specialty products are also higher
in the fourth quarter as a result of the Company's merchandising programs with
its dealers. Sales of casual products to national account are typically higher
in the fourth and first quarters as the national accounts warehouse product in
preparation for the spring season. Weather conditions during the peak retail
selling season and the resulting impact on consumer purchases of outdoor
furniture products can also affect sales of our casual products.
LIQUIDITY AND CAPITAL RESOURCES
The Company's short-term cash needs are primarily for debt service and
working capital, including accounts receivable and inventory requirements. The
Company has historically financed its short-term liquidity needs with cash flow
generated from operations and revolving line of credit borrowings. At March 28,
2003, the Company had $74.6 million of working capital and $10.1 million of
unused and available funds under its revolving credit facility.
Cash Flows from Operating Activities. During the first quarter of 2003, net
cash used in operations was $6.1 million, compared to $1.6 million for the same
period of 2002. The increase in cash used in operations in the first quarter of
2003 as compared to the same period of the prior year relates primarily to an
increase in accounts receivable associated with longer dating on certain
shipments and payment of accrued expenses partially offset by a refund for
income taxes and an increase in accounts payable.
Cash Flows from Investing Activities. During the first quarter of 2003 the
Company spent $0.4 million on capital expenditures and sold several assets
resulting in $0.5 million generated by investing activities. This is compared to
the first quarter of 2002, which included $0.9 million spent on capital
expenditures and $0.1 million generated by the sale of certain assets resulting
in $0.8 million used in investing activities.
Cash Flows from Financing Activities. Net cash provided by financing
activities during the first quarter of 2003 was $2.0 million compared to net
cash provided by financing activities of $4.0 million for the same period of
2002. During the first quarter of 2003 the Company made scheduled term loan
principal payments of $1.9 million and borrowed $3.9 million against the
revolving line of credit, resulting in net borrowings of $2.0 million.
During the first quarter of 2003, our senior credit facility consisted of a
$165.0 million term loan of which $144.4 million was outstanding on January 1,
2003. During the quarter, principal payments totaling $2.7 million were made
against the term loan leaving an outstanding balance on the loan of $141.7
million as of March 28, 2003. During the first quarter of 2003 our senior credit
facility also included, a $50.0 million revolving credit facility, of which
$34.4 million was borrowed and $5.5 million was allocated to existing letters of
credit outstanding at March 28, 2003. As of March 31, 2003, we had undrawn
availability based on a borrowing base formula under the revolving credit
facility of approximately $10.1 million.
The s enior credit facility also requires the Company to enter i nto an
interest rate swap agreement to fix the interest rate on a portion of the
Company's variable rate debt. (See Note 5 to the Consolidated Financial
Statements).
We have significant amounts of debt requiring interest and principal
repayments. The senior subordinated notes (See Note 6 to the Consolidated
Financial Statements) require semi-annual interest payments and will mature in
August 2007. Borrowings under the senior credit facility also require quarterly
interest payments.
Our other liquidity needs relate to working capital, capital expenditures
and potential acquisitions. We intend to fund our working capital, capital
expenditures and debt service requirements through cash flow generated from
operations and borrowings under our senior credit facility.
We believe that existing sources of liquidity and funds expected to be
generated from operations will provide adequate cash to fund our anticipated
working capital needs. Significant expansion of our business or the completion
of any material strategic acquisitions may require additional funds which, to
the extent not provided by internally generated sources, could require us to
seek access to debt or equity markets.
Operating cash flows are closely correlated to demand for the Company's
products. A decrease in demand for the Company's products would impact the
availability of these internally generated funds. Further, the Company's
revolving line of credit is contingent upon the Company maintaining particular
debt covenants. Failure to comply with these covenants would impact the
availability of funds on the revolving credit line.
Our anticipated capital needs through 2003 will consist primarily of the
following:
interest payments due on the notes and interest and principal due under
our senior credit facility,
increases in working capital driven by the growth of our business, and
the financing of capital expenditures.
Aggregate capital expenditures are budgeted at approximately $2.0 million
in 2003. To the extent available, funds will be used to reduce outstanding
borrowings under our senior credit facility.
As of December 31, 2002 the Company was not in compliance with the Maximum
Consolidated Total and Senior Leverage Covenant Ratios and the Interest Coverage
Covenant Ratio as defined in the Senior Credit Facility. The lender's agent and
the requisite lenders waived these violations of covenants pursuant to the terms
contained in the Second Amendment to the Credit Agreement and Limited Waiver
("Second Amendment"). The Second Amendment, dated March 19, 2003, changed
certain covenant requirements, established the applicable LIBOR margin at 5.0%
for the term debt and 4.5% for the revolver debt, until the later of March 31,
2004 or the delivery of the audited 2003 financials statements. The revolving
credit portion of the facility was also reduced from $60 million to $50 million.
As of March 28, 2003 the Company was in compliance with all debt covenants.
Under a Guaranty between the senior bank group and Trivest, Trivest agreed
to guarantee up to $13.4 million of the Company's obligations to pay interest on
the subordinated indebtedness. The Reimbursement Agreement obligates the Company
to reimburse Trivest for any funds paid by it pursuant to the Guaranty. Under a
Guaranty Agreement between the senior bank group and Trivest, Trivest agreed to
fund the Company up to $13.4 million in the event that the Company failed to
make its subordinated debt interest payment or was not in compliance with the
fixed charge covenant in the Second Amendment. The Second Amendment allowed the
Company to become liable for its obligations under the Trivest Reimbursement
Agreement pursuant to a subordination agreement between Trivest and the senior
bank group. The Trivest Reimbursement Agreement obligates the Company to
reimburse Trivest for any funds paid by it pursuant to the Guaranty Agreement
between Trivest and the bank group.
RELATED PARTY TRANSACTIONS
In October 1994, the Company entered into a ten-year agreement (the
"Investment Services Agreement") with Trivest. Pursuant to the Investment
Services Agreement, Trivest provides corporate finance, financial relations,
strategic and capital planning and other management advice to the Company. The
annual base compensation under the Investment Services Agreement is $750,000.
Pursuant to the Second Amendment to the Senior Credit Facility the Company will
continue to expense the management fee of $750,000 but is restricted to paying
only $350,000 during the period of the Second Amendment. The Company paid
$193,000 to Trivest associated with this during the quarter ended
March 28, 2003.
FOREIGN EXCHANGE FLUCTUATIONS AND EFFECTS OF INFLATION
BJI purchases some raw materials from several Italian suppliers. In
addition, the Company funds some expenses for its Juarez, Mexico manufacturing
facility. These transactions expose the Company to the effects of fluctuations
in the value of the U.S. dollar versus the Euro and Mexican Peso. If the U.S.
dollar declines in value versus these foreign currencies, the Company will pay
more in U.S. dollars for these transactions. To reduce its exposure to loss from
such potential foreign exchange fluctuations, the Company will occasionally
enter into foreign exchange forward contracts. These contracts allow the Company
to buy Euros and Mexican Pesos at a predetermined exchange rate and thereby
transfer the risk of subsequent exchange rate fluctuations to a third party.
During the quarter ended March 28, 2003 the Company did not enter into foreign
exchange forward contracts and there were no contracts outstanding at March 28,
2003. The Company does not speculate in foreign currency.
Inflation has not had a significant impact on us in the past three years,
and management does not expect inflation to have a significant impact in the
foreseeable future.
CRITICAL ACCOUNTING POLICIES
General
Management's discussion and analysis of its financial condition and results
of operations are based upon the Company's consolidated financial statements,
which have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these financial statements
requires the Company to make estimates and judgments that affect the reported
amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. On an on going basis, the Company evaluates
its estimates, including those related to customer programs and incentives,
product returns, bad debts, inventories, intangible assets, income taxes,
warranty obligations, pensions and contingencies and litigation. The Company
bases its estimates on historical experience and on various other assumptions
that are believed to be reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions.
The Company believes the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of its consolidated
financial statements.
Allowance for Doubtful Accounts
The Company maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers to make required payments. If the
financial condition of the Company's customers were to deteriorate, resulting in
an impairment of their ability to make payments, additional allowances may be
required. The Company performs periodic credit evaluations of its customers'
financial condition and determines if collateral is needed on a customer by
customer basis.
Warranty Reserve
The Company provides for the estimated cost of product warranties at the
time revenue is recognized. While the Company engages in product quality
programs and processes, including actively monitoring and evaluating the quality
of its component suppliers, the Company's warranty obligation is affected by
product failure rates, material usage and service delivery costs incurred in
correcting a product failure. Should actual product failure rates, material
usage or service delivery costs differ from the Company's estimates, revisions
to the estimated warranty liability would be required.
Inventory
The Company writes down its inventory for estimated obsolescence or
unmarketable inventory equal to the difference between the cost of inventory and
the estimated market value based upon assumptions about future demand and market
conditions. If actual market conditions are less favorable than those projected
by management, additional inventory write-downs may be required.
Goodwill
Under the purchase method of accounting for acquisitions, goodwill
represents the excess of the purchase price over the fair value of the net
assets acquired. Goodwill is capitalized and through December 31, 2001 was
amortized on a straight-line basis over its estimated useful life which was 40
years. Effective with the Company's adoption of SFAS No. 142, "Goodwill and
Other Intangible Assets", on January 1, 2002, good will is no longer subject to
amortization. Instead, goodwill is subject to an annual assessment for
impairment in value by applying a fair-value based test.
Impairment loss for goodwill arising from the initial adoption of SFAS No.
142 is to be reported as resulting from a change in accounting principle. During
the fourth quarter the Company completed its Step 2 assessment of goodwill and
has recorded an SFAS No. 142 transition impairment of $201.2 million, net of
tax. The impairment has been accounted for as a cumulative effect of a change in
accounting principle and has been recorded effective January 1, 2002.
Trademarks
Trademarks represent the estimated fair value of trade name related
intangible assets acquired in connection with certain business acquisitions.
Trademarks are indefinite lived intangible assets and therefore are not being
amortized. Such assets are tested annually for impairment.
Customer relationships
Customer relationships represent the estimated fair value of customer
related intangible assets acquired in connection with certain business
acquisitions. Customer relationships are being amortized over their estimated
useful life of 10 years. Accumulated amortization as of March 28, 2003 and
amortization expense for the quarter then ended is $4.7 million and $615,000,
respectively.
Derivatives
The Company utilizes an interest rate swap to hedge the variability of cash
flow to be paid related to a portion of its recognized variable-rate debt
liability. The effectiveness of the interest rate swap hedge relationship is
assessed by utilizing the "variable cash flows method". Changes in the fair
value of a derivative that is designated and qualifies as a cash flow hedge, to
the extent that the hedge is ineffective, are recorded in other comprehensive
income, until earnings are affected by the variability of the hedged cash flows.
Cash flow hedge ineffectiveness is recorded in interest expense.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
On January 1, 2002, the Company adopted SFAS 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." SFAS 144 supersedes SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be Disposed of," and the accounting and reporting provisions of APB Opinion No.
30, "Reporting the Results of Operations-Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions," for the disposal of a segment of a business. SFAS 144
provides more guidance on estimating cash flows when performing a recoverability
test, requires that a long-lived asset or asset group, principally consisting of
property, plant and equipment, to be disposed of other than by sale (e.g.,
abandoned) be classified as "held and used" until it is disposed of, requires
revision of the depreciable life of a long-lived asset to be abandoned and
establishes more restrictive criteria to classify an asset or asset group as
"held for sale." The adoption of this Statement did not have a material impact
on the Company's financial position or results of operations.
In April 2002, the FASB issued SFAS No. 145, "Rescission of FASB Statements
No. 4, 44 and 64, Amendment of FASB Statement No. 13, and Technical
Corrections", which, among other things, rescinded SFAS No. 4, "Reporting Gains
and Losses from Extinguishment of Debt". Previously under SFAS No. 4, all gains
and losses from extinguishments of debt were required to be aggregated and, if
material, classified as an extraordinary item in the statements of operations.
SFAS No. 145 requires that gains and losses from extinguishments of debt be
classified as extraordinary items only if they meet the criteria in APB No. 30,
"Reporting the Results of Operations-Reporting the Effects of Disposal of a
Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions". Any gains or losses on extinguishment of debt that
were presented as extraordinary items in prior periods but which do not qualify
for classification as an extraordinary item under APB No. 30, are to be
reclassified. Companies are required to adopt SFAS No. 145 in fiscal years
beginning after May 15, 2002. The Company early adopted the provisions and
reclassified previously recorded loss from extinguishment of debt from
extraordinary loss to interest expense for the year ended December 31, 2001.
In July 2002, FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities," which addresses financial accounting and
reporting for costs associated with exit or disposal activities and nullifies
EITF No. 94-3, "Liability Recognition for Certain Employee Termination Benefits
and Other Costs to Exit an Activity Including Certain Costs Incurred in a
Restructuring" (EITF 94-3). The principal difference between SFAS No. 146 and
EITF 94-3 relates to SFAS No. 146's requirements for recognition of a liability
for a cost associated with an exit or disposal activity. SFAS No. 146 requires
that a liability for a cost associated with an exit or disposal activity be
recognized when the liability is incurred. Under EITF 94-3, a liability for an
exit cost was recognized at the date of an entity's commitment to an exit plan.
A fundamental conclusion reached by FASB in this statement is that an entity's
commitment to a plan, by itself, does not create an obligation that meets the
definition of a liability. Therefore, this statement eliminates the definition
and requirements for recognition of exit costs in EITF 94-3. This statement also
establishes that fair value is the objective for initial measurement of the
liability. The effective date of the new statement is January 1, 2003, with
earlier adoption encouraged. Adoption of this statement did not materially
impact the Company's financial position or results of operations.
On December 31, 2002, FASB issued SFAS No. 148, Accounting for Stock-Based
Compensation - Transition and Disclosure ("Statement 148"). Statement 148 amends
SFAS No. 123, Accounting for Stock-Based Compensation ("Statement 123"), to
provide alternative methods of transition to Statement 123's fair value method
of accounting for stock-based employee compensation. Statement 148 also amends
the disclosure provisions of Statement 123 and Accounting Principles Board
Opinion No. 28, "Interim Financial Reporting," to require disclosures in the
summary of significant accounting policies of the effects of an entity's
accounting policy with respect to stock-based employee compensation on reported
net income and earnings per share in annual and interim financial statements.
Statement 148 does not amend Statement 123 to require companies to account for
employee stock options using the fair value method. The Company adopted the
disclosure provisions required in Statement 148.
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This filing contains certain forward-looking statements about our financial
condition, results of operations and business within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. You can find many of these statements by looking for words like "will,"
"should," "believes," "expects," "anticipates," "estimates," "intends," "may,"
"pro forma," or similar expressions used in this prospectus. These
forward-looking statements are subject to assumptions, risks and uncertainties,
including those relating to the following:
o our level of leverage;
o our ability to meet our debt service obligations;
o the subordination of the registered notes to our senior indebtedness,
which is secured by substantially all of our assets;
o the restrictions imposed upon us by our indenture and our senior credit
facility;
o our ability to identify suitable acquisition opportunities and to
finance, complete and integrate acquisitions;
o the competitive and cyclical nature of the furniture manufacturing
industry; and
o general domestic and global economic conditions.
Because these statements are subject to risks and uncertainties, actual
results may differ materially from those expressed or implied by the
forward-looking statements. You are cautioned not to place undue reliance on
these statements, which speak only as of the date of this filing.
We do not undertake any responsibility to release publicly any revisions to
these forward-looking statements to take into account events or circumstances
that occur after the date of this filing. Additionally, we do not undertake any
responsibility to update you on the occurrence of any unanticipated events which
may cause actual results to differ from those expressed or implied by the
forward-looking statements contained in this filing.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
The information required by this item is contained in "Management's
Discussion and Analysis of Financial Condition and Results of Operations," under
the heading "Foreign Exchange Fluctuations and Effects of Inflation".
ITEM 4. CONTROLS AND PROCEDURES
As of April 30, 2003 an evaluation was performed under the supervision and
with the participation of our management, including the Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of
our disclosures controls and procedures. Based on the evaluation, our
management, including the Chief Executive Officer and Chief Financial Officer,
believes that our disclosure controls and procedures are adequately designed to
ensure that the information that we are required to disclose in this report has
been accumulated and communicated to our management, including our Chief
Financial Officer and Chief Executive Officer, as appropriate, to allow timely
decisions regarding such required disclosures.
There have been no significant changes in our internal controls or in other
factors that could significantly affect internal controls subsequent to April
30, 2003.
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
From time to time, we are subject to legal proceedings and other claims
arising in the ordinary course of our business. We maintain insurance coverage
against potential claims in an amount that we believe to be adequate. We are not
presently a party to any litigation, the outcome of which would have a material
adverse effect on our business, financial condition, and results of operations
or future prospects.
Item 2. Submission of Matters to a Vote of Security Holders
(a) None
Item. 3 SIGNATURES
Pursuant to the requirements of the Company's Senior Subordinated Debenture, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned the reunto duly authorized.
BROWN JORDAN INTERNATIONAL,INC
By:/s/ Bruce Albertson
----------------------
May 12, 2003 Bruce Albertson
President and Chief Executive Officer
May 12, 2003 By:/s/ Vincent A.Tortorici, Jr.
----------------------------
Vincent A. Tortorici, Jr.
Chief Financial Officer
CERTIFICATIONS
I, Bruce R. Albertson, President and Chief Executive Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Brown Jordan
International, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared:
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of the registrant's board of directors (or persons performing the
equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
By:/s/ Bruce R. Albertson
May 12, 2003 Bruce R. Albertson
President and Chief Executive Officer
CERTIFICATIONS
I, Vincent A. Tortorici, Jr., Chief Financial Officer, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Brown
Jordan International, Inc.;
2. Based on my knowledge, this quarterly report does not contain
any untrue statement of a material fact or omit to state a
material fact necessary to make the statements made, in light
of the circumstances under which such statements were made,
not misleading with respect to the period covered by this
quarterly report;
3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report,
fairly present in all material respects the financial
condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are
responsible for establishing and maintaining disclosure
controls and procedures (as defined in Exchange Act Rules
13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this quarterly report is being prepared:
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this quarterly report (the "Evaluation
Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have
disclosed, based on our most recent evaluation, to the
registrant's auditors and the audit committee of the
registrant's board of directors (or persons performing the
equivalent functions):
d) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and report
financial data and have identified for the registrant's
auditors any material weaknesses in internal controls; and
e) any fraud, whether or not material, that involves management
or other employees who have a significant role in the
registrant's internal controls; and
The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
May 12, 2003 By:/s/ Vincent A. Tortorici, Jr.
----------------------------------
Vincent A. Tortorici, Jr.
Chief Financial Officer
CERTIFICATION PURSUANT TO 18 U.S.C SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Brown Jordan International, Inc.
(the "Company") on Form 10-Q for the period ended March 28, 2003 as filed with
the Securities and Exchange Commission on the date hereof (the "Report"), I,
Bruce R. Albertson, President and Chief Executive Officer of the Company,
certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to section 906
of the Sarbanes-Oxley Act of 2002:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
By:/s/ Bruce R. Albertson
---------------------------
May 12, 2003 Bruce R. Albertson
President and Chief Executive Officer
The foregoing certification is being furnished solely pursuant to 18 U.S.C Sec
1350 and is not being filed as part of the Report or as a separate disclosure
document.
CERTIFICATION PURSUANT TO 18 U.S.C SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Brown Jordan International, Inc. (the
"Company") on Form 10-Q for the period ended March 28, 2003 as filed with the
Securities and Exchange Commission on the date hereof (the "Report"), I, Vincent
A. Tortorici, Jr., Chief Financial Officer of the Company, certify, pursuant to
18 U.S.C. section 1350, as adopted pursuant to section 906 of the Sarbanes-Oxley
Act of 2002:
(1) The Report fully complies with the requirements of section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended; and
(2) The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.
May 12, 2003 By:/s/ Vincent A. Tortorici, Jr.
----------------------------------
Vincent A. Tortorici, Jr.
Chief Financial Officer
The foregoing certification is being furnished solely pursuant to 18 U.S.C Sec
1350 and is not being filed as part of the Report or as a separate disclosure
document.