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 June 27, 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 July 31, 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 June 27, 2003
(unaudited) and December 31, 2002 3
Consolidated Statements of Operations for the three
and six months ended June 27, 2003 and June 28, 2002
(unaudited) 4
Consolidated Statements of Cash Flows for the six
months ended June 27, 2003 and June 28, 2002
(unaudited) 5-6
Notes to Consolidated Financial Statements 7-12
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 13-22
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 22
Item 4. Controls and Procedures 22
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 23
Item 2. Submission of Matters to a Vote of
Security Holders 23
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
June 27, December 31,
($000's) 2003 2002
------------------- ------------------
(unaudited)
Assets
Cash and cash equivalents $ 1,418 $7,927
Accounts receivable, net 50,317 76,379
Refundable income taxes - 4,012
Inventories 32,372 28,238
Prepaid and other current assets 11,796 10,856
------------------- ------------------
Total current assets 95,903 127,412
Property, plant and equipment, net 26,679 28,682
Customer relationships, net 19,702 20,504
Trademarks 25,335 25,335
Goodwill, net 91,253 91,253
Other assets, net 8,364 8,907
------------------- ------------------
Total assets $267,236 $302,093
=================== ==================
Liabilities and Stockholder's Deficit
Current portion of long-term debt $ 10,325 $9,700
Accounts payable 11,334 18,153
Accrued interest 6,383 4,917
Other accrued liabilities 18,738 21,223
------------------- ------------------
Total current liabilities 46,780 53,993
Long-term debt, net of current portion 245,504 273,329
Other non-current liabilities 5,791 6,381
Deferred income taxes 3,957 4,016
------------------- ------------------
Total liabilities 302,032 337,719
Commitments and contingencies
Stockholder's Deficit
Common stock -- par value $.01 per share
1,000 shares authorized, issued and outstanding
at June 27, 2003 and December 31, 2002 - -
Additional paid in capital 162,041 162,041
Accumulated deficit (194,428) (194,638)
Accumulated other comprehensive loss (2,409) (3,029)
------------------- ------------------
Total stockholder's deficit (34,796) (35,626)
------------------- ------------------
Total liabilities and stockholder's deficit $267,236 $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 For the Six Months Ended
---------------------------------------- ----------------------------------------
June 27, June 28, June 27, June 28,
($000's) 2003 2002 2003 2002
------------------ ------------------ ----------------- -------------------
Net sales $ 89,573 $ 74,354 $ 192,675 $ 199,273
Cost of sales 63,501 48,469 147,501 146,363
------------------ ------------------ ----------------- -------------------
Gross profit 26,072 25,885 45,174 52,910
Selling, general and
administrative expense 12,130 13,903 25,776 27,316
Amortization 774 698 1,476 1,395
------------------ ------------------ ----------------- -------------------
Operating income 13,168 11,284 17,922 24,199
Interest expense 8,541 8,356 17,565 16,528
------------------ ------------------ ----------------- -------------------
Income before provision for income
taxes and cumulative effect of change
in accounting principle 4,627 2,928 357 7,671
Provision for income taxes 1,621 1,152 147 3,019
------------------ ------------------ ----------------- -------------------
Income before cumulative effect of
change in accounting principle 3,006 1,776 210 4,652
Cumulative effect of change in
accounting principle, net of tax - - - (201,247)
------------------ ------------------ ----------------- -------------------
Net income (loss) $ 3,006 $ 1,776 $ 210 $ (196,595)
================== ================== ================= ===================
The accompanying notes are an integral part of these financial statements.
BROWN JORDAN INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
($000's) June 27, June 28
2003 2002
Cash flows from operating activities:
Net income (loss) $ 210 $ (196,595)
Adjustments to reconcile net
income (loss) to net cash provided
by operating activities:
Cumulative effect of change in accounting principle, net
of tax
- 201,247
Depreciation and amortization 4,154 4,262
Reduction of allowance for doubtful accounts (538) (615)
Provision for excess and obsolete inventory 1,172 1,170
Loss on sale of assets 177 733
Changes in operating assets and
liabilities, net of effects from
acquisitions and dispositions:
Accounts receivable 26,600 38,586
Refundable income taxes 4,012 -
Inventories (5,306) (1,629)
Prepaid expenses and other
current assets (940) (1,086)
Other assets (713) (977)
Accounts payable (6,819) (23,157)
Accrued interest 1,466 220
Other accrued liabilities (2,043) 5,771
Deferred income taxes (471) -
Net cash provided by
------------------- --- -------------------
operating activities 20,961 27,930
Cash flows from investing activities:
Capital expenditures (955) (1,117)
Cash proceeds from sales of property, plant and
equipment, net 931 1,985
Net cash (used in) provided by
------------------- --- -------------------
investing activities (24) 868
Cash flows from financing activities:
Net payments on revolving credit agreements (22,214) (30,084)
Payments on long-term debt (5,232) -
------------------- --- -------------------
Net cash used in financing activities (27,446) (30,084)
Net decrease in cash and cash equivalents (6,509) (1,286)
Cash and cash equivalents
at beginning of period 7,927 5,107
Cash and cash equivalents at
------------------- --- -------------------
end of period $ 1,418 $ 3,821
=================== === ===================
Six Months Ended
June 27 June 28
2003 2002
Supplemental disclosures:
Cash paid for interest $ 14,660 $ 14,887
Net cash (refunded) paid for income taxes $ (2,948) $ 2,531
The accompanying notes are an integral part of these financial statements.
BROWN JORDAN INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 27, 2003
1. ORGANIZATION AND BUSINESS
ORGANIZATION
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 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 channels. BJI's furniture products are
constructed of extruded and tubular aluminum, wrought iron, cast aluminum, woven
materials and teak and 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 BJI 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 three and six
months ended June 27, 2003 and June 28, 2002. The results of operations for
these periods 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,"
("SFAS No. 142"), 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 a change in accounting principle. During the fourth quarter
of 2002, 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
The Company follows the disclosure provisions required in SFAS No. 148,
"Accounting for Stock-Based Compensation - Transition and Disclosure". The
following table summarizes the Company's results as if stock based compensation
expense was recorded for the three and six months ended June 27, 2003 and June
28, 2002:
Three Months Ended Six Months Ended
--------------------------------- -----------------------------------
($000's) June 27, 2003 June 28, 2002 June 27, 2003 June 28, 2002
-------------- -------------- --------------- ----------------
Net income (loss) as reported $3,006 $1,776 $210 ($196,595)
Pro forma stock based compensation expense,
net of tax 37 37 74 74
-------------- -------------- --------------- ----------------
Pro forma net income (loss) $2,969 $1,739 $136 ($196,669)
============== ============== =============== ================
Expected dividend yield zero zero zero zero
Expected stock price volatility 25% 25% 25% 25%
Risk-free interest rate 5.00% 4.68% 5.00% 4.68%
Expected life of options in years 10 10 10 10
3. Inventories
Inventories consisted of the following:
($000's) June 27, 2003 December 31, 2002
----------------- --------------------
Raw materials $28,053 $21,497
Work in progress 1,440 2,667
Finished goods 2,879 4,074
----------------- --------------------
$32,372 $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. The following table presents information related to the
Company's two reportable segments:
Three Months Ended Six Months Ended
-------------------------------------------- --------------------------------------------
June 27, June 28, June 27, June 28,
($000's) 2003 2002 2003 2002
-------------------- -------------------- -------------------- --------------------
Net sales:
Retail channel $ 54,332 $ 41,563 $ 133,923 $ 144,580
Contract channel 35,241 32,791 58,752 54,693
-------------------- -------------------- -------------------- --------------------
Total net sales $ 89,573 $ 74,354 $ 192,675 $ 199,273
==================== ==================== ==================== ====================
Gross profit:
Retail channel $ 14,122 $ 14,710 $ 26,769 $ 34,762
Contract channel 11,950 11,175 18,405 18,148
-------------------- -------------------- -------------------- --------------------
Total gross profit $ 26,072 $ 25,885 $ 45,174 $ 52,910
==================== ==================== ==================== ====================
Three Months Ended Six Months Ended
------------------------------------------ ---------------------------------------
June 27, June 28, June 27, June 28,
($000's) 2003 2002 2003 2002
----------------- ------------------ ---------------- -----------------
Depreciation and amortization:
Retail channel $ 126 $ 138 $ 250 $ 275
Contract channel 270 326 566 577
Shared 2,129 2,180 3,338 3,410
----------------- ------------------ ---------------- -----------------
Total depreciation and amortization $ 2,525 $ 2,644 $ 4,154 $ 4,262
================= ================== ================ =================
Expenditures for long lived assets:
Retail channel $ 23 $ 20 $ 39 $ 54
Contract channel 3 23 79 33
Shared 527 87 837 1030
----------------- ------------------ ---------------- -----------------
Total expenditures for long lived
assets $ 553 $ 130 $ 955 $ 1,117
================= ================== ================ =================
As of
Segment assets June 27, December 31,
2003 2002
-------------------- ------------------
Retail channel $ 21,732 $ 72,589
Contract channel 36,408 83,860
Shared 209,096 145,644
-------------------- ------------------
Total assets $ 267,236 $ 302,093
==================== ==================
5. INTEREST RATE SWAP
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 on $100 million at 5.09% through March
31, 2004 and on $80 million from March 31, 2004 to March 31, 2005.
As of June 27, 2003 and December 31, 2002, the fair value of the swap was
recorded as a liability of $5.8 million and $6.4 million, respectively. The
portion of the change in fair value attributable to the ineffectiveness of the
hedge is recorded in the accompanying statement of operations as "interest
expense" and was $0.4 million and $0.3 million for the six months ended June 27,
2003 and June 28, 2002, respectively. The balance of the change in fair value of
$0.6 million is recorded in other comprehensive loss, net of tax.
From the period of December 31, 2002 through June 27, 2003 the 3-month LIBOR
interest rate declined approximately 19 basis points, resulting in the fair
value decline of the interest rate swap. 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
Long-term debt consisted of the following at June 27, 2003 and December 31,
2002:
$000's June 27, December 31,
2003 2002
--------------- -----------------
Revolving line of credit $ 10,758 $ 32,647
Term loan 139,203 144,435
Senior subordinated notes 102,943 102,697
IDB bonds 2,925 3,250
--------------- -----------------
255,829 283,029
Less current portion (10,325) (9,700)
--------------- -----------------
$245,504 $273,329
=============== =================
SENIOR CREDIT FACILITY
The senior credit 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 financials 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 June 27, 2003.
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.
SENIOR SUBORDINATED NOTES AND WARRANTS
The indenture under which the senior subordinated notes are issued requires
the Company to meet a minimum fixed charge coverage ratio and includes other
provisions generally common in such indentures including restrictions on
dividends, additional indebtedness and asset sales. The Company failed to make
the $6.7 million scheduled semi-annual interest payment in February 2003. The
Company subsequently made the interest payment within the cure period specified
in the Notes. At June 27, 2003, the Company was in compliance with such
covenants.
The Indenture was amended in March of 2003 to allow for 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 Income (Loss)
The components of other comprehensive income (loss) and total comprehensive
income (loss) for the three and six months ended June 27, 2003 and June 28, 2002
are as follows:
Three Months Ended Six Months Ended
------------------------------------- ------------------------------------
June 27, June 28, June 27, June 28,
($000's) 2003 2002 2003 2002
---------------- ----------------- ---------------- ----------------
Net income (loss) $ 3,006 $ 1,776 $ 210 $(196,595)
Change in fair value of interest rate
swap, net of taxes (280) (1,427) (620) (835)
---------------- ----------------- ---------------- ----------------
Comprehensive income (loss) $ 2,726 $ 349 $ (410) $(197,430)
================ ================= ================ ================
8. Warranty Costs
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. The Company accrues for
warranties based on historical experience and sales.
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 channels. 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 and six months ended June 27, 2003 and June
28, 2002 for each of the Company's market channels:
Three Months Ended
June 27, 2003 June 28, 2002
----------------- -- ---------------- -- ---------- -- ----------------- -- ---------------- -- ----------
Gross Gross
($000's) Net Sales Gross Profit Margin Net Sales Gross Profit Margin
----------------- -- ---------------- -- ---------- -- ----------------- -- ---------------- -- ----------
Retail Channel $ 54,332 $ 14,122 26.0% $ 41,563 $ 14,710 35.4%
Contract Channel 35,241 11,950 33.9% $ 32,791 $ 11,175 34.1%
----------------- ---------------- ---------- ----------------- ---------------- ----------
$ 89,573 $ 26,072 29.1% $ 74,354 $ 25,885 34.8%
================= ================ ========== ================= ================ ==========
Six Months Ended
June 27, 2003 June 28, 2002
----------------- -- ---------------- -- ---------- -- ----------------- -- ---------------- -- ----------
Gross Gross
Net Sales Gross Profit Margin Net Sales Gross Profit Margin
----------------- -- ---------------- -- ---------- -- ----------------- -- ---------------- -- ----------
Retail Channel $ 133,923 $ 26,769 20.0% $ 144,580 $ 34,762 24.0%
Contract Channel 58,752 18,405 31.3% 54,693 18,148 33.2%
----------------- ---------------- ---------- ----------------- ---------------- ----------
$ 192,675 $ 45,174 23.4% $ 199,273 $ 52,910 26.6%
================= ================ ========== ================= ================ ==========
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 Six Months Ended
------------------------------------- ---------------------------------
June 27, 2003 June 28, 2002 June 27, 2003 June 27, 2002
----------------- ---------------- --------------- --------------
Gross profit 29.1% 34.8% 23.4% 26.6%
Selling, general
and administrative
expense 13.5% 18.7% 13.4% 13.7%
Amortization 0.9% 0.9% 0.8% 0.7%
Operating income 14.7% 15.2% 9.3% 12.1%
Interest expense 9.5% 11.2% 9.1% 8.3%
Provision for
income taxes 1.8% 1.5% 0.1% 1.5%
Cumulative effect
of change in
accounting
principle 0.0% 0.0% 0.0% (101.0%)
Net income (loss) 3.4% 2.4% 0.1% (98.7%)
COMPARISON OF THREE MONTHS ENDED JUNE 27, 2003 AND JUNE 28, 2002
Net Sales. Consolidated net sales increased $15.2 million or 20.5% in the second
quarter of 2003, to $89.6 million compared to $74.4 million for the same period
of 2002. Net sales in the retail channel increased $12.8 million or 30.7%, while
sales in the contract channel increased $2.5 million or 7.5% as compared to the
same period of 2002. Retail channel sales increased in the second quarter of
2003 compared to the same period of 2002 as a result of increased shipments to
national accounts in the second quarter of 2003, the result of an increased
backlog at the end of the first quarter partially offset by lower shipments to
specialty accounts due to weather related issues. Contract sales continued its
steady growth primarily due to our ability to extend our market to colleges and
universities and sports complexes as well as increased sales from our Tropicraft
and Texacraft brands.
Gross Profit. Gross profit increased by $0.2 million, or 0.7% in the second
quarter of 2003 to $26.1 million compared to $25.9 million in the second quarter
of 2002. The overall increase in gross margin experienced in the second quarter
of 2003 was primarily due to increased sales volume as discussed above;
partially offset by an unfavorable product mix which included a greater
percentage of total sales to national accounts, which are typically lower in
margin. The contract channel experienced a slight decrease in gross margin as a
percentage of net sales primarily due to continued margin pressures as a result
of a sluggish economy.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $1.8 million or 12.8% from $13.9 million in
the second quarter of 2002 to $12.1 million in the second quarter of 2003. The
results for the second quarter of 2002 include a non-recurring charge of $0.7
for the loss on the sale of equipment. Also contributing to the variance was a
decrease in commission expense related to increased sales to national accounts,
which do not have commissions associated with them.
Amortization. Amortization expense of $0.8 million in the second quarter of 2003
relating to the amortization of certain intangible assets was substantially
unchanged compared to the same period for the prior year.
Operating Income. As a result of the above, operating income increased from
$11.3 million in the second quarter of 2002 (15.2% of net sales) to $13.2
million (14.7% of net sales) in the same period of 2003.
Interest Expense. Interest expense increased $0.1 million in the second
quarter of 2003 to $8.5 million from $8.4 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 pursuant to an amendment to the facility
entered into in March of 2003 (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.
Provision for Income Taxes. The effective tax rate in the second quarter of 2003
was a provision of 35.0 % compared to a tax expense of 39.3% for the same period
of the prior year and is greater than the federal statutory rate due to the
effect of state income taxes.
COMPARISON OF SIX MONTHS ENDED JUNE 27, 2003 AND JUNE 28, 2002
Net Sales. Consolidated net sales decreased $6.6 million or 3.3% during the
six months ended June 27, 2003, to $192.7 million, compared to $199.3 million
for the same period of 2002. Net sales in the retail channel decreased $10.7
million or 7.4%, while sales in the contract channel increased $4.1 million or
7.4% as compared to the same period of 2002. Retail channel sales decreased in
the first six months of 2003 compared to the same period of 2002 as a result of
poor seasonal sales at many retailers, including both specialty retailers and
national accounts. Contract sales continued its steady growth primarily due to
our ability to extend our market to colleges and universities and sports
complexes as well as increased sales from our Tropicraft and Texacraft brands.
Gross Profit. Gross profit decreased by $7.7 million, or 14.6% in the first
six months of 2003 to $45.2 million compared to $52.9 million for the same
period of 2002. The overall decrease in gross margin experienced in the first
six months of 2003 was primarily due to decreased sales volume as discussed
above, compounded by an unfavorable product mix which included a greater
percentage of total sales to national accounts, which are typically lower in
margin. In addition the retail channel gross profit was down as a percent of net
sales due to 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 slight decrease
in gross margin as a percentage of net sales primarily due to margin pressures
resulting from a sluggish economy.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses decreased $1.5 million or 5.6% from $27.3 million in the
first six months of 2002 to $25.8 million in 2003 primarily due to a decrease in
compensation expense partially offset by increased legal and professional
services expenses along with a loss incurred on the sale of certain assets.
Amortization. Amortization expense of $1.5 million in for the six months ended
June 27, 2003 relating to the amortization of certain intangible assets was
substantially unchanged compared to the same period for the prior year.
Operating Income. As a result of the above, operating income decreased from
$24.2 million in the first six months of 2002 (12.1% of net sales) to $17.9
million (9.3% of net sales) in the same period of 2003.
Interest Expense. Interest expense increased $1.1 million in the first six
months of 2003 to $17.6 million from $16.5 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 pursuant to an amendment to the facility
entered into in March of 2003 (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.
Provision for Income Taxes. The effective tax rate in the first six months
of 2003 was a tax expense of 41.2% 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 demand for retail 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 retail products to national accounts are typically higher in
the fourth and first quarters as the national accounts warehouse products 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 June 27,
2003, the Company had $49.1 million of working capital and $32.5 million of
unused and available funds under its revolving credit facility.
Cash Flows from Operating Activities. During the first six months of 2003, net
cash provided by operations was $21.0 million, compared to $27.9 million for the
same period of 2002. The decrease in cash provided by operations in the
first six months of 2003 as compared to the same period of the prior year
relates primarily to a decrease in cash provided by accounts receivable
associated with longer dating on certain shipments, an increase in inventory and
a decrease in other accrued liabilities, partially offset by an increase in
accounts payable and a refund for income taxes.
Cash Flows from Investing Activities. During the first six months of 2003
the Company spent $1.0 million on capital expenditures which was offset by funds
generated from the sale of certain assets. This is compared to the first six
months of 2002, which included $1.1 million spent on capital expenditures and
$2.0 million generated by the sale of certain assets resulting in $0.9 million
provided by investing activities.
Cash Flows from Financing Activities. Net cash used in financing activities
during the first six months of 2003 was $27.4 million compared to net cash used
in financing activities of $30.1 million for the same period of 2002. During the
first six months of 2003 the Company made scheduled term loan principal payments
of $4.4 million along with an additional payment of $0.8 million from the sale
of certain assets and paid $22.2 million against the revolving line of credit,
resulting in net payments of $27.4 million.
During the six months ended June 27, 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 six month period, principal payments totaling
$5.2 million were made against the term loan leaving an outstanding balance on
the loan of $139.2 million as of June 27, 2003. During the six months ended June
27, 2003 our senior credit facility also included a $50.0 million revolving
credit facility, of which $10.8 million was borrowed and $6.7 million was
allocated to existing letters of credit outstanding at June 27, 2003. As of June
27, 2003, we had undrawn availability based on a borrowing base formula under
the revolving credit facility of approximately $32.5 million.
The senior credit facility also requires the Company to enter into 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. In addition, under our senior credit facility, as amended, we
are required to pay down the principal amount of all borrowings under the
revolving credit facility to zero for a period of thirty (30) days between July
1, 2003 and August 31, 2003. We paid down the entire revolving credit facility
balance on July 23, 2003, and under the provisions of the second amendment of
the senior credit facility, will not be able to borrow again until August 22,
2003. As a result there is a chance that we will not be able to fund the
semi-annual interest payment to the holders of our senior subordinated notes,
which is due on August 15, 2003. We currently anticipate, however, that we will
be able to fund the payment on August 22, 2003, within the grace period provided
under the Indenture governing the senior subordinated notes.
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 meeting 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 financial statements. The revolving
credit portion of the facility was also reduced from $60 million to $50 million.
As of June 27, 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 for 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. We paid $175,000 to
Trivest associated with this during the period from January 1, 2003 to June 27,
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 six months ended June 27, 2003 the Company did not enter into foreign
exchange forward contracts and there were no contracts outstanding at June 27,
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 is 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 ongoing 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. The Company accrues for
warranties based on historical experience and sales.
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, 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.
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 June 27, 2003 and amortization
expense for the quarter then ended is $4.9 million and $0.6 million,
respectively.
Interest Rate Swap
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 effective, 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
In April 2003, FASB issued SFAS No. 149, "Amendment of SFAS No. 133 on
Derivative Instruments and Hedging Activities" ("SFAS No. 149"). SFAS No. 149
amends and clarifies financial accounting and reporting for derivative
instruments, including certain derivative instruments embedded in other
contracts, and for hedging activities under SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities,". SFAS No. 149 also amends SFAS
No. 133 for decisions made (1) as part of the Derivatives Implementation Group
process that effectively required amendments to SFAS No. 133, (2) in connection
with other FASB projects dealing with financial instruments and (3) in
connection with implementation issues raised in relation to the application of
the definition of derivative. SFAS No. 149 is effective for contracts entered
into or modified after June 30, 2003, except as stated below, and for hedging
relationships designated after June 30, 2003. In addition, except as stated
below, all provisions of SFAS No. 149 will be applied prospectively. The
provisions of SFAS No. 149 that relate to SFAS No. 133 implementation issues
that have been effective for fiscal quarters that began prior to June 15, 2003
should continue to be applied in accordance with their respective effective
dates. In addition, certain provisions relating to forward purchases or sales of
when-issued securities or other securities that do not yet exist, should be
applied to both existing contracts and new contracts entered into after June 30,
2003. The Company expects that the implementation of SFAS No.149 will have no
material effects on its financial position or results of operations.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity,("SFAS
No. 150"). The statement requires that an issuer classify financial instruments
that are within its scope as a liability. Many of those instruments were
classified as equity under previous guidance. SFAS No. 150 is effective for all
financial instruments entered into or modified after May 31, 2003. Otherwise, it
is effective on July 1, 2003. The Company does not believe that the adoption of
SFAS No. 150 will have a material effect on our financial position or results of
operations.
In November 2002, the FASB issued FIN No. 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness of Others" ("FIN No. 45"). FIN No. 45 will significantly change
current practice in the accounting for, and disclosure of, guarantees.
Guarantees meeting the characteristics described in FIN No. 45 are required to
be initially recorded at fair value, which is different from the current
practice of recording a liability only when a loss is probable and reasonably
estimable, as those terms are defined in FASB Statement No. 5, Accounting for
Contingencies. FIN No. 45 also requires a guarantor to make significant new
disclosures for virtually all guarantees even when the likelihood of the
guarantor's having to make payments under the guarantee is remote. FIN No. 45
disclosure requirements are effective for financial statements with annual
periods ending after December 15, 2002 and requires initial recognition and
initial measurement provisions on a prospective basis to guarantees issued or
modified after December 29, 2002. The guarantor's previous accounting for
guarantees issued prior to the date of the adoption of FIN No. 45 will not be
revised or restated to reflect the Interpretation's provisions. The adoption of
FIN No. 45 did not impact the Company's financial position, results of
operations or cash flows for the six periods ended June 29, 2003.
In January of 2003 FASB issued FIN No. 46, "Consolidation of Variable
Interest Entities," ("FIN No. 46"). FIN No. 46 addresses consolidating certain
variable interest entities and applies immediately to variable interest entities
created after January 31, 2003. The Company does not believe the adoption of FIN
No. 46 will have any material effects on its financial position or results of
operations.
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 July 31, 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 the date
of that evaluation.
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 believe 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 AND CERTIFICATIONS
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 thereunto duly authorized.
BROWN JORDAN INTERNATIONAL, INC
By:/s/ Bruce R. Albertson
----------------------
August 11, 2003 Bruce R. Albertson
President and Chief Executive Officer
August 11, 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
---------------------
August 11, 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
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.
August 11, 2003 By:/s/ Vincent A. Tortorici, Jr.
----------------------------------
Vincent A. Tortorici, Jr.
Chief Financial Officer
Exhibit 99.1
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 June 27, 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
---------------------
August 11, 2003 Bruce R. Albertson
President and Chief Executive Officer
The foregoing certificate 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.
A signed original of this written statement required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature that
appears in typed form within this electronic version of this written statement
required by Section 906, has been provided to the Company and will be retained
by the Company and furnished to the Securities and Exchange Commission or its
staff upon request.
Exhibit 99.2
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 June 27, 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.
August 11, 2003 By:/s/ Vincent A. Tortorici, Jr.
----------------------------------
Vincent A. Tortorici, Jr.
Chief Financial Officer
The foregoing certificate 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.
A signed original of this written statement required by Section 906, or other
document authenticating, acknowledging, or otherwise adopting the signature that
appears in typed form within this electronic version of this written statement
required by Section 906, has been provided to the Company and will be retained
by the Company and furnished to the Securities and Exchange Commission or its
staff upon request.