POINDEXTER J B & CO INC - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

(Mark one)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended JUNE 30, 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 33-75154

J.B. POINDEXTER & CO., INC.
(Exact name of registrant as specified in its charter)

DELAWARE 76-0312814
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

1100 LOUISIANA
SUITE 5400
HOUSTON, TEXAS
77002
------
(Address of principal executive offices)
(Zip code)

713-655-9800
---------------------------------------------------
(Registrant's telephone number, including area code)

NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
---

The registrant meets the conditions set forth in General Instructions H(1)(a)
and (b) of Form 10Q and is therefore filing this form with reduced disclosure
format.

There were 3,059 shares of Common Stock, $.01 par value, of the registrant
outstanding as of August 1, 2003.

PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS

J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)

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

2

J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS)

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

3

J.B. POINDEXTER & CO., INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

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

4

J.B. POINDEXTER AND CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(1) ORGANIZATION AND BUSINESS. J.B. Poindexter & Co., Inc. ("JBPCO") and its
subsidiaries (the "Subsidiaries", and, together with JBPCO, the "Company"),
operate primarily manufacturing businesses. Subsidiaries consist of Morgan
Trailer Mfg. Co., ("Morgan"), Truck Accessories Group, Inc., ("TAG"), and
Magnetic Instruments Corp., ("MIC Group"). MIC Group has one operating
subsidiary, Universal Brixius Inc., ("Universal") which together with MIC Group
and EFP Corporation ("EFP") comprise the Specialty Manufacturing Group (SMG).
SWK Inc., formerly KWS Manufacturing Inc., the operations of which were sold
effective December 31, 2002, is a subsidiary of MIC.

The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, following the rules and regulations of
the Securities and Exchange Commission. In the opinion of management, the
information furnished reflects all adjustments, consisting only of normal
recurring adjustments, which are necessary for a fair presentation of the
results of the interim periods. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with accounting
principles generally accepted in the United States have been condensed or
omitted following such rules and regulations. However, the Company believes that
the disclosures are adequate to make the information presented understandable.
Operating results for the six-month period ended June 30, 2003 are not
necessarily indications of the results that may be expected for the year ended
December 31, 2003. These financial statements should be read in conjunction with
the audited consolidated financial statements and notes thereto for the year
ended December 31, 2002 filed with the Securities and Exchange Commission on
Form 10-K.

(2) SEGMENT DATA. The following is a summary of the business segment data (in
thousands):

Morgan has two customers (truck leasing and rental companies) that accounted
for approximately 52% and 37% of Morgan's net sales during each of the six
months ended June 30, 2003 and 2002, respectively. SMG has an industry
concentration, in international oil field service companies; sales to these
customers accounted for 29% and

5

J.B. POINDEXTER AND CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

22% of net sales, with one customer that accounted for approximately 15% and 12%
of SMG's net sales during each of the six months ended June 30, 2003 and 2002,
respectively.

(3) COMPREHENSIVE INCOME. The components of comprehensive income (loss) were as
follows (in thousands):

(4) INVENTORIES. Consolidated net inventories consisted of the following (in
thousands):

(5) REVOLVING LOAN AGREEMENTS. At June 30, 2003 and December 31, 2002, the
Company had total borrowing availability of approximately $40,406,000 and
$30,312,000 of which approximately $4,100,000 was used to secure letters of
credit. Additionally as of June 30, 2003 and December 31, 2002, $15,720,000 and
$15,866,000, respectively had been borrowed to fund operations, resulting in
unused availability of $20,616,000 and $10,366,000 respectively.

(6) DISCONTINUED OPERATIONS. The Gem Top division of TAG was sold effective
February 28, 2003 and has been presented as a discontinued operation. During the
six months ended June 30, 2003 and 2002, net sales of the Gem Top division were
$918,000 and $3,744,000, respectively and operating losses, net of income taxes,
were $183,000 and $39,000 respectively.

The operations of SWK (formerly KWS, a division of SMG) were sold
effective December 31, 2002 and have been presented as discontinued. During the
six months ended June 30, 2003 operating losses of SWK were $30,000 net of
income taxes. For the six months ended June 30, 2002 net sales of SWK were
$4,637,000 and the operating loss was $441,000 net of income taxes.

The Company sold its Lowy operations during 1999 and presented the
operations as discontinued. During the six months ended June 30, 2003, Lowy
recorded a gain of $185,000, net of income taxes, as a result of a legal
settlement.

During the six months ended June 30, 2002, the Income (loss) from
discontinued operations included the operating losses of the TAG Polymer
Products and Distribution divisions and the Marlin plant of SMG of $471,000 and
$216,000 net of income taxes, respectively. The tax benefit of $738,000 recorded
against discontinued operations as of June 30, 2002 was reduced by a valuation
allowance of $738,000 effective December 31, 2002.

6

J.B. POINDEXTER AND CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(7) LONG TERM DEBT AND NOTE OFFERING. Effective June 10, 2003 the Company
successfully completed the exchange of $84,985,000 of its 12.5% Senior Notes due
May 2004 (Old Notes) for $84,985,000 of 12.5% Senior Secured Notes due May 2007
(New Notes). The interest rate is 12.50% per year; provided that, if on May 15,
2005, the Company has not retired (either through tender offers or redemptions)
at least an aggregate of $7.5 million of New Notes since the issue date of the
New Notes, the interest rate on the New Notes will increase by 200 basis points
(i.e., 2.0%) until the interest payment date immediately succeeding the date on
which the Company has repaid an aggregate of at least $7.5 million of New Notes;
provided further, if on May 15, 2006, the Company has not retired (either
through tender offers or redemptions) at least an aggregate of $15 million of
New Notes since the issue date of the New Notes, the interest rate on the New
Notes will increase by an additional 250 basis points (i.e., 2.5%) from the
interest rate then in effect until the interest payment date immediately
succeeding the date on which the Company has repaid an aggregate of at least
$15.0 million of New Notes. Interest on the New Notes accrues from May 15, 2003
and will be payable on May 15 and November 15 of each year and at maturity,
commencing on November 15, 2003. Interest will be paid in cash provided that, at
the option of the Company, any three of the first five interest payments (i.e.,
November 15, 2003, May 15 and November 15, 2004 and May 15 and November 15,
2005) may be made (i) half in cash and (ii) half in the form of additional New
Notes, or paid-in kind, with a principal amount equal to 112.5% of the amount of
cash that would have otherwise been payable.

The New Notes rank senior in right of payment to all subordinated debt
of the Company, and pari passu in right of payment with all senior debt of the
Company, including obligations under the Company's Revolving Loan Agreement.
However, the New Notes are effectively subordinated to the Company's obligations
under the Revolving Loan Agreement to the extent of the value of the assets
securing such obligations. While the Company's unsecured and unsubordinated
indebtedness rank pari passu with the New Notes in right of payment, the holders
of the New Notes may, to the exclusion of unsecured creditors, seek recourse
against the pledged assets as security for the New Notes until amounts owed
under the New Notes are satisfied in full.

The Company's obligations under the New Notes are guaranteed by all of
its current and future subsidiaries (the "Subsidiaries" or the "Guarantors"),
other than Beltrami Door Company ("Beltrami") which was merged with and into
Morgan effective June 10, 2003.

The New Notes are secured by a perfected, first priority security
interest in all the assets owned by the Company and the Subsidiaries except for
the assets securing the Revolving Credit Agreement (primarily cash, inventory
and accounts receivable) and the assets of Universal Brixius, Inc., securing
borrowings under a term loan agreement. The New Notes are also secured by a
pledge of the capital stock of the Company's subsidiaries, other than the stock
of Morgan. The Company agreed not to encumber the stock of Morgan.

The New Indenture includes covenants that limit the ability of the
Company and the ability of the Company's Restricted Subsidiaries to: incur
additional debt, including guarantees; make acquisitions; sell assets; make
investments and other restricted payments, pay dividends, redeem or repurchase
capital stock or subordinated obligations, subject to certain exceptions; create
specified liens; create or permit restrictions on the ability of the Company's
Restricted Subsidiaries to pay dividends or make other distributions to the
Company; engage in transactions with affiliates; engage in sale and leaseback
transactions; consolidate or merge with or into other companies or sell all or
substantially all of their assets.

Costs associated with the Exchange Offer of $940,000 were expensed
during the six months ended June 30, 2003. The Company paid a consent fee to the
holders of the Old Notes of 3% or approximately $2,550,000 that was paid in cash
effective June 10, 2003. The consent fee was capitalized as deferred loan costs
and will be amortized as interest expense over the term of the New Notes.

7

J.B. POINDEXTER AND CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

(8) ASSET ACQUISITIONS AND DISPOSITIONS. Effective May 12, 2003, the Company
sold the Morgan facility located in Monterrey, Mexico. The Company received cash
proceeds of approximately $865,000, net of fees, which was used to pay down
borrowings under the Revolving Loan Agreement. There was no gain or loss on the
transaction.

Effective May 5, 2003 Beltrami purchased certain assets, primarily
inventory, of a truck body manufacturer, located in Los Angeles, California.
Beltrami was an un-restricted, non-guarantor subsidiary of Morgan prior to June
10, 2003 and was merged into Morgan on that date. Beltrami paid approximately
$400,000, in cash, for the assets and assumed certain liabilities of
approximately $240,000. Concurrently with the acquisition, Beltrami entered into
a 2 year non-compete agreement with the former owner and a 2 year consulting
agreement with a former officer of the company. Beltrami will pay an aggregate
of approximately $380,000 each year under the terms of the agreements. The
acquisition provided Morgan with an operational manufacturing facility and was a
cost effective alternative to a planned investment in a new facility in the Los
Angeles market.

(9) INCOME TAXES. The Company accounts for income taxes under the provisions of
Statement of Financial Accounting Standards (SFAS) No. 109. Under SFAS No. 109,
deferred tax assets and liabilities are computed based on the difference between
the financial statement and income tax bases of assets and liabilities using the
enacted tax rates. The income tax provision (benefit) for the six months ended
June 30, 2003 and 2002 differ from amounts computed based on the federal
statutory rate as a result of state and foreign taxes.

The Company recorded a valuation allowance of $2,665,000 during the
year ended December 31, 2002 to reduce deferred tax assets to the amount that is
more likely than not to be realized. While the Company has considered future
taxable income and on-going prudent and feasible tax planning strategies in
assessing the need for the valuation allowance, should the Company determine
that it is more likely than not to be able to realize the deferred tax assets in
the future in excess of the net recorded amount, an adjustment to the valuation
allowance would increase income in the period such determination was made.
Likewise, should the Company determine that it is more likely than not to be
unable to realize all or part of the net deferred tax asset in the future, an
adjustment to the valuation allowance would reduce income in the period such
determination was made.

(10) CONTINGENCIES.

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

WARRANTY. Morgan provides product warranties for periods of up to five
years. TAG provides a warranty period, exclusive to the original product owner,
which is, in general but with exclusions, one year for parts, five years for
paint and lifetime for structure. A provision for warranty costs is included in
cost of sales when goods are sold based on historical experience and estimated
future claims. The Company had accrued warranty costs of $2,541,000 and
$2,519,000 at June 30, 2003 and December 31, 2002, respectively. During the six
months ended June 30, 2003 and 2002, the Company charged to expense $1,291,000
and $1,356,000 and made warranty payments of $1,269,000 and $1,417,000,
respectively.

ENVIRONMENTAL MATTERS. The Company's operations are subject to numerous
environmental statutes and regulations, including laws and regulations affecting
its products and the materials used in and wastes generated by manufacturing the
Company's products. In addition, certain of the Company's operations are subject
to federal, state and local environmental laws and regulations that impose
limitations on the discharge of pollutants into the air and water of the United
States. The Company also generates non-hazardous wastes. The Company has
received notices of noncompliance, from time to time, with respect to its
operations, which are typically resolved by correcting the conditions and the
payment of minor fines, none of which individually or in the aggregate has had a
material adverse

8

J.B. POINDEXTER AND CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

effect on the Company. However, the Company expects that the nature of its
operations will continue to make it subject to increasingly stringent
environmental regulatory standards. Although the Company believes it has made
sufficient capital expenditures to maintain compliance with existing laws and
regulations, future expenditures may be necessary, as compliance standards and
technology change. Unforeseen significant expenditures required to maintain such
future compliance, including unforeseen liabilities, could limit expansion or
otherwise have a material adverse effect on the Company's business and financial
condition.

Since 1989, Morgan has been named as a potentially responsible party
("PRP") with respect to the generation of hazardous materials alleged to have
been handled or disposed of at two federal superfund sites in Pennsylvania and
one in Kansas. Although a precise estimate of liability cannot currently be made
with respect to these sites, the Company currently believes that its
proportionate share, if any, of the ultimate costs related to any necessary
investigation and remedial work at those sites will not have a material adverse
effect on the Company. To date, Morgan's expenditures related to those sites
have not been significant. The Company has not recorded a liability related to
this matter.

In a memorandum dated January 10, 2002 issued by the Georgia
Environmental Protection Division ("EPD"), TAG was notified that it may be a PRP
in a Georgia state superfund site. Although a precise estimate of liability
cannot currently be made with respect to this site, the Company currently
believes that its proportionate share, if any, of the ultimate costs related to
any necessary investigation and remedial work at this site will not have a
material adverse effect on the Company. The Company has not recorded a liability
related to this matter.

On October 4, 2001, the United States Environmental Protection Agency
("USEPA") filed an administrative complaint against TAG. The USEPA claimed that
the Company failed to timely file certain forms allegedly required pursuant to
Section 313 of the Emergency Planning and Community Right-to-Know Act, and
regulations promulgated thereunder. The USEPA originally sought a penalty of
$59,000 for issues that arose in 1996. TAG self disclosed issues in other years
and has now resolved these claims and the Consent Order and Final Agreement
(CAFO) with USEPA Region V was signed October 24, 2002. The settlement proposed
an initial penalty of $161,769, which was reduced to $35,910 that was paid and
TAG implement two Supplemental Environmental Projects, undertaken in connection
with the settlement of this enforcement action, that require approximately
$124,000 of capital expenditures.

On January 29, 2003, USEPA notified TAG that it had reviewed a
self-disclosure regarding failure to file certain forms allegedly required
pursuant to Section 313 of the Emergency Planning and Community Right-to-Know
Act, and regulations promulgated thereunder. USEPA is proposing a penalty of
$139,786. The Company is engaged in settlement discussions to resolve these and
other potential claims. The liability with respect to the alleged violation is
estimated to be approximately $21,000. The Company has accrued expenses of
$20,000 and has implemented four Supplemental Environmental Projects, undertaken
in connection with this matter, that require approximately $90,000 of capital
expenditures.

During a Phase II Environmental Assessment in November 2002 at KWS
Manufacturing, in preparation for its sale, two areas of potential contamination
were identified. As a part of the sale agreement, a Phase III project was
undertaken to determine the exact level of contamination and potential
remediation, if necessary. The Company has entered into a "Voluntary Clean Up
Project" with the Texas Commission on Environmental Quality that is expected to
be completed by August 2003. Although a precise estimate of liability cannot
currently be made with respect to the contamination levels or potential
remediation, the Company has reserved approximately $50,000 that it currently
believes is adequate to cover the ultimate costs of this matter.

SELF-INSURED RISKS. The Subsidiaries utilize a combination of insurance
coverage and self-insurance programs for property, casualty, including workers'
compensation, and health care insurance. The Company has

9

J.B. POINDEXTER AND CO., INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

reserves recorded to cover the self-insured portion of these risks based on
known facts and historical trends and management believes that such reserves are
adequate and the ultimate resolution of these matters will not have a material
adverse effect on the financial position or results of operations of the
Company.

(11) RECENTLY ISSUED ACCOUNTING STANDARDS.

In January 2003 the FASB issued FIN 46, Consolidation of Variable
Interest Entities. FIN 46 requires that companies that control another entity
through interests other than voting interest should consolidate the controlled
entity. Interpretation 46 currently applies to variable interest entities
created after January 31, 2003 and to variable interest entities in which a
company obtains an interest after that date. Since the Company had no such
interests arising subsequent to or before January 31, 2003, this interpretation
has had no impact on its consolidated results of operations or consolidated
balance sheet to date.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS

The Company operates in industries that are dependent on various
factors reflecting general economic conditions, including corporate
profitability, consumer spending patterns, sales of truck chassis and new pickup
trucks and levels of oil and gas exploration.

RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 2003 COMPARED TO SIX MONTHS ENDED JUNE 30, 2002

Net sales increased $26.9 million, or 15% to $204.2 million for the six
months ended June 30, 2003 compared to $177.3 million during the six months
ended June 30, 2002. Morgan's net sales increased 36% or $29.9 million on a 23%
increase in unit shipments to approximately 15,123 units. The greater percentage
increase in net sales over unit shipments reflects changes in the mix of
products sold and not improved pricing. Shipment of product to consumer rental
companies that historically are completed in the first and second quarters of
the year and generally command a lower unit price decreased 21% compared to the
same period in 2002. However, shipments of commercial units increased 64% as
Morgan's major fleet customers and dealers increased new truck body purchases
from Morgan. TAG's net sales decreased $2.7 million or 4% to $64.4 million on a
6% decline in unit shipments during the 2003 period compared to the prior year
period. SMG's net sales decreased $0.3 million or 1% to $26.9 million as a $1.1
million increase in sales to customers in the energy industry was offset by
decreased sales to non-energy customers.

Morgan's backlog at June 30, 2003 was $41.1 million compared to $46.3
million at December 31, 2002 and $24.7 million at June 30, 2002. The increase
was due to additional commercial unit orders during the first six months of 2003
compared to both the last six months of 2002 and the first six months of 2002.
SMG's backlog at June 30, 2003 was $17.6 million compared to $18.1 million at
December 31, 2002 and $15.8 million at June 30, 2002. Higher activity from
customers in the energy industry was offset by lower non-energy orders as of
December 31, 2002. TAG's backlog of approximately 2 weeks production was $6.2
million at June 30, 2003 compared to $3.6 million as of December 31, 2002 and
$4.0 million as of June 30, 2002. The TAG backlog increased at June 30, 2003
compared to December as a result of the seasonal increase in sales activity.

Cost of sales increased 15% to $173.2 million for the six months ended
June 30, 2003 compared to $151.1 million during the six months ended June 30,
2002. Gross profit increased 18% to $31.0 million (15% of net sales) during the
six months ended June 30, 2003 compared to $26.2 million (15% of net sales) for
the six months ended June 30, 2002. Gross profit at Morgan increased $6.2
million or 66% to $15.6 million or 14% of sales compared to 11% of sales during
2002, primarily due to higher volume of sales and the associated improved
absorption of overhead.

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

TAG's gross profit decreased slightly to $10.4 million (16% of net sales)
compared to $10.6 million (16% of net sales) during the six months ended June
30, 2002 period. SMG's gross profit decreased $1.2 million to $5.0 million (19%
of net sales) compared to $6.2 million (23% of net sales) during the six months
ended June 30, 2002 primarily due to increased raw material costs on non-oil
related business.

Selling, general and administrative expenses decreased $3.2 million or
16% to $17.4 million (9% of net sales) for the six months ended June 30, 2003
compared to $20.6 million (12% of net sales) during the six months ended June
30, 2002. Expenses decreased to 6% of sales at Morgan compared to 8% for the six
months ended June 30, 2002. Expenses decreased $1.5 million or 22% at TAG, due
to reductions in administrative personnel and associated costs. Corporate
expenses for the 2003 period declined $1.4 million or 48% primarily as a result
of personnel reductions and their associated costs and a reduction in insurance
costs of $0.4 million during 2003.

Operating income increased $7.2 million to $12.8 million (6% of net
sales) for the six months ended June 30, 2003 compared to $5.7 million (3% of
net sales) during the six months ended June 30, 2002. Morgan's operating income
increased $6.0 million to $9.1 million for the period due to higher sales. TAG's
operating income increased 36% or $1.3 million to $4.9 million (8% of net sales)
compared to $3.6 million (5% of net sales) during 2002. SMG's operating income
decreased $0.7 million, as increased profits from sales to customers in the
energy business were offset by reductions in non-oil related profits. During the
six months ended June 30, 2003, SMG recorded income of approximately $118,000,
included in Other Income, from benefits paid under a life insurance policy held
on a former employee. Operating income for the 2003 period was reduced by costs
of $940,000 associated with the offer to exchange the Senior Notes that was
successfully completed on June 10, 2003.

Interest expense was $6.2 million for the six months ended June 30,
2003 compared to $6.3 million for the same period in 2002 despite a $3.9 million
or 31% increase in average revolver borrowings.

The income tax provision (benefit) for the six months ended June 30,
2003 and 2002 differ from amounts computed based on the federal statutory rate
due to state and foreign taxes.

SECOND QUARTER 2003 COMPARED TO SECOND QUARTER 2002

Net sales increased $16.7 million or 17% to $114.3 million for the
quarter ended June 30, 2003 compared to $97.6 million during the 2002 period.
Morgan's sales increased 32% or $16.0 million as shipments of Morgan's
commercial units increased 76% offset by a 37% decrease in shipments of consumer
rental products. TAG's sales increased slightly to $34.9 million on a 2%
decrease in units shipped. SMG's sales increased 3% to $13.8 million primarily
due to a $0.6 million or 14% decrease in sales to customers in the energy
services business.

Cost of sales increased 17% to $96.0 million for the quarter ended June
30, 2003 compared to $82.1 million during the 2002 period. Gross profit
increased 18% to $18.2 million (16% of net sales) during the 2003 quarter
compared to $15.5 million (16% of net sales) for 2002. Gross profit at Morgan
increased $2.6 million (37%) to $9.5 million or 15% of sales compared to 14% of
sales during 2002 as the higher volume of production and reduced fixed overhead
costs improved overhead absorption rates and therefore the gross profit margin.
TAG's gross profit as a percent of sales increased to 17% during the 2003
compared to 16% during the 2002 period primarily as a result of lower material
costs. SMG's gross profit decreased $0.5 million to $2.6 million (19% of net
sales) during 2003 compared to $3.1 million (23% of net sales) during 2002
primarily due to increased material costs.

Selling, general and administrative expenses were $8.7 million (8% of
net sales) for the quarter ended June 30, 2003 compared to $10.4 million (11% of
net sales) during 2002. TAG and SMG reduced expenses $0.8 million or 23% and
$0.2 million or 10%, respectively, partially offset by a $0.1 million increase
at Morgan. Corporate expenses decreased $0.8 million or 49% on reduced salary
and related costs.

11

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

Operating income was $8.6 million (8% of net sales) for the quarter
ended June 30, 2003 compared to $5.1 million (5% of net sales) in 2002. Morgan's
operating income increased $2.5 million for the period on an improved gross
profit margin and TAG's operating income increased $1.4 million on improved
gross profits and reduced general and administrative expense. SMG's operating
income decreased $0.3 million or 25% as a result of lower gross profits.

Interest expense was $2.9 million for the quarter ended June 30, 2003,
3% less than the $3.0 million during the same period in 2002. The decrease was
due to lower interest rates.

LIQUIDITY AND CAPITAL RESOURCES

Effective June 10, 2003 the Company successfully completed the exchange
of $84,985,000 of its 12.5% 2004 Senior Notes for a like number of 12.5% 2007
Senior Secured Notes, thereby extending the maturity of the principal portion of
its long term debt by 3 years. The Company paid a consent fee of 3% or
approximately $2,550,000 in cash at the time of closing to the holders of the
Old Notes.

Operating activities during the six months ended June 30, 2003
generated cash of $4.6 million compared to break even during the same period in
2002. Working capital at June 30, 2003 was $13.9 million compared to $5.9
million at December 31, 2002. The increase was primarily due to increased
receivables and inventory in response to the increase in sales during the six
months ended June 30, 2003.

The ability to borrow under the Revolving Loan Agreement depends on the
amount of eligible collateral, which, in turn, depends on certain advance rates
applied to the value of accounts receivables and inventory. At August 1, 2003,
the Company had unused available borrowing capacity of approximately $20.7
million under the terms of the Revolving Loan Agreement. Borrowings under the
Revolving Loan Agreement at June 30, 2003 were $15.7 million compared to $15.9
million at December 31, 2002 and $15.0 million at June 30, 2002.

Capital expenditures for the six months ended June 30, 2003 were $1.8
million compared to $2.9 million during the same period in 2002.

At June 30, 2003 and December 31, 2002, the Consolidated EBITDA
coverage Ratio, as defined in the 2007 12.5% Senior Secured Notes Bond
Indenture, was less than 2:1. As a result, the Company is limited in its ability
to incur additional borrowings for capital expenditures, excluding borrowings
under the Revolving Loan agreement. The Company's Revolving Loan Agreement and
Senior Secured Notes Indenture restrict the ability of the Company to dispose of
assets, incur debt, pay dividends, and undertake certain corporate activities.
The Company is in compliance with the terms of the Revolving Loan Agreement and
the Indenture.

The Company continually evaluates the most efficient use of its capital
and contemplates various strategic options, which may include, without
limitation, restructuring its indebtedness or capital structure. Accordingly,
the Company or its subsidiaries may from time to time consider, among other
things, purchasing, refinancing or otherwise retiring certain outstanding
indebtedness, public or private issuances of debt or equity securities, joint
venture transactions, new borrowings, offers to purchase, exchange offers or any
combination thereof, although there can be no assurances that such financing
sources will be available on commercially reasonable terms. There can be no
assurances that these strategic options, if pursued, will be consummated. The
Company, under the terms of the New Notes indenture, will incur significant
interest penalties if it has not retired at least $15 million of New Notes by
May 15, 2006.

The Company believes that it has adequate resources to meet its working
capital, debt service and capital expenditure requirements consistent with past
trends and practices. Operating cash flows are a principal source of liquidity
to the Company and the diverse nature of the operations of the Company, in
management's opinion, reduces exposure to economic factors such as a
manufacturing recession. Additionally, the Company believes that its

12

borrowing availability under the Revolving Credit Agreement and potentially
available sources of long-term financing will satisfy the Company's cash
requirements for the coming year, given anticipated business conditions, its
anticipated additional capital expenditures, working capital requirements and
its known obligations.

CRITICAL ACCOUNTING POLICIES

A discussion of critical accounting policies is included in the Company
2002 Annual Report on Form 10-K. There have been no material changes in critical
accounting policies since the date of that filing, or during the quarter ended
June 30, 2003

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Forward-looking statements in this report, including without
limitation, statements relating to the Company's plans, strategies, objectives,
expectations, intentions and adequacy of resources, are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Investors are cautioned that such forward-looking statements involve risks and
uncertainties including without limitation the following: (1) the Company's
plans, strategies, objectives, expectations and intentions are subject to change
at any time at the discretion of the Company; (2) other risks and uncertainties
indicated from time to time in the Company's filings with the Securities and
Exchange Commission.

ITEM 3. OTHER INFORMATION

The registrant meets the conditions set forth in General Instructions H
(1)(a) and (b) of Form 10Q and is therefore filing this form with reduced
disclosure format.

ITEM 4. CONTROLS AND PROCEDURES

The Company's management with the participation of the Chief Executive
Officer and Chief Financial Officer performed an evaluation of the Company's
disclosure controls and procedures, which have been designed to permit the
Company to effectively identify and timely disclose important information as of
the end of the fiscal quarter ended June 30, 2003. Based on this evaluation, the
CEO and CFO have concluded that the Company's disclosure controls and procedures
were effective as of the end of the fiscal quarter ended June 30, 2003 to ensure
that information that is required to be disclosed by the Company in the reports
it files or submits under the Exchange Act is recorded, processed, summarized
and reported, within the time periods specified in the SEC's rules and forms.

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

4.2.5 Senior Secured Notes Indenture dated June 10, 2003

10.1.21 Amendment No. 17 to the Loan and Security Agreement by and among
Congress Financial Corporation and J.B. Poindexter & Co., Inc.,
dated April 22, 2003.

31.1 Certification by the Chief Executive Officer dated August 14,
2003

31.2 Certification by the Principal Financial Officer dated August
14, 2003

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

J.B. POINDEXTER & CO., INC.
(Registrant)

Date: August 14, 2003 By: R.S.Whatley
--------------------------------------
R. S. Whatley, Principal Financial and
Accounting Officer

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EXHIBIT INDEX