1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
February 28, 2002
For the quarterly period ended ...........................................
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ................... to ....................
0-11631
Commission File Number ..........
JUNO LIGHTING, INC.
..........................................................................
(Exact name of registrant as specified in its charter)
Incorporated in Delaware 36-2852993
..........................................................................
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1300 South Wolf Road, Des Plaines, Illinois 60017-5065
..........................................................................
(Address of principal executive offices) (Zip Code)
847 - 827 - 9880
..........................................................................
(Registrant's telephone number, including area code)
..........................................................................
(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 Sections 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 .....
There were 2,500,389 shares of common stock outstanding as of March 31, 2002.
2
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
=====================================
(In Thousands)
February 28, November 30,
ASSETS 2002 2001
------ ---------- -----------
(Unaudited) (Unaudited)
CURRENT ASSETS:
Cash $ 1,346 $ 1,280
Accounts receivable, less allowance for
doubtful accounts of $975 and $977 29,614 30,348
Inventories, net 21,690 20,735
Prepaid expenses and miscellaneous 4,095 4,552
---------- ----------
TOTAL CURRENT ASSETS 56,745 56,915
---------- ----------
PROPERTY, PLANT AND EQUIPMENT,
less accumulated depreciation of
$27,619 and $26,521 43,153 43,889
---------- ----------
OTHER ASSETS:
Goodwill and other intangibles, net of
accumulated amortization of
$1,983 and $1,975 7,759 7,835
Deferred financing costs, net of accumulated
amortization of $3,449 and $3,124 6,894 7,219
Miscellaneous 3,243 3,285
---------- ----------
TOTAL OTHER ASSETS 17,896 18,339
---------- ----------
$ 117,794 $ 119,143
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 12,998 $ 8,668
Accrued liabilities 12,097 18,969
Short-term borrowings 9,800 5,350
Current maturities of long-term debt 3,808 3,711
---------- ----------
TOTAL CURRENT LIABILITIES 38,703 36,698
---------- ----------
LONG-TERM DEBT & DEFERRED INCOME TAXES 166,743 169,995
---------- ----------
STOCKHOLDERS' DEFICIT:
Preferred Stock, Series A & B convertible,
$.001 par value,$100 stated value, shares
authorized 5,000,000; issued 1,063,500 132,192 129,600
Common stock, $.001 par value, shares
authorized 45,000,000;
issued 2,500,389 2 2
Paid-in-capital 674 674
Accumulated other comprehensive loss (1,187) (1,043)
Shareholder note receivable (200) (200)
Accumulated deficit (219,133) (216,583)
---------- ----------
TOTAL STOCKHOLDERS' DEFICIT (87,652) (87,550)
---------- ----------
$ 117,794 $ 119,143
========== ==========
(See Notes To Condensed Consolidated Financial Statements)
3
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
===========================================
(In Thousands Except Per
Share Amounts)
Three Months Ended
--------------------------
February 28, February 28,
2002 2001
----------- -----------
(Unaudited) (Unaudited)
NET SALES $ 41,406 $ 41,538
COST OF SALES 21,067 21,174
----------- -----------
Gross profit 20,339 20,364
SELLING, GENERAL AND ADMINISTRATIVE 13,073 14,391
COSTS OF TERMINATED ACQUISITION 3,050 -
----------- -----------
Operating income 4,216 5,973
----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (4,397) (5,262)
Interest and dividend income 4 51
Miscellaneous 246 25
----------- -----------
Total other income (expense) (4,147) (5,186)
----------- -----------
INCOME BEFORE TAXES ON INCOME 69 787
TAXES ON INCOME 27 301
----------- -----------
NET INCOME 42 486
LESS: PREFERRED DIVIDENDS 2,592 2,395
----------- -----------
NET (LOSS) AVAILABLE TO
COMMON SHAREHOLDERS $ (2,550) $ (1,909)
=========== ===========
NET (LOSS) PER COMMON SHARE
(BASIC AND DILUTED) $(1.02) $ (.77)
====== =====
(See Notes To Condensed Consolidated Financial Statements)
4
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF ACCUMULATED DEFICIT
=======================================================
(In Thousands)
Three Months Ended
February 28, 2002
----------------
(Unaudited)
ACCUMULATED DEFICIT, beginning of period $ (216,583)
PREFERRED DIVIDEND (2,592)
NET INCOME, three months ended
February 28, 2002 42
----------
ACCUMULATED DEFICIT, end of period $ (219,133)
==========
(See Notes To Condensed Consolidated Financial Statements)
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JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
====================================
(In Thousands)
Three Months Ended
---------------------------
February 28, February 28,
2002 2001
------------ -----------
(Unaudited) (Unaudited)
CASH FLOWS USED IN OPERATING
ACTIVITIES:
Net income $ 42 $ 486
Adjustments to reconcile net income
to net cash used in operating
activities:
Depreciation and amortization 1,466 1,471
Deferred compensation 18 18
Changes in operating assets and liabilities:
Decrease (Increase)in accounts
receivable 590 (146)
(Increase) in inventory (955) (15)
Decrease in prepaid expenses
and miscellaneous 457 477
Decrease in other assets 132 25
(Decrease) in accounts
payable and accrued liabilities (2,542) (5,130)
(Decrease) in deferred
income taxes (72) (190)
---------- ---------
NET CASH USED IN
OPERATING ACTIVITIES (864) (3,004)
---------- ---------
CASH FLOWS USED IN INVESTING
ACTIVITIES:
Capital expenditures (421) (857)
License - lighting technology - (3,197)
---------- ---------
NET CASH USED IN
INVESTING ACTIVITIES (421) (4,054)
---------- ---------
(Continued on Next Page)
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JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS (CONTINUED)
====================================
(In Thousands)
Three Months Ended
---------------------------
February 28, February 28,
2002 2001
----------- -----------
(Unaudited) (Unaudited)
CASH FLOWS PROVIDED BY
FINANCING ACTIVITIES:
Proceeds from bank debt 15,550 8,000
Principal payments on long-term debt
and bank debt (14,199) (3,552)
---------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 1,351 4,448
---------- -----------
NET INCREASE (DECREASE) IN CASH 66 (2,610)
CASH AT BEGINNING OF PERIOD 1,280 4,817
---------- -----------
CASH AT END OF PERIOD $ 1,346 $ 2,207
========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 8,148 $ 9,125
Income taxes 311 5
(See Notes To Condensed Consolidated Financial Statements)
7
JUNO LIGHTING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
====================================================
FINANCIAL INFORMATION
The financial information presented in these condensed consolidated
financial statements is unaudited but, in the opinion of management, reflects
all normal adjustments necessary for the fair presentation of the Company's
financial position, results of its operations and cash flows. The information
in the condensed consolidated balance sheet as of November 30, 2001 was
derived from the Company's audited consolidated financial statements.
INVENTORIES
Inventories are summarized as follows:
(In Thousands)
February 28, November 30,
2002 2001
------------ ------------
Finished goods $ 9,533 $ 9,059
Raw materials 12,157 11,676
------------ ------------
$ 21,690 $ 20,735
============ ============
LONG-TERM DEBT AND SHORT-TERM BORROWINGS
Long-term debt consists of the following:
(In Thousands)
February 28, November 30,
2002 2001
---------- -----------
Bank of America, N.A. and certain other lenders,
Tranche A Term Loan, payable in escalating
installments through November, 2005, plus
interest at a variable rate, generally
approximating 3 month LIBOR plus 2.75% $ 16,545 $ 18,213
Bank of America, N.A. and certain other lenders,
Tranche B Term Loan, payable in escalating
installments through November, 2006, plus
interest at a variable rate, generally
approximating 3 month LIBOR plus 3.25% 27,571 29,002
Senior Subordinated Notes due July 2009, plus
interest at 11 7/8%, net of discount of $746
and $762, respectively 124,254 124,238
-------- --------
168,370 171,453
Less current maturities 3,808 3,711
-------- --------
Total long-term debt $164,562 $167,742
======== ========
The Company has a senior credit facility (the "Senior Credit
Facility") with Bank Of America, N.A., Credit Suisse First Boston and certain
other lenders providing (i) a $90 million term facility consisting of a (a)
$40 million tranche A term loan ("Term Loan A"), and (b) $50 million tranche B
term loan ("Term Loan B"), and (ii) a $35 million revolving credit facility
(the "Revolving Credit Facility"). Borrowings under the Senior Credit
Facility bear interest, at the Company's option, at a rate per annum equal to
either the Eurodollar rate (the London interbank offered rate for eurodollar
deposits as adjusted for statutory reserve requirements) or a base rate plus
variable applicable percentages. At February 28, 2002, the nominal interest
rates for Term Loan A and Term Loan B were 4.52% and 5.02%, respectively.
Term Loan A and Term Loan B are each payable in separate quarterly
installments.
8
The final maturity of Term Loan A is November 30, 2005 and the final maturity
of Term Loan B is November 30, 2006. Amounts outstanding under the Revolving
Credit Facility at February 28, 2002 and November 30, 2001 were $9,800,000 and
$5,350,000 respectively. At February 28, 2002, the nominal interest rate for
borrowing on the Revolving Credit Facility was 6.0%. Borrowings under the
Revolving Credit Facility are due on November 30, 2005. In addition, the
Company issued $125 million principal amount of 11-7/8% senior subordinated
notes due July 1, 2009 (the "Notes") to qualified institutional buyers under a
private placement offering pursuant to Rule 144A and Regulation S of the
Securities Act of 1933, which notes were then exchanged for new notes
registered under the Securities Act of 1933 with substantially identical
economic terms, resulting in approximately $120.4 million in proceeds to the
Company. Interest is payable on the Notes semi-annually on January 1 and July
1 of each year. The Notes are unsecured senior subordinated obligations of
the Company, subordinated in right of payment to all existing and future
senior indebtedness of the Company, including the Senior Credit Facility.
Each of the aforementioned debt facilities contain restrictive covenants. The
credit agreement related to the Senior Credit Facility (the "Secured Credit
Agreement") requires the Company to maintain certain financial ratios, as
defined therein.
Relating to the Senior Credit Facility and the Notes, the Company
incurred approximately $3.9 million and $6.3 million of financing fees,
respectively, which are being amortized over the life of the related debt.
The Senior Credit Facility is collateralized by substantially all of
the assets of the Company and its domestic subsidiaries as more particularly
described in the Secured Credit Agreement dated June 29, 1999 and filed as an
exhibit hereto. The aggregate amounts of existing long-term debt maturing in
each of the next four years are as follows: 2003 - $4,622,000; 2004 -
$4,622,000; 2005 - $5,707,000; 2006 - $26,513,000.
SERIES A AND SERIES B PREFERRED STOCK
On June 30, 1999, the Company issued 1,060,000 shares of Series A
convertible preferred stock ("Series A") to Fremont Investors and certain
employees of the Company. On November 30, 2000, the Company issued 3,500
shares of Series B convertible preferred stock ("Series B", and together with
the Series A, the "Preferred Stock") to the Company's Chief Executive Officer.
Holders of the Preferred Stock are entitled to receive cumulative quarterly
dividends, whether or not declared by the Board of Directors, in an amount
equal to the greater of:
- dividends which would have been payable to the holders of Series A
or Series B, as the case may be, in such quarter had they
converted their Preferred stock into Juno common stock prior to
the record date of dividends declared on the common stock in such
quarter, or
- the stated amount then in effect multiplied by 2%.
Through June 30, 2004, the dividends for the Series A will be
payable by an increase in the stated amount of such stock, and through
November 30, 2005, the dividends for the Series B will be payable by an
increase in the stated amount of such stock. After June 30, 2004, the
dividends on the Series A will be paid in cash until redemption or conversion,
and after November 30, 2005, the dividends on the Series B will be paid in
cash until redemption or conversion. The Preferred Stock is convertible into
shares of the Company's common stock at a price of $26.25 per share. Holders
of Preferred Stock are entitled to one vote for each whole share of common
stock that would be issuable to such holder upon the conversion of all the
shares of the Preferred Stock held by such holder on the record date for the
determination of stockholders entitled to vote. Additionally, holders of
Preferred Stock have preference to common stockholders in the event of
liquidation, dissolution, winding up or sale of the Company.
9
NET (LOSS) PER COMMON SHARE
Basic earnings per share is calculated by dividing net (loss) by
the weighted average number of common shares outstanding. Diluted earnings
per share is calculated by dividing net (loss) by the weighted average number
of common shares outstanding including assumed exercise of dilutive stock
options during the periods. Such weighted average number of shares
outstanding is as follows:
February 28, February 28,
2002 2001
---------- ----------
3 months ended
Basic 2,500,389 2,463,248
Diluted 2,500,389 2,463,248
COMPREHENSIVE (LOSS) INCOME
As of December 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130).
SFAS 130 established new rules for the reporting and display of comprehensive
income and its components. SFAS 130 requires foreign currency translation
adjustments to be included in other comprehensive (loss) income.
The components of comprehensive (loss) income, net of related tax,
are as follows (in thousands):
Three Months Ended
February 28, February 28,
2002 2001
----------- -----------
Net income $ 42 $ 486
Foreign currency
translation adjustment (144) (32)
------- --------
Comprehensive (loss) income $ (102) $ 454
======= ========
The components of accumulated other comprehensive loss, net of
related tax, are as follows (in thousands):
February 28, November 30,
2002 2001
------------ ------------
Foreign currency translation adjustment $(1,187) $(1,043)
------ ------
Accumulated other comprehensive loss $(1,187) $(1,043)
====== ======
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MERGER AND RECAPITALIZATION
On June 30, 1999, Jupiter Acquisition Corp. ("Merger Sub"), a
Delaware corporation and a wholly-owned subsidiary of Fremont Investors I, LLC
("Fremont Investors"), was merged (the "Merger") with and into the Company
pursuant to an Agreement and Plan of Recapitalization and Merger dated March
26, 1999 (the "Merger Agreement") by and among Merger Sub, the Company and
Fremont Investors. Pursuant to the Merger, the holders of all the issued and
outstanding shares of Juno common stock, $.01 par value per share, were
entitled to receive either $25 cash or one share of Juno common stock, $.001
par value per share, for each share of common stock issued and outstanding;
provided that this consideration was subject to proration, as such holders
were entitled to receive an aggregate of 2,400,000 shares of Juno common
stock. The Company funded this effective retirement of 16,242,527 shares of
the Company's common stock with a payment to stockholders in the aggregate of
approximately $406 million. The sources of this funding included the
Company's available cash and marketable securities, a $106 million preferred
stock investment by Fremont and key employees of Juno ("Series A"),
approximately $94.9 million of bank debt ("Bank Debt") and the issuance of
$125 million of subordinated debt ("Subordinated Debt"). In connection with
the Merger, the Company incurred approximately $9.9 million in transaction
costs and $10.2 million of deferred financing costs. Included in these costs
were payments of approximately $4.9 million to Fremont Investors.
GUARANTORS' FINANCIAL INFORMATION
The Company has issued and registered $125 million of Series B
Senior Subordinated Notes at 11-7/8% (the "Senior Subordinated Notes") under
the Securities Act of 1933, as amended (the "Act"), which notes were exchanged
for the notes that were sold earlier in a private placement offering to
qualified institutional buyers. Pursuant to terms of the Senior Subordinated
Notes, the Company's domestic subsidiaries, Juno Manufacturing, Inc. and Indy
Lighting, Inc., provide full and unconditional senior subordinated guarantees
for the Senior Subordinated Notes on a joint and several basis.
Following is consolidating condensed financial information
pertaining to the Company ("Parent") and its subsidiary guarantors and
subsidiary non-guarantors.
For the Three Months Ended February 28, 2002
---------------------------------------------
(in thousands)
Guarantor Non-Guarantor Total
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------- ------------ ------------
Net sales $ 33,486 $ 33,399 $ 3,400 $ (28,879) $ 41,406
Cost of sales 28,309 20,193 2,320 (29,755) 21,067
-------- ------------ ------------- ------------ ------------
Gross profit 5,177 13,206 1,080 876 20,339
Selling, general and
administrative 6,840 5,456 749 28 13,073
Costs of terminated
acquisition - 3,050 - - 3,050
-------- ------------ ------------- ------------ ------------
Operating (loss) income (1,663) 4,700 331 848 4,216
Other (expense) (4,034) (7) (106) - (4,147)
-------- ------------ ------------- ------------ ------------
(Loss) income before
taxes on income (5,697) 4,693 225 848 69
Taxes on income (1,739) 1,675 92 (1) 27
-------- ------------ ------------- ------------ ------------
Net (loss) income (3,958) 3,018 133 849 42
Less: preferred
dividends (2,592) - - - (2,592)
-------- ------------ ------------- ------------- --------------
Net (loss) income
available to
common shareholders $(6,550) $ 3,018 $ 133 $ 849 $ (2,550)
======== ============ ============= ============ ===========
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GUARANTORS' FINANCIAL INFORMATION (CONTINUED)
For the Three Months Ended February 28, 2001
--------------------------------------------
(in thousands)
Guarantor Non-Guarantor Total
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------- ------------ ------------
Net sales $ 34,520 $ 35,351 $ 2,422 $ (30,755) $ 41,538
Cost of sales 28,384 20,979 2,136 (30,325) 21,174
-------- ------------ ------------- ------------ ------------
Gross profit 6,136 14,372 286 (430) 20,364
Selling, general and
administrative 7,201 6,706 457 27 14,391
-------- ------------ ------------- ------------ ------------
Operating (loss) income (1,065) 7,666 (171) (457) 5,973
Other income (expense) 59,489 6 (31) (64,650) (5,186)
-------- ------------ ------------- ------------ ------------
Income (loss) before
taxes on income 58,424 7,672 (202) (65,107) 787
Taxes on income (2,398) 2,790 (90) (1) 301
-------- ------------ ------------- ------------ ------------
Net income (loss) 60,822 4,882 (112) (65,106) 486
Less: preferred
dividends (2,395) - - - (2,395)
-------- ------------ ------------- ------------- --------------
Net income (loss)
available to
common shareholders $ 58,427 $ 4,882 $ (112) $ (65,106) $ (1,909)
======== ============ ============= ============ ===========
February 28, 2002
-----------------
(in thousands)
Guarantor Non-Guarantor Total
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------- ------------ ------------
Cash $ 893 $ (369) $ 800 $ 22 $ 1,346
Accounts receivable, net 26,083 37,870 2,174 (36,513) 29,614
Inventories, net 16,125 11,675 2,107 (8,217) 21,690
Other current assets 3,060 969 66 4,095
-------- ----------- ------------ ------------ ------------
Total current assets 46,161 50,145 5,147 (44,708) 56,745
Property and equipment 10,877 57,559 2,713 (377) 70,772
Less accumulated depreciation 3,346 23,900 650 (277) 27,619
-------- ----------- ------------ ------------ ------------
Net property and equipment 7,531 33,659 2,063 (100) 43,153
Other assets 73,986 128 5,798 (62,016) 17,896
-------- ----------- ------------ ------------ ------------
$127,678 $ 83,932 $ 13,008 $ (106,824) $ 117,794
Total assets ======== =========== ============ ============ ============
Current liabilities $ 51,380 $ 15,795 $ 8,019 $ (36,491) $ 38,703
Other liabilities 166,571 - 2,213 (2,041) 166,743
-------- ----------- ------------ ----------- ------------
Total liabilities 217,951 15,795 10,232 (38,532) 205,446
Total stockholders'
(deficit) equity (90,273) 68,139 2,776 (68,294) (87,652)
-------- ----------- ------------ ------------ ------------
Total liabilities and
stockholders' equity
(deficit) $127,678 $ 83,934 $ 13,008 $ (106,826) $ 117,794
======== =========== ============ ============ ===========
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GUARANTORS' FINANCIAL INFORMATION (CONTINUED)
November 30, 2001
-----------------
(in thousands)
Guarantor Non-Guarantor Total
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------- ------------ ------------
Cash $1,141 $(541) $674 $6 $1,280
Accounts receivable, net 27,960 30,044 2,503 (30,159) 30,348
Inventories 16,363 11,377 2,066 (9,071) 20,735
Other current assets 3,165 1,193 194 - 4,552
-------- ------------ ------------- ------------ ------------
Total current assets 48,629 42,073 5,437 (39,224) 56,915
Property and equipment 10,869 57,172 2,746 (377) 70,410
Less accumulated depreciation 3,268 22,899 630 (276) 26,521
-------- ------------ ------------- ------------ ------------
Net property and equipment 7,601 34,273 2,116 (101) 43,889
Other assets 74,365 129 5,899 (62,054) 18,339
-------- ------------ ------------- ------------ ------------
Total assets $130,595 $76,475 $13,452 $(101,379) $119,143
======== ============ ============= ============ ============
Current liabilities $47,068 $11,355 $8,430 $(30,155) $36,698
Other liabilities 169,841 - 2,202 (2,048) 169,995
-------- ------------ ------------- ------------ ------------
Total liabilities 216,909 11,355 10,632 (32,203) 206,693
Total stockholders' (deficit)
equity (86,314) 65,120 2,820 (69,176) (87,550)
-------- ------------ ------------- ------------ ------------
Total liabilities and
stockholders' equity
(deficit) $130,595 $76,475 $13,452 $(101,379) $119,143
======== ============ ============= ============ ============
For the Three Months Ended February 28, 2002
--------------------------------------------
(in thousands)
Guarantor Non-Guarantor Total
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------- ------------ ------------
Net cash (used in) provided
by operating activities $ (1,591) $ 559 $ 160 $ 8 $ (864)
--------- ------------ ------------- ------------ ------------
Cash flows (used in)
investing activities:
Capital expenditures (8) (387) (26) - (421)
--------- ------------ ------------- ------------ ------------
Net cash (used in)
investing activities (8) (387) (26) - (421)
--------- ------------ ------------- ------------ ------------
Cash provided by (used in)
financing activities:
Proceeds from bank debt 15,550 - - - 15,550
Principal payments on
Long Term Debt (14,199) - (8) 8 (14,199)
--------- ------------ ------------- ------------ ------------
Net cash provided by
(used in) financing
activities 1,351 - (8) 8 1,351
--------- ------------ ------------- ------------ ------------
Net (decrease) increase
in cash (248) 172 126 16 66
Cash at beginning of period 1,141 (541) 674 6 1,280
--------- ------------ ------------- ------------ ------------
Cash at end of period $ 893 $ (369) $ 800 $ 22 $ 1,346
========= ============ ============= ============ ============
13
For the Three Months Ended February 28, 2001
--------------------------------------------
(in thousands)
Guarantor Non-Guarantor Total
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------- ------------ ------------
Net cash (used in) provided
by operating activities $ (2,993) $ (32) $ 29 $ (8) $ (3,004)
--------- ------------ ------------- ------------ ------------
Cash flows (used in)
investing activities:
Capital expenditures (253) (604) - - (857)
Purchase of license
agreement (3,197) (3,197)
--------- ------------ ------------- ------------ ------------
Net cash (used in)
investing activities (3,450) (604) - - (4,054)
--------- ------------ ------------- ------------ ------------
Cash provided by (used in)
financing activities:
Proceeds from bank debt 8,000 - - - 8,000
Principal payments on
Long Term Debt (3,552) - (8) 8 (3,552)
--------- ------------ ------------- ------------ ------------
Net cash provided by
(used in) financing
activities 4,448 - (8) 8 4,448
--------- ------------ ------------- ------------ ------------
Net (decrease) increase
in cash (1,995) (636) 21 - (2,610)
Cash at beginning of period 4,043 739 35 - 4,817
--------- ------------ ------------- ------------ ------------
Cash at end of period $ 2,048 $ 103 $ 56 $ - $ 2,207
========= ============ ============= ============ ============
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
=========================================================
RESULTS OF OPERATIONS:
- ----------------------
Three Months Ended February 28, 2002 Compared With Three Months
- -------------------------------------------------------------
Ended February 28, 2001
- -----------------------
During the first quarter ended February 28, 2002, net sales remained
flat at $41,406,000 compared to $41,538,000 for the like period in 2001. In
management's opinion, the inability to make revenue progress was impacted by
continuing weakness in the commercial segment. Approximately $1,000,000 of
first quarter 2002 sales was from Acculite, a manufacturer of High Intensity
Discharge (HID) lighting fixtures that was acquired by Juno on August 28,
2001.
Cost of sales as a percentage of net sales remained relatively unchanged
at 50.9% for the first quarter of 2002, compared to 51.0% for the like period
in 2001 as favorable purchase price variances were offset by an unfavorable
sales mix at both the Juno and Indy Lighting divisions.
Selling, general and administrative expenses expressed as a percentage
of sales increased to 38.9% for the first quarter of 2002 compared with 34.6%
for the like period in 2001. First quarter 2002 results include $3,050,000 of
one-time expenses incurred in connection with a proposed major acquisition
that was not consummated. Approximately $337,000 of these charges represent
fees and expenses payable to Fremont Partners L.L.C. and affiliates. Fees
paid to Sonnenschein Nath & Rosenthal for legal services in the first quarter
of 2002 were $309,000 which included $258,000 in charges relating to the
aforementioned proposed acquisition.
As a result of the above factors, operating income decreased to 10.2% of
sales as compared to 14.4% for the like period in 2001.
Interest expense amounted to $4,397,000 for the first quarter of 2002
compared to $5,262,000 for the like period in 2001. This decrease is due to
14
the reduction of debt from $191,020,000 at February 28, 2001 to $178,170,000
at February 28, 2002 and reductions in interest rates on the Company's
floating rate debt.
INFLATION
- ---------
While Juno believes that it generally has been successful in
controlling the prices it pays for materials and passing on increased costs by
increasing its prices, the Company may not have future success in limiting
material price increases, reflecting any material price increases in the
prices it charges its customers or offsetting such price increases through
improved efficiencies.
LIQUIDITY AND CAPITAL RESOURCES:
- --------------------------------
During the three month period ended February 28, 2002, operating
activities used cash flow of $864,000. This was comprised principally of net
income, depreciation and amortization, decreases in accounts receivable and
prepaid expenses,(collectively aggregating $2,555,000), net of increases in
inventory and decreases in accounts payable and accrued liabilities of
$3,497,000.
Net cash used in investing activities amounted to $421,000 used to
finance capital expenditures.
The net cash provided from financing activities of $1,351,000
consisted primarily of proceeds from the Revolving Credit Facility of
$15,550,000 less principal payments on the Senior Credit Facility of
$14,199,000.
Prior to the June 1999 Merger, the Company historically had funded
its operations principally from cash generated from operations and available
cash. The Company incurred substantial indebtedness in connection with the
Merger. The Company's liquidity needs are expected to arise primarily from
operating activities and servicing indebtedness incurred in connection with
the Merger.
Principal and interest payments under the Senior Credit Facility and
the Subordinated Debt, both entered into in connection with the Merger,
represent significant liquidity requirements for the Company. As of February
28, 2002, the Company had cash of approximately $1.3 million, a $9.8 million
balance on the Company's Revolving Credit Facility and total term debt of
approximately $168.4 million. Detailed information concerning the terms of the
Senior Credit Facility and the Subordinated Debt can be found in the Company's
audited financial statements included in the November 30, 2001 Annual Report
on Form 10-K.
The Company's $35 million Revolving Credit Facility is available to
finance its working capital and had an outstanding balance of $9.8 million on
February 28, 2002. The Company's principal source of cash to fund its
liquidity needs will be net cash from operating activities and borrowings
under the Senior Credit Facility. The Company believes these sources will be
adequate to meet its anticipated future requirements for working capital,
capital expenditures, and scheduled payments of principal and interest on its
existing indebtedness for the next 12 months. However, the Company may not
generate sufficient cash flow from operations or have future working capital
borrowings available in an amount sufficient to enable it to service its
indebtedness, including the Subordinated Debt, or to make necessary capital
expenditures.
OTHER MATTERS:
- --------------
This document contains various forward-looking statements.
Statements in this document that are not historical are forward-looking
statements. Such statements are subject to various risks and uncertainties
that could cause actual results to vary materially from those stated. Such
risks and uncertainties include: economic conditions generally; levels of
construction and remodeling activities, the ability to improve manufacturing
efficiencies, disruptions in manufacturing or distribution, product and price
competition, raw material prices, the ability to develop and successfully
15
introduce new products, technology changes, patent issues, exchange rate
fluctuations, and other risks and uncertainties. The Company undertakes no
obligation to update any such factors or to publicly announce the result of
any revisions to any of the forward-looking statements contained herein to
reflect future events or developments.
RECENTLY ISSUED ACCOUNTING STANDARDS
- ------------------------------------
In December 1999, the Securities and Exchange Commission (SEC)
issued Staff Accounting Bulletin (SAB) 101, "Revenue Recognition in Financial
Statements." This bulletin addresses appropriate revenue recognition
practices in the application of generally accepted accounting principles in
financial statements. The Company adopted this standard in the first quarter
of fiscal 2001. The Company concluded that no changes to existing revenue
recognition practices was warranted.
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" ("SFAS 133"). The Company
adopted this standard in the first quarter of fiscal 2001. This standard
requires, among other things, that all derivatives be carried on the balance
sheet at fair value. The Company has certain interest rate swap agreements
that qualify as derivative instruments and are further discussed in Item 3
below.
In June 2001, the FASB issued SFAS 141, "Business Combinations".
This standard applies to acquisitions after June 30, 2001 and requires, among
other things, that purchase accounting be followed. Accordingly, the Company
applied this standard to the acquisition of Acculite Manufacturing.
Consistent with this standard, the resulting goodwill from the acquisition of
$3,965,000 was not subject to amortization.
In June 2001, the FASB issued SFAS 142, "Goodwill and Other
Intangible Assets". This standard addresses the accounting for goodwill and
other intangible assets that have been historically subject to annual
amortization over their estimated useful lives. In October 2001, the FASB
issued SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets". This standard establishes a single accounting model for long-lived
assets. The Company has adopted these standards in the first quarter of
fiscal 2002. The result of adopting these standards was the ceasing of
amortization on goodwill recorded prior to June 30, 2001.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
=======================================================
The Company entered into two interest rate swap agreements in fiscal
2001 resulting in net income for the quarter ended February 28, 2002 of
$227,000 based on the swaps' estimated market values as of February 28, 2002.
Detailed information concerning the terms of these swaps can be found in the
Company's audited Financial Statements an notes thereto appearing in the
November 30, 2001 Annual Report 10-K.
PART II - OTHER INFORMATION
===========================
Item 1. Legal Proceedings - On or about April 11, 2002, Juno filed an
application for a prejudgment remedy in connection with a Proposed
Complaint against U.S. Industries, Inc. in the Superior Court for the
Judicial District of Ansonia/Milford in the State of Connecticut. On
or about April 15, 2002, an order for a hearing on the application
was granted, and a hearing was set for May 6, 2002. At this hearing,
the court will determine whether to grant Juno's application. In the
Proposed Complaint, Juno alleges that U.S. Industries breached an
exclusivity agreement with Juno related to a proposed acquisition, by
engaging in negotiations with another company during an exclusivity
period with Juno. The Proposed Complaint seeks damages based on a
liquidated damages provision contained in the exclusivity agreement
to cover expenses incurred and additional losses by Juno, as well as
attorneys' fees and costs. The likelihood of a favorable outcome on
the application for a prejudgment remedy and on the merits of the
Proposed Complaint cannot be assessed at this time.
Item 2. Changes in Securities and Use of Proceeds - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. (a) Exhibits - None
(b) During the quarter for which this report is filed, no reports on
Form 8-K were filed.
16
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.
JUNO LIGHTING, INC.
By: /s/ George J. Bilek
---------------------------------------
George J. Bilek, Vice President Finance
(Principal Financial Officer and Duly
Authorized Officer of the Registrant)
Dated: April 15, 2002