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
May 31, 1999
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 18,617,227 common shares outstanding as of May 31, 1999.
2
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
=====================================
(In Thousands)
May 31, November 30,
ASSETS 1999 1998
------ ---------- -----------
(Unaudited) (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 28 232 $ 10 498
Marketable securities 74 485 77 836
Accounts receivable, less allowance for
possible losses of $1,240,000 and $1,205,000 28 515 24 577
Inventories at lower of cost or market 29 318 28 115
Prepaid expenses and miscellaneous 4 319 5 041
---------- ----------
TOTAL CURRENT ASSETS 164 869 146 067
---------- ----------
PROPERTY, PLANT AND EQUIPMENT,
less accumulated depreciation of
$17,346,000 and $15,351,000 47 313 46 176
---------- ----------
OTHER ASSETS:
Marketable securities 0 12 049
Goodwill and other intangibles, net of
accumulated amortization of
$1,617,000 and $1,536,000 4 348 3 940
Miscellaneous 1 069 607
---------- ----------
TOTAL OTHER ASSETS 5 417 16 596
---------- ----------
$ 217 599 $ 208 839
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 6 548 $ 4 441
Accrued liabilities 5 775 8 217
---------- ----------
TOTAL CURRENT LIABILITIES 12 323 12 658
---------- ----------
LONG-TERM DEBT & DEFERRED INCOME TAXES 4 859 4 733
---------- ----------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par, shares authorized
50,000,000; issued 18,617,227 & 18,595,327 186 186
Paid-in-capital 5 864 5 484
Accumulated other comprehensive income ( 402) 604
Retained earnings 194 769 185 174
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 200 417 191 448
---------- ----------
$ 217 599 $ 208 839
========== ==========
(See Notes To Consolidated Financial Statements)
3
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
===========================================
(In Thousands Except Per
Share Amounts)
Three Months Ended
--------------------------
May 31, May 31,
1999 1998
----------- -----------
(Unaudited) (Unaudited)
NET SALES $ 45 504 $ 40 846
COST OF SALES 23 477 20 345
----------- -----------
Gross profit 22 027 20 501
SELLING, GENERAL AND ADMINISTRATIVE 11 876 10 873
----------- -----------
Operating income 10 151 9 628
OTHER INCOME 1 136 1 141
----------- -----------
Income before taxes on income 11 287 10 769
TAXES ON INCOME 3 981 3 947
----------- -----------
NET INCOME $ 7 306 $ 6 822
=========== ===========
NET INCOME PER COMMON SHARE (BASIC AND DILUTED) $0.39 $0.37
===== =====
(See Notes To Consolidated Financial Statements)
4
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
===========================================
(In Thousands Except Per
Share Amounts)
Six Months Ended
-------------------------
May 31, May 31,
1999 1998
----------- -----------
(Unaudited) (Unaudited)
NET SALES $ 82 781 $ 75 232
COST OF SALES 42 032 37 961
---------- ----------
Gross profit 40 749 37 271
SELLING, GENERAL AND ADMINISTRATIVE 22 672 21 341
---------- ----------
Operating income 18 077 15 930
OTHER INCOME 2 395 2 071
---------- ----------
Income before taxes on income 20 472 18 001
TAXES ON INCOME 7 157 6 414
---------- ----------
NET INCOME $ 13 315 $ 11 587
========== ==========
NET INCOME PER COMMON SHARE - BASIC $0.72 $0.62
===== =====
NET INCOME PER COMMON SHARE - DILUTED $0.71 $0.62
===== =====
(See Notes To Consolidated Financial Statements)
5
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF RETAINED EARNINGS
=====================================================
(In Thousands)
Six Months Ended
May 31, 1999
----------------
(Unaudited)
RETAINED EARNINGS, beginning of period $ 185 174
CASH DIVIDEND ($0.20 per share) ( 3 720)
NET INCOME, six months ended 13 315
May 31, 1999 ----------
RETAINED EARNINGS, end of period $ 194 769
==========
(See Notes To Consolidated Financial Statements)
6
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
====================================
(In Thousands)
Six Months Ended
----------------------------
May 31, May 31,
1999 1998
------------ -----------
(Unaudited) (Unaudited)
CASH FLOWS PROVIDED BY (USED IN) OPERATING
ACTIVITIES:
Net income from continuing operations $ 13 315 $ 11 587
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation & amortization 2 076 1 842
Gain on Sale of Assets - ( 175)
Changes in assets and liabilities:
(Increase) in accounts
receivable ( 3 819) ( 4 070)
(Increase) in inventory ( 1 203) ( 3 007)
Decrease in prepaid expense 1 297 520
(Increase) in other assets ( 950) ( 41)
(Decrease) increase in accounts
payable and accrued expenses ( 335) 662
Deferred income taxes 186 33
----------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 10 567 7 351
----------- ----------
CASH FLOWS PROVIDED BY (USED IN) INVESTING
ACTIVITIES:
Proceeds on sale of building - 4 601
Capital expenditures ( 3 133) ( 2 536)
Purchases of marketable securities ( 63 966) ( 26 093)
Sales of marketable securities 77 666 15 500
----------- ----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 10 567 ( 8 528)
----------- ----------
(Continued on Next Page)
7
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS (CONTINUED)
====================================
(In Thousands)
Six Months Ended
----------------------------
May 31, May 31,
1999 1998
----------- -----------
(Unaudited) (Unaudited)
CASH FLOWS PROVIDED BY (USED IN) FINANCING
ACTIVITIES:
Proceeds from exercise of stock
options 380 249
Dividend paid ( 3 720) ( 3 341)
Principal payments on long-term debt ( 60) ( 58)
----------- -----------
NET CASH (USED IN) FINANCING ACTIVITIES ( 3 400) ( 3 150)
----------- -----------
NET INCREASE (DECREASE) IN CASH 17 734 ( 4 327)
CASH AT BEGINNING OF PERIOD 10 498 6 806
----------- -----------
CASH AT END OF PERIOD $ 28 232 $ 2 479
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 62 $ 78
Income taxes 7 114 5 810
(See Notes To Consolidated Financial Statements)
8
JUNO LIGHTING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
====================================================
FINANCIAL INFORMATION
The financial information presented in these 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, 1998 was derived from
the Company's audited consolidated financial statements.
INVENTORIES
Inventories are summarized as follows:
(In Thousands)
May 31, November 30,
1999 1998
------------ ------------
Finished goods $ 13 204 $ 13 164
Raw materials 16 114 14 951
------------ ------------
$ 29 318 $ 28 115
============ ============
NET INCOME PER COMMON SHARE
Basic earnings per share is calculated by dividing net income by the
weighted average number of common shares outstanding. Diluted earnings per
share is calculated by dividing net income 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:
May 31, May 31,
1999 1998
---------- ----------
3 months ended
Basic 18,602,077 18,564,020
Diluted 18,653,666 18,608,016
6 months ended
Basic 18,599,184 18,562,199
Diluted 18,654,308 18,594,120
COMPREHENSIVE INCOME
As of December 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130).
The adoption of this Statement had no impact on the Company's net income or
stockholders' equity. SFAS 130 establishes new rules for the reporting and
display of comprehensive income and its components. SFAS 130 requires foreign
currency translation adjustments and unrealized gains or losses on the
Company's available-for-sale securities to be included in other comprehensive
income. Prior to the adoption of SFAS, the Company reported such adjustments
and unrealized gains or losses separately in stockholders' equity. Amounts in
prior year financial statements have been reclassified to conform to SFAS 130.
9
COMPREHENSIVE INCOME (Continued)
The components of comprehensive income, net of related tax, are as
follows (in thousands):
Three Months Ended Six Months Ended
May 31, May 31, May 31, May 31,
1999 1998 1999 1998
------- ------- ------- -------
Net income $ 7,306 $ 6,822 $13,315 $11,587
Net change in
unrealized gain (loss)
on available-for-sale
securities ( 913) 153 ( 1,124) 358
Foreign currency
translation adjustment 64 ( 87) 118 ( 84)
------- ------- ------- -------
Comprehensive income $ 6,457 $ 6,888 $12,309 $11,861
======= ======= ======= =======
The components of accumulated other comprehensive income, net of
related tax, are as follows (in thousands):
May 31, November 30,
1999 1998
------ ------
Unrealized gain (loss) on
available-for-sale securities $ 135 $1,259
Foreign currency translation adjustment ( 537) ( 655)
------ ------
Accumulated other comprehensive income ($ 402) $ 604
====== ======
PROPOSED MERGER AND RECAPITALIZATION
On March 26, 1999 the Company entered into a merger and
recapitalization agreement, which if consummated, would materially affect the
Company's capitalization and liquidity. The proposed agreement includes the
repurchase of approximately $405 million of the Company's outstanding common
stock to be funded by the Company's available cash and marketable securities,
additional debt financing and a $106 million preferred stock investment by
Fremont Investors I, LLC. In contemplation of the proposed merger and
recapitalization, the Company has classified all marketable securities in the
accompanying condensed consolidated balance sheet as of May 31, 1999 as
current assets.
10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
===========================================================
RESULTS OF OPERATIONS:
- ----------------------
Three Months Ended May 31, 1999 Compared With Three Months
- ----------------------------------------------------------
Ended May 31, 1998
- ------------------
During the second quarter ended May 31, 1999, net sales increased by
11.4% to $45,504,000 compared to $40,846,000 for the like period in 1998. In
the opinion of management, this increase is due primarily to market share
gains and an overall increase in demand from improving economic conditions.
Sales through Juno's Canadian subsidiary increased 21.3% to $2,764,000
compared to $2,278,000.
Cost of sales as a percentage of net sales increased to 51.6% for the
quarter, compared to 49.8% for the like period in 1998 due primarily to a
change in sales mix for Juno's Canadian and Indy Lighting subsidiaries.
Selling, general and administrative expenses expressed as a percentage
of sales decreased slightly to 26.1% for the second quarter of 1999 compared
with 26.6% for the like period in 1998 due primarily to economies of scale
associated with the sales increase.
As a result of the above factors, operating income decreased to 22.3%
of sales as compared to 23.6% for the like period in 1998.
Six Months Ended May 31, 1999 Compared With Six Months
- ------------------------------------------------------
Ended May 31, 1998
- ------------------
During the six month period ended May 31, 1999, net sales increased
10.0% to $82,781,000 compared to $75,232,000 for the like period in 1998. In
the opinion of management, sales increases were due primarily to market share
gains and increases in demand from improved economic conditions.
Cost of sales as a percentage of net sales increased slightly to 50.8%
compared to 50.5% for the like period in 1998. This increase is due primarily
to changes in sales mix for Juno's Canadian and Indy Lighting subsidiaries.
Selling, general and administrative expenses as a percentage of sales
decreased to 27.4% as compared to 28.4% in 1998 due to economies of scale
associated with the increase in sales.
(Continued on Next Page)
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (continued)
=============================================================
LIQUIDITY AND CAPITAL RESOURCES:
- --------------------------------
During the six month period ended May 31, 1999, the Company generated
positive net cash flow from operating activities of $10,567,000. This was
comprised principally of net income, depreciation and amortization and a
decrease in prepaid expenses, (collectively aggregating $16,688,000), net of
increases in accounts receivable of $3,819,000 and inventory of $1,203,000 and
other assets of $950,000. The Company used the net cash provided from
operating activities to finance capital expenditures of $3,133,000 and pay
dividends of $3,720,000.
PROPOSED MERGER AND RECAPITALIZATION
- ------------------------------------
On March 26, 1999, the Company entered into a merger and
recapitalization agreement, which if consummated, would materially affect the
Company's capitalization and liquidity. (Reference is made to the Company's
Current Report on Form 8-K filed March 29, 1999 including the exhibits thereto
and a Registration Statement on Form S-4, including the exhibits thereto,
registration number 333-76101, filed April 12, 1999, as amended for additional
information.)
The Company has historically funded its operations principally from
cash generated from operations, available cash and income from marketable
securities. In the event the Company consummates the merger and
recapitalization, the Company would use substantially all cash and marketable
securities as well as incur significant indebtedness. In such event, the
Company's liquidity needs would be expected to arise primarily from operating
activities and servicing indebtedness incurred in connection with the merger
and recapitalization. Principal and interest payments under such indebtedness
would represent significant liquidity requirements for the Company. In the
event the Company consummates the merger and recapitalization, its principal
source of cash to fund its liquidity needs would be net cash from operating
activities and borrowings.
OTHER MATTERS:
- -------------
We have has been assessing our "Year 2000" readiness and exposure to
Year 2000 issues. Partly in connection with such assessment, we initiated a
program to upgrade our systems hardware and software. Our assessment has been
focused on information technology systems and has also included a limited
review of non-information technology systems, principally imbedded building
and facility systems. We entered into an agreement to acquire new enterprise
system software and certain related consulting services. The vendor has
advised us that the system is Year 2000 compliant. We implemented and tested
a portion of the new system in the fourth calendar quarter of 1998 and expect
the new system to be fully implemented and operational in our U.S. facilities
and in our Canadian facility in the third calendar quarter of 1999. We have
also solicited confirmation from our principal suppliers that they are Year
2000 compliant.
We believe that the principal cost of addressing our Year 2000
issues are costs associated with implementing our new enterprise system.
Through May 31, 1999, we incurred costs of approximately $4,300,000 with
12
respect to such system and estimate that we will incur approximately an
additional $625,000 with respect to such system. However, the ultimate costs
that we may incur with respect to such system or Year 2000 matters may be
significantly greater.
The failure of one or more of our systems to be Year 2000 compliant
or of our vendors or customers to be Year 2000 compliant could (i) prevent us
from engaging in our normal business operations for a time period, (ii) cause
us to resort to alternate or manual processes and incur material additional
expenses to correct or replace deficient systems, and (iii) have a material
effect on our results of operation, liquidity and financial condition,
although the ultimate impact of such events is uncertain. Based on our
assessment of our principal information technology systems, including the
advice of our enterprise systems vendor, we believe that our material systems
will be Year 2000 compliant. However, the impact of the failure of such
systems to be compliant is uncertain and we are unable to determine our most
reasonably likely worst case scenario. We have not undertaken and do not
anticipate undertaking further analysis of the uncertainty or development of a
plan to address this uncertainty or the potential that we or our vendors or
customers fail to be Year 2000 compliant.
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
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.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
======================================================================
The Company, in the normal course of doing business, is
theoretically exposed to interest rate change market risk with respect to its
Securities Available for Sale. All of the Registrant's Securities Available
for Sale are state government or municipal bonds. As of May 31, 1999, the
cost and market value of such bonds was $74,286,000 and $74,485,000,
respectively. A significant increase in interest rates would result in a
decrease in the bond prices. However, to minimize risk, the Company has a
policy of investing only in highly rated instruments (substantially all have
AA or better Moody's bond ratings).
The table below presents notional amounts and related weighted-
average interest rates by year of maturity for the Company's investment
portfolio (in thousands, except percentages).
1999 2000 2001 2002 2003 Thereafter
---- ---- ---- ---- ---- ----------
Investments $22,822 $2,573 $4,558 $4,968 $3,834 $ 35,730
Average 5.1% 5.9% 5.8% 5.3% 5.4% 5.3%
Interest Rate
In the event the proposed merger and recapitalization is
consummated, it is not anticipated that upon or after consummation the Company
would continue to have a material security investment portfolio.
13
PART II - OTHER INFORMATION
===========================
Item 1. Legal Proceedings - Reference is made to Item 3 of the Company's
Annual Report on Form 10-K for the fiscal year ended November 30,
1998 and Item 1 of the Company's Quarterly Report on Form 10-Q for
the quarterly period ended February 28, 1999 for descriptions of
Nilssen vs. Juno Lighting, Inc.
Reference is made to Item 1 of the Company's Quarterly Report on
Form 10-Q for the quarterly period ended February 28, 1999 for a
description of Linda Parnes v. George M. Ball, Thomas Tomsovic,
Allan Coleman, Robert S. Fremont, Julius Lewis, Fremont Investors I,
LLC, Fremont Partners, L.P. and Juno Lighting, Inc.
Item 2. Changes in Securities - 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 -
2.1 Plan of Acquisition, Reorganization, Arrangement, Liquidation
or Succession - Agreement and Plan of Merger, dated as of
March 26, 1999, by and between Fremont Investors I, LLC,
Jupiter Acquisition Corp. and Juno Lighting, Inc. filed as
Exhibit 2 to the Company's Current Report on Form 8-K (SEC
File No. 0-11631) filed with the Securities and Exchange
Commission on March 29, 1999 and incorporated herein by
reference.
(b) During the quarter for which this report is filed, a report
on Form 8-K (SEC File No. 0-11631) was filed with the
Securities and Exchange Commission on March 29, 1999, and
incorporated herein by reference, to report that Juno Lighting,
Inc. entered into an Agreement and Plan of Merger, dated as of
March 26, 1999, with Fremont Investors I, LLC and Jupiter
Acquisition Corp.
14
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:George J. Bilek
---------------------------------------
George J. Bilek, Vice President Finance
(Principal Financial Officer)
Dated: June 24, 1999