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
May 31, 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 June 30, 2002.
2
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
=====================================
(In Thousands)
May 31, November 30,
ASSETS 2002 2001
------ ---------- -----------
(Unaudited) (Unaudited)
CURRENT ASSETS:
Cash $ 379 $ 1,280
Accounts receivable, less allowance for
doubtful accounts of $1,050 and $977 31,519 30,348
Inventories, net 22,540 20,735
Prepaid expenses and miscellaneous 4,648 4,552
---------- ----------
TOTAL CURRENT ASSETS 59,086 56,915
---------- ----------
PROPERTY, PLANT AND EQUIPMENT,
less accumulated depreciation of
$28,409 and $26,521 42,691 43,889
---------- ----------
OTHER ASSETS:
Goodwill and other intangibles, net of
accumulated amortization of
$1,991 and $1,975 7,968 7,835
Deferred financing costs, net of accumulated
amortization of $3,774 and $3,124 6,568 7,219
Miscellaneous 3,198 3,285
---------- ----------
TOTAL OTHER ASSETS 17,734 18,339
---------- ----------
$ 119,511 $ 119,143
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 12,394 $ 8,668
Accrued liabilities 18,115 18,969
Short-term borrowings 5,350 5,350
Current maturities of long-term debt 3,791 3,711
---------- ----------
TOTAL CURRENT LIABILITIES 39,650 36,698
---------- ----------
LONG-TERM DEBT & DEFERRED INCOME TAXES 162,873 169,995
---------- ----------
STOCKHOLDERS' DEFICIT:
Preferred Stock, Series A & B convertible,
$.001 par value,$100 stated value, shares
authorized 5,000,000; issued 1,063,500 134,836 129,600
Common stock, $.001 par value, shares
authorized 45,000,000;
issued 2,500,389 2 2
Paid-in-capital 800 674
Accumulated other comprehensive loss (833) (1,043)
Shareholder note receivable (200) (200)
Accumulated deficit (217,617) (216,583)
---------- ----------
TOTAL STOCKHOLDERS' DEFICIT (83,012) (87,550)
---------- ----------
$ 119,511 $ 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
--------------------------
May 31, May 31,
2002 2001
----------- -----------
(Unaudited) (Unaudited)
NET SALES $ 46,376 $ 46,309
COST OF SALES 22,554 22,811
----------- -----------
Gross profit 23,822 23,498
SELLING, GENERAL AND ADMINISTRATIVE 13,409 14,242
----------- -----------
Operating income 10,413 9,256
----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (4,283) (5,129)
Interest and dividend income 2 17
Miscellaneous 566 11
----------- -----------
Total other income (expense) (3,715) (5,101)
----------- -----------
INCOME BEFORE TAXES ON INCOME 6,698 4,155
TAXES ON INCOME 2,538 1,533
----------- -----------
NET INCOME 4,160 2,622
LESS: PREFERRED DIVIDENDS 2,644 2,442
----------- -----------
NET INCOME AVAILABLE TO
COMMON SHAREHOLDERS $ 1,516 $ 180
=========== ===========
NET INCOME PER COMMON SHARE
(BASIC AND DILUTED) $ .61 $ .07
====== =====
(See Notes To Condensed 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,
2002 2001
----------- -----------
(Unaudited) (Unaudited)
NET SALES $ 87,782 $ 87,847
COST OF SALES 43,621 43,984
----------- -----------
Gross profit 44,161 43,863
SELLING, GENERAL AND ADMINISTRATIVE 26,482 28,634
COSTS OF TERMINATED ACQUISITION 3,050 -
----------- -----------
Operating income 14,629 15,229
----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (8,680) (10,391)
Interest and dividend income 6 69
Miscellaneous 811 35
----------- -----------
Total other income (expense) (7,863) (10,287)
----------- -----------
INCOME BEFORE TAXES ON INCOME 6,766 4,942
TAXES ON INCOME 2,564 1,834
----------- -----------
NET INCOME 4,202 3,108
LESS: PREFERRED DIVIDENDS 5,236 4,837
----------- -----------
NET (LOSS) AVAILABLE TO
COMMON SHAREHOLDERS $ (1,034) $ (1,729)
=========== ===========
NET (LOSS) PER COMMON SHARE
(BASIC AND DILUTED) $ (.41) $ (.70)
====== =====
(See Notes To Condensed Consolidated Financial Statements)
5
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF ACCUMULATED DEFICIT
=======================================================
(In Thousands)
Six Months Ended
May 31, 2002
----------------
(Unaudited)
ACCUMULATED DEFICIT, beginning of period $ (216,583)
PREFERRED DIVIDEND (5,236)
NET INCOME, six months ended
May 31, 2002 4,202
----------
ACCUMULATED DEFICIT, end of period $ (217,617)
==========
(See Notes To Condensed Consolidated Financial Statements)
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JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
====================================
(In Thousands)
Six Months Ended
---------------------------
May 31, May 31,
2002 2001
------------ -----------
(Unaudited) (Unaudited)
CASH FLOWS PROVIDED BY OPERATING
ACTIVITIES:
Net income $ 4,202 $ 3,108
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 3,042 2,981
Deferred compensation 36 36
Changes in operating assets and liabilities:
(Increase)in accounts
receivable (1,171) (982)
(Increase)Decrease in inventory (1,805) 739
(Increase)Decrease in prepaid expenses
and miscellaneous (96) 496
(Increase)Decrease in other assets 89 58
Increase in accounts
payable and accrued liabilities 2,872 1,609
(Decrease) in deferred
income taxes (38) (370)
---------- ---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 7,131 7,675
---------- ---------
CASH FLOWS USED IN INVESTING
ACTIVITIES:
Capital expenditures (996) (1,723)
License - lighting technology - (3,220)
---------- ---------
NET CASH USED IN
INVESTING ACTIVITIES (996) (4,943)
---------- ---------
(Continued on Next Page)
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JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS (CONTINUED)
====================================
(In Thousands)
Six Months Ended
---------------------------
May 31, May 31,
2002 2001
----------- -----------
(Unaudited) (Unaudited)
CASH FLOWS (USED IN)
FINANCING ACTIVITIES:
Proceeds from bank debt 26,200 14,000
Principal payments on long-term debt
and bank debt (33,236) (18,799)
---------- -----------
NET CASH (USED IN) FINANCING
ACTIVITIES (7,036) (4,799)
---------- -----------
NET (DECREASE) IN CASH (901) (2,067)
CASH AT BEGINNING OF PERIOD 1,280 4,817
---------- -----------
CASH AT END OF PERIOD $ 379 $ 2,750
========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 8,698 $ 10,854
Income taxes 439 263
(See Notes To Condensed Consolidated Financial Statements)
8
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)
May 31, November 30,
2002 2001
------------ ------------
Finished goods $ 10,445 $ 9,059
Raw materials 12,095 11,676
------------ ------------
$ 22,540 $ 20,735
============ ============
LONG-TERM DEBT AND SHORT-TERM BORROWINGS
Long-term debt consists of the following:
(In Thousands)
May 31, 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% $ 14,620 $ 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% 25,558 29,002
Senior Subordinated Notes due July 2009, plus
interest at 11 7/8%, net of discount of $729
and $762, respectively 124,271 124,238
-------- --------
164,449 171,453
Less current maturities 3,791 3,711
-------- --------
Total long-term debt $160,658 $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 May 31, 2002, the nominal interest rates
for Term Loan A and Term Loan B were 4.35% and 4.85%, respectively. Term Loan
A and Term Loan B are each payable in separate quarterly installments.
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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 May 31, 2002 and November 30, 2001 were
$5,350,000 and $5,350,000 respectively. At May 31, 2002, the nominal interest
rate for borrowing on the Revolving Credit Facility was 5.75%. 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 - $4,295,000; 2004 -
$4,295,000; 2005 - $5,306,000; 2006 - $24,640,000.
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.
10
NET INCOME (LOSS) PER COMMON SHARE
Basic earnings per share is calculated by dividing net income (loss)
by the weighted average number of common shares outstanding. Diluted earnings
per share is calculated by dividing net income (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:
May 31, May 31,
2002 2001
---------- ----------
3 months ended
Basic and Diluted 2,500,389 2,469,914
6 months ended
Basic and Diluted 2,500,389 2,466,105
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 income.
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,
2002 2001 2002 2001
-------- -------- -------- -------
Net income $ 4,160 $ 2,622 $ 4,202 $ 3,108
Foreign currency
translation adjustment 354 85 210 53
-------- -------- ------- -------
Comprehensive income $ 4,514 $ 2,707 $ 4,412 $ 3,161
======== ======== ======= =======
The components of accumulated other comprehensive loss, net of
related tax, are as follows (in thousands):
May 31, November 30,
2002 2001
------------ ------------
Foreign currency translation adjustment $ (833) $(1,043)
------ ------
Accumulated other comprehensive loss $ (833) $(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 May 31, 2002
---------------------------------------------
(in thousands)
Guarantor Non-Guarantor Total
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------- ------------ ------------
Net sales $ 38,040 $ 40,849 $ 3,769 $ (36,282) $ 46,376
Cost of sales 31,714 22,408 2,756 (34,324) 22,554
-------- ------------ ------------- ------------ ------------
Gross profit 6,326 18,441 1,013 (1,958) 23,822
Selling, general and
administrative 7,056 5,572 753 28 13,409
-------- ------------ ------------- ------------ ------------
Operating (loss) income (730) 12,869 260 (1,986) 10,413
Other (expense) income (3,624) 3 (94) - (3,715)
-------- ------------ ------------- ------------ ------------
(Loss) income before
taxes on income (4,354) 12,872 166 (1,986) 6,698
Taxes on income (2,417) 4,891 65 (1) 2,538
-------- ------------ ------------- ------------ ------------
Net (loss) income (1,937) 7,981 101 (1,985) 4,160
Less: preferred
dividends 2,644 - - - 2,644
-------- ------------ ------------- ------------- --------------
Net (loss) income
available to
common shareholders $ (4,581) $ 7,981 $ 101 $ (1,985) $ 1,516
======== ============ ============= ============ ===========
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GUARANTORS' FINANCIAL INFORMATION (CONTINUED)
For the Three Months Ended May 31, 2001
---------------------------------------
(in thousands)
Guarantor Non-Guarantor Total
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------- ------------ ------------
Net sales $ 38,190 $ 37,747 $ 2,568 $ (32,196) $ 46,309
Cost of sales 31,558 22,890 2,047 (33,684) 22,811
-------- ------------ ------------- ------------ ------------
Gross profit 6,632 14,857 521 1,488 23,498
Selling, general and
administrative 7,775 5,971 469 27 14,242
-------- ------------ ------------- ------------ ------------
Operating (loss) income (1,143) 8,886 52 1,461 9,256
Other (expense) (5,060) (7) (34) - (5,101)
-------- ------------ ------------- ------------ ------------
(Loss) income before
taxes on income (6,203) 8,879 18 1,461 4,155
Taxes on income (1,910) 3,435 9 (1) 1,533
-------- ------------ ------------- ------------ ------------
Net (loss) income (4,293) 5,444 9 1,462 2,622
Less: preferred
dividends (2,442) - - - (2,442)
-------- ------------ ------------- ------------- --------------
Net (loss) income
available to
common shareholders $ (6,735) $ 5,444 $ 9 $ 1,462 $ 180
======== ============ ============= ============ ===========
For the Six Months Ended May 31, 2002
---------------------------------------------
(in thousands)
Guarantor Non-Guarantor Total
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------- ------------ ------------
Net sales $ 71,527 $ 74,248 $ 7,169 $ (65,162) $ 87,782
Cost of sales 60,025 42,601 5,076 (64,081) 43,621
-------- ------------ ------------- ------------ ------------
Gross profit 11,502 31,647 2,093 (1,081) 44,161
Selling, general and
administrative 13,896 11,028 1,502 56 26,482
Costs of terminated
acquisition - 3,050 - - 3,050
-------- ------------ ------------- ------------ ------------
Operating (loss) income (2,394) 17,569 591 (1,137) 14,629
Other (expense) (7,658) (4) (201) - (7,863)
-------- ------------ ------------- ------------ ------------
(Loss) income before
taxes on income (10,052) 17,656 390 (1,137) 6,766
Taxes on income (4,155) 6,566 157 (4) 2,564
-------- ------------ ------------- ------------ ------------
Net (loss) income (5,897) 10,999 233 (1,133) 4,202
Less: preferred
dividends 5,236 - - - 5,236
-------- ------------ ------------- ------------- --------------
Net (loss) income
available to
common shareholders $(11,133) $ 10,999 $ 233 $ (1,133) $ (1,034)
======== ============ ============= ============ ===========
13
GUARANTORS' FINANCIAL INFORMATION (CONTINUED)
For the Six Months Ended May 31, 2001
-------------------------------------
(in thousands)
Guarantor Non-Guarantor Total
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------- ------------ ------------
Net sales $ 72,711 $ 73,098 $ 4,990 $ (62,952) $ 87,847
Cost of sales 59,943 43,869 4,183 (64,011) 43,984
-------- ----------- ------------- ----------- -----------
Gross profit 12,768 29,229 807 1,059 43,863
Selling, general and
administrative 14,976 12,677 926 55 28,634
-------- ----------- ------------- ----------- -----------
Operating (loss) income (2,208) 16,552 (119) 1,004 15,229
Other income(expense) 54,429 (1) (65) (64,650) (10,287)
-------- ----------- ------------- ----------- -----------
Income (loss) before taxes
on income 52,221 16,551 (184) (63,646) 4,942
Taxes on income (4,307) 6,225 (81) (3) 1,834
-------- ----------- ------------- ----------- -----------
Net income (loss) 56,528 10,326 (103) (63,643) 3,108
Less: preferred
dividends (4,837) - - - (4,837)
-------- ----------- -------------- ----------- -----------
Net income (loss)
available to
common shareholders $ 51,691 $ 10,326 $ (103) $ (63,643) $ (1,729)
======== =========== ============= =========== ===========
May 31, 2002
-----------------
(in thousands)
Guarantor Non-Guarantor Total
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------- ------------ ------------
Cash $ 620 $ (281) $ (57) $ 97 $ 379
Accounts receivable, net 27,999 46,723 3,237 (46,440) 31,519
Inventories, net 19,078 10,994 2,669 (10,201) 22,540
Other current assets 3,593 999 56 - 4,648
-------- ----------- ------------ ------------ ------------
Total current assets 51,290 58,435 5,905 (56,544) 59,086
Property and equipment 10,879 57,717 2,880 (376) 71,100
Less accumulated depreciation 3,424 24,549 714 (278) 28,409
-------- ----------- ------------ ------------ ------------
Net property and equipment 7,455 33,168 2,166 (98) 42,691
Other assets 73,600 130 6,103 (62,099) 17,734
-------- ----------- ------------ ------------ ------------
$132,345 $ 91,733 $ 14,174 $ (118,741) $ 119,511
Total assets ======== =========== ============ ============ ============
Current liabilities $ 61,753 $ 15,613 $ 8,627 $ (46,343) $ 39,650
Other liabilities 162,678 - 2,229 (2,034) 162,873
-------- ----------- ------------ ----------- ------------
Total liabilities 224,431 15,613 10,856 (48,377) 202,523
Total stockholders'
(deficit) equity (92,086) 76,120 3,318 (70,364) (83,012)
-------- ----------- ------------ ------------ ------------
Total liabilities and
stockholders' equity
(deficit) $132,345 $ 91,733 $ 14,174 $ (118,741) $ 119,511
======== =========== ============ ============ ===========
14
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, net 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 Six Months Ended May 31, 2002
--------------------------------------------
(in thousands)
Guarantor Non-Guarantor Total
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------- ------------ ------------
Net cash provided by (used
in) operating activities $ 6,526 $ 1,193 $ (662) $ 74 $ 7,131
--------- ------------ ------------- ------------ ------------
Cash flows (used in)
investing activities:
Capital expenditures (10) (933) (53) - (996)
--------- ------------ ------------- ------------ ------------
Net cash (used in)
investing activities (10) (933) (53) - (996)
--------- ------------ ------------- ------------ ------------
Cash provided by (used in)
financing activities:
Proceeds from bank debt 26,200 - 26,200
Principal payments on
long term debt (33,236) - (17) 17 (33,236)
--------- ------------ ------------- ------------ ------------
Net cash (used in) provided
by financing activities (7,036) - (17) 17 (7,036)
--------- ------------ ------------- ------------ ------------
Net (decrease) increase
in cash (520) 260 (732) 91 (901)
Cash at beginning of period 1,141 (541) 674 6 1,280
--------- ------------ ------------- ------------ ------------
Cash at end of period $ 621 $ (281) $ (58) $ 97 $ 379
========= ============ ============= ============ ============
15
For the Six Months Ended May 31, 2001
-------------------------------------
(in thousands)
Guarantor Non-Guarantor Total
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------- ------------ ------------
Net cash provided by (used
in) operating activities $ 5,608 $ 2,123 $ (54) $ (2) $ 7,675
--------- ------------ ------------- ------------ ------------
Cash flows (used in)
investing activities:
Capital expenditures (318) (1,405) 0 0 (1,723)
License - lighting
technology (3,220) 0 0 0 (3,220)
--------- ------------ ------------- ------------ ------------
Net cash (used in)
investing activities (3,538) (1,405) 0 0 (4,943)
--------- ------------ ------------- ------------ ------------
Cash provided by (used in)
financing activities:
Proceeds from bank debt 14,000 0 0 0 14,000
Principal payments on
long term debt (18,799) 0 (15) 15 (18,799)
--------- ------------ ------------- ------------ ------------
Net cash (used in)
provided by financing
activities (4,799) 0 (15) 15 (4,799)
--------- ------------ ------------- ------------ ------------
Net (decrease) increase
in cash (2,729) 718 (69) 13 (2,067)
Cash at beginning of period 4,042 739 36 0 4,817
--------- ------------ ------------- ------------ ------------
Cash at end of period $ 1,313 $ 1,457 $ (33) $ 13 $ 2,750
========= ============ ============= ============ ============
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
===========================================================
RESULTS OF OPERATIONS:
- ----------------------
Three Months Ended May 31, 2002 Compared With Three Months
- ----------------------------------------------------------
Ended May 31, 2001
- ------------------
During the second quarter ended May 31, 2002, net sales remained flat at
$46,376,000 compared to $46,309,000 for the like period in 2001. In
management's opinion, the inability to generate revenue growth was impacted by
continuing weakness in commercial end markets. Approximately $1,100,000 of
second quarter sales was from Acculite, a manufacturer of High Intensity
Discharge (HID) lighting fixtures that was acquired by Juno on August 28,
2001.
Gross profit expressed as a percentage of net sales increased to 51.4%
for the second quarter of 2002, compared to 50.7% for the like period in 2001
as favorable purchase price variances were offset, to some degree, by
unfavorable sales mix and, in management's opinion, a more competitive selling
price environment.
Selling, general and administrative expenses expressed as a percentage
of sales decreased to 28.9% for the second quarter of 2002 compared with 30.8%
for the like period in 2001 due primarily to continued efforts to control
these costs and the effects of the re-engineering initiatives put in place
last year. Fees paid to Sonnenschein Nath & Rosenthal for legal services in
the second quarter of 2002 were $179,000
As a result of the above factors, operating income increased to 22.5% of
sales for the second quarter of 2002 as compared to 20.0% for the like period
in 2001.
Interest expense was $4,283,000 for the second quarter ended May 31,
2002 compared to $5,129,000 for the like period in 2001. This decrease is due
to the reduction of debt from $181,788,000 at May 31, 2001 to $169,799,000 at
May 31, 2002 and reductions in interest rates on the Company's floating rate
debt.
16
Six Months Ended May 31, 2002 Compared With Six Months
- ------------------------------------------------------
Ended May 31, 2001
- ------------------
During the six month period ended May 31, 2002, net sales were
relatively unchanged at $87,872,000 compared to $87,847,000 for the like
period in 2001 due primarily to weakness in the commercial end market.
Approximately $2,300,000 of sales for the six months ended May 31, 2002 was
from Acculite.
Gross profit expressed as a percentage of net sales increased slightly
to 50.3% for the six months ended May 31, 2002 compared to 49.9% for the like
period in 2001 as favorable purchase price variances were offset, in part, by
unfavorable sales mix and competitive pricing pressures.
Selling, general and administrative expenses expressed as a percentage
of sales increased to 33.6% for the six months ended May 31, 2002 compared
with 32.6% for the like period in 2001. First quarter 2002 results included
$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 in the first six months of 2002
were $488,000 which included $322,000 in charges relating to the
aforementioned proposed acquisition.
As a result of the above factors, operating income decreased to 16.7% of
sales for the six months ended May 31, 2002 as compared to 17.3% for the like
period in 2001.
Interest expense was $8,680,000 for the six months ended May 31, 2002
compared to $10,391,000 for the like period in 2001. This decrease is due to
the reduction of debt from $181,788,000 at May 31, 2001 to $169,799,000 at May
31, 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 six month period ended May 31, 2002, operating activities
provided cash flow of $7,131,000. This was comprised principally of net
income, depreciation and amortization, increases in accounts payable and
accrued liabilities,(collectively aggregating $10,116,000), net of increases
in inventory and account receivable of $2,976,000.
Net cash used in investing activities amounted to $996,000 used to
finance capital expenditures.
The net cash used in financing activities of $7,036,000 consisted
primarily of proceeds from the Revolving Credit Facility of $26,200,000 less
principal payments on the Senior Credit Facility of $33,236,000.
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 May 31,
2002, the Company had cash of approximately $.4 million, a $5.4 million
balance on the Company's Revolving Credit Facility and total term debt of
17
approximately $164.4 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 $5.4 million on
May 31, 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
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 were 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.
18
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
=======================================================
At May 31, 2002 the Company has three interest rate swap agreements.
The net gain from these swaps for the six months ended May 31, 2002 based on
their estimated market values was $754,000 ($527,000 in the second quarter of
2002). Detailed information concerning the terms of interest rate swaps can
be found in the Company's audited financial statements and notes thereto
appearing in the November 30, 2001 Annual Report on Form 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 May 13, the Company voluntarily withdrew its application for
a prejudgment remedy in connection with the Proposed Complaint
against U.S. Industries, Inc. On or about May 17, 2002, the Company
filed a Complaint against U.S. Industries, Inc. in the Superior Court
of the State of Delaware in and for New Castle County and issued
written discovery to U.S. Industries. In the Complaint, the Company
alleges that U.S. Industries breached an exclusivity agreement with
the Company related to a proposed acquisition. The Complaint seeks
damages of $8,500,000 based on a liquidated damages provision
contained in the exclusivity agreement to cover expenses incurred and
additional losses by the Company, as well as attorneys' fees and
costs. U.S. Industries is due to respond to the Company's Complaint
and discovery requests on July 15, 2002.
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 -
(a) The Company held its annual meeting of stockholders on
May 28, 2002.
(b) The Company's stockholders elected the following persons to
serve as directors: Robert Jaunich II, Mark Williamson, T. Tracy
Bilbrough, Daniel DalleMolle and Michael Froy.
(c) The following table shows the votes that were cast with respect
to the election of directors:
Nominee Votes in Favor Votes Withheld
------- -------------- --------------
Robert Jaunich II 7,055,057 6,284
Mark Williamson 7,055,067 6,274
T. Tracy Bilbrough 7,053,084 8,257
Daniel DalleMolle 7,054,556 6,785
Michael Froy 7,055,235 6,106
(d) The Company's stockholders approved the adoption of the amended
and restated version of the Juno Lighting, Inc. 1996 Employee
Stock Purchase Plan ("Plan")
(e) The following table shows the votes that were cast with respect
to the Plan:
Votes in Favor Votes Against Absentions Non-Votes
-------------- ------------- ---------- ---------
6,608,664 25,183 109,769 317,725
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.
19
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: July 12, 2002
Page 19 of 19