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
August 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 2,529,534 shares of common stock outstanding as of September 30,
2002.
2
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
=====================================
(In Thousands)
August 31, November 30,
ASSETS 2002 2001
------ ---------- -----------
(Unaudited) (Unaudited)
CURRENT ASSETS:
Cash $ 706 $ 1,280
Accounts receivable, less allowance for
doubtful accounts of $1,036 and $977 31,264 30,348
Inventories, net 21,511 20,735
Prepaid expenses and miscellaneous 4,674 4,552
---------- ----------
TOTAL CURRENT ASSETS 58,155 56,915
---------- ----------
PROPERTY, PLANT AND EQUIPMENT,
less accumulated depreciation of
$29,562 and $26,521 42,169 43,889
---------- ----------
OTHER ASSETS:
Goodwill and other intangibles, net of
accumulated amortization of
$2,000 and $1,975 7,876 7,835
Deferred financing costs, net of accumulated
amortization of $4,100 and $3,124 6,243 7,219
Miscellaneous 3,164 3,285
---------- ----------
TOTAL OTHER ASSETS 17,283 18,339
---------- ----------
$ 117,607 $ 119,143
========== ==========
LIABILITIES AND STOCKHOLDERS' DEFICIT
-------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 10,168 $ 8,668
Accrued liabilities 14,240 18,969
Short-term borrowings 7,250 5,350
Current maturities of long-term debt 3,925 3,711
---------- ----------
TOTAL CURRENT LIABILITIES 35,583 36,698
---------- ----------
LONG-TERM DEBT & DEFERRED INCOME TAXES 160,726 169,995
---------- ----------
STOCKHOLDERS' DEFICIT:
Preferred Stock, Series A & B convertible,
$.001 par value,$100 stated value, shares
authorized 5,000,000; issued 1,063,500 137,533 129,600
Common stock, $.001 par value, shares
authorized 45,000,000;
issued 2,529,534 and 2,500,389 2 2
Paid-in-capital 1,035 674
Accumulated other comprehensive loss (803) (1,043)
Shareholder note receivable (200) (200)
Accumulated deficit (216,269) (216,583)
---------- ----------
TOTAL STOCKHOLDERS' DEFICIT (78,702) (87,550)
---------- ----------
$ 117,607 $ 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
--------------------------
August 31, August 31,
2002 2001
----------- -----------
(Unaudited) (Unaudited)
NET SALES $ 45,520 $ 46,404
COST OF SALES 22,974 22,401
----------- -----------
Gross profit 22,546 24,003
SELLING, GENERAL AND ADMINISTRATIVE 13,208 13,908
----------- -----------
Operating income 9,338 10,095
----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (4,121) (4,921)
Interest and dividend income 8 24
Realized gain on interest rate swap 1,549 -
Miscellaneous (381) 10
----------- -----------
Total other income (expense) (2,945) (4,887)
----------- -----------
INCOME BEFORE TAXES ON INCOME 6,393 5,208
TAXES ON INCOME 2,347 2,039
----------- -----------
NET INCOME 4,046 3,169
LESS: PREFERRED DIVIDENDS 2,697 2,491
----------- -----------
NET INCOME AVAILABLE TO
COMMON SHAREHOLDERS $ 1,349 $ 678
=========== ===========
NET INCOME PER COMMON SHARE
(BASIC AND DILUTED) $ .53 $ .27
====== =====
(See Notes To Condensed Consolidated Financial Statements)
4
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
===========================================
(In Thousands Except Per
Share Amounts)
Nine Months Ended
--------------------------
August 31, August 31,
2002 2001
----------- -----------
(Unaudited) (Unaudited)
NET SALES $ 133,302 $ 134,251
COST OF SALES 66,595 66,386
----------- -----------
Gross profit 66,707 67,865
SELLING, GENERAL AND ADMINISTRATIVE 39,690 42,541
COSTS OF TERMINATED ACQUISITION 3,050 -
----------- -----------
Operating income 23,967 25,324
----------- -----------
OTHER INCOME (EXPENSE):
Interest expense (12,801) (15,313)
Interest and dividend income 14 93
Realized gain on interest rate swap 1,549 -
Miscellaneous 430 46
----------- -----------
Total other income (expense) (10,808) (15,174)
----------- -----------
INCOME BEFORE TAXES ON INCOME 13,159 10,150
TAXES ON INCOME 4,912 3,873
----------- -----------
NET INCOME 8,247 6,277
LESS: PREFERRED DIVIDENDS 7,933 7,328
----------- -----------
NET INCOME(LOSS) AVAILABLE TO
COMMON SHAREHOLDERS $ 314 $ (1,051)
=========== ===========
NET INCOME(LOSS) PER COMMON SHARE
(BASIC AND DILUTED) $ .13 $ (.42)
====== =====
(See Notes To Condensed Consolidated Financial Statements)
5
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF ACCUMULATED DEFICIT
=======================================================
(In Thousands)
Nine Months Ended
August 31, 2002
----------------
(Unaudited)
ACCUMULATED DEFICIT, beginning of period $ (216,583)
PREFERRED DIVIDEND (7,933)
NET INCOME, nine months ended
August 31, 2002 8,247
----------
ACCUMULATED DEFICIT, end of period $ (216,269)
==========
(See Notes To Condensed Consolidated Financial Statements)
6
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
====================================
(In Thousands)
Nine Months Ended
---------------------------
August 31, August 31,
2002 2001
------------ -----------
(Unaudited) (Unaudited)
CASH FLOWS PROVIDED BY OPERATING
ACTIVITIES:
Net income $ 8,247 $ 6,277
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 4,546 4,468
Deferred compensation 36 54
Changes in operating assets and liabilities:
(Increase)in accounts
receivable (916) (4,438)
(Increase)Decrease in inventory (776) 1,961
(Increase)Decrease in prepaid expenses
and miscellaneous (122) 690
Decrease(Increase) in other assets 294 (212)
(Decrease)in accounts
payable and accrued liabilities (3,229) (1,814)
(Decrease) in deferred
income taxes (93) (351)
---------- ---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 7,987 6,635
---------- ---------
CASH FLOWS USED IN INVESTING
ACTIVITIES:
Capital expenditures (1,684) (2,327)
License - lighting technology - (3,220)
Purchase of assets through acquisition - (1,889)
Purchase of goodwill through acquisition - (3,982)
---------- ---------
NET CASH USED IN
INVESTING ACTIVITIES (1,684) (11,418)
---------- ---------
(Continued on Next Page)
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JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS (CONTINUED)
====================================
(In Thousands)
Nine Months Ended
---------------------------
August 31, August 31,
2002 2001
----------- -----------
(Unaudited) (Unaudited)
CASH FLOWS (USED IN)PROVIDED BY
FINANCING ACTIVITIES:
Proceeds from bank debt 42,350 26,000
Proceeds from bank debt for acquisition - 5,900
Proceeds from sale of common stock
through employee purchase plan 235 155
Principal payments on long-term debt
and bank debt (49,462) (31,467)
---------- -----------
NET CASH (USED IN)PROVIDED BY
FINANCING ACTIVITIES (6,877) 588
---------- -----------
NET (DECREASE) IN CASH (574) (4,195)
CASH AT BEGINNING OF PERIOD 1,280 4,817
---------- -----------
CASH AT END OF PERIOD $ 706 $ 622
========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 16,528 $ 19,517
Income taxes 3,688 2,244
(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 2001 audited consolidated financial statements.
INVENTORIES
Inventories are summarized as follows:
(In Thousands)
August 31, November 30,
2002 2001
------------ ------------
Finished goods $ 9,985 $ 9,059
Raw materials 11,526 11,676
------------ ------------
$ 21,511 $ 20,735
============ ============
LONG-TERM DEBT AND SHORT-TERM BORROWINGS
Long-term debt consists of the following:
(In Thousands)
August 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 2.5% $ 13,458 $ 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 3.0% 24,745 29,002
Senior Subordinated Notes due July 2009, plus
interest at 11 7/8%, net of discount of $712
and $762, respectively 124,288 124,238
-------- --------
162,491 171,453
Less current maturities 3,925 3,711
-------- --------
Total long-term debt $158,566 $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 August 31, 2002, the nominal interest
rates for Term Loan A and Term Loan B were 4.32% and 4.82%, respectively.
Term Loan A and Term Loan B are each payable in separate quarterly
installments.
9
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 August 31, 2002 and November 30, 2001 were
$7,250,000 and $5,350,000 respectively. At August 31, 2002, the nominal
interest rate for borrowing on the Revolving Credit Facility was 4.94%.
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 - $4,169,000; 2004 -
$4,169,000; 2005 - $5,148,000; 2006 - $23,918,000.
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:
August 31, August 31,
2002 2001
---------- ----------
3 months ended
Basic and Diluted 2,522,248 2,492,770
9 months ended
Basic and Diluted 2,509,115 2,476,390
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 Nine Months Ended
August 31, August 31, August 31, August 31,
2002 2001 2002 2001
-------- -------- -------- -------
Net income $ 4,046 $ 3,169 $ 8,247 $ 6,277
Foreign currency
translation adjustment 30 (41) 240 11
-------- -------- ------- -------
Comprehensive income $ 4,076 $ 3,128 $ 8,487 $ 6,288
======== ======== ======= =======
The components of accumulated other comprehensive loss, net of
related tax, are as follows (in thousands):
August 31, November 30,
2002 2001
------------ ------------
Foreign currency translation adjustment $ (803) $(1,043)
------ ------
Accumulated other comprehensive loss $ (803) $(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 August 31, 2002
---------------------------------------------
(in thousands)
Guarantor Non-Guarantor Total
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------- ------------ ------------
Net sales $ 36,626 $ 36,344 $ 4,752 $ (32,202) $ 45,520
Cost of sales 29,538 21,830 3,354 (31,748) 22,974
-------- ------------ ------------- ------------ ------------
Gross profit 7,088 14,514 1,398 (454) 22,546
Selling, general and
administrative 6,968 5,406 806 28 13,208
-------- ------------ ------------- ------------ ------------
Operating income (loss) 120 9,108 592 (482) 9,338
Other (expense) (2,812) (11) (122) - (2,945)
-------- ------------ ------------- ------------ ------------
(Loss) income before
taxes on income (2,692) 9,097 470 (482) 6,393
Taxes on income (2,105) 4,260 193 (1) 2,347
-------- ------------ ------------- ------------ ------------
Net (loss) income (587) 4,837 277 (481) 4,046
Less: preferred
dividends (2,697) - - - (2,697)
-------- ------------ ------------- ------------- ------------
Net (loss) income
available to
common shareholders $ (3,284) $ 4,837 $ 277 $ (481) $ 1,349
======== ============ ============= ============ ===========
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GUARANTORS' FINANCIAL INFORMATION (CONTINUED)
For the Three Months Ended August 31, 2001
------------------------------------------
(in thousands)
Guarantor Non-Guarantor Total
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------- ------------ ------------
Net sales $38,671 $ 36,060 $ 2,949 $ (31,276) $ 46,404
Cost of sales 30,341 22,258 2,096 (32,294) 22,401
-------- ------------ ------------- ------------ ------------
Gross profit 8,330 13,802 853 1,018 24,003
Selling, general and
administrative 7,799 5,573 509 27 13,908
-------- ------------ ------------- ------------ ------------
Operating income 531 8,229 344 991 10,095
Other (expense) (4,845) (3) (39) - (4,887)
-------- ------------ ------------- ------------ ------------
(Loss) income before
taxes on income (4,314) 8,226 305 991 5,208
Taxes on income (1,352) 3,255 138 (2) 2,039
-------- ------------ ------------- ------------ ------------
Net (loss) income (2,962) 4,971 167 993 3,169
Less: preferred
dividends (2,491) - - - (2,491)
-------- ------------ ------------- ------------- -----------
Net (loss) income
available to
common shareholders $(5,453) $ 4,971 $ 167 $ 993 $ 678
======== ============ ============= ============ ===========
For the Nine Months Ended August 31, 2002
---------------------------------------------
(in thousands)
Guarantor Non-Guarantor Total
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------- ------------ ------------
Net sales $108,153 $ 110,592 $ 11,921 $ (97,364) $ 133,302
Cost of sales 89,562 64,430 8,429 (95,826) 66,595
-------- ------------ ------------- ------------ ------------
Gross profit 18,591 46,162 3,492 (1,538) 66,707
Selling, general and
administrative 20,865 16,435 2,308 82 39,690
Costs of terminated
acquisition - 3,050 - - 3,050
-------- ------------ ------------- ------------ ------------
Operating (loss) income (2,274) 26,677 1,184 (1,620) 23,967
Other (expense) (10,470) (15) (323) (10,808)
-------- ------------ ------------- ------------ ------------
(Loss) income before
taxes on income (12,744) 26,662 861 (1,620) 13,159
Taxes on income (6,260) 10,826 350 (4) 4,912
-------- ------------ ------------- ------------ ------------
Net (loss) income (6,484) 15,836 511 (1,616) 8,247
Less: preferred
dividends (7,933) - - - (7,933)
-------- ------------ ------------- ------------- ------------
Net (loss) income
available to
common shareholders $(14,417) $ 15,836 $ 511 $ (1,616) $ 314
======== ============ ============= ============ ===========
13
GUARANTORS' FINANCIAL INFORMATION (CONTINUED)
For the Nine Months Ended August 31, 2001
----------------------------------------
(in thousands)
Guarantor Non-Guarantor Total
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------- ------------ ------------
Net sales $111,382 $ 109,158 $ 7,939 $ (94,228) $ 134,251
Cost of sales 90,285 66,127 6,279 (96,305) 66,386
-------- ----------- ------------- ----------- -----------
Gross profit 21,097 43,031 1,660 2,077 67,865
Selling, general and
administrative 22,772 18,251 1,436 82 42,541
-------- ----------- ------------- ----------- -----------
Operating (loss) income (1,675) 24,780 224 1,995 25,324
Other income(expense) 49,584 (3) (104) (64,651) (15,174)
-------- ----------- ------------- ----------- -----------
Income (loss) before taxes
on income 47,909 24,777 120 (62,656) 10,150
Taxes on income (5,659) 9,480 56 (4) 3,873
-------- ----------- ------------- ----------- -----------
Net income (loss) 53,568 15,297 64 (62,652) 6,277
Less: preferred
dividends (7,328) - - - (7,328)
-------- ----------- -------------- ----------- -----------
Net income (loss)
available to
common shareholders $ 46,240 $ 15,297 $ 64 $ (62,652) $ (1,051)
======== =========== ============= =========== ===========
August 31, 2002
-----------------
(in thousands)
Guarantor Non-Guarantor Total
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------- ------------ ------------
Cash $ 1,075 $ (321) $ (63) $ 15 $ 706
Accounts receivable, net 27,173 50,607 3,918 (50,434) 31,264
Inventories, net 19,451 10,214 2,526 (10,680) 21,511
Other current assets 3,176 1,425 73 - 4,674
-------- ----------- ------------ ------------ ------------
Total current assets 50,875 61,925 6,454 (61,099) 58,155
Property and equipment 10,879 58,388 2,840 (376) 71,731
Less accumulated depreciation 3,502 25,606 732 (278) 29,562
-------- ----------- ------------ ------------ ------------
Net property and equipment 7,377 32,782 2,108 (98) 42,169
Other assets 73,244 114 5,981 (62,056) 17,283
-------- ----------- ------------ ------------ ------------
$131,496 $ 94,821 $ 14,543 $ (123,253) $ 117,607
Total assets ======== =========== ============ ============ ============
Current liabilities $ 63,419 $ 13,865 $ 8,719 $ (50,420) $ 35,583
Other liabilities 160,515 - 2,238 (2,027) 160,726
-------- ----------- ------------ ----------- ------------
Total liabilities 223,934 13,865 10,957 (52,447) 196,309
Total stockholders'
(deficit) equity (92,438) 80,956 3,586 (70,806) (78,702)
-------- ----------- ------------ ------------ ------------
Total liabilities and
stockholders' equity
(deficit) $131,496 $ 94,821 $ 14,543 $ (123,253) $ 117,607
======== =========== ============ ============ ===========
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 Nine Months Ended August 31, 2002
--------------------------------------------
(in thousands)
Guarantor Non-Guarantor Total
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------- ------------ ------------
Net cash provided by (used
in) operating activities $ 6,821 $ 1,824 $ (642) $ (16) $ 7,987
--------- ------------ ------------- ------------ ------------
Cash flows (used in)
investing activities:
Capital expenditures (10) (1,604) (70) - (1,684)
--------- ------------ ------------- ------------ ------------
Net cash (used in)
investing activities (10) (1,604) (70) - (1,684)
--------- ------------ ------------- ------------ ------------
Cash provided by (used in)
financing activities:
Proceeds from bank debt 42,350 - - - 42,350
Proceeds from sales of common
stock through Employee
stock purchase plan 235 - - - 235
Principal payments on
long term debt (49,462) - (25) 25 (49,462)
--------- ------------ ------------- ------------ ------------
Net cash (used in) provided
by financing activities (6,877) - (25) 25 (6,877)
--------- ------------ ------------- ------------ ------------
Net (decrease) increase
in cash (66) 220 (737) 9 (574)
Cash at beginning of period 1,141 (541) 674 6 1,280
--------- ------------ ------------- ------------ ------------
Cash at end of period $ 1,075 $ (321) $ (63) $ 15 $ 706
========= ============ ============= ============ ============
15
GUARANTORS' FINANCIAL INFORMATION (CONTINUED)
For the Nine Months Ended August 31, 2001
----------------------------------------
(in thousands)
Guarantor Non-Guarantor Total
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------- ------------ ------------
Net cash provided by
operating activities $ 5,519 $ 860 $ 64 $ 192 $ 6,635
--------- ------------ ------------- ------------ ------------
Cash flows (used in)
investing activities:
Capital expenditures (340) (1,983) (4) - (2,327)
License - lighting
technology (3,220) - - - (3,220)
Purchase of assets
through acquisition - - (1,889) - (1,889)
Purchase of goodwill
through acquisition - - (3,982) - (3,982)
--------- ------------ ------------- ------------ ------------
Net cash (used in)
investing activities (3,560) (1,983) (5,875) - (11,418)
--------- ------------ ------------- ------------ ------------
Cash provided by (used in)
financing activities:
Proceeds from bank debt 26,000 - - - 26,000
Proceeds from bank debt
for acquisition - - 5,900 - 5,900
Proceeds from sale of common
stock through employee
stock purchase plan 155 - - - 155
Principal payments on
long term debt (31,467) - (23) 23 (31,467)
--------- ------------ ------------- ------------ ------------
Net cash (used in)
provided by financing
activities (5,312) - 5,877 23 588
--------- ------------ ------------- ------------ ------------
Net (decrease) increase
in cash (3,353) (1,123) 66 215 (4,195)
Cash at beginning of period 4,042 739 36 - 4,817
--------- ------------ ------------- ------------ ------------
Cash at end of period $ 689 $ (384) $ 102 $ 215 $ 622
========= ============ ============= ============ ============
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
===========================================================
RESULTS OF OPERATIONS:
- ----------------------
Three Months Ended August 31, 2002 Compared With Three Months
- --------------------------------------------------------------
Ended August 31, 2001
- ---------------------
During the third quarter ended August 31, 2002, net sales decreased 1.9%
to $45,520,000 compared to $46,404,000 for the like period in 2001 due
primarily to continued weakness in commercial end markets.
Gross profit expressed as a percentage of net sales decreased to 49.5%
for the third quarter of 2002, compared to 51.7% for the like period in 2001
as favorable purchase price variances were offset 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 29.0% for the third quarter of 2002 compared with 30.0%
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 third quarter of 2002 were $96,000.
16
As a result of the above factors, operating income decreased to 20.5% of
sales for the third quarter of 2002 as compared to 21.8% for the like period
in 2001.
Interest expense was $4,121,000 for the third quarter ended August 31,
2002 compared to $4,921,000 for the like period in 2001. This decrease is due
to the reduction of debt from $187,034,000 at August 31, 2001 to $169,741,000
at August 31, 2002, reductions in interest rates on the Company's floating
rate debt and the net affect of interest rate swaps.
Nine Months Ended August 31, 2002 Compared With Nine Months
- ------------------------------------------------------
Ended August 31, 2001
- ------------------
During the nine month period ended August 31, 2002, net sales decreased
0.7% to $133,302,000 compared to $134,251,000 for the like period in 2001 due
primarily to weakness in the commercial end markets.
Gross profit expressed as a percentage of net sales decreased to 50.0%
for the nine months ended August 31, 2002 compared to 50.6% for the like
period in 2001 as favorable purchase price variances were offset by
unfavorable sales mix and competitive pricing pressures.
Selling, general and administrative expenses expressed as a percentage
of sales increased to 32.1% for the nine months ended August 31, 2002 compared
with 31.7% 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 nine months of 2002
were $584,000 which included $327,000 in charges relating to the
aforementioned proposed acquisition.
As a result of the above factors, operating income decreased to 18.0% of
sales for the nine months ended August 31, 2002 as compared to 18.9% for the
like period in 2001.
Interest expense was $12,801,000 for the nine months ended August 31,
2002 compared to $15,313,000 for the like period in 2001. This decrease is due
to the reduction of debt from $187,034,000 at August 31, 2001 to $169,741,000
at August 31, 2002, reductions in interest rates on the Company's floating
rate debt and the net affect of interest rate swaps.
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 nine month period ended August 31, 2002, operating
activities provided cash flow of $7,987,000. This was comprised principally
of net income, depreciation and amortization of $12,793,000, net of increases
in inventory and accounts receivable and decreases in accounts payable and
accrued liabilities, collectively aggregating $4,921,000.
Net cash used in investing activities amounted to $1,684,000 used to
purchase capital assets.
The net cash used in financing activities of $6,877,000 consisted
primarily of proceeds from the Revolving Credit Facility of $42,350,000 less
principal payments on the Senior Credit Facility of $49,462,000.
17
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 August
31, 2002, the Company had cash of approximately $.7 million, a $7.3 million
balance on the Company's Revolving Credit Facility and total term debt of
approximately $162.5 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 $7.3 million on
August 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.
18
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
=======================================================
At August 31, 2002 the Company has two interest rate swap
agreements. The net gain from these swaps for the nine months ended August
31, 2002 based on their estimated market values was $377,000 (($377,000) in
the third quarter of 2002). During the quarter ended August 31, 2002, the
Company also realized a gain of $1,549,000 as a result of an interest rate
swap transaction. 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.
ITEM 4. CONTROLS AND PROCEDURES
=======================================================
Based on the evaluation of the Company's disclosure controls and
procedures as of a date within 90 days of the filing date of this quarterly
report, each of T. Tracy Bilbrough, the Chief Executive Officer, and George J.
Bilek, Vice President-Finance, have concluded that in their judgment the
Company's disclosure controls and procedures are designed to ensure that
material information relating to the Company, including the Company's
subsidiaries, is made known to such officers by others within the Company or
its subsidiaries.
There were no significant changes in the Company's internal controls
or in other factors that could significantly affect these controls subsequent
to the date of their evaluation, including any corrective actions with regard
to significant deficiencies and material weaknesses.
19
PART II - OTHER INFORMATION
===========================
Item 1. On or about May 13, 2002, Juno voluntarily withdrew its application
for a prejudgement remedy in connection with a Proposed Complaint
against U.S. Industries, Inc. that it had filed in the Superior
Court for the Judicial District of Ansonia/Milford in the State of
Connecticut on April 11, 2002. On or about May 17, 2002, Juno 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, 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
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 Juno, as well as attorneys' fees
and costs. U.S. Industries has answered the Complaint and denied
liability. The parties are proceeding with discovery.
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.
20
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: October 11, 2002
I, T. Tracy Bilbrough, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Juno lighting,
Inc., a Delaware corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date");
and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function);
21
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for
the registrant's auditors any material weakness in internal controls;
and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: October 11, 2002
/s/ T. Tracy Bilbrough
----------------------
T. Tracy Bilbrough
Chief Executive Officer
I, George J. Bilek, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Juno lighting,
Inc., a Delaware corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior to the filing date
of this quarterly report (the "Evaluation Date");
and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function);
22
a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified for
the registrant's auditors any material weakness in internal controls;
and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: October 11, 2002
/s/ George J. Bilek
----------------------
George J. Bilek
Vice President Finance