<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 0-27738
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THE JPM COMPANY
_______________________________________________________________________________
(Exact name of registrant as specified in its charter)
Pennsylvania 23-1702908
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(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
Route 15 North, Lewisburg, PA 17837
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(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code 717-524-8200
---------------------------
Not applicable
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes No X
----- -----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
At March 31, 1996, 3,489,000 shares of common stock, $.000067 par value, are
issued and outstanding.
<PAGE>
THE JPM COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited-In Thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31,1996 March 31,1995 March 31,1996 March 31,1995
------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
Net sales $14,470 $ 8,557 $26,855 $16,644
Cost of sales 12,330 7,149 22,685 13,847
------------- ------------- --------------- -------------
Gross profit 2,140 1,408 4,170 2,797
Selling, general and administrative 1,068 657 2,035 1,363
Amortization of excess cost 49 13 98 25
------------- ------------- --------------- -------------
Operating profit 1,023 738 2,037 1,409
Other income (expense)
Interest expense (282) (162) (536) (289)
Other (net) 34 (6) (33) (38)
------------- ------------- --------------- -------------
(248) (168) (569) (327)
------------- ------------- --------------- -------------
Income before taxes,minority interest 775 570 1,468 1,082
Provision for income taxes 310 260 587 494
------------- ------------- --------------- -------------
Income before minority interest 465 310 881 588
Minority interest 166 - 371 -
------------- ------------- --------------- -------------
Net income 299 310 510 588
Cumulative dividend on Preferred
Stock 60 60 120 120
Net income applicable to Common ------------- ------------- --------------- -------------
Stock $ 239 $ 250 $ 390 $ 468
============= ============= =============== =============
Earnings per share $0.05 $0.07 $0.09 $0.14
============= ============= =============== =============
Weighted average number of shares 3,845,627 3,489,138 3,885,429 3,489,138
</TABLE>
The accompanying notes are an integral part of these statements.
Page 2
<PAGE>
THE JPM COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
----------- -----------
<S> <C> <C>
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 659 $ 1,280
Accounts receivable, net 7,365 4,509
Inventories, net 6,875 5,541
Other current assets 138 152
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Total current assets 15,037 11,482
PROPERTY, PLANT AND EQUIPMENT,NET 6,871 6,408
NOTES RECEIVABLE RELATED PARTIES 603 584
EXCESS OF COST OVER FAIR VALUE OF ASSETS 2,659 2,757
ACQUIRED
OTHER ASSETS 768 354
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$25,938 $21,585
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 6,358 $ 5,257
Current maturities of long-term debt 631 631
Accounts payable 4,949 2,918
Accrued expenses 2,054 2,086
Income tax payable 693 505
Deferred income taxes 284 284
----------- -----------
Total current liabilities 14,969 11,681
LONG-TERM DEBT, less due currently 4,083 3,885
SUBORDINATED DEBENTURES 365 390
OTHER LONG-TERM LIABILITIES 814 724
MINORITY INTEREST 1,269 898
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21,500 17,578
STOCKHOLDERS' EQUITY
Preferred Stock, no par value ,
10,000,000 shares authorized,
Class A, $31.43 stated value, 111,840 3,515 3,515
shares issued and outstanding
Common Stock, $.000067 par value,
50,000,000 shares
authorized, issued 7,389,000 in 1995, 0 0
3,489,000 at March 31, 1996
Additional paid-in-capital 260 585
Retained earnings 663 232
Less: Treasury Stock 0 (325)
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Total shareholders' equity 4,438 4,007
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$25,938 $21,585
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
Page 3
<PAGE>
THE JPM COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
------------------------------
(In Thousands) March 31,1996 March 31, 1995
------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 510 $ 588
Adjustments to reconcile net income to net cash:
Depreciation & amortization 437 320
Foreign currency translation (gain) (5) 0
Provision for doubtful accounts 24 12
Loss (gain) on sale of property, plant & equipment (5) (4)
(Gain) on sale of non-operating 0 (48)
property-related parties
Minority interest 371 0
Deferred compensation expense 90 61
Change in assets and liabilities, net of effects from business acquired:
(Increase) decrease in accounts receivable (2,898) (174)
(Increase) decrease in inventories (1,334) 116
(Increase) decrease in other assets (314) 192
Increase (decrease) in accounts payable 2,031 (386)
Increase (decrease) in accrued expenses (32) 98
Increase (decrease) in income taxes payable 188 142
------------- --------------
Net cash provided by (used in) operating activities (937) 917
Cash flows from investing activities:
Capital expenditures (803) (547)
Proceeds from the sales of property, plant & equipment 12 6
Proceeds from sale of non-operating property-related parties 0 50
Deferred compensation plan contributions (68) (69)
Loans to related parties (19) (219)
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Net cash used in investing activities (878) (779)
Cash flows from financing activities:
Net borrowings (repayments) under credit facilities 1,101 304
Proceeds from issuance of long-term debt 525 16
Principal payments on long term debt (353) (276)
Preferred stock dividends paid (79) (206)
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Net cash provided by (used in) financing activities 1,194 (162)
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Increase (decrease) in cash (621) (24)
Cash at beginning of the period 1,280 32
------------- --------------
Cash at end of the period $ 659 $ 8
============= ==============
</TABLE>
The accompanying notes are an integral part of these statements.
Page 4
<PAGE>
Accounting Policies
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The consolidated balance sheet as of March 31, 1996, and the related
consolidated statements of earnings and cash flows for the three month and six
month periods ended March 31, 1996 and March 31, 1995, have been prepared by the
Company without audit. In the opinion of management, the financial statements
include all of the adjustments necessary for fair presentation. All adjustments
made were of a normal recurring nature. Interim results are not necessarily
indicative of results for a full year. For further financial information, refer
to the audited financial statements of the Company and the notes thereto for the
fiscal year ended September 30, 1995, included in the Company's Form S-1 dated
April 30, 1996.
Inventories
- -----------
Inventories are valued at the lower of cost or market as determined on the
first-in, first out basis. Cost includes raw materials, direct labor and
manufacturing overhead. The Company generally provides reserves for inventory
considered to be in excess of 36 months of future demand.
<TABLE>
<CAPTION>
March 31, March 31,
1996 1995
<S> <C> <C>
Finished goods $ 625,226 $ 568,318
Work-in-process 848,299 550,853
Raw material and supplies 5,989,606 4,760,116
Valuation reserve (588,121) (337,800)
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$6,875,010 $5,541,487
========== ==========
</TABLE>
Public Offering
- ---------------
The Company completed an initial public offering of its common stock on April
30, 1996. The offering consisted of a total of 2,100,000 shares. Of those
shares 1,876,800 were sold by the Company. Net proceeds to the Company from the
offering were approximately $12,100,000 after deducting the associated
underwriting discount and expenses of the offering. The net proceeds were used
to acquire the remaining 40% of the Company's Mexican subsidiary Electronica
Pantera, S. A. de C. V. ("Pantera") for $3,400,000, to reduce the Company's debt
in an amount of approximately $6,200,000 and to pay dividends on and redeem the
Company's preferred stock in an amount of approximately $2,500,000.
Also in connection with the closing of the offering, 104,244 shares of common
stock were issued upon conversion of the Company's Series B Debentures, and
232,635 common shares were issued in exchange for the Class A preferred shares
not redeemed at the time of the offering.
The Underwriters exercised their option to purchase the additional 315,000 over
allotment shares of common stock on Thursday May 30, 1996. The additional net
proceeds from this exercise was approximately $2,192,000.
Page 5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Net sales for the three and six months ended March 31, 1996 increased
$5,913,000, or 69.1%, and $10,211,000, or 61.3%, respectively, compared to the
same periods one year earlier. Pantera accounted for $4,636,000 and $8,510,000,
respectively, of the increases. Additional sales increases of $1,277,000 and
$1,701,000, respectively, were primarily the result of internal sales growth
through increased volumes with new and existing customers.
Gross profit increased $732,000, or 52.0%, for the three months and $1,373,000,
or 49.1% for the six months when compared to the corresponding periods one year
earlier. Gross profit as a percentage of net sales decreased to 14.8% from
16.5% for the three month period and to 15.5% from 16.8% for the six month
period compared to the same periods one year earlier. The decrease in gross
profit as a percentage of net sales was primarily caused by additional costs
related to nine new customer start-ups during the three and the six month
periods in 1996. The Company also experienced reduced capacity at its
Pennsylvania facility during the winter storms in January. The Company believes
that gross margins should return to a more normal level with the completion of
the new customer start-ups.
Selling, general and administrative ("SG & A") expenses increased $411,000, or
62.6%, for the three month period and $672,000, or 49.3%, for the six month
period compared to the same periods one year earlier. As a percentage of net
sales, SG & A declined to 7.4% from 7.7% for the three month period and to 7.6%
from 8.2% for the six month period compared to the same period one year earlier.
The increase in SG & A expenses was primarily due to compensation expenses
necessary to support the Company's growth and, to a lesser extent, SG & A
personnel and expenses added through the May 1995 acquisition of Pantera.
Other expense increased $80,000, or 47.6%, for the three months when compared to
the same period one year earlier. Other expense increased $242,000, or 74.0%,
for the six month period when compared to the same period one year earlier. The
increases were primarily related to interest expense resulting from financing
the Company's Pantera acquisition and working capital needs relating to the
growth in accounts receivable and inventory.
The Company's effective tax rate for the three and six months decreased to 40%
from 45.6% . The higher effective tax rate incurred in fiscal 1995 was primarily
the result of the Company's recognition of a non-recurring, non-cash expense of
$165,000 associated with the conversion of the Company's Series A Debentures.
Net earnings decreased $11,000, or 3.5%, and $78,000, or 13.3%, when compared to
the three and six month periods one year earlier. The net earnings decrease is
mainly related to the Company's decision to place business in its 60% owned
Mexican subsidiary, new customer start-ups and the January 1996 weather
conditions mentioned above.
Liquidity and Capital Resources
- -------------------------------
Operating activities during the first six months of fiscal 1996 utilized cash in
the amount of $937,000 mainly to finance increased accounts receivable and
inventory needed to support sales growth and new customer start-ups as compared
to cash generated in the amount of $917,000 during the same period one year
earlier. Working capital at March 31, 1996 was $68,000, an increase of $267,000
from September 30, 1995. The increase was primarily the result of new financing
acquired in February, 1996. During the six months the Company had capital
expenditures of $803,000, comprised mainly of production equipment related to
the start-up of the nine new customers mentioned above.
After the end of the quarter, on April 19,1996 the Company amended its bank
revolving credit line to permit the Company to draw up to $6,500,000
collateralized by the Company's inventories and accounts receivable. Pursuant
to this amendment, the interest rate is the bank's prime lending rate plus
0.325%.
Page 6
<PAGE>
The line requires the Company to maintain a debt service coverage ratio of no
less than 1.4 to 1.0; limits advances to a percentage of: (i) eligible accounts
receivable starting at 90% and reducing to 80% by January 1998, plus (ii) raw
materials and finished goods inventory of 35%; provides for certain restrictions
with regard to acquisitions, mergers, dissolution, capital expenditures and the
incurrence of additional indebtedness; prohibits loans to or investments in
other entities or persons; and limits payments of dividends by the Company to a
maximum of 25% of the Company's pretax profits. The Company was in compliance
with all loan covenants at March 31 and April 19, 1996. The bank line of credit
expires April 30, 1997. Previously, the Company maintained a $5,000,000 line of
credit bearing interest at the same rate. Borrowings under the line of credit at
March 31, 1996 amounted to $4,458,000 against an availability of $5,000,000
(based on the collateral base and the then $5,000,000 limit).
On February 16, 1996, the Company obtained a $525,000 term loan, which bears
interest at the bank's prime rate plus 0.325%, provides for monthly payments of
$8,750 plus interest and matures on March 20, 2001.
In addition, Pantera maintains U. S. dollar bank credit facilities aggregating
$3,000,000 to finance working capital needs. Loans are extended for a period of
time, ranging from 60 to 90 days and are then renewed upon the presentation of
documentation of customer billings and invoices for material purchases. Loan
advances are currently subject to the availability of United States dollars held
by the Mexican banks. The three separate credit facilities bear interest rates
of 11.71%, 11.89% and 12.50% as of March 31, 1996. Borrowings under these
credit facilities amounted to $1,900,000 as of March 31, 1996.
Initial Public Offering
- -----------------------
Subsequent to March 31, 1996, the Company completed an initial public offering
of its Common Stock on April 30, 1996. Net proceeds of approximately
$12,100,000 was utilized to acquire the remaining 40% of Pantera for $3,400,000,
pay down debt of $6,200,000 and to pay dividends on and redeem preferred stock
in the amount of $2,500,000. The Underwriters exercised the 315,000 share over-
allotment on May 30, 1996. The Company received additional proceeds in the
amount of approximately $2,192,000 from the exercise of this over-allotment.
The Company believes that after the application of the net proceeds of its
initial public offering, cash flow from operations and funds available from its
bank lines of credit will be sufficient to satisfy its working capital
requirements and capital expenditure needs for at least the next twelve months.
However, depending upon its rate of growth and profitability, the Company may
require additional equity or debt financing to meet its working capital
requirements or capital expenditure needs, including the possible need for
additional manufacturing capacity.
Page 7
<PAGE>
PART II - OTHER INFORMATION
Item 1. N/A
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Item 2. N/A
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Item 3. N/A
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Item 4. Submission of matters to a vote of Security Holders.
- -------
The Company's annual meeting of Shareholders was held on January
23, 1996 in Lewisburg, Pennsylvania. The Company did not solicit
proxies for the meeting. The Board of Directors was classified
and elected as described in the Company's Form S-1 Registration
Statement filed with the Securities and Exchange Commission on
February 9, 1996 and amended thereafter (the "Registration
Statement"). The Shareholders unanimously approved the Amended
and Restated Articles of Incorporation as proposed by the Board
of Directors on January 23, 1996 and filed as Exhibit 3.1 to the
Registration Statement. The Shareholders also unanimously
approved the retention of Price Waterhouse LLP as the Company's
independent auditor for fiscal 1996.
Item 5. N/A
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Item 6. Exhibits and Reports on Form 8-K.
- ------- ---------------------------------
(a) Exhibits:
11 - Statement of per share earnings
(b) Reports on Form 8-K: None filed for the period ended March 31,
1996.
Page 8
<PAGE>
SIGNATURES
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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.
THE JPM COMPANY
---------------
Registrant
Date: June 4, 1996 By: /s/ John H. Mathias
-------------- ----------------------------------------
John H. Mathias
Chairman of the Board and Chief Executive
Officer (Principal Executive Officer)
Date: June 4, 1996 By: /s/ William D. Baker
-------------- ----------------------------------------
Chief Financial Officer and Treasurer
(Principal Financial Officer and Accounting
Officer)
Page 9
<PAGE>
EXHIBIT INDEX
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Exhibit numbers are in accordance with the
Exhibit Table in Item 601 of Regulation S-K
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Exhibit No. Exhibit Description Sequential Page No.
- ----------- ------------------- -------------------
11.1 Statement of per share earnings 11
Page 10
<PAGE>
Exhibit 11.1
THE JPM COMPANY
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31,
1996 1995
-------- --------
(dollars in thousands, except
per share amounts)
<S> <C> <C>
Net income $ 299 $ 310
Cumulative Preferred Stock dividends (60) (60)
Undeclared participating preferred stock dividends (1) (36) (7)
Increase to net income from reduced interest expense from the
assumed conversion of Series B debentures (2) - 7
-------- --------
Adjusted net income applicable to Common Stock $ 203 $ 250
========= ========
Net Income per common share $ .05 $ .07
========= ========
Common shares outstanding beginning of period 3,489,000 3,174,000
Effect of stock options outstanding 356,627 -
Effect of stock options issued prior to February 1995 (2) - -
Effect of convertible debt issued and stock options granted
since February 1995 (2) - 315,138
--------- --------
Weighted average common shares outstanding 3,845,627 3,489,138
========= ========
</TABLE>
(1) Represents a reduction of net income to the extent of all possible
participating dividends on Preferred Stock. See Note 11 to the Consolidated
Financial Statements of the Company.
(2) Pursuant to Securities and Exchange Commission Staff Accounting Bulletin
No. 83, common stock equivalents related to stock options granted and
convertible debt issued with exercise prices below the anticipated initial
public offering price of $8.50 per share in the twelve months preceding the
initial filing were included as if outstanding for all periods presented in
the prospectus.
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