<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 June 30 , 1996
------------------------------------------------
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
- -------------------------- --------------------------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
Route 15 North, Lewisburg, PA 17837
- --------------------------------------------------------------------------------
(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 June 30, 1996, 6,017,679 shares of common stock, $.000067 par value, are
issued and outstanding.
<PAGE>
<TABLE>
<CAPTION>
THE JPM COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited-In Thousands)
Three Months Ended Nine Months Ended
June 30,1996 June 30,1995 June 30,1996 June 30,1995
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
Net sales $ 15,555 $ 9,582 $ 42,410 $ 26,226
Cost of sales 12,383 8,135 35,068 21,982
----------- ----------- ----------- -----------
Gross profit 3,172 1,447 7,342 4,244
Selling, general and administrative 1,321 912 3,454 2,300
----------- ----------- ---------- -----------
Operating profit 1,851 535 3,888 1,944
Other income (expense)
Interest expense (195) (206) (731) (495)
Other (net) 32 39 (1) 1
----------- ----------- ---------- -----------
(163) (167) (732) (494)
----------- ----------- ----------- -----------
Income before taxes, minority interest 1,688 368 3,156 1,450
Provision for income taxes 675 167 1,262 661
----------- ----------- ---------- -----------
Income before minority interest 1,013 201 1,894 789
Minority interest 52 79 423 79
----------- ----------- ---------- -----------
Net income 961 122 1,471 710
Cumulative dividend on Preferred Stock 20 60 140 180
----------- ----------- ---------- -----------
Net income applicable to Common Stock $ 941 $ 62 $ 1,331 $ 530
=========== =========== =========== ===========
Earnings per share $0.14 $0.01 $0.26 $0.15
=========== =========== =========== ===========
Weighted average number of shares 5,436,451 3,489,138 4,402,436 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>
June 30, September 30,
1996 1995
------------- -------------
<S> <C> <C>
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 2,163 $ 1,280
Accounts receivable, net 8,847 4,509
Inventories, net 7,413 5,541
Other current assets 187 152
------------ ------------
Total current assets 18,610 11,482
PROPERTY, PLANT AND EQUIPMENT,NET 7,398 6,408
NOTES RECEIVABLE RELATED PARTIES 204 584
EXCESS OF COST OVER FAIR VALUE OF ASSETS 4,717 2,757
ACQUIRED
OTHER ASSETS 458 354
------------ ------------
$31,387 $21,585
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 281 $ 5,257
Current maturities of long-term debt 631 631
Accounts payable 4,955 2,918
Accrued expenses 2,746 2,086
Income tax payable 1,013 505
Deferred income taxes 284 284
------------ ------------
Total current liabilities 9,910 11,681
LONG-TERM DEBT, less due currently 3,398 3,885
SUBORDINATED DEBENTURES - 390
OTHER LONG-TERM LIABILITIES 811 724
MINORITY INTEREST - 898
------------ ------------
14,119 17,578
STOCKHOLDERS' EQUITY
Preferred Stock, no par value,
10,000,000 shares authorized,
Class A, $31.43 stated value, 111,840 - 3,515
shares issued and outstanding at
September 30, 1995 and no shares
outstanding at June 30, 1996
Common Stock, $.000067 par value,
50,000,000 shares authorized, issued
7,389,000 in 1995, - -
6,018,000 at June 30, 1996
Additional paid-in-capital 16,167 585
Retained earnings 1,101 232
Less: Treasury Stock - (325)
------------ ------------
Total shareholders' equity 17,268 4,007
------------ ------------
$31,387 $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>
NINE MONTHS ENDED
-----------------------------
(In Thousands) June 30,1996 June 30, 1995
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,471 $ 710
Adjustments to reconcile net income
to net cash:
Depreciation and amortization 852 468
Foreign currency translation (gain) (12) 3
loss
Provision for doubtful accounts 30 27
Loss (gain) on sale of property, (5) -
plant & equipment
(Gain) on sale of non-operating - (53)
property-related parties
Minority interest 423 79
Deferred compensation expense 90 89
Change in assets and liabilities, net
of effects from business acquired:
(Increase) decrease in accounts (4,387) 584
receivable
(Increase) decrease in (1,871) 293
inventories
(Increase) decrease in other (53) 269
assets
Increase (decrease) in accounts 2,035 (898)
payable
Increase (decrease) in accrued 669 (164)
expenses
Increase (decrease) in income 509 (285)
taxes payable
------------ ------------
Net cash provided by (used (249) 1,122
in) operating activities
Cash flows from investing activities:
Payments for businesses acquired, net
of cash acquired of (3,400) (2,204)
$1,584,000 in fiscal 1995.
Capital expenditures (1,843) (824)
Proceeds from the sales of property, 13 217
plant and equipment
Proceeds from sale of non-operating - 201
property-related parties
Deferred compensation plan (68) (91)
contributions
Loans to related parties 380 (154)
------------ ------------
Net cash used in investing (4,918) (2,855)
activities
Cash flows from financing activities:
Net borrowings (repayments) under (4,976) 484
credit facilities
Proceeds from issuance of long-term 525 2,730
debt
Principal payments on long-term debt (1,402) (371)
Net proceeds from sale of common stock 14,389 -
Preferred stock redemption (1,885) -
Preferred stock dividends paid (601) (266)
------------ ------------
Net cash provided by 6,050 2,577
financing activities
------------ ------------
Increase (decrease) in cash 883 844
Cash at beginning of the period 1,280 32
------------ ------------
Cash at end of the period $ 2,163 $ 876
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
Page 4
<PAGE>
Accounting Policies
- -------------------
The consolidated balance sheet as of June 30, 1996, and the related consolidated
statements of earnings and cash flows for the three month and nine month periods
ended June 30, 1996 and June 30, 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>
June 30, June 30,
(In Thousands) 1996 1995
<S> <C> <C>
Finished goods $ 640 $ 568
Work-in-process 1,028 551
Raw material and supplies 6,330 4,760
Valuation reserve (585) (338)
------ ------
$7,413 $5,541
====== ======
</TABLE>
Public Offering
- ---------------
The Company completed an initial public offering of its common stock on April
30, 1996. The initial offering consisted of a total of 2,100,000 shares. Of
those shares 1,876,800 were sold by the Company. The Underwriters exercised
their option to purchase an additional 315,000 over allotment shares of common
stock on May 30, 1996. Net proceeds to the Company from the offering were
approximately $13,800,000 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 $7,900,000 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.
Page 5
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Net sales for the three and nine months ended June 30, 1996 increased
$5,973,000, or 62.3%, and $16,184,000, or 61.7%, respectively, compared to the
same periods one year earlier. Pantera accounted for $1,884,000 and
$10,337,000, respectively, of the increases. Additional sales increases of
$4,089,000 and $5,847,000, respectively, were primarily the result of internal
sales growth through increased volumes with new and existing customers.
Gross profit increased $1,725,000, or 119.2%, for the three months and
$3,098,000, or 73.0% for the nine months when compared to the corresponding
periods one year earlier. Gross profit as a percentage of net sales increased
to 20.4% from 15.1% for the three month period and to 17.3% from 16.2% for the
nine month period compared to the same periods one year earlier. The increased
gross margin as a percentage of net sales for the three and nine month periods
was mainly the result of decreased raw material costs related to the Company's
ability to acquire materials at a lower price than the year ago period and the
greater absorption of fixed costs because of greater volumes. The ability to
acquire materials at lower prices is attributed to higher volumes and recent
reductions in copper prices.
Selling, general and administrative ("SG & A") expenses increased $378,000, or
43.2%, for the three month period and $1,050,000, or 46.9%, for the nine month
period compared to the same periods one year earlier. As a percentage of net
sales, SG & A declined to 8.1% from 9.1% for the three month period and to 7.8%
from 8.5% for the nine 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 April 1995 acquisition of Pantera.
Other expense decreased $4,000, or 2.4%, for the three months when compared to
the same period one year earlier. Other expense increased $238,000, or 48.2%,
for the nine month period when compared to the same period one year earlier.
The increase during the nine month period was 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 nine 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-deductible
expense of $165,000 associated with the conversion of the Company's Series A
Debentures.
Net earnings increased $839,000, or 687.7%, and $761,000, or 107.2%, when
compared to the three and nine month periods one year earlier. The net earnings
increase during the three and nine month periods was mainly due to increased
margins as discussed above and the Company's acquisition of the remaining 40 %
of Pantera on April 30, 1996.
Earnings per share increased to $0.14 from $0.01 and to $0.26 from $0.15 for the
three and nine month periods when compared to the year earlier periods,
respectively. Earnings per share for the three and nine month periods were
reduced $0.03 and $.04, respectively, by a $167,000 premium paid on the
redemption of the preferred stock.
Liquidity and Capital Resources
- -------------------------------
Operating activities during the first nine months of fiscal 1996 utilized cash
in the amount of $1,570,000 mainly to finance increased accounts receivable and
inventory needed to support sales growth and new customer start-ups as compared
to cash utilized in the amount of $662,000 during the same period one year
earlier. Working capital at June 30, 1996 was $8,701,000, an increase of
$8,899,000 from September 30, 1995. The increase was primarily the result of
the proceeds of the Company's initial public offering in April, 1996.
Page 6
<PAGE>
During the nine months the Company had capital expenditures of $1,843,000,
comprised mainly of production equipment.
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%.
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 is in compliance
with all loan covenants at June 30, 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 June 30, 1996
amounted to $281,000 against an availability of $6,500,000 based on the
collateral base and the $6,500,000 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.
Initial Public Offering
- -----------------------
The Company completed an initial public offering of its common stock on April
30, 1996. The initial offering consisted of a total of 2,100,000 shares. Of
those shares 1,876,800 were sold by the Company. The Underwriters exercised
their option to purchase an additional 315,000 over allotment shares of common
stock on May 30, 1996. Net proceeds to the Company from the offering were
approximately $13,800,000 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 $7,900,000 and to pay dividends on and redeem the Company's
preferred stock in an amount of approximately $2,500,000.
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
- -------
Item 2. N/A
- -------
Item 3. N/A
- -------
Item 4. N/A
- -------
Item 5. N/A
- -------
Item 6. Exhibits and Reports on Form 8-K.
- ------------------------------------------
(a) Exhibits:
11 - Statement of per share earnings
27 - Financial Data Schedule
(b) Reports on Form 8-K: None filed for the period ended June 30, 1996.
Page 8
<PAGE>
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.
THE JPM COMPANY
---------------
Registrant
Date: August 14, 1996 By: /s/ John H. Mathias
--------------------- ------------------------------------------
John H. Mathias
Chairman of the Board and Chief Executive
Officer (Principal Executive Officer)
Date: August 14, 1996 By: /s/ William D. Baker
--------------------- ------------------------------------------
Chief Financial Officer and Treasurer
(Principal Financial Officer and Accounting
Officer)
Page 9
<PAGE>
EXHIBIT INDEX
-------------
Exhibit numbers are in accordance with the
Exhibit Table in Item 601 of Regulation S-K
-------------------------------------------
Exhibit No. Exhibit Description Sequential Page No.
- ----------- ------------------- -------------------
11.1 Statement of per share earnings 11
27 Financial Data Schedule 12
The following exhibits are incorporated by reference from the Company's
registration statement filed on Form S-1 on February 9, 1996 and declared
effective April 30, 1996:
3.1 Ammended and Restated Articles of Incorporation
of the Company
3.2. Ammended and Restated Bylaws of the Company
4.1. Specimen Certificate of Common Stock of the Company
10.4. List of contracts identified in Item 16 of the Company's
Registration Statement
23.1 Contract of Duane Morris Heckscher
23.2. Contract of Price Waterhouse, LLP
23.3. Contract of Price Waterhouse Mexico
24.1. Power of Attorney
Page 10
<PAGE>
Exhibit 11.1
THE JPM COMPANY
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended
June 30, June 30,
1996 1995
---- ----
(dollars in thousands, except
per share amounts)
<S> <C> <C>
Net income $ 961 $ 122
Cumulative Preferred Stock dividends (20) (60)
Undeclared participating preferred stock
dividends (1) (29)
Premium on preferred stock conversion (167)
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 $ 774 $ 40
========== ==========
Net income per common share $ .14 $ .01
========== ==========
Common shares outstanding beginning of period 3,489,000 3,174,000
Effect of stock options outstanding 366,665 -
Effect of Public Offering 1,356,200 -
Effect of Preferred Stock Conversion 155,090 -
Effect of Debenture Conversion 69,496 -
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 5,436,451 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 $7.50 per share in the twelve months
preceding the initial filing were included as if outstanding for all
periods prior to April 30, 1996.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF FRANKLIN ELECTRONIC PUBLISHERS, INC. AND
SUBSIDIARIES AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<CASH> 2,163
<SECURITIES> 0
<RECEIVABLES> 8,847
<ALLOWANCES> 30
<INVENTORY> 7,413
<CURRENT-ASSETS> 16,610
<PP&E> 7,398
<DEPRECIATION> 686
<TOTAL-ASSETS> 31,387
<CURRENT-LIABILITIES> 9,910
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 17,268
<TOTAL-LIABILITY-AND-EQUITY> 31,387
<SALES> 42,410
<TOTAL-REVENUES> 42,410
<CGS> 35,068
<TOTAL-COSTS> 38,522
<OTHER-EXPENSES> 1
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 731
<INCOME-PRETAX> 3,156
<INCOME-TAX> 1,262
<INCOME-CONTINUING> 1,262
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,471
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
</TABLE>
