<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, 1997
------------------------------------------------
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------------------------------------------
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 X No
---------- __________
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, 1997, 6,077,141 shares of common stock, $.000067 par value, are
issued and outstanding.
<PAGE>
THE JPM COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited-In Thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
Mar. 31,1997 Mar. 31,1996 Mar. 31,1997 Mar. 31,1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 23,123 $ 14,470 $ 43,340 $ 26,855
Cost of sales 18,182 12,330 34,509 22,685
---------- ---------- ---------- ----------
Gross profit 4,941 2,140 8,831 4,170
Selling, general and administrative 1,710 1,117 3,164 2,133
---------- ---------- ---------- ----------
Operating profit 3,231 1,023 5,667 2,037
Other income (expense)
Interest expense (109) (282) (189) (536)
Other (net) (66) 34 227 (33)
---------- ---------- ---------- ----------
(175) (248) 38 (569)
---------- ---------- ---------- ----------
Income before taxes, minority interest 3,056 775 5,705 1,468
Provision for income taxes 1,223 310 2,282 587
---------- ---------- ---------- ----------
Income before minority interest 1,833 465 3,423 881
Minority interest - 166 - 371
---------- ---------- ---------- ----------
Net income 1,833 299 3,423 510
Cumulative dividend on Preferred Stock - 60 - 120
---------- ---------- ---------- ----------
Net income applicable to Common Stock $ 1,833 $ 239 $ 3,423 $ 390
========== ========== ========== ==========
Earnings per share $0.27 $0.05 $0.51 $0.09
========== ========== ========== ==========
Weighted average number of shares 6,683,366 3,845,627 6,626,401 3,885,429
</TABLE>
The accompanying notes are an integral part of these statements
Page 2
<PAGE>
THE JPM COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited-In Thousands)
<TABLE>
<CAPTION>
March 31, 1997 September 30, 1996
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash 384 $ 1,411
Accounts receivable, net 12,920 9,903
Inventories, net 10,411 9,330
Other current assets 789 740
------- -------
Total current assets 24,504 21,384
Property, plant and equipment 9,623 7,966
Notes receivable related parties - 206
Excess cost over fair value of assets acquired, net 4,485 4,640
Other assets 811 520
------- -------
$39,423 $34,716
======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ 1,773 $ 257
Current maturities of long-term debt 681 631
Accounts payable 4,206 5,132
Accrued expenses 4,330 3,976
Income tax payable 474 1,061
Deferred income taxes payable 879 879
------- -------
Total current liabilities 12,343 11,936
Long-term debt, less due currently 3,972 3,249
Other long-term liabilities 996 962
------- -------
17,311 16,147
SHAREHOLDERS' EQUITY
Common Stock, $.000067 par value, 50,000,000 shares authorized
issued 6,077,000 at March 31, 1997, 6,018,000 in 1996, - -
Additional paid-in capital 16,282 16,162
Retained earnings 5,830 2,407
------- -------
Total shareholders' equity 22,112 18,569
------- -------
$39,423 $34,716
======= =======
</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-In Thousands)
<TABLE>
<CAPTION>
Six Months Ended
Mar. 31, 1997 Mar. 31, 1996
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,423 $ 510
Adjustments to reconcile net income to net cash:
Depreciation and amortization 734 437
Foreign currency translation (gain) loss (335) (5)
Provision for doubtful accounts 35 24
Loss (gain) on sale of property, plant & equipment 34 (5)
Minority interest - 371
Deferred compensation expense 35 90
Change in assets and liabilities:
(Increase) decrease in accounts receivable (3,112) (2,898)
(Increase) decrease in inventories (1,081) (1,334)
(Increase) decrease in other assets (243) (314)
Increase (decrease) in accounts payable (925) 2,031
Increase (decrease) in accrued expenses 688 (32)
Increase (decrease) in income taxes payable (587) 188
------- -------
Net cash (used in) operating activities (1,334) (937)
Cash flows from investing activities:
Capital expenditures (2.340) (803)
Proceeds from the sales of property, plant and equipment 71 12
Deferred compensation plan contributions (38) (68)
Loans to related parties, net 206 (19)
------- -------
Net cash (used in) investing activities (2,101) (878)
Cash flows from financing activities:
Net borrowings (repayments) under credit facilities 1,566 1,101
Proceeds from the issuance of long-term debt 1,073 525
Principal payments on long-term debt (350) (353)
Proceeds from exercise of stock options 119 -
Preferred stock dividends paid - (79)
------- -------
Net cash provided by financing activities 2,408 1,194
(Decrease) in cash (1,027) (621)
Cash at beginning of the period 1,411 1,280
------- -------
Cash at end of the period $ 384 $ 659
======= =======
</TABLE>
Supplemental information relative to non-cash investing and financing activity-
See notes.
The accompanying notes are an integral part of these statements.
Page 4
<PAGE>
Accounting Policies
- -------------------
The consolidated balance sheet as of March 31, 1997, and the related
consolidated statements of operations for the three month and six month periods
ended March 31, 1997 and March 31, 1996 and cash flows for the six month
periods ended March 31, 1997 and March 31, 1996, 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, 1996, included in the Company's form 10-K dated
December 13, 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 12 months of future demand.
<TABLE>
<CAPTION>
Mar. 31, Sept. 30,
(In Thousands) 1997 1996
-------- --------
<S> <C> <C>
Finished goods $2,013 $1,515
Work-in-process 1,205 1,253
Raw material and supplies 7,838 7,169
Valuation reserve (645) (607)
------ ------
$10,411 $9,330
====== ======
</TABLE>
Supplemental Cash Flow Information
- ----------------------------------
During the first quarter of fiscal year 1997, the Company incurred a capital
lease obligation of $1,122 associated with the lease of a manufacturing facility
in Beaver Springs, PA.
Supplemental Earnings Per Share Information (SFAS 128)
- ------------------------------------------------------
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" (SFAS 128), which
establishes new standards for computing and presenting earnings per share
("EPS"). SFAS 128 replaces the presentation of primary EPS with a presentation
of basic EPS. It also requires dual presentation of basic and diluted EPS on
the face of the income statement for all entities with a complex capital
structure. SFAS 128 is effective for financial statements issued for periods
ending after December 15, 1997 and earlier adoption is not permitted. EPS
included in the accompanying financial information is computed in accordance
with APB Opinion No. 15, "Earnings per Share". Had the provisions of SFAS 128
been effective for the Company's second quarter of fiscal 1997, basic EPS and
diluted EPS on a pro forma basis would be approximately $.30 per share and $.27
per share, respectively, for the three months ended March 31, 1997.
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, 1997 increased
$8,653,000, or 59.8%, and $16,485,000 or 61.4%, to $23,123,000 and $43,340,000,
respectively, compared to the same periods one year earlier. The net sales
increase for both the three and the six month periods was primarily the result
of internal sales growth through increased volumes with existing customers. The
Company experienced some softness in business from one of its major customers at
the end of the quarter and another during mid-quarter. Although this slow down
was more than offset by the growth in sales to other customers, the late quarter
slow down continues during the early weeks of the third fiscal quarter,
historically the slowest quarter for the Company and its industry.
Gross profit increased $2,801,000, or 130.9% and $4,661,000, or 111.8% to
$4,941,000 and $8,831,000, respectively, for the three and six month periods
when compared to the corresponding periods one year earlier. Gross profit as a
percentage of net sales increased to 21.4% from 14.8% and to 20.4% from 15.5%,
respectively, for the three and six month periods compared to the same periods
one year earlier. The increased gross margin as a percentage of net sales for
the three and six month periods was mainly the result of a favorable product
mix, decreased raw material costs related to the Company's ability to acquire
materials at a lower price than the year ago period because of increased
purchase volumes and the greater absorption of fixed costs because of greater
sales volumes. The ability to acquire materials at lower prices is attributable
to higher volume purchase discounts. Negatively impacting the Company's margins
during the second quarter were start-up costs related to new products to be
built in San Jose, CA. at Denron, Inc., an acquisition expected to close during
the first week of June 1997.
Selling, general and administrative ("SG & A") expenses increased $593,000, or
53.1%, for the three month period to $1,710,000 and $1,031,000, or 48.3% for the
six month period to $3,164,000 when 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 7.3% from 7.9% for the six month period compared to
the same periods one year earlier. The increase in SG & A expenses was primarily
due to compensation expense necessary to support the Company's growth and to
commissions paid on the sale of certain of the Company's products.
Other expense decreased $73,000, or 29.4%, for the three months and $607,000, or
107.7% for the six months compared to the same periods one year earlier. The
decrease for the six months was mainly because of a $349,000 translation gain
realized during the first three months of fiscal 1997 and a reduction in
interest expense of $347,000 resulting from the pay down of debt after the
Company's April 30, 1996 IPO.
The Company's effective tax rate for the three month period remained at 40%.
Net earnings increased $1,534,000, or 513.0% and $2,913,000, or 571.2%, to
$1,833,000 and $3,423,000 respectively, compared to the same periods one year
earlier. The net earnings increase during the three months and six months was
primarily due to increased sales and margins as discussed above and the
Company's acquisition of the remaining 40 % of Pantera on April 30, 1996.
Earnings per share increased to $0.27 from $0.05 and $0.51 from $0.09 for the
three and six month periods, respectively, compared to the same periods one year
earlier. Earnings per share for the six months was increased $0.03 by a $349,000
translation gain realized at its Electronica Pantera subsidiary during the
Company's first quarter of fiscal 1997.
Liquidity and Capital Resources
- -------------------------------
Operating activities during the six months of fiscal 1997 utilized cash in the
amount of $1,334,000 mainly to finance increased inventory and accounts
receivable needed to support sales growth and new customer start-ups as compared
to cash used in the amount of $937,000 during the same period one year earlier.
Working capital at March 31, 1997 was $12,161,000, an increase of $2,713,000
from September 30, 1996.
Page 6
<PAGE>
During the six months the Company had capital expenditures of $2,340,000,
comprised mainly of production equipment. During the six months the Company also
entered into a lease purchase agreement for $1,122,000 for the lease purchase of
the new facility in Beaver Springs, PA.
The Company's $6,500,000 bank line of credit 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;
and prohibits loans to or investments in other entities or persons. The Company
is in compliance with all loan covenants at March 31, 1997. The bank line of
credit expires April 30, 1997.
Borrowings under the Company's line of credit at March 31, 1997 amounted to
$1,773,000 against an availability of $6,500,000 based on the collateral base
and the $6,500,000 limit.
On March 31, 1997, the Company signed a commitment letter to increase its bank
revolving credit line to permit the Company to draw up to $20,000,000
collateralized by the Company's inventories and accounts receivable. The
interest rate is the bank's prime lending rate minus .25% or a rate per annum
equal to 2% in excess of the bank's LIBOR rate for borrowings of 30, 60 or 90
days.
On November 25, 1996, the Company announced it had signed a letter of intent to
merge with Denron, Inc., a San Jose, California based manufacturer of wire
harnesses and cable assemblies. Denron had sales of approximately $25,000,000
during its fiscal year completed March 31, 1996. The transaction is intended to
be accounted for as a pooling of interests combination. Based on recent stock
prices of approximately $25.00 per share and the $23,000,000 acquisition cap
provided for under the agreement, the Company would issue approximately 950,000
shares in the transaction currently expected to be completed by approximately
June 6, 1997.
Subsequent to the close of the second quarter on April 22, 1997, the Company
announced it had reached an agreement in principle to acquire the assets of
Corma GmbH located in Leuchtenberg, Germany and Corma s. r. o. located in Bor,
Czech Republic for approximately $2,000,000. JPM had previously announced a
manufacturing services agreement with Corma to manufacture products to support
JPM's customers in Europe. The initial agreement was to provide wire harness and
cable assemblies to Interbold, the joint venture between IBM and Diebold for
ATM's in the European market.
The Company believes 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, acquisitions 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.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of
1995
This filing may contain forward-looking statements that involve risks and
uncertainties. Among the important factors which could cause actual results to
differ materially from those in the forward-looking statements are the impact of
competitive products and pricing, product demand, the presence of competitors
with greater financial resources, and commercialization risks, costs associated
with integration and administration of acquired operations, capacity and supply
constraints or difficulties, the results of financing efforts and other factors
detailed in the Company's filings with the Securities and Exchange Commission
including its recent filings on Forms 10-K, 10-Q and Schedule 14A.
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:
27 - Financial Data Schedule
(b) Reports on Form 8-K: On March 12 1997, the Company filed a notice
of the execution of a definitive merger agreement for the
acquisition of Denron, Inc.
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: May 13, 1997 By: /s/ John H. Mathias
------------------ --------------------------------
John H. Mathias
Chairman of the Board and Chief Executive
Officer (Principal Executive Officer)
Date: May 13, 1997 By: /s/ William D. Baker
---------------------- --------------------------------------
William D. Baker
Vice President,
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.
- ----------- ------------------- -------------------
27. Financial Data Schedule 11
The following exhibits are incorporated by reference from the Company's annual
report on Form 10-K filed on December 13, 1996.
3.1.* Amended and Restated Articles of Incorporation
of the Company
3.2.* Amended 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. Consent of Duane Morris Heckscher
24.1. Power of Attorney
* Filed as part of the Company's registration statement filed on Form S-1
on February 9, 1996 and declared effective April 30, 1996.
Page 10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF THE JPM COMPANY AND SUBSIDIARIES AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 384
<SECURITIES> 0
<RECEIVABLES> 13,064
<ALLOWANCES> 144
<INVENTORY> 10,411
<CURRENT-ASSETS> 24,504
<PP&E> 16,248
<DEPRECIATION> 6,626
<TOTAL-ASSETS> 39,423
<CURRENT-LIABILITIES> 12,343
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 22,112
<TOTAL-LIABILITY-AND-EQUITY> 39,423
<SALES> 43,340
<TOTAL-REVENUES> 43,340
<CGS> 34,509
<TOTAL-COSTS> 37,673
<OTHER-EXPENSES> (227)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (189)
<INCOME-PRETAX> 5,705
<INCOME-TAX> 2,282
<INCOME-CONTINUING> 3,423
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,423
<EPS-PRIMARY> 0.51
<EPS-DILUTED> 0.51
</TABLE>
