<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 December 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
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(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
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(Address of principal executive offices) (ZIP Code)
Registrant's telephone number, including area code 717-524-8200
-----------------------------
Not applicable
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(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
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Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
At December 31, 1996, 6,039,641 shares of common stock, $.000067 par value, are
issued and outstanding.
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THE JPM COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited-In Thousands)
<TABLE>
<CAPTION>
Three Months Ended
Dec. 31, 1996 Dec. 31, 1995
--------------------- -------------------- -------------------- --------------------
<S> <C> <C> <C> <C>
Net sales $ 20,217 $ 12,385
Cost of sales 16,327 10,355
--------------------- -------------------- -------------------- --------------------
Gross profit 3,890 2,030
Selling, general and administrative 1,454 1,016
--------------------- -------------------- -------------------- --------------------
Operating profit 2,436 1,014
Other income (expense)
Interest expense (80) (266)
Other (net) 293 (55)
--------------------- -------------------- -------------------- --------------------
213 (321)
--------------------- -------------------- -------------------- --------------------
Income before taxes, minority
interest 2,649 693
Provision for income taxes 1,059 277
--------------------- -------------------- -------------------- --------------------
Income before minority interest 1,590 416
Minority interest - 205
--------------------- -------------------- -------------------- --------------------
Net income 1,590 211
Cumulative dividend on Preferred - 60
--------------------- -------------------- -------------------- --------------------
Stock
Net income applicable to Common $ 1,590 $ 151
===================== ==================== ==================== ====================
Stock
Earnings per share $ 0.24 $ 0.04
===================== ==================== ==================== ====================
Weighted average number of shares 6,498,443 3,925,229
</TABLE>
The accompanying notes are an integral part of these statements.
Page 2
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THE JPM COMPANY AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
December 31, September 30,
1996 1996
-------------------- ----------------------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 752 $ 1,411
Accounts receivable, net 9,330 9,903
Inventories, net 10,679 9,330
Other current assets 758 740
-------------------- ----------------------
Total current assets 21,519 21,384
Property, plant and equipment 9,382 7,966
Notes receivable related parties 203 206
Excess of cost over fair value of assets acquired 4,563 4,640
Other assets 594 520
-------------------- ----------------------
$ 36,261 $ 34,716
==================== ======================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $ 1,030 $ 257
Current maturities of long-term debt 681 631
Accounts payable 3,870 5,132
Accrued expenses 3,584 3,976
Income tax payable 908 1,061
Deferred income taxes 879 879
-------------------- ----------------------
Total current liabilities 10,952 11,936
Long-term debt, less due currently 4,164 3,249
Other long-term liabilities 959 962
-------------------- ----------------------
16,075 16,147
SHAREHOLDERS' EQUITY
Common Stock, $.000067 par value, 50,000,000 shares authorized,
issued 6,018,000 in 1995, 6,040,000 at June 30, 1996 - -
Additional paid-in-capital 16,189 16,162
Retained earnings 3,997 2,407
-------------------- ----------------------
Total shareholders' equity 20,186 18,569
-------------------- ----------------------
$ 36,261 $ 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>
THREE MONTHS ENDED
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Dec. 31,1996 Dec. 31, 1995
--------------------- ----------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,590 $ 211
Adjustments to reconcile net income to net cash:
Depreciation and amortization 338 198
Foreign currency translation (gain) loss (349) (15)
Provision for doubtful accounts 4 18
Loss (gain) on sale of property, plant & equipment 41 (2)
Minority interest - 205
Deferred compensation expense 27 13
Change in assets and liabilities, net of effects from business acquired:
(Increase) decrease in accounts receivable 569 (1,259)
(Increase) decrease in inventories (1,349) (1,073)
(Increase) decrease in other assets (92) 2
Increase (decrease) in accounts payable (1,262) 2,808
Increase (decrease) in accrued expenses (73) (627)
Increase (decrease) in income taxes payable (153) (54)
--------------------- ----------------------
Net cash provided by (used in) operating activities (709) 425
Capital expenditures (667) (500)
Proceeds from the sales of property, plant and equipment 71 -
Deferred compensation plan contributions - (21)
Loans to related parties, net 3 -
--------------------- ----------------------
Net cash used in investing activities (593) (521)
Cash flows from financing activities:
Net borrowings (repayments) under credit facilities 773 621
Principal payments on long-term debt (157) (185)
Proceeds from sale of stock options 27 -
Preferred stock dividends paid - (79)
--------------------- ----------------------
Net cash provided by financing activities 643 357
--------------------- ----------------------
Increase (decrease) in cash (659) 260
Cash at beginning of the period 1,411 1,279
--------------------- ----------------------
Cash at end of the period $ 752 $ 1,540
===================== ======================
</TABLE>
Supplemental information relative to non-cash investing and financing
activity-See notes.
The accompanying notes are an integral part of these statements.
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Accounting Policies
- -------------------
The consolidated balance sheet as of December 31, 1996, and the related
consolidated statements of earnings and cash flows for the three month periods
ended December 31, 1996 and December 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, 1996, included in the Company's form 10-K dated
December 13, 1996.
Inventories
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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>
Dec. 31, Sept. 30,
(In Thousands) 1996 1996
---- ----
<S> <C> <C>
Finished goods $ 1,735 $ 1,515
Work-in-process 1,393 1,253
Raw material and supplies 8,175 7,169
Valuation reserve (624) (607)
-------------------- ----------
$10,679 $ 9,330
====== =====
</TABLE>
Supplemental Cashflow 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.
Page 5
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
- ---------------------
Net sales for the three months ended December 31, 1996 increased $7,832,000, or
63.2%, to $20,217,000 compared to the same period one year earlier. The sales
increase was the result of internal sales growth through increased volumes with
existing customers.
Gross profit increased $1,860,000, or 91.6%, for the three months to $3,890,000
when compared to the corresponding period one year earlier. Gross profit as a
percentage of net sales increased to 19.2% from 16.4% for the three month period
compared to the same period one year earlier. The increased gross margin as a
percentage of net sales for the three month period 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 attributable to higher volume purchase discounts. Also affecting
the gross margins in the quarter was an annual wage increase granted October 1,
1996 to substantially all of the Company's domestic employees and start-up costs
related to the Company's new manufacturing facility in Beaver Springs, PA.
Selling, general and administrative ("SG & A") expenses increased $438,000, or
43.1%, for the three month period to $1,454,000 compared to the same period one
year earlier. As a percentage of net sales, SG & A declined to 7.2% from 8.2%
for the three 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, to commissions paid on
the sale of certain of the Company's products.
Other expense decreased $534,000, or -166.4%, for the three months when compared
to the same period one year earlier. The decrease was mainly because of a
$349,000 translation gain realized during the three months.
The Company's effective tax rate for the three month period remained at 40%.
Net earnings increased $1,379,000, or 653.6%, to $1,590,000 when compared to the
three month period one year earlier. The net earnings increase during the three
months was mainly 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 $0.24 from $0.04 for the three month period when
compared to the year earlier period. Earnings per share for the three months
were increased $0.03 by a $349,000 translation gain realized at its Electronica
Pantera subsidiary.
Liquidity and Capital Resources
- -------------------------------
Operating activities during the first three months of fiscal 1997 utilized cash
in the amount of $709,000 mainly to finance increased inventory needed to
support sales growth and new customer start-ups as compared to cash generated in
the amount of $425,000 during the same period one year earlier. Working capital
at December 31, 1996 was $10,567,000, an increase of $1,119,000 from September
30, 1996.
During the three months the Company had capital expenditures of $667,000,
comprised mainly of production equipment. During the quarter 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 maintains a bank revolving credit line to permit the Company to draw
up to $6,500,000 collateralized by the Company's inventories and accounts
receivable. The interest rate is the bank's prime lending rate.
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; and prohibits loans to or investments in
other entities or persons. The Company is in compliance with all loan covenants
at December 31, 1996. The bank line of credit expires April 30, 1997. Borrowings
under the line of credit at December 31, 1996 amounted to $1,030,000 against an
availability of $6,500,000 based on the collateral base and the $6,500,000
limit.
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 most recent fiscal year completed March 31, 1996. The transaction is
intended to be accounted for as a pooling of interests combination. The Company
would issue up to approximately 1,500,000 shares in the transaction currently
expected to be completed by approximately March 31, 1997.
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.
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
- -------
Item 4. N/A
- -------
Item 5. N/A
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Item 6. Exhibits and Reports on Form 8-K.
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(a) Exhibits:
27 - Financial Data Schedule
(b) Reports on Form 8-K: None filed for the period ended
December 31, 1996.
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<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: February 5, 1997 By: /s/ John H. Mathias
---------------------- -------------------------------------------
John H. Mathias
Chairman of the Board and Chief Executive
Officer (Principal Executive Officer)
Date: February 5, 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
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Exhibit numbers are in accordance with the
Exhibit Table in Item 601 of Regulation S-K
-------------------------------------------
<TABLE>
<CAPTION>
Exhibit No. Exhibit Description Sequential Page No.
- ----------- ------------------- -------------------
<S> <C> <C>
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
</TABLE>
* 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> 3-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 752
<SECURITIES> 0
<RECEIVABLES> 9,443
<ALLOWANCES> 113
<INVENTORY> 10,679
<CURRENT-ASSETS> 21,519
<PP&E> 15,502
<DEPRECIATION> 6,120
<TOTAL-ASSETS> 36,261
<CURRENT-LIABILITIES> 10,952
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 20,185
<TOTAL-LIABILITY-AND-EQUITY> 36,261
<SALES> 20,217
<TOTAL-REVENUES> 20,217
<CGS> 16,327
<TOTAL-COSTS> 17,781
<OTHER-EXPENSES> (293)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 80
<INCOME-PRETAX> 2,649
<INCOME-TAX> 1,059
<INCOME-CONTINUING> 1,590
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,590
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.24
</TABLE>
