<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, 1999
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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.)
155 North 15th Street, Lewisburg,PA 17837
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(Address of principal executive offices) (ZIP Code)
Registrants telephone number, including area code 570-524-8225
----------------------
- ------------------------------------------------------------------------
(Former address of principal executive offices) (ZIP 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 section 10 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, 1999, 7,350,199 shares of common stock, $.000067 par value,
were issued and outstanding.
<PAGE>
Item 1. Financial Statements
<TABLE>
<CAPTION>
THE JPM COMPANY
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited-in thousands, except share and per share amounts)
Three Months Ended Six Months Ended
March 31, March 31, March 31, March 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 43,638 $ 30,373 $ 84,879 $ 61,839
Cost of sales 35,542 24,971 69,411 51,214
----------- ----------- ----------- -----------
Gross profit 8,096 5,402 15,468 10,625
Selling, general and
administrative expenses 4,159 3,566 8,181 6,817
Secondary offering costs - - - 400
Plant shutdown expenses 178 1,412 178 1,412
----------- ----------- ----------- ----------
Operating profit 3,759 424 7,109 1,996
Other income (expense)
Interest expense (1,049) (443) (1,975) (707)
Other, net 61 (13) (92) 48
----------- ----------- ----------- -----------
(988) (456) (2,067) (659)
----------- ----------- ----------- -----------
Income (loss) before taxes and
minority interest 2,771 (32) 5,042 1,337
Provision for income taxes 1,029 (12) 1,810 508
----------- ----------- ----------- -----------
Income (loss) before minority interest 1,742 (20) 3,232 829
Minority interest (79) - (277) -
----------- ----------- ----------- -----------
Net income (loss) $ 1,663 $ (20) $ 2,955 $ 829
=========== =========== =========== ===========
Basic earnings per share $ 0.23 $ 0.00 $ 0.41 $ 0.12
=========== =========== =========== ===========
Diluted earnings per share $ 0.22 $ 0.00 $ 0.39 $ 0.11
=========== =========== =========== ===========
Average number of shares
outstanding (Basic) 7,344,000 7,007,000 7,268,000 6,992,000
Average number of shares
outstanding (Diluted) 7,679,000 7,425,000 7,563,000 7,492,000
The accompanying notes are an integral part of these statements.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
THE JPM COMPANY CONDENSED CONSOLIDATED BALANCE SHEET (in thousands)
March 31, September 30,
1999 1998
----------------- -------------------
<S> <C> <C>
(unaudited)
ASSETS
CURRENT ASSETS
Cash $ 1,576 $ 2,625
Accounts receivable, net 21,602 19,681
Inventories, net 32,584 23,984
Other current assets 4,374 3,711
------------- --------------
Total current assets 60,136 50,001
Property, plant and equipment, net 25,922 21,267
Excess of cost over fair value of net assets acquired and other intangible
assets, net 25,352 15,445
Other assets 1,973 2,308
------------- --------------
$ 113,383 $ 89,021
============= ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Short-term borrowings $ - $ 290
Current maturities of long-term debt 544 544
Notes payable 2,000 -
Accounts payable 16,272 7,707
Accrued expenses 6,115 4,448
Deferred income taxes 1,620 1,620
------------- --------------
Total current liabilities 26,551 14,609
Long-term debt 47,958 42,193
Other long-term liabilities 2,597 1,457
Minority interest 346 -
------------- --------------
77,452 58,259
SHAREHOLDERS' EQUITY
Preferred stock, no par value, 10,000
shares authorized; none issued and outstanding - -
Common Stock, $.000067 par value,
40,000 shares authorized, issued
7,350 at March 31, 1999 and
7,060 at September 30, 1998 - -
Additional paid-in capital 20,178 17,513
Retained earnings 16,569 13,614
Accumulated other comprehensive loss (816) (365)
-------------- -----------
Total shareholders' equity 36,931 30,762
-------------- -----------
$ 113,383 $ 89,021
============== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
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<TABLE>
<CAPTION>
THE JPM COMPANY CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (unaudited-in thousands)
Six Months Ended
March 31, March 31,
1999 1998
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,955 $ 829
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,321 1,369
Foreign currency translation (gain) loss 24 (92)
Loss (gain) on sale of property, plant and equipment (18) -
Deferred taxes 1,142 (231)
Minority interest 277 -
Deferred compensation expense 99 105
Change in assets and liabilities,
net of effects from businesses acquired:
(Increase) decrease in accounts receivable (1,298) (2,444)
(Increase) decrease in inventories (7,729) (2,164)
(Increase) decrease in other assets (856) (242)
Increase (decrease) in accounts payable 7,697 (793)
Increase (decrease) in accrued expenses 161 2,070
Increase (decrease) in income taxes payable 684 -
--------- ---------
Net cash provided by (used in) operating activities 5,070 (1,593)
--------- ---------
Cash flows from investing activities:
Payments for businesses acquired, net of cash
acquired ($465 in 1999) (5,827) -
Capital expenditures (5,641) (4,389)
Proceeds from sale of property, plant and equipment 28 -
Deferred compensation plan contributions (100) (105)
--------- ---------
Net cash provided by (used in) investing
activities (11,540) (4,494)
--------- ---------
Cash flows from financing activities:
Net borrowings (repayments) under credit facilities 5,756 4,856
Proceeds from issuance of long-term debt - 2,898
Principal payments on long-term debt (282) (321)
Proceeds from exercise of stock options 165 129
--------- ---------
Net cash provided by (used in) financing activities 5,639 7,562
--------- ---------
Net effect of changes in exchange rates on cash (218) -
--------- ---------
Increase (decrease) in cash (1,049) 1,475
Cash at beginning of period 2,625 543
--------- ---------
Cash at end of period $ 1,576 $ 2,018
========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE>
Accounting Policies (in thousands)
The consolidated balance sheet as of March 31, 1999 and the related
consolidated statements of operations and cash flows for the three and six month
periods ended March 31, 1999 and March 31, 1998, 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. These financial statements should be read
in conjunction with the audited financial statements of the Company and the
notes thereto for the fiscal year ended September 30, 1998, included in the
Company's Form 10-K dated December 22, 1998.
Acquisition
On November 12, 1998, the Company acquired 60% of AF Datalink Equipamentos
de Telecomunicacao, Ltda. ("Datalink"), a Sao Paulo, Brazil based manufacturer
of wire harnesses and cable assemblies for $6,000 in cash, $2,500 in stock (256
shares of JPM stock) and one-year notes for $2,000. The transaction has been
accounted for as a purchase in accordance with APB 16. Datalink had sales of
approximately $1,589 in the first five months since the acquisition.
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>
March 31, September 30,
(in thousands) 1999 1998
<S> <C> <C>
------------ ------------
Finished goods $ 10,818 $ 5,915
Work-in-process 3,331 4,194
Raw material and supplies 19,774 15,172
Valuation reserves (1,339) (1,297)
------------ ------------
$ 32,584 $ 23,984
============ ============
</TABLE>
Comprehensive Income
During the quarter ended December 31, 1998, the Company adopted the
provisions of Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" ("SFAS 130"), which is required for fiscal years beginning
after December 15, 1997. SFAS 130 establishes standards for reporting
comprehensive income and its components in a full set of general-purpose
financial statements.
The components of accumulated other comprehensive income are as follows:
<TABLE>
March 31, September 30,
(in thousands) 1999 1998
----------- ----------
<S> <C> <C>
Foreign currency translation adjustments $ (816) $(365)
---------- ----------
Accumulated other comprehensive loss $ (816) $ (365)
========== ==========
</TABLE>
The components of comprehensive income of the Company for the three and six
month periods ended March 31, 1999 and 1998 are as follows:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
(in thousands) March 31, March 31, March 31, March 31,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Net income $ 1,663 $ (20) $ 2,955 $ 829
Other comprehensive income, net of tax:
Foreign currency translation adjustments (185) 6 (280) (7)
(net of taxes of $(114) and $3 for the three months
ended March 31, 1999 and 1998, respectively
and $(171) and $4 for the six months
ended March 31, 1999 and 1998, respectively)
--------- --------- -------- -----
Other comprehensive income (loss) (185) 6 (280) (7)
--------- --------- -------- -----
Comprehensive income (loss) $ 1,478 $ (14) $ 2,675 $ 822
======== ======== ======= ======
</TABLE>
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<PAGE>
Earnings Per Share Information
Basic and diluted earnings (loss) per common share computations are made in
accordance with 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. The difference between the basic average
number of shares outstanding and the diluted average number of shares
outstanding is due to the treasury stock method calculation of the impact of
unexercised stock options granted under the Company's stock option plans.
Short-Term Borrowings
On December 17, 1998, the Company amended and modified its current line of
credit agreement to reflect an increase in the current line of $10,000 to
$70,000. Certain covenants were also modified. The credit facility maturity date
remains April 2001 and provides for both short and long-term borrowing. The
interest rate on the line is an adjustable rate which varies between the bank's
prime lending rate plus 0% up to 0.25% or, at the Company's election, a
LIBOR-based rate plus 0.875% up to 2.0% measured on a sliding scale tied to the
Company's debt to annualized EBITDA ratio. At March 31, 1999, the Company was in
compliance with all loan covenants.
Closing of South Carolina Manufacturing Facility
On March 27, 1998, the Company announced plans to cease operations at its
Winnsboro, S.C. manufacturing location and subsequently transfer all business to
other plants in Pennsylvania, California and Mexico.
The Plant ceased production on June 26, 1998. Supervisory and breakdown
crews remained at the facility until July 17, 1998. The Company had accrued
expenses totaling approximately $1.412 in closing and severance costs. These
costs are reflected in the income statement as a separate line item described as
"Plant shutdown expenses". At March 31, 1999, the Company reported an additional
incurred cost of $178 above the original estimate of $1,412, for a total
plant shutdown expense of $1,590. All activity has ceased and the physical
facility is under contract to be sold.
Recent Accounting Pronouncements
On June 15, 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 is effective for all
fiscal quarters of all fiscal years beginning after June 15, 1999. SFAS 133
requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and if it is, the type
of hedge transaction. Management of the Company anticipates that due to its
limited use of derivative instruments, the adoption of SFAS 133 will not have a
significant effect on the Company's results of operations or its financial
position.
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<PAGE>
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following table presents, in thousands of dollars and as a percentage
of sales, certain selected consolidated financial data for the quarters ended
March 31, 1999 and 1998.
<TABLE>
March 31, Change March 31,
(in thousands of dollars) 1999 1998 in Dollars 1999 1998
--------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales............ $ 43,638 $ 30,373 $13,265 100.0% 100.0%
Cost of sales........ 35,542 24,971 10,571 81.4 82.2
-------------------------------------------------------
Gross profit......... 8,096 5,402 2,694 18.6 17.8
Selling, general and
administrative expenses. 4,159 3,566 593 9.5 11.7
Costs related to
the plant shutdown expense 178 1,412 (1,234) 0.4 4.7
-----------------------------------------------------
Income from operations.. 3,759 424 3,335 8.7 1.4
Interest expense........ (1,049) (443) (606) (2.4) (1.5)
Other income (expense).. 61 (13) 74 0.1 0.0
-----------------------------------------------------
Income before taxes and
minority interest...... 2,771 (32) 2,803 6.4% (0.1%)
=======================================================
</TABLE>
Results of Operations
Net sales for the three and six months ended March 31, 1999 increased
$13,265 or 43.7% and $23,040 or 37.3% to $43,638 and $84,879, respectively,
compared to the same periods one year earlier. The current quarter and year to
date figures are both new records in net sales. The net increase for the three
and six month periods was primarily the result of the inclusion of sales of
Antrum Interface 725, Ltd. after the acquisition in June 1998, the inclusion of
five months sales of AF Datalink Equipamentos de Telecomunicacao, Ltda, which
was acquired in November 1998 and internal sales growth through increased
volumes with existing customers. The additional sales of the acquisitions
amounted to $9,165 and $16,011 for the three and six month periods,
respectively. However, since the Company determines the site to manufacture
products for its customers on a worldwide basis, this increase in sales also
reflects a portion of sales, and gross margins, transferred to the acquired
operations from pre-existing JPM operations.
Gross profit for the three and six months ended March 31, 1999, increased
$2,694 or 49.9%, and $4,843 or 45.6% to $8,096 and $15,468, respectively, when
compared to the corresponding periods one year earlier. Gross profit as a
percentage of net sales for the three and six month periods increased to 18.6%
from 17.8% and to 18.2% from 17.2%, respectively, when compared to the same
periods one year earlier. The increase in gross profit as a percentage of net
sales for the three and six month periods was primarily the result of increased
fixed cost absorption that offset premium freight charges, overtime premium and
training costs related to the ramp up in business earlier in the year.
Selling, general and administrative ("SG & A") expenses increased $593 or
16.6% and $1,364 or 20.0% to $4,159 and $8,181 respectively, when companred to
the corresponding periods one year earlier. As a percentage of sales, SG&A
decreased to 9.5% from 11.7% for the three month period and to 9.6% from 11.0%
for the six month period compared to the same periods one year earlier. The
increase in dollars was primarily because of increased goodwill amortization and
personnel costs. The decrease in the percentage was primarily due to greater
absorption as a result of increased sales.
SG&A for the three and six month periods ending March 31, 1999 excludes an
additional $178 of plant shutdown expense related the South Carolina
manufacturing facility. The plant shutdown expense for the three and six month
periods in the prior year was $1,412. The six month comparison also excludes the
$400 charge for the write-off of expenses related to the cancelled secondary
offering in the first fiscal quarter 1998.
Interest expense for the three and six months ended March 31, 1999
increased $606 or 136.8% to $1,049 and $1,268 or 179.3% to $1,975 when compared
to the same periods one year earlier. As a percentage of sales, interest expense
increased to 2.4% from 1.5% for the three month period and increased to 2.3%
from 1.1% for the six month period compared to the same periods one year
earlier. The increase is primarily attributable to the borrowings for the
acquisition of Antrum Interface 725, Ltd and AF Datalink Equipamentos de
Telecomunicacao, Ltda. and borrowings related to increases in accounts
receivable and inventory, primarily finished goods inventory.
The Company's effective tax rate for the three and six month periods was
38%. This rate was calculated using income before taxes, which amounted to
$2,771 and $5,042 less pre-tax minority interest, which amounted to $85 and $299
for the three and six month periods, respectively. The minority interest amount
of $79 for the three month
Page-7
<PAGE>
period and $277 for the six month period, which is net of Brazilian tax, is from
JPM's 60% ownership of AF Datalink Equipamentos de Telecomunicacao, Ltda.
Net income after minority interest for the three months ending March 31,
1999 amounted to $1,663 and net income was $2,955 for the six months ending
March 31, 1999. The three and six months ended March 31, 1999 includes $178 of
additional expense related to the South Carolina plant shutdown ($0.01 per
share). The net income increase during the three and six month periods was
primarily due to increased sales and margins as dicussed above. This compares to
net loss of $20 for the three month period and net income of $829 for the six
month period one year earlier. Diluted earnings per share for the current three
and six month periods increased to $0.22 and $0.39, in comparison to $0.00 and
$0.11 for the three and six month periods one year earlier. The three and six
month fiscal periods ending March 31, 1998 include the $400 first quarter
write-off of the cancelled secondary offering ($0.03 per share) and the $1,412
write-off relating to the South Carolina plant shutdown ($0.12 per share).
Since the announced closing of the South Carolina manufacturing facility on
March 27, 1998, the Company's total actual cost through March 31, 1999 amounted
to $1,590, compared to the accrued estimated cost of $1,412. All activity has
ceased and the physical facility is under contract to be sold.
During November 1998, the Company acquired 60% of AF Datalink Equipamentos
de Telecomunicacao, Ltda. ("Datalink"), a Sao Paulo, Brazil based manufacturer
of wire harnesses and cable assemblies for $10,500; $6,000 in cash, $2,500 in
stock (256 shares of JPM stock) and one-year notes for $2,000. Datalink had
sales of approximately $1,589 in the first five months since the acquisition.
Foreign Operations
The Company maintains manufacturing facilities located in Guadalajara,
Mexico; Toronto and Calgary, Canada; Bor, Czech Republic and Sao Paulo, Brazil.
While the Company believes it has good relationships with each local government,
the spread of the manufacturing process over multiple countries subjects the
Company to risks inherent in international operations. Those risks include
currency fluctuations, inflationary pressures, unexpected changes in regulatory
requirements, tariffs and barriers, potentially limited intellectual property
protection, potential cross border shipment delays, changes in political
climate, difficulties in coordinating and managing foreign operations, increases
in employee turnover and potentially adverse tax consequences. Any of the
foregoing could have a material adverse effect on the Company's business,
financial condition, and results of operations and cash flow.
The Company has determined that the U.S. Dollar is the functional currency
of its Mexican operations. Foreign currency inventories and property, plant and
equipment are remeasured into U.S. Dollars at historical rates; all other
foreign currency assets and liabilities are remeasured at year-end exchange
rates. Income and expenses are remeasured at average rates prevailing during the
year, except for expenses related to inventories and property, plant and
equipment, which are remeasured at historical rates. Exchange gains and losses
resulting from remeasurement are included in the earnings statement.
The Company has determined that the Canadian, Czech Republic and Brazilian
operations use their respective currency as their functional currency. As such,
translation adjustments are not included in determining net income but are
reported separately and accumulated in a separate component of equity.
Adjustments, however, may be necessary if any of the Company's operations were
deemed to be part of a highly inflationary economy in the future.
Liquidity and Capital Resources
Operating activities during the six months of fiscal 1999 provided cash in
the amount of $5,070, primarily attributable to an increase in accounts payable,
which offset increases in accounts receivable and inventory as compared to cash
utilized in the amount of $1,593 during the same period one year earlier.
Working capital at March 31, 1999 was $33,585, a decrease of $1,807 from
September 30, 1998. During the first six months of fiscal 1999, the Company had
capital expenditures of $5,644, comprised mainly of costs related to new
manufacturing facilities in Mexico and the Czech Republic.
Borrowings under the Company's line of credit at March 31, 1999 were
$44,500 under the terms of the line of credit agreement at an average LIBOR rate
of 6.95% with an availability of $70,000. At March 31, 1999, the Company was in
compliance with all loan covenants.
The Company believes cash flow from operations and funds available from its
bank line 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-8
<PAGE>
New ERP Computer Software System
On Jan. 7, 1999, the Company announced the selection of PeopleSoft version
7.5 Global Manufacturing System to facilitate the integration of its nine (9)
worldwide manufacturing facilities as well as remote sales, engineering, and
distribution locations during a 24 month rollout. The ERP system includes
Manufacturing, Distribution, Financial, and Human Resource Management modules,
including Performance Measurement functionality. The selection of a tier one ERP
system is consistent with our strategic plan to promote the Company's global
manufacturing capability, better serve our customers, align our organization,
and finally, implement an infrastructure and tools to integrate our worldwide
operations. The ERP project will be supported by a new network infrastructure
and complemented by a new global messaging and document management system as
well as computer aided design tools. We intend to utilize PeopleSoft's
E-business initiatives by integrating these information systems with our
customers and suppliers via extranets, the Internet, electronic data interchange
(EDI), and electronic funds transfer (EFT). The PeopleSoft ERP implementation
will allow us to unify operations by providing consistency and standardization
of the entire company. We expect our cash outlay to be approximately $5,000 over
the two year period of its installation. The majority of this outlay will be
capitalized.
Year 2000 Issue
The Year 2000 issue is the result of computer programs being written using
two digits rather than four digits to define the applicable year. Any of the
Company's computer programs that have date-sensitive software may recognize a
date using "00" as the year 1900 rather than the year 2000. This could result in
a system failure or miscalculations causing disruptions in operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
The Company is aware of potential Year 2000 issues in its internal computer
systems and software, customer and supplier systems and software, Electronic
Data Interchange (EDI) software, and security and production equipment
containing micro-processors.
The Company has implemented a Year 2000 project previously headed by its
Director of Management Information Services and now being coordinated by its
Corporate Treasurer. Each JPM facility also has a Year 2000 project team. The
project team is identifing areas with potential Year 2000 issues and is
developing, assessing, and evaluating projects in each of those areas. A report
on the status of each of these projects is issued to the Company's Chief
Executive Officer and the Chief Financial Officer on a monthly basis. This
information is then summarized and reported to the Board of Directors at its
quarterly meetings. These projects have timetables with deadlines through June
1999.
The Company's enterprise software, consisting of its internal financial and
manufacturing systems, has been evaluated with the following status:
1. Corporate BPCS/AS400 Upgraded to Year 2000 compliant version
2. Lewisburg BPCS/AS400 Upgraded to Year 2000 compliant version
3. Beaver Springs BPCS/AS400 Upgraded to Year 2000 compliant version
4. Toronto Network based Upgraded to Year 2000 compliant version
5. Calgary Network based Upgraded to Year 2000 compliant version
6. Czech Republic Network based Upgraded to Year 2000 compliant version
7. San Jose Comet/Network based Software is Year 2000 compliant
8. Mexico Visual Mfg & PC based Software is Year 2000 compliant
The Company has implemented and validated its enterprise system software
upgrades that are required so that its computer systems will properly utilize
dates beyond December 31, 1999. The Company presently believes with the
conversion and modifications of the software, the Year 2000 issue can be
mitigated. However, if such modifications or conversions are not adequate, the
Year 2000 issue could have a material impact on the operations of the Company.
The Company has inventoried its computer equipment and identified potential
Year 2000 issues. The Company plans to acquire the necessary software to
evaluate this hardware as to its Year 2000 compliance. The Company does not
believe that it will require a significant investment to upgrade any such
hardware.
The Company generally utilizes Microsoft based office suites and networking
products for its computing software needs and upgrades to newer software as it
becomes available. The Company's current standard products are Windows 95 and
Office 97. The Company utilizes Auto-Cad for its engineering functions. These
products will be validated by validation information and software provided by
the suppliers. Because of its recent investment in this upgraded software, the
Company does not believe that any additional investment would be material.
Page-9
<PAGE>
The Company has initiated formal communications with all of its significant
suppliers and large customers to determine the extent to which the Company is
vulnerable to those third parties' failure to remediate their own Year 2000
issues. These communications ask for written assurances that they are or will be
Year 2000 compliant. The Company utilizes some of its larger customers'
forecasts as part of its material requirements planning system. The Company has
alternate sources for substantially all of its raw materials as a contingency if
any of its suppliers are not able to supply material. The Company believes that
it cannot produce an adequate contingency plan if the customer is not able to
order parts or supply forecasts.
The Company assessed and validated the Electronic Data Interchange systems
that it utilizes to communicate and transmit data between the Company and its
suppliers and customers.
The Company has inventoried those security systems and production assets
that contain micro-processors. This equipment is being assessed and will be
validated by June 30, 1999. Remediation of any issues through the implementation
of new equipment or contingency plans is expected to be completed by June 30,
1999. The Company does utilize some equipment in its testing and quality
assurance that also may provide some exposure to the Year 2000 issue which is
currently being assessed. The Company is not heavily mechanized and expects that
any remediation costs would not be material.
The Company's total estimated Year 2000 project costs of approximately
$250 include the estimated cost and time associated with the impact of third
parties' Year 2000 issues on the Company and are based on presently available
information. There can be no guarantee that the systems of other companies on
which the Company's systems rely will be timely converted, or that a failure to
convert by another company, or a conversion that is incompatible with the
Company's systems, would not have a material adverse effect on the Company. The
Company has determined it has no exposure to contingencies related to the Year
2000 issue for the products it manufactures or it has sold.
The Company has completed the modifications and conversions of its
enterprise system software at a cost of approximately $175. Additional
expenditures will be required to complete the upgrade of any software contained
in any hardware or production equipment found not to be Year 2000 compliant. The
Company currently estimates it will incur additional costs of approximately $75
to upgrade such equipment and complete the assessments described above.
The Company does not currently believe that it has any material exposure to
the Year 2000 issue. However, if the Company discovers any such exposure, it
will implement projects to correct or prepare contingency plans to address any
such issue. The Company believes that a material failure would occur if a
utility supplier was unable to provide service to one or more of the Company's
facilities. The Company does not currently have an alternative for this
contingency.
The Company intends to provide the funds for the Year 2000 project through
utilization of its internally generated funds and its bank line of credit.
The costs of the project and the dates on which the Company plans to
complete the Year 2000 assessments, modifications, conversions and validation
are based on management's best judgement. The projected costs were derived
utilizing assumptions of future events including the continued availability of
certain resources, third party modification plans and other factors. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ materially from these plans. Specific factors that might
cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct relevant computer codes and similar uncertainties.
Page-10
<PAGE>
Item 3
Quantitative and Qualitative Disclosures About Market Risk
During the first two quarters of fiscal 1999, the Company has experienced
an immaterial amount of exposure to changes in financial market conditions due
to business transactions denominated in foreign currencies. The Company has not
engaged in the hedging of foreign currency exposures. The Company believes
that it will experience significant increases in transactions denominated in
foreign currencies in fiscal 1999. As a result, future earnings, cash flows and
fair value of assets and liabilities will be subject to uncertainty. The Company
intends to establish policies, procedures and internal processes governing its
management of certain market conditions, and will use both operational and
financial market actions in its risk management activities.
The Company is exposed to changes in interest rates primarily due to its
borrowing and investing activities which include primarily short and long-term
debt used to maintain liquidity and fund its business operations. The Company
has entered into an interest rate hedge on $15,000 of its long-term debt. A 100
basis point move in interest rates would effect the value of the Company's
floating rate borrowings.
Recent Accounting Pronouncements
On June 15, 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS 133"). SFAS 133 is effective for all
fiscal quarters of all fiscal years beginning after June 15, 1999. SFAS 133
requires that all derivative instruments be recorded on the balance sheet at
their fair value. Changes in the fair value of derivatives are recorded each
period in current earnings or other comprehensive income, depending on whether a
derivative is designated as part of a hedge transaction and if it is, the type
of hedge transaction. Management of the Company anticipates that due to its
limited use of derivative instruments, the adoption of SFAS 133 will not have a
significant effect on the Company's results of operations or its financial
position.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act
of 1995.
This above discussion may contain forward-looking statements that involve
risks and uncertainties. Among the important factors which could cause actual
results to differ materially from those forward-looking statements are the
impact of competitive products and pricing, product demand, the presence of
competitors with greater financial resources, availability of additional sources
of financing 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 recent
filings of Forms 10-K and 10-Q.
Page-11
<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
(a) None
(b) None
<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, 1999 By:/s/ John H. Mathias
------------ ----------------------
John H. Mathias
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date: May 13, 1999 By: /s/ William D. Baker
------------ ------------------------
William D. Baker
Vice President and Chief Financial Officer
(Principal Financial Officer)
<PAGE>
EXHIBIT INDEX
Exhibit numbers are in accordance with the
Exhibit Table in Item 601 of Regulation S-K
Exhibit No. Exhibit
Description
3.1.* Amended and Restated Articles of Incorporation of the Company
3.2.* Amended and Restated Bylaws of the Company
4.1.* Specimen Certification of Common Stock of the Company
27 Financial Data Schedule
* Filed as part of the Company's Registration Statement filed on Form S-1 on
February 9, 1996 and declared effective April 30, 1996.
<TABLE> <S> <C>
<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> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,576
<SECURITIES> 0
<RECEIVABLES> 21,933
<ALLOWANCES> 331
<INVENTORY> 32,584
<CURRENT-ASSETS> 60,136
<PP&E> 36,707
<DEPRECIATION> 10,785
<TOTAL-ASSETS> 113,383
<CURRENT-LIABILITIES> 26,551
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 35,931
<TOTAL-LIABILITY-AND-EQUITY> 113,383
<SALES> 84,879
<TOTAL-REVENUES> 84,879
<CGS> 69,411
<TOTAL-COSTS> 81,924
<OTHER-EXPENSES> 92
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,975
<INCOME-PRETAX> 5,042
<INCOME-TAX> 1,810
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<EPS-PRIMARY> .41
<EPS-DILUTED> .39
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