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, 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
- ------------------------------------------------------------------------
(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 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 February 8, 2000, 7,367,853 shares of common stock, $.000067 par value, were
issued and outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
THE JPM COMPANY
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(unaudited-in thousands, except per share amounts)
Three Months Ended
December 31, December 31,
1999 1998
------------------- -------------------
(unaudited) (unaudited)
<S> <C> <C>
Net sales $ 45,419 $ 41,241
Cost of sales 38,070 34,161
------------------- -----------------
Gross profit 7,349 7,080
Selling, general and administrative expenses 4,129 3,730
------------------- -----------------
Operating profit 3,220 3,350
Other income (expense)
Interest expense (1,308) (926)
Other (net) (163) (153)
------------------ -----------------
(1,471) (1,079)
------------------ -----------------
Income before taxes and minority interest 1,749 2,271
Provision for income taxes 659 781
------------------ -----------------
Income before minority interest 1,090 1,490
Minority interest ( 60) (198)
------------------- -----------------
Net income $ 1,030 $ 1,292
================== =================
Basic earnings per share $ 0.14 $ 0.18
================== =================
Diluted earnings per share $ 0.14 $ 0.17
================== =================
Average number of shares outstanding (Basic) 7,364 7,193
Average number of shares outstanding (Diluted) 7,527 7,443
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE JPM COMPANY
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands, except per share amounts)
December 31, September 30,
1999 1999
----------------- -------------------
(unaudited)
ASSETS
<S> <C> <C>
CURRENT ASSETS
Cash $ 1,203 $ 969
Accounts receivable, net 26,439 21,755
Inventories, net 40,175 37,227
Other current assets 8,009 5,802
------------- --------------
Total current assets 75,826 65,753
Property, plant and equipment, net 32,793 31,164
Excess of cost over fair value of net assets acquired, net 24,423 24,773
Other assets 2,848 2,870
------------- --------------
$ 135,890 $ 124,560
============= ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 863 $ 744
Notes payable 2,000 2,000
Accounts payable 16,932 18,375
Accrued expenses 4,776 4,753
Deferred income taxes 3,589 3,589
------------- --------------
Total current liabilities 28,160 29,461
Long-term debt 63,841 53,100
Other long-term liabilities 2,637 2,428
Minority interest 813 698
------------- --------------
95,451 85,687
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
7,364 at December 31, 1999 and
September 30, 1999 - -
Additional paid-in capital 20,373 20,373
Retained earnings 19,940 18,910
Accumulated other comprehensive income (loss) 126 (410)
----------- -----------
Total shareholders' equity 40,439 38,873
----------- -----------
$ 135,890 $ 124,560
=========== ===========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE JPM COMPANY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited-in thousands)
Three Months Ended
December 31, December 31,
1999 1998
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,030 $ 1,292
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 1,174 987
Foreign currency translation (gain) loss 82 39
Loss (gain) on sale of property, plant and equipment - (16)
Deferred taxes 209 551
Minority interest 60 198
Deferred compensation expense 47 49
Change in assets and liabilities,
net of effects from businesses acquired:
(Increase) decrease in accounts receivable (4,728) (2,438)
(Increase) decrease in inventories (2,868) (4,165)
(Increase) decrease in other assets (2,193) (412)
Increase (decrease) in accounts payable (1,009) 1,833
Increase (decrease) in accrued expenses (54) 395
--------- ---------
Net cash provided by (used in) operating activities (8,250) (1,687)
--------- ---------
Cash flows from investing activities:
Payments for business acquired, net of cash
acquired ($465 in fiscal 1999). - (5,827)
Capital expenditures (2,180) (2,693)
Proceeds from sale of property, plant and equipment - 27
Deferred compensation plan contributions - (47)
--------- ---------
Net cash provided by (used in) investing activities (2,180) (8,540)
--------- ---------
Cash flows from financing activities:
Net borrowings (repayments) under credit facilities 10,948 8,677
Principal payments on long-term debt (307) (138)
Proceeds from exercise of stock options - 97
--------- ---------
Net cash provided by (used in) financing activities 10,641 8,636
--------- ---------
Effect of changes in exchange rates on cash 23 -
---------- ---------
Increase (decrease) in cash 234 (1,591)
Cash at beginning of period 969 2,625
--------- ---------
Cash at end of period $ 1,203 $ 1,034
========= =========
The accompanying notes are an integral part of these statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands except per share data)
Accounting Policies
- -------------------
The consolidated balance sheet as of December 31, 1999 and the related
consolidated statements of operations and cash flows for the three month periods
ended December 31, 1999 and December 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, 1999, included in the
Company's Form 10-K dated December 27, 1999.
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.
December 31, September 30,
1999 1999
------------- --------------
Finished goods $ 10,167 $ 10,392
Work-in-process 4,058 5,134
Raw material and supplies 27,284 23,039
Valuation reserves (1,334) (1,338)
--------- ----------
$ 40,175 $ 37,227
========= ==========
Comprehensive Income
- --------------------
The components of accumulated other comprehensive income (loss) are as
follows:
December 31, September 30,
1999 1999
----------- -------------
Foreign currency translation adjustments $ 126 $(410)
---------- ----------
Accumulated other comprehensive income (loss) $ 126 $ (410)
========== ==========
<PAGE>
The components of comprehensive income (loss) of the Company for the three
month periods ended December 31, 1999, and December 31, 1998, are as follows:
December 31, December 31,
1999 1998
-------- --------
Net income $ 1,030 $ 1,292
Other comprehensive income (loss):
Change in accumulated translation adjustments 536 (95)
-------- --------
Other comprehensive income (loss) 536 (95)
-------- --------
Total comprehensive income $ 1,566 $ 1,197
======== ========
Earnings Per Share Information
- ------------------------------
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.
Financing Arrangements
- ----------------------
The Company has a $70,000 bank revolving line of credit that expires in
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. Borrowings under the line of credit were
$58,616 at December 31, 1999. At December 31, 1999, the Company requested and
received from its banks a waiver for its loan covenant that measures EBITDA to
total debt. As a result of the higher borrowings and the waiver, the interest
rate on borrowings under the line of credit agreement will increase by 1.0%
effective January 24, 2000.
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, 2000. 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.
Reclassification
- ----------------
Certain prior year balances have been reclassified for comparative
purposes.
<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
December 31, 1999 and December 31, 1998.
December 31, Change December 31,
(in thousands of dollars) 1999 1998 in Dollars 1999 1998
--------------------------------------------------------
Net sales............ $ 45,419 $ 41,241 $4,178 100.0% 100.0%
Cost of sales........ 38,070 34,161 3,909 83.8 82.8
-------------------------------------------------------
Gross profit......... 7,349 7,080 269 16.2 17.2
Selling, general and
administrative expenses. 4,129 3,730 399 9.1 9.0
-----------------------------------------------------
Income from operations.. 3,220 3,350 (130) 7.1 8.1
Interest expense........ (1,308) (926) (382) (2.9) (2.2)
Other income (expense).. (163) (153) (10) (0.3) (0.4)
-----------------------------------------------------
Income before taxes and
minority interest...... 1,749 2,271 (522) 3.9% 5.5%
=======================================================
Results of Operations
Net sales for the three months ended December 31, 1999 increased $4,178 or
10.1% to $45,419 compared to the same period one year earlier. The net increase
for the three month period was primarily the result of internal sales growth
through increased volumes with existing customers, especially customers in the
telecommunications market.
Gross profit for the three months ended December 31, 1999 increased $269 or
3.8% when compared to the same period one year earlier. Gross profit as a
percentage of net sales decreased to 16.2% from 17.2% for the three month period
compared to the same period one year earlier. The decrease in gross profit as a
percentage of net sales was attributable to increased demand on the Company's
Canadian and United States operations while available capacity existed in the
Company's lower cost Mexican facilities. Costs associated with product transfer,
hiring and training new employees and expedited logistics expenses had a
negative impact on gross profit. The Company's annual wage increase also
negatively affected gross profit during the quarter.
Selling, general and administrative expenses ("SG & A") for the three
months ended December 31, 1999 increased $399 or 10.7% to $4,129 when compared
to the same period one year earlier. The increase in dollars was primarily
attributable to increased personnel costs. As a percentage of sales, SG&A was
9.1% of sales in the quarter ended December 31, 1999 compared to 9.0% a year
earlier.
Interest expense for the three months ended December 31, 1999 increased
$382 or 41.3% to $1,308 when compared to the same period one year earlier. As a
percentage of sales, interest expense increased to 2.9% from 2.2% for the three
month period compared to the same period one year earlier. The increase is
primarily attributable to borrowings related to increases in working capital
during the quarter ended December 31, 1999 and higher interest rates in 1999.
Net income after minority interest for the three months ending December 31,
1999 amounted to $1,030. This compares to net earnings of $1,292 one year
earlier. The net earnings decrease for the three month period was primarily due
to decreased margins and increased interest expense. Diluted earnings per share
for the three month period was $0.14, in comparison to $0.17 for the three month
period one year earlier.
<PAGE>
Liquidity and Capital Resources
- -------------------------------
Operating activities during the first three months of fiscal 2000 utilized
cash in the amount of $8,250, primarily attributable to increases in accounts
receivable and inventory, as compared to cash utilized in the amount of $1,687
during the same period one year earlier. Working capital at December 31, 1999
was $47,666, an increase of $11,374 from September 30, 1999. During the first
three months of fiscal 2000, the Company had capital expenditures of $2,180.
Borrowings under the Company's $70,000 line of credit at December 31, 1999
were $58,616 at an average interest rate of 8.23%. Borrowings under the line
increased by $10,948 during the quarter to fund increased working capital
levels, which resulted from increased sales near the end of the quarter.
At December 31, 1999, the Company requested and received from its banks a
waiver for its loan covenant that measures EBITDA to total debt. As a result of
the higher borrowings and the waiver, the interest rate on borrowings under the
line of credit agreement will increase by 1.0% effective January 24, 2000.
As the Company's bank line of credit facility matures April 2001, the
Company expects to commence discussions during the next six months to extend or
refinance the existing facility.
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.The Company could also be required to pay by September 30, 2000,
contingent cash consideration of up to $4.5 million pursuant to an earnout
arrangement included in the Antrum stock purchase agreement. The Company
believes funds available from its operations and working capital line of credit
will be sufficient to satisfy this obligation, if earned. 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.
Year 2000 Issues
- ----------------
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 implemented a Year 2000 project to identify, assess and
implement changes to information technology systems and operational systems and
to evaluate the Year 2000 readiness of key suppliers, customers and other
parties.
To date, the Company has not experienced any material Year 2000 compliance
problems and, to the Company's knowledge, none of its significant vendors,
service providers, or customers have suffered material problems related to Year
2000 compliance that the Company believes are likely to materially adversely
affect the Company.
The Company incurred Year 2000 project costs of approximately $250 which
were funded through operating cash flow and its bank line of credit. The Company
does not expect to incur any significant additional costs relating to Year 2000
issues.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act
of 1995.
This report 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 costs related to the
start-up of new business with new or existing customers, 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, 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
There have been no material changes from the information concerning the
Company's "Market Risk" as previously reported in the Company's Annual Report on
Form 10-K for the year ended September 30, 1999.
<PAGE>
PART II - OTHER INFORMATION
Item 1. N/A
Item 2. N/A
Item 3. Default Upon Senior Securities
At December 31, 1999, the Company requested and received
from its banks a waiver for its loan covenant that measurers
EBITDA to total debt. The discussion in "Management's Discussion
and Analysis of Financial Condition and Results of Operations -
Liquidity and Capital Resources" is incorporated herein by
reference.
Item 4. N/A
Item 5. N/A
Item 6. Exhibits and Reports on Form 8-K
---------------------------------------
(a) Exhibits
Amended and Restated Articles of Incorporation of the Company
Amended and Restated Bylaws of the Company
Specimen Certification of Common Stock of the Company
Financial Data Schedule
(b) Reports on Form 8-K
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: February 14, 2000 By: /s/ John H. Mathias
----------------- ------------------------------
John H. Mathias
Chairman of the Board and
Chief Executive Officer
(Principal Executive Officer)
Date: February 14, 2000 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> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-START> OCT-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,203
<SECURITIES> 0
<RECEIVABLES> 26,439
<ALLOWANCES> 357
<INVENTORY> 40,175
<CURRENT-ASSETS> 75,826
<PP&E> 32,793
<DEPRECIATION> 12,237
<TOTAL-ASSETS> 135,890
<CURRENT-LIABILITIES> 28,160
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 40,439
<TOTAL-LIABILITY-AND-EQUITY> 135,890
<SALES> 45,419
<TOTAL-REVENUES> 45,419
<CGS> 38,070
<TOTAL-COSTS> 38,070
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,308
<INCOME-PRETAX> 1,749
<INCOME-TAX> 659
<INCOME-CONTINUING> 1,030
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,030
<EPS-BASIC> .14
<EPS-DILUTED> .14
</TABLE>
