FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
August 31, 1998
For the quarterly period ended ...........................................
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ................... to ....................
0-11631
Commission File Number ..........
JUNO LIGHTING, INC.
..........................................................................
(Exact name of registrant as specified in its charter)
Incorporated in Delaware 36-2852993
..........................................................................
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1300 S. Wolf Road, Des Plaines, Illinois 60017-5065
..........................................................................
(Address of principal executive offices) (Zip Code)
847 - 827 - 9880
..........................................................................
(Registrant's telephone number, including area 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 Sections 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 .....
There were 18,592,569 common shares outstanding as of September 30, 1998.
<PAGE 2>
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
August 31, November 30,
ASSETS 1998 1997
(Unaudited) (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 6 102 $ 6 806
Marketable securities 76 173 65 766
Accounts receivable, less
allowance for possible losses
of $1,386,000 and $907,000 28 400 22 533
Inventories at lower of cost or market 27 574 22 707
Prepaid expenses and miscellaneous 3 924 4 696
--------- --------
TOTAL CURRENT ASSETS 142 173 122 508
--------- --------
PROPERTY, PLANT AND EQUIPMENT,
less accumulated depreciation of
$14,450,000 and $14,611,000 45 568 44 449
OTHER ASSETS:
Marketable securities 11 809 11 373
Goodwill and other intangibles, net
of accumulated amortization of
$1,494,000 and $1,367,000 4 471 4 603
Miscellaneous 119 4 456
--------- --------
TOTAL OTHER ASSETS 16 399 20 432
--------- --------
$ 204 140 $ 187 389
========= ========
<PAGE 3>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 5 433 $ 3 579
Accrued liabilities 8 777 8 053
-------- --------
TOTAL CURRENT LIABILITIES 14 210 11 632
-------- --------
LONG-TERM DEBT & DEFERRED INCOME TAXES 4 181 5 127
-------- --------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par, shares
authorized 50,000,000;
issued 18,592,569 & 18,563,412 186 186
Paid-in-capital 5 353 4 934
Cumulative marketable securities
valuation adjustment 1 083 723
Cumulative loss on foreign
currency translation ( 732) ( 395)
Retained earnings 179 859 165 238
--------- --------
185 749 170 686
Less Treasury Stock, at cost;
0 & 50,400 shares 0 ( 56)
--------- ---------
TOTAL STOCKHOLDERS' EQUITY 185 749 170 630
--------- ---------
$ 204 140 $ 187 389
========= =========
(See Notes To Consolidated Financial Statements)
<PAGE 4>
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per
Share Amounts)
Three Months Ended
--------------------------
August 31, August 31,
1998 1997
(Unaudited) (Unaudited)
NET SALES $ 44 419 $ 37 238
COST OF SALES 21 569 18 471
-------- --------
Gross profit 22 850 18 767
SELLING, GENERAL AND ADMINISTRATIVE 11 413 10 530
-------- --------
Operating income 11 437 8 237
OTHER INCOME 1 190 899
-------- --------
Income before taxes on income 12 627 9 136
TAXES ON INCOME 4 577 3 324
-------- --------
NET INCOME $ 8 050 $ 5 812
======== ========
NET INCOME PER COMMON SHARE (BASIC AND DILUTED) $0.43 $0.31
===== =====
(See Notes To Consolidated Financial Statements)
<PAGE 5>
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In Thousands Except Per
Share Amounts)
Nine Months Ended
--------------------------
August 31, August 31,
1998 1997
(Unaudited) (Unaudited)
NET SALES $ 119 651 $ 103 874
COST OF SALES 59 530 53 733
-------- --------
Gross profit 60 121 50 141
SELLING, GENERAL AND ADMINISTRATIVE 32 755 29 719
-------- --------
Operating income 27 366 20 422
OTHER INCOME 3 262 2 765
-------- --------
Income before taxes on income 30 628 23 187
TAXES ON INCOME 10 990 8 187
-------- --------
NET INCOME $ 19 638 $ 15 000
======== ========
NET INCOME PER COMMON SHARE (BASIC AND DILUTED) $1.06 $0.81
===== =====
(See Notes To Consolidated Financial Statements)
<PAGE 6>
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF RETAINED EARNINGS
(In Thousands)
Nine Months Ended
August 31, 1998
(Unaudited)
RETAINED EARNINGS, beginning of period $ 165 238
CASH DIVIDEND ($0.27 per share) ( 5 013)
REISSUANCE OF TREASURY STOCK ( 4)
NET INCOME, nine months ended August 31, 1998 19 638
--------
RETAINED EARNINGS, end of period $ 179 859
========
(See Notes To Consolidated Financial Statements)
<PAGE 7>
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
(In Thousands)
Nine Months Ended
---------------------------
August 31, August 31,
1998 1997
(Unaudited) (Unaudited)
CASH FLOWS PROVIDED BY (USED IN) OPERATING
ACTIVITIES:
Net income from continuing operations $ 19 638 $ 15 000
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation & amortization 2 728 2 438
Gain on sale of assets ( 179) 0
Changes in assets and liabilities:
(Increase) in accounts
receivable ( 6 204) ( 3 685)
(Increase) Decrease in inventory ( 4 867) 977
Decrease in prepaid expense 584 351
(Increase) in other assets ( 27) ( 654)
Increase (Decrease) in accounts payable
and accrued expenses 2 578 ( 2 852)
(Decrease) in deferred taxes ( 859) ( 557)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES: 13 392 11 018
--------- ---------
CASH FLOWS PROVIDED BY (USED IN) INVESTING
ACTIVITIES:
Proceeds on sale of building 4 605 1 731
Capital expenditures ( 3 776) ( 9 876)
Purchases of marketable securities ( 39 491) ( 15 201)
Sales of marketable securities 29 194 17 741
--------- ---------
NET CASH (USED IN) INVESTING
ACTIVITIES ( 9 468) ( 5 605)
--------- ---------
(Continued on Next Page)
<PAGE 8>
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS (CONTINUED)
_________________________________
(In Thousands)
Nine Months Ended
--------------------------
August 31, August 31,
1998 1997
___________ ___________
(Unaudited) (Unaudited)
CASH FLOWS PROVIDED BY (USED IN) FINANCING
ACTIVITIES:
Proceeds from sale of Common Stock thru
Employee Purchase Plan 191 201
Proceeds from exercise of stock
options 280 0
Dividend paid ( 5 013) ( 4 443)
Principal payments on long-term debt ( 86) ( 188)
___________ ___________
NET CASH (USED IN)
FINANCING ACTIVITIES ( 4 628) ( 4 430)
___________ ___________
NET (DECREASE) INCREASE IN CASH ( 704) 983
CASH AT BEGINNING OF PERIOD 6 806 3 473
___________ ___________
CASH AT END OF PERIOD $ 6 102 $ 4 456
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 126 $ 183
Income taxes 11 130 8 199
(See Notes To Consolidated Financial Statements)
<PAGE 9>
JUNO LIGHTING, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FINANCIAL INFORMATION
The financial information presented in these consolidated financial
statements is unaudited but, in the opinion of management, reflects all normal
adjustments necessary for the fair presentation of the Company's financial
position, results of its operations and cash flows. The information in the
condensed consolidated balance sheet as of November 30, 1997 was derived from
the Company's audited consolidated financial statements.
INVENTORIES
Inventories are summarized as follows:
(In Thousands)
August 31, November 30,
1998 1997
Finished goods $ 12 257 $ 7 762
Raw materials 15 317 14 945
---------- ----------
$ 27 574 $ 22 707
========== ==========
NET INCOME PER COMMON SHARE
Basic earnings per share is calculated by dividing net income by the
weighted average number of common shares outstanding. Diluted earnings per
share is calculated by dividing net income by the weighted average number of
common shares outstanding including assumed exercise of dilutive stock options
during the periods. Such weighted average number of shares outstanding is
as follows:
August 31, August 31,
1998 1997
---------- ----------
3 months ended
Basic 18,575,395 18,523,931
Diluted 18,617,165 18,541,948
9 months ended
Basic 18,566,300 18,517,379
Diluted 18,599,962 18,531,970
<PAGE 10>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
===========================================================
RESULTS OF OPERATIONS:
Three Months Ended August 31, 1998 Compared With Three Months
Ended August 31, 1997
- -------------------------------------------------------------
During the third quarter ended August 31, 1998, net sales increased by
19.3% to $44,419,000 compared to $37,238,000 for the like period in 1997.
This increase is due primarily to an overall increase in demand from improving
economic conditions and is represented by solid growth across substantially
all product lines and markets. Sales through Juno's Canadian subsidiary
increased 11.3% to $2,642,000 compared to $2,374,000.
Cost of sales as a percentage of net sales decreased to 48.6% for the
quarter, compared to 49.6% for the like period in 1997 due to increased
productivity, stable raw material costs and benefits from the redesign and
retooling of high volume parts.
Selling, general and administrative expenses expressed as a percentage
of sales decreased to 25.7% for the third quarter of 1998 compared with 28.3%
for the like period in 1997 due primarily to economies of scale associated
with the sales increase. In addition, the third quarter of 1997 included
one-time charges of approximately $700,000 to repair defective components in
certain exit and emergency lighting fixtures.
As a result of the above factors, operating income increased to 25.7% of
sales as compared to 22.1% for the like period in 1997.
Nine Months Ended August 31, 1998 Compared With Nine Months
Ended August 31, 1997
- -----------------------------------------------------------
During the nine month period ended August 31, 1998, net sales increased
15.2% to $119,651,000 compared to $103,874,000 for the like period in 1997.
Sales increases were due primarily to increases in demand from improved
economic conditions.
Cost of sales as a percentage of net sales decreased to 49.8% compared
to 51.7% for the like period in 1997. This decrease is due primarily to
increased productivity, stable raw material costs and benefits resulting from
the redesign and retooling of high volume parts.
Selling, general and administrative expenses as a percentage of sales
decreased to 27.4% as compared to 28.6% in 1997 due to economies of scale
associated with the increase in sales as well as the factors cited above
regarding one-time charges to repair certain exit and emergency lighting
fixtures in 1997.
(Continued on Next Page)
<PAGE 11>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION (continued)
=========================================================
LIQUIDITY AND CAPITAL RESOURCES:
- -------------------------------
During the nine month period ended August 31, 1998, the Company
generated positive net cash flow from operating activities of $13,392,000.
This was comprised principally of net income, depreciation and amortization, a
decrease in prepaid expenses and an increase in accounts payable,
(collectively aggregating $25,528,000), net of increases in accounts
receivable of $6,204,000 and inventory of $4,867,000. The Company used the
net cash provided from operating activities to finance capital expenditures of
$3,776,000 and pay dividends of $5,013,000. The Company generated positive
cash flow of $4,605,000 from the sale of the building that formerly served as
the Company's principal corporate office and assembly facility. This building
was previously classified in miscellaneous other assets. The cash flow from
the sale of the facility along with positive cash flow from operating
activities permitted the Company to increase its investment portfolio by
$10,297,000.
On September 1, 1998, the Company announced the declaration of a cash
dividend of 9 cents per share payable October 15, 1998, to shareholders of
record September 15, 1998. The Board of Directors intends to maintain regular
quarterly dividends at the same rate. Management believes that the existing
level of working capital is adequate for the Company's liquidity needs
currently and in the foreseeable future. It is currently anticipated that
future working capital requirements and capital expenditures will be met by
internally generated funds.
OTHER MATTERS
- -------------
The Company has been assessing its "Year 2000" readiness and exposure to
Year 2000 issues. Partly in connection with such assessment, the Company
initiated a program to upgrade its systems hardware and software. The
Company's assessment has been focused on information technology systems but
has included a limited review of non-information technology systems,
principally imbedded building and facility systems. The Company entered into
an agreement to acquire new enterprise system software and certain related
consulting services. The vendor has advised the Company that the system is
Year 2000 compliant. The Company anticipates implementing and testing a
portion of the new system in the fourth calendar quarter of 1998 and the
balance in the first calendar quarter of 1999. The Company has also solicited
confirmation from its principal vendors that such vendors are Year 2000
compliant.
<PAGE 12>
The Company believes that the principal cost of addressing the Company's
Year 2000 issues are costs associated with implementing its new enterprise
system. Through August 31, 1998, the Company incurred costs of approximately
$2,170,000 with respect to such system and estimates that it will incur
approximately an additional $1,060,000 with respect to such system. However,
no assurance can be given as to the ultimate costs that may be incurred with
respect to such system or Year 2000 matters.
The failure of one or more of the Company's systems to be Year 2000
compliant or of the Company's vendors or customers to be Year 2000 compliant
could (i) prevent the Company from engaging in its normal business operations
for a time period, (ii) cause the Company to resort to alternate or manual
processes and incur material additional expenses to correct or replace deficient
systems and (iii) have a material effect on the Company's results of operation,
liquidity and financial condition; although the ultimate impact of such events
is uncertain. Based on its assessment of its principal information technology
systems, including the advice of its enterprise systems vendor, the Company
believes that its material systems will be Year 2000 compliant. However, the
impact of the failure of such systems to be compliant is uncertain and the
Company is unable to determine its most reasonably likely worst case scenario.
The Company has not undertaken and does not anticipate undertaking to further
analyze the uncertainty or to develop a plan to address this uncertainty or
the potential that the Company or its vendors or customers fail to be Year
2000 compliant.
This document contains various forward-looking statements. Statements
in this document that are not historical are forward-looking statements. Such
statements are subject to various risks and uncertainties that could cause
actual results to vary materially from those stated. Such risks and
uncertainties include: economic conditions generally; levels of construction
and remodeling activities, the ability to improve manufacturing efficiencies,
disruption in manufacturing or distribution, product and price competition,
raw material prices, the ability to develop and successfully introduce new
products, technology changes, patent issues, exchange rate fluctuations, the
effects of technological difficulties including remediation of Year 2000
compliance issues, and other risks and uncertainties. The Company undertakes
no obligation to update any such factors or to publicly announce the result
of any revisions to any of the forward-looking statements contained herein to
reflect future events or developments.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
==================================================================
Not applicable.
<PAGE 13>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - On September 8, 1997, Juno Lighting, Inc.
("Juno") was served with a complaint for patent infringement alleged by
Mr. Ole K. Nilssen (Case No. 97 C 4624 in the United States District
Court for the Northern District of Illinois). In his complaint,
Mr. Nilssen alleges that Juno has infringed seven of Mr. Nilssen's
patents and seeks a permanent injunction against Juno's sale of products
utilizing the inventions claimed by such patents and unspecified
monetary damages including a request for treble damages. These patents
relate variously to low-voltage, high frequency power supplies for
lighting systems and to so-called track lighting systems incorporating
such low-voltage high frequency power supplies. Juno has filed an
answer and counterclaim denying the allegations of the complaint and
asserting a number of affirmative defenses and prayers for declaratory
relief.
Item 2. Changes in Securities - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. (a) Exhibits - None
(b) During the quarter for which this report is filed, no reports on
Form 8-K were filed.
<PAGE 14>
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.
JUNO LIGHTING, INC.
By: _____________________________________
George J. Bilek, Vice President Finance
(Principal Financial Officer)
Dated: October 14, 1998
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