<PAGE>1
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
February 28, 1999
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.
X
Yes ..... No .....
There were 18,597,027 common shares outstanding as of March 31, 1999.
<PAGE>2
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
=====================================
(In Thousands)
February 28, November 30,
ASSETS 1999 1998
------ ----------- -----------
(Unaudited) (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 4 008 $ 10 498
Marketable securities 79 992 77 836
Accounts receivable, less
allowance for possible losses
of $1,223,000 and $1,205,000 24 773 24 577
Inventories at lower of cost or market 29 284 28 115
Prepaid expenses and miscellaneous 4 197 5 041
----------- -----------
TOTAL CURRENT ASSETS 142 254 146 067
----------- -----------
PROPERTY, PLANT AND EQUIPMENT,
less accumulated depreciation of
$16,344,000 and $15,351,000 46 691 46 176
OTHER ASSETS:
Marketable securities 19 650 12 049
Goodwill and other intangibles, net
of accumulated amortization of
$1,577,000 and $1,536,000 4 388 4 429
Miscellaneous 114 118
----------- -----------
TOTAL OTHER ASSETS 24 152 16 596
----------- -----------
$ 213 097 $ 208 839
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 4 477 $ 4 441
Accrued liabilities 8 405 8 217
----------- -----------
TOTAL CURRENT LIABILITIES 12 882 12 658
LONG-TERM DEBT & DEFERRED INCOME TAXES 4 750 4 733
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, $.01 par, shares
authorized 50,000,000;
outstanding 18,597,027 & 18,595,327 186 186
Paid-in-capital 5 509 5 484
Accumulated other comprehensive income 447 604
Retained earnings 189 323 185 174
----------- ----------
TOTAL STOCKHOLDERS' EQUITY 195 465 191 448
----------- ----------
$ 213 097 $ 208 839
=========== =========
(See Notes To Consolidated Financial Statements)
<PAGE>3
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
===========================================
(In Thousands Except Per
Share Amounts)
Three Months Ended
------------------------------
February 28, February 28,
1999 1998
----------- -----------
(Unaudited) (Unaudited)
NET SALES $ 37 277 $ 34 386
COST OF SALES 18 554 17 616
----------- -----------
Gross profit 18 723 16 770
SELLING, GENERAL AND ADMINISTRATIVE 10 797 10 468
----------- -----------
Operating income 7 926 6 302
OTHER INCOME 1 259 931
----------- -----------
Income before taxes on income 9 185 7 233
TAXES ON INCOME 3 176 2 467
----------- -----------
NET INCOME $ 6 009 $ 4 766
=========== ===========
NET INCOME PER COMMON SHARE (BASIC AND DILUTED) $0.32 $0.26
===== =====
(See Notes To Consolidated Financial Statements)
<PAGE>4
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF RETAINED EARNINGS
=====================================================
(In Thousands)
Three Months Ended
February 28, 1999
------------------
(Unaudited)
RETAINED EARNINGS, beginning of period $ 185 174
CASH DIVIDEND ($0.10 per share) ( 1 860)
NET INCOME, three months ended
February 28, 1999 6 009
-----------
RETAINED EARNINGS, end of period $ 189 323
===========
(See Notes To Consolidated Financial Statements)
<PAGE>5
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
====================================
(In Thousands)
Three Months Ended
-----------------------------
February 28, February 28,
1999 1998
----------- -----------
(Unaudited) (Unaudited)
CASH FLOWS PROVIDED BY (USED IN) OPERATING
ACTIVITIES:
Net income $ 6 009 $ 4 766
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation & amortization 1 033 938
Changes in assets and liabilities:
(Increase) in accounts receivable( 143) ( 785)
(Increase) in inventory ( 1 169) ( 761)
Decrease in prepaid expense 984 120
Decrease (Increase) in other
assets 6 ( 19)
Increase in accounts payable and
accrued expenses 224 602
Deferred income taxes 57 68
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES: 7 001 4 929
----------- -----------
CASH FLOWS PROVIDED BY (USED IN) INVESTING
ACTIVITIES:
Capital expenditures ( 1 508) ( 1 580)
Purchases of marketable securities ( 18 079) ( 12 392)
Sales of marketable securities 7 971 5 931
----------- -----------
NET CASH (USED IN) PROVIDED BY INVESTING
ACTIVITIES ( 11 616) ( 8 041)
(Continued on Next Page)
<PAGE>6
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS (CONTINUED)
=================================
(In Thousands)
Three Months Ended
-----------------------------
February 28, February 28,
1999 1998
___________ ___________
(Unaudited) (Unaudited)
CASH FLOWS PROVIDED BY (USED IN) FINANCING
ACTIVITIES:
Proceeds from exercise of stock
options 25 12
Dividend paid ( 1 860) ( 1 670)
Principal payments on long-term debt ( 40) ( 29)
___________ ___________
NET CASH (USED IN)
FINANCING ACTIVITIES ( 1 875) ( 1 687)
___________ ___________
NET (DECREASE) IN CASH ( 6 490) ( 4 799)
CASH AT BEGINNING OF PERIOD 10 498 6 806
___________ ___________
CASH AT END OF PERIOD $ 4 008 $ 2 007
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 34 $ 41
Income taxes 0 208
(See Notes To Consolidated Financial Statements)
<PAGE>7
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, 1998 was derived from
the Company's audited consolidated financial statements.
INVENTORIES
Inventories are summarized as follows:
(In Thousands)
February 28, November 30,
1999 1998
----------- -----------
Finished goods $ 14 491 $ 13 164
Raw materials 14 793 14 951
----------- -----------
$ 29 284 $ 28 115
=========== ===========
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:
Three Months Ended
------------------
February 28, February 28,
1999 1998
----------- -----------
Basic 18,595,752 18,559,970
Diluted 18,650,611 18,584,295
COMPREHENSIVE INCOME
As of December 1, 1998, the Company adopted Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130). The
adoption of this Statement had no impact on the Company's net income or
stockholders' equity. SFAS 130 establishes new rules for the reporting and
display of comprehensive income and its components. SFAS 130 requires foreign
currency translation adjustments and unrealized gains or losses on the Company's
available-for-sale securities to be included in other comprehensive income.
Prior to the adoption of SFAS 130, the Company reported such adjustments and
unrealized gains or losses separately in stockholders' equity. Amounts in
prior year financial statements have been reclassified to conform to SFAS 130.
<PAGE>8
COMPREHENSIVE INCOME (Continued)
The components of comprehensive income, net of related tax, are as
follows (in thousands):
Three Months Ended February 28,
1999 1998
------------------------------
Net income $6,009 $4,766
Net change in unrealized gain (loss)
on available-for-sale securities ( 211) 205
Foreign currency translation adjustment 54 3
------ ------
Comprehensive income $5,852 $4,974
====== ======
The components of accumulated other comprehensive income, net of related
tax, are as follows (in thousands):
February 28, November 30,
1999 1998
------ ------
Unrealized gain (loss) on
available-for-sale securities $1,048 $1,259
Foreign currency translation adjustment ( 601) ( 655)
------ -----
Accumulated other comprehensive income $ 447 $ 604
====== ======
<PAGE>9
ITEM 2.MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
======================================================
RESULTS OF OPERATIONS:
- ---------------------
Three Months Ended February 28, 1999 Compared With Three Months
- ---------------------------------------------------------------
Ended February 28, 1998
- -----------------------
During the first quarter ended February 28, 1999, net sales increased by
8.4% to $37,277,000 compared to $34,386,000 for the like period in 1998. This
increase was not confined to any particular product line, market or geographic
area, but, in management's opinion, is reflective of market share gains and an
overall increase in demand from improving economic conditions. Sales through
Juno's Canadian subsidiary increased 14.4% to $2,007,000 compared to $1,754,000
for the like period in 1998.
Cost of sales as a percentage of net sales decreased to 49.8% for the
quarter, compared to 51.2% for the like period in 1998 due to increased
productivity, stable raw material costs and benefits resulting from the
retooling of high volume parts.
Selling, general and administrative expenses expressed as a percentage of
sales decreased to 29.0% for the first quarter of 1999 compared with 30.4% for
the like period in 1998 due primarily to economies of scale associated with the
sales increase.
As a result of the above factors, operating income increased to 21.3% of
sales as compared to 18.3% for the like period in 1998.
LIQUIDITY AND CAPITAL RESOURCES:
- -------------------------------
During the three month period ended February 28, 1999, the Company
generated positive net cash flow from operating activities of $7,001,000. This
was comprised principally of net income, depreciation and amortization,
decreases in prepaid expenses, and increases in accounts payable and accrued
expenses (collectively aggregating $8,250,000), net of increases in accounts
receivable of $143,000 and inventory of $1,169,000. The Company used the net
cash provided from operating activities to finance capital expenditures of
$1,508,000, pay dividends of $1,860,000 and to increase its investment portfolio
by $10,108,000.
On March 1, 1999, the Company announced the declaration of a cash dividend
of 10 cents per share payable April 15, 1999, to stockholders of record on March
15, 1999. Management believes that the existing level of working capital is
adequate for the Company's liquidity needs currently and in the foreseeable
future based on the Company's current capitalization. It is currently
anticipated that future working capital requirements and capital expenditures
will be met by internally generated funds based on the Company's current
capitalization.
PROPOSED MERGER AND RECAPITALIZATION
- ------------------------------------
On March 26, 1999, the Company entered into a merger and recapitalization
agreement, which if consummated, would materially affect the Company's
capitalization and liquidity. (See Part II, Item 5).
OTHER MATTERS:
- -------------
The Company has been assessing its "Year 2000" readiness and exposure to
Year 2000 issues. Partly is connection with such assessment, the Company
initiated a program to upgrade its systems hardware and software. The Company's
assessment has
<PAGE>10
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
implemented a portion of the new system in the fourth calendar quarter of 1998
and anticipates implementing the balance in the second calendar quarter of
1999. The Company has also solicited confirmation from its principal vendors
that such vendors are Year 2000 compliant.
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 February 28, 1999, the Company incurred costs of approximately
$3,475,000 with respect to such system and estimates that it will incur
approximately an additional $900,000 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
further analysis of the uncertainty or development of 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,
disruptions 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, 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
===================================================================
The Company, in the normal course of doing business, is theoretically
exposed to interest rate change market risk with respect to its Securities
Available for Sale. All of the Registrant's Securities Available for Sale are
state government or municipal bonds. As of February 28, 1999, the cost and
market value of such bonds was $97,954,000 and $99,642,000, respectively.
A significant increase in interest rates would result in a decrease in the bond
prices. However, to minimize risk, the Company has a policy of investing only
in highly rated instruments (substantially all have AA or better Moody's bond
ratings).
<PAGE>11
The table below presents notional amounts and related weighted-average
interest rates by year of maturity for the Company's investment portfolio (in
thousands, except percentages).
1999 2000 2001 2002 2003 Thereafter
----- ----- ----- ----- ----- ----------
Investments $ 7,987 $8,229 $7,264 $6,719 $8,503 $ 60,940
Average 5.3% 5.4% 5.8% 5.5% 5.3% 5.5%
Interest Rate
PART II - OTHER INFORMATION
===========================
Item 1. Legal Proceedings - Reference is made to Item 3 of the Company's
Annual Report on Form 10-K for the fiscal year ended November
30, 1998 for a description of Nilssen vs. Juno Lighting, Inc.
("Juno"). On February 17, 1999, the complaint was amended to
add Management Investment & Technology, Ltd. and Digital
Lighting, Inc. as plaintiffs and to claim lost profits of
these entities as damages. These parties are allegedly exclusive
licensees under patents held by Mr. Nilssen.
LINDA BARNES Juno, its directors, Fremont Investors I, LLC
("Fremont Investors") and Fremont Partners, L.P. ("Fremont
Partners") have been named defendants in a purported class
action lawsuit commenced on or about April 1, 1999 in the
Court of Chancery in and for New Castle County, Delaware.
Such action is captioned Linda Barnes v. George M. Ball, Thomas
Tomsovic, Allan Coleman, Robert S. Fremont, Julius Lewis, Fremont
Investors I, LLC, Fremont Partners, L.P. and Juno Lighting, Inc.
(Case No. 17084NC). The complaint in such lawsuit alleges, among
other things, that the Juno Board of Directors breached their
fiduciary duties to Juno stockholders by failing to appoint
additional independent directors and by entering into the merger
agreement, and that Fremont Investors and Fremont Partners aided
and abetted such breach of fiduciary duties. More specifically,
the plaintiff alleges, among other things, that the Juno Board of
Directors failed to engage in any market check and agreed to sell
control of Juno to Fremont Investors for a price that was less
than Juno's true worth. As relief, the complaint seeks,among
other things, an injunction against consummation of the merger
or, to the extent the merger is concluded, a rescission of the
merger, damages in an unspecified amount, a court order
compelling Juno to appoint two additional independent
directors, and an award to plaintiff of her costs and expenses,
including attorneys' and expert's fees, incurred in connection
with such lawsuit.
Juno believes that the allegations contained in the complaint
are without merit and intends to vigorously contest the
action, on behalf of itself and its directors, if the
plaintiff elects to proceed with her action.
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
<PAGE>12
Item 5. Other Information On March 26, 1999, Juno Lighting, Inc. ("Juno")
entered into a merger and recapitalization agreement with an entity
controlled by Fremont Partners, L.P., Fremont Investors I, LLC
("Fremont"), providing for the merger of Juno with Jupiter
Acquisition Corp., a Delaware corporation formed by Fremont.
The merger and recapitalization agreement provides that the owner of
each outstanding share of Juno common stock can elect either to
receive $25.00 in cash for that share or to retain that share,
subject to proration as described below; provided that an aggregate
of 2,400,000 shares (approximately 12.9% of the presently
outstanding shares) must be retained by existing public
shareholders. If existing public shareholders elect to retain more
than 2,400,000 of the outstanding shares, then the shares available
will be prorated among those electing to retain shares and cash
will be paid for all other shares. If holders elect to retain fewer
than 2,400,000 of the outstanding shares, the remaining available
shares will be prorated among those electing cash. Immediately
following the merger, existing shareholders will hold an
approximate 39.5% fully diluted interest in Juno, not taking into
account the subsequent increase in the stated amount of the
preferred stock referred to below and the corresponding increase in
the number of shares of common stock issuable upon conversion of
the preferred stock.
The merger and recapitalization agreement also provides for a
simultaneous purchase by Fremont of 1,060,000 newly issued
convertible preferred shares of Juno at a price of $100.00 per
share or an aggregate initial stated amount of $106,000,000. The
preferred stock will generally have the right to receive cumulative
2% quarterly dividends. These quarterly dividends will cause an
increase in the stated amount of the preferred stock for the
first five years following issuance; the dividends will become
payable in cash thereafter. The preferred stock will be
convertible into a number of shares of common stock derived by
dividing the stated amount by the conversion price of $26.25 per
share, which is subject to adjustment in certain events. At any
time beginning on the ninth anniversary of the effective time of
the merger, Juno may elect to redeem the preferred stock at a price
equal to the then stated amount plus any accrued by unpaid
dividends.
Juno's Board of Directors has unanimously recommended that
shareholders vote in favor of the transactions and has received a
fairness opinion from Juno's financial advisor, William Blair &
Company, L.L.C. Upon completion of the transaction, Juno expects
to continue to operate as an independent public company under its
current name, and its headquarters are expected to remain in
Des Plaines, Illinois.
Juno's Board of Directors also adopted the Third Amendment to its
Stockholder Rights Agreement which amendment, among other things,
provides that none of Fremont, Jupiter Acquisitions Corp., or any of
their respective Affiliates or Associates shall be become an Acquiring
Person (as such terms are defined in the Rights Agreement) as the
result an acquisition of Juno securities pursuant to and in
accordance with the merger and recapitalization agreement.
The merger and recapitalization is subject to customary terms and
conditions, including the approval of Juno's shareholders and funding
of financing arrangements. It is currently contemplated that the
transaction would be submitted to shareholders for approval at a
shareholders' meeting
<PAGE>13
to be held as soon as practicable. A commitment has been obtained
from Bank of America for up to $125 million in senior debt
financing and an investment bank has been engaged to arrange
approximately $125 million of senior subordinated debt to finance
the transaction.
The merger and recapitalization agreement includes provisions
prohibiting Juno from soliciting another purchaser and provides for
the payment of certain fees and the reimbursement of expenses to
Fremont in the event of a termination of the merger agreement under
certain circumstances.
Reference is made to the Company's Current Report on Form 8-K filed
March 29, 1999 including the exhibits thereto and a Registration
Statement on Form S-4, including the exhibits thereto, to be filed
promptly after the filing of this Quarterly Report on Form 10-Q for
additional information.
Item 6. (a) Exhibits
2.1 PLAN OF ACQUISITION, REORGANIZATION, ARRANGEMENT, LIQUIDATION OR
SUCCESSION. Agreement and Plan of Merger, dated as of March
26, 1999, by and between Fremont Investors I, LLC, Jupiter
Acquisition Corp. and Juno Lighting, Inc. filed as Exhibit 2 to
the Company's Current Report on Form 8-K (SEC File No. 0-11631)
filed with the Securities and Exchange Commission on March 29,
1999 and incorporated herein by reference.
(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
--------------------
George J. Bilek, Vice President Finance
(Principal Financial Officer)
Dated: April 12, 1999
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