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
August 31, 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 South 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 2,412,126 shares of common stock outstanding as of September 30,
1999.
<PAGE 2>
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
=====================================
($ In Thousands)
August 31, November 30,
ASSETS 1999 1998
------ ---------- -----------
(Unaudited) (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 5 437 $ 10 498
Marketable securities 0 77 836
Accounts receivable, less allowance for
possible losses of $1,248 and $1,205 26 922 24 577
Inventories at lower of cost or market 29 656 28 115
Prepaid expenses and miscellaneous 4 362 5 041
---------- ----------
TOTAL CURRENT ASSETS 66 377 146 067
---------- ----------
PROPERTY, PLANT AND EQUIPMENT,
less accumulated depreciation of
$18,452 and $15,351 47 888 46 176
---------- ----------
OTHER ASSETS:
Marketable securities 0 12 049
Goodwill and other intangibles, net of
accumulated amortization of
$1,591 and $1,477 4 160 4 275
Deferred financing costs & other, net of
accumulated amortization of $199 & $59. 9 798 272
---------- ----------
TOTAL OTHER ASSETS 13 958 16 596
---------- ----------
$ 128 223 $ 208 839
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 7 562 $ 4 441
Accrued liabilities 10 933 8 217
Current maturities of long-term debt 3 500 -
---------- ----------
TOTAL CURRENT LIABILITIES 21 995 12 658
---------- ----------
LONG-TERM DEBT & DEFERRED INCOME TAXES 212 337 4 733
---------- ----------
STOCKHOLDERS' EQUITY:
Preferred Stock, Series A, $.001 par,
shares authorized 5,000,000;
issued 1,060,000 108 120 -
Common stock, $.001 and $.01 par, shares
authorized 45,000,000 & 50,000,000;
issued 2,412,126 & 18,595,327 2 186
Paid-in-capital 298 5 484
Accumulated other comprehensive income ( 576) 604
Retained earnings <Deficit> (213 953) 185 174
---------- ----------
TOTAL STOCKHOLDERS' EQUITY <DEFICIT> (106 109) 191 448
---------- ----------
$ 128 223 $ 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
--------------------------
August 31, August 31,
1999 1998
----------- -----------
(Unaudited) (Unaudited)
NET SALES $ 42 979 $ 44 419
COST OF SALES 21 546 21 569
----------- -----------
Gross profit 21 433 22 850
SELLING, GENERAL AND ADMINISTRATIVE 13 845 11 413
----------- -----------
Operating income 7 588 11 437
OTHER INCOME (EXPENSE) ( 3 420) 1 190
----------- -----------
Income before taxes on income 4 168 12 627
TAXES ON INCOME 1 535 4 577
----------- -----------
NET INCOME $ 2 633 $ 8 050
=========== ===========
NET INCOME PER COMMON SHARE (BASIC AND DILUTED) $0.08 $0.43
===== =====
(See Notes To Consolidated Financial Statements)
<PAGE 4>
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
===========================================
(In Thousands Except Per
Share Amounts)
Nine Months Ended
-------------------------
August 31, August 31,
1999 1998
----------- -----------
(Unaudited) (Unaudited)
NET SALES $ 125 761 $ 119 651
COST OF SALES 63 579 59 530
---------- ----------
Gross profit 62 182 60 121
SELLING, GENERAL AND ADMINISTRATIVE 36 517 32 755
---------- ----------
Operating income 25 665 27 366
OTHER INCOME (EXPENSE) ( 1 025) 3 262
---------- ----------
Income before taxes on income 24 640 30 628
TAXES ON INCOME 8 692 10 990
---------- ----------
NET INCOME $ 15 948 $ 19 638
========== ==========
NET INCOME PER COMMON SHARE - BASIC $1.01 $1.06
===== =====
NET INCOME PER COMMON SHARE - DILUTED $1.00 $1.06
===== =====
(See Notes To Consolidated Financial Statements)
<PAGE 5>
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF RETAINED EARNINGS
=====================================================
(In Thousands)
Nine Months Ended
August 31, 1999
-----------------
(Unaudited)
RETAINED EARNINGS, beginning of period $ 185 174
CASH DIVIDEND ($0.20 per share) ( 3 720)
PREFERRED DIVIDEND ( 2 120)
COMMON STOCK RETIREMENT ( 409 235)
NET INCOME, nine months ended 15 948
August 31, 1999 ----------
RETAINED EARNINGS <DEFICIT>, end of period ($ 213 953)
==========
(See Notes To Consolidated Financial Statements)
<PAGE 6>
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS
====================================
(In Thousands)
Nine Months Ended
----------------------------
August 31, August 31,
1999 1998
------------ -----------
(Unaudited) (Unaudited)
CASH FLOWS PROVIDED BY (USED IN) OPERATING
ACTIVITIES:
Net income from continuing operations $ 15 948 $ 19 638
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation & amortization 3 567 2 728
Loss <Gain> on Sale of Assets 606 ( 179)
Changes in assets and liabilities:
(Increase) in accounts
receivable ( 2 266) ( 6 204)
(Increase) in inventory ( 1 541) ( 4 867)
Decrease in prepaid expense 1 319 584
(Increase) in other assets ( 9 948) ( 27)
Increase in accounts
payable and accrued expenses 5 956 2 578
Increase (Decrease) in deferred
income taxes 258 ( 859)
----------- ----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 13 899 13 392
----------- ----------
CASH FLOWS PROVIDED BY (USED IN) INVESTING
ACTIVITIES:
Proceeds on sale of building 0 4 605
Capital expenditures ( 4 742) ( 3 776)
Purchases of marketable securities ( 63 966) ( 39 491)
Sales of marketable securities 151 346 29 194
----------- ----------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 82 638 ( 9 468)
----------- ----------
(Continued on Next Page)
<PAGE 7>
JUNO LIGHTING, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS
OF CASH FLOWS (CONTINUED)
====================================
(In Thousands)
Nine Months Ended
----------------------------
August 31, August 31,
1999 1998
----------- -----------
(Unaudited) (Unaudited)
CASH FLOWS PROVIDED BY (USED IN) FINANCING
ACTIVITIES:
Proceeds from sale of Common Stock thru
Employee Purchase Plan 193 191
Proceeds from exercise of stock
options 838 280
Proceeds from issuance of Preferred Stock 106 000 -
Proceeds from Subordinated Debt 124 103 -
Proceeds from bank debt 94 900 -
Common Stock retired ( 415 636) -
Dividend paid ( 3 720) ( 5 013)
Principal payments on long-term debt ( 8 276) ( 86)
----------- -----------
NET CASH (USED IN) FINANCING ACTIVITIES ( 101 598) ( 4 628)
----------- -----------
NET (DECREASE) IN CASH ( 5 061) ( 704)
CASH AT BEGINNING OF PERIOD 10 498 6 806
----------- -----------
CASH AT END OF PERIOD $ 5 437 $ 6 102
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 1 148 $ 126
Income taxes 7 550 11 130
(See Notes To Consolidated Financial Statements)
<PAGE 8>
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)
August 31, November 30,
1999 1998
------------ ------------
Finished goods $ 18 814 $ 13 164
Raw materials 10 842 14 951
------------ ------------
$ 29 656 $ 28 115
============ ============
LONG-TERM DEBT
In connection with the Merger, the Company entered into a senior
credit facility (the "Credit Facility") with Bank Of America, N.A., Credit
Suisse First Boston and certain other lenders providing (i) a $90 million term
facility consisting of a (a) $40 million tranche A term loan ("Term Loan A"),
and (b) $50 million tranche B term loan ("Term Loan B"), and (ii) a $35
million revolving credit facility (the "Revolving Credit Facility").
Borrowings under the Credit Facility bear interest, at the Company's option,
at a rate per annum equal to either the Eurodollar rate (the London interbank
offered rate for eurodollar deposits as adjusted for statutory reserve
requirements) or a base rate plus a varying applicable percentage. At August
31, 1999 the nominal interest rates for Term Loan A and Term Loan B were 7.77%
and 8.27%, respectively. Term Loan A and Term Loan B are each payable in
separate quarterly installments commencing February 29, 2000. The final
maturity of Term Loan A is November 30, 2005 and the final maturity of Term
Loan B is November 30, 2006. Borrowings under the Revolving Credit Facility
are due on November 30, 2005. In addition, the Company issued $125 million
principal amount of 11-7/8% senior subordinated notes due July 1, 2009 (the
"Notes") to qualified institutional buyers under a private placement offering
pursuant to Rule 144A and Regulation S of the Securities Act, resulting in
approximately $120.4 million in proceeds to the Company. Interest is payable
on the Notes semi-annually on January 1 and July 1 of each year commencing
January 1, 2000. The Notes are unsecured senior subordinated obligations of
the Company, subordinated in right of payment to all existing and future
senior indebtedness of the Company, including the Credit Facility. Each of
the aforementioned debt facilities contain restrictive covenants. The Secured
Credit Agreement requires the Company to maintain certain financial ratios, as
defined.
The Credit Facility is collateralized by certain land and buildings.
The aggregate amounts of existing long-term debt maturing in each of the next
five years are as follows: 2000 - $3,500,000; 2001 - $5,500,000; 2002 -
$6,500,000; 2003 - $8,500,000; 2004 - $8,500,000.
<PAGE 9>
EXTINGUISHMENT OF LONG-TERM DEBT
On June 30, 1999 the Company paid approximately $3.3 million to pay
off an Industrial Revenue Development Bond due in 2016. The early
extinguishment resulted in an extraordinary charge consisting of the write-off
of related unamortized financing costs.
(In Thousands)
Three Months Nine Months
Ended Ended
Aug. 31, Aug. 31, Aug. 31, Aug. 31,
1999 1998 1999 1998
-------- -------- -------- --------
Income Before Extraordinary $ 2 723 $ 8 050 $16 038 $19 638
Item
Extraordinary Item (Net of
Applicable Income Taxes of
$59) 90 - 90 -
-------- -------- -------- --------
Net Income $ 2 633 $ 8 050 $15 948 $19 638
======== ======== ======== ========
SERIES A PREFERRED STOCK
On June 30, 1999, the Company issued 1,060,000 shares of Series A
convertible stock ("Preferred Stock") to Fremont Investors and certain
employees of the Company. Holders of the Preferred Stock are entitled to
receive cumulative quarterly dividends, whether or not declared by the Board
of Directors, in an amount equal to the greater of:
- dividends which would have been payable to the holders of Series A
Convertible Preferred Stock in such quarter had they converted
their Series A Convertible Preferred stock into Juno common stock
prior to the record date of dividends declared on the common stock
in such quarter, or
- the stated amount then in effect multiplied by 2%.
Through June 30, 2004, the dividends for the Preferred Stock will be
payable by an increase in the stated amount of such stock. After June 30,
2004, the dividends will be paid in cash until redemption or conversion. The
Preferred Stock is convertible into shares of the Company's common stock at a
rate of $26.25 per share. Holders of Preferred Stock are entitled to vote for
each whole share of common stock that would be issuable to such holder upon
the conversion of all the shares of the Preferred Stock held by such holder on
the record date for the determination of stockholders entitled to vote.
Additionally, holders of Preferred Stock have preference to common
stockholders in the event of liquidation, dissolution or winding up of the
Company.
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:
(Continued on Next Page)
<PAGE 10>
August 31, August 31,
1999 1998
---------- ----------
3 months ended
Basic 6 460 320 18 575 395
Diluted 6 469 117 18 617 165
9 months ended
Basic 13 741 834 18 566 300
Diluted 13 773 866 18 599 962
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.
The components of comprehensive income, net of related tax, are as
follows (in thousands):
Three Months Ended Nine Months Ended
August 31, August 31, August 31, August 31,
1999 1998 1999 1998
------- ------- ------- -------
Net income $ 2 633 $ 8 050 $15 948 $19 638
Net change in
unrealized gain (loss)
on available-for-sale
securities - 3 - 359
Foreign currency
translation adjustment ( 38) ( 253) 80 ( 336)
------- ------- ------- -------
Comprehensive income $ 2 595 $ 7 800 $16 028 $19 661
======= ======= ======= =======
The components of accumulated other comprehensive income, net of
related tax, are as follows (in thousands):
August 31, November 30,
1999 1998
------ ------
Unrealized gain (loss) on
available-for-sale securities $ - $1 259
Foreign currency translation adjustment ( 576) ( 655)
------ ------
Accumulated other comprehensive income ($ 576) $ 604
====== ======
(Continued on Next Page)
<PAGE 11>
MERGER AND RECAPITALIZATION
On June 30, 1999, Jupiter Acquisition Corp. ("Merger Sub"), a
Delaware corporation and a wholly-owned subsidiary of Fremont Investors I, LLC
("Fremont Investors"), was merged (the "Merger") with and into the Company
pursuant to an Agreement and Plan of Recapitalization and Merger dated March
26, 1999 (the "Merger Agreement") by and among Merger Sub, the Company and
Fremont Investors. Pursuant to the Merger, the holders of all the issued and
outstanding shares of Juno common stock, $.01 par value per share, were
entitled to receive either $25 cash or one share of Juno common stock, $.001
par value per share, for each share of common stock issued and outstanding;
provided that this consideration was subject to proration, as such holders
were entitled to receive an aggregate of 2,400,000 shares of Juno common
stock. The Company funded this effective retirement of 16,242,527 shares of
the Company's common stock with a payment to stockholders in the aggregate of
approximately $406 million. The sources of this funding included the
Company's available cash, a $106 million preferred stock investment by Fremont
and key employees of Juno ("Preferred Stock"), approximately $94.9 million of
bank debt ("Bank Debt") and the issuance of $125 million of subordinated debt
("Subordinated Debt"). In connection with the Merger and Recapitalization the
Company incurred approximately $9.7 million in transaction costs and $9.9
million of deferred financing costs. Included in these costs were payments of
approximately $4.9 million to Fremont Investors.
GUARANTORS' FINANCIAL INFORMATION
The Company has issued and registered $125 million of Series B
Senior Subordinated Notes at 11-7/8% (the "Senior Subordinated Notes") under
the Securities Act of 1933, as amended (the "Act"). Pursuant to the
registration and issuance of the Senior Subordinated Notes under the Act, the
Company's domestic subsidiaries, Juno Manufacturing, Inc., Indy Lighting, Inc.
and Advanced Fiberoptic Technologies, Inc., will provide full and
unconditional senior subordinated guarantees for the Senior Subordinated Notes
on a joint and several basis.
Following is consolidating condensed financial information
pertaining to the Company ("Parent") and its subsidiary guarantors and
subsidiary non-guarantors.
<TABLE>
<CAPTION>
For the Three Months Ended August 31, 1999
------------------------------------------
(in thousands)
Guarantor Non-Guarantor Total
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 32 971 $ 39 168 $ 2 953 ($ 32 113) $ 42 979
Cost of sales 26 351 23 653 2 545 ( 31 003) 21 546
-------- ------------ ------------- ------------ ------------
Gross profit 6 620 15 515 408 ( 1 110) 21 433
Selling, general and
administrative 7 437 5 871 509 27 13 844
-------- ------------ ------------- ------------ ------------
Operating income ( 817) 9 644 ( 101) ( 1 137) 7 589
Other income(expense) ( 3 409) 23 ( 34) - ( 3 420)
-------- ------------ ------------- ------------ ------------
Income before taxes
on income ( 4 226) 9 667 ( 135) ( 1 137) 4 169
Taxes on income ( 1 300) 2 899 ( 62) ( 1) 1 536
-------- ------------ ------------- ------------ ------------
Net income ($ 2 926) $ 6 768 $ ( 73) ($ 1 136) $ 2 633
======== ============ ============= ============ ============
</TABLE>
(Continued on Next Page)
<PAGE 12>
<TABLE>
GUARANTORS' FINANCIAL INFORMATION (CONTINUED)
<CAPTION>
For the Three Months Ended August 31, 1998
------------------------------------------
(in thousands)
Guarantor Non-Guarantor Total
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 32 766 $ 37 356 $ 2 728 $(28 431) $ 44 419
Cost of sales 18 410 22 578 2 251 (21 670) 21 569
-------- ------------ ------------- ------------ ------------
Gross profit 14 356 14 778 477 ( 6 761) 22 850
Selling, general and
administrative 5 800 5 147 437 29 11 413
-------- ------------ ------------- ------------ ------------
Operating income 8 556 9 631 40 ( 6 790) 11 437
Other income(expense) 1 130 98 ( 36) ( 2) 1 190
-------- ------------ ------------- ------------ ------------
Income before taxes
on income 9 686 9 729 4 (6 792) 12 627
Taxes on income 906 3 666 7 ( 2) 4 577
-------- ------------ ------------- ------------ ------------
Net income $ 8 780 $ 6 063 $( 3) $(6 790) $ 8 050
======== ============ ============= ============ ============
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended August 31, 1999
-----------------------------------------
(in thousands)
Guarantor Non-Guarantor Total
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 99 545 $106 064 $ 7 726 ($ 87 574) $125 761
Cost of sales 77 972 65 301 6 743 ( 86 437) 63 579
-------- ------------ ------------- ------------ ------------
Gross profit 21 573 40 763 983 ( 1 137) 62 182
Selling, general and
administrative 18 893 16 124 1 418 82 36 517
-------- ------------ ------------- ------------ ------------
Operating income 2 680 24 639 ( 435) ( 1 219) 25 665
Other income(expense) ( 1 230) 305 ( 100) - ( 1 025)
-------- ------------ ------------- ------------ ------------
Income before taxes
on income 1 450 24 944 ( 535) ( 1 219) 24 640
Taxes on income 595 8 335 ( 234) ( 4) 8 692
-------- ------------ ------------- ------------ ------------
Net income (loss) $ 855 $ 16 609 $ ( 301) ($ 1 215) $ 15 948
======== ============ ============= ============ ============
</TABLE>
(Continued on Next Page)
<PAGE 13>
<TABLE>
GUARANTORS' FINANCIAL INFORMATION (CONTINUED)
<CAPTION>
For the Nine Months Ended August 31, 1998
-----------------------------------------
(in thousands)
Guarantor Non-Guarantor Total
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net sales $ 93 571 $ 52 375 $ 6 801 $(33 096) $ 119 651
Cost of sales 48 980 31 474 5 434 (26 358) 59 530
-------- ------------ ------------- ------------ ------------
Gross profit 44 591 20 901 1 367 ( 6 738) 60 121
Selling, general and
administrative 21 957 9 471 1 215 112 32 755
-------- ------------ ------------- ------------ ------------
Operating income 22 634 11 430 152 ( 6 850) 27 366
Other income(expense) 2 869 499 ( 110) 4 3 262
-------- ------------ ------------- ------------ ------------
Income before taxes
on income 25 503 11 929 42 ( 6 846) 30 628
Taxes on income 6 331 4 636 30 ( 7) 10 990
-------- ------------ ------------- ------------ ------------
Net income (loss) $ 19 172 $ 7 293 $ 12 $ ( 6 839) $ 19 638
======== ============ ============= ============ ============
</TABLE>
<TABLE>
<CAPTION>
August 31, 1999
---------------
(in thousands)
Guarantor Non-Guarantor Total
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash $ 4 246 $ 478 $ 49 $ 664 $ 5 437
Accounts receivable, net 25 176 61 780 1 609 ( 61 643) 26 922
Inventories 21 408 16 263 1 435 ( 9 450) 29 656
Other current assets 3 610 694 58 - 4 362
-------- ------------ ------------- ------------ ------------
Total current assets 54 440 79 215 3 151 ( 70 429) 66 377
Property and equipment 10 390 53 702 2 623 ( 376) 66 339
Less accumulated depreciation 2 240 16 072 407 ( 268) 18 451
-------- ------------ ------------- ------------ ------------
Net property and equipment 8 150 37 630 2 216 ( 108) 47 888
Other assets 73 844 70 1 ( 59 957) 13 958
-------- ------------ ------------- ------------ ------------
Total assets 136 434 116 915 5 368 ( 130 494) 128 223
======== ============ ============= ============ ============
Current liabilities 69 602 11 196 2 176 ( 60 979) 21 995
Other liabilities 212 254 1 2 184 ( 2 102) 212 337
-------- ------------ ------------- ------------ ------------
Total liabilities 281 856 11 197 4 360 ( 63 081) 234 332
Total stockholders' equity ( 145 422) 105 718 1 008 ( 67 413) ( 106 109)
-------- ------------ ------------- ------------ ------------
Total liabilities and
stockholders' equity 136 434 116 915 5 368 ( 130 494) 128 223
======== ============ ============= ============ ============
</TABLE>
(Continued on Next Page)
<PAGE 14>
<TABLE>
GUARANTORS' FINANCIAL INFORMATION (CONTINUED)
<CAPTION>
November 30, 1998
-----------------
(in thousands)
Guarantor Non-Guarantor Total
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Cash $ 9 066 $ 1 054 $ 349 $ 29 $ 10 498
Marketable securities 77 836 - - - 77 836
Accounts receivable, net 71 605 94 485 1 412 (142 925) 24 577
Inventories 19 528 15 472 1 354 (8 239) 28 115
Other current assets 4 222 769 50 - 5 041
-------- ------------ ------------- ------------ ------------
Total current assets 182 257 111 780 3 165 (151 135) 146 067
Property and equipment 10 107 49 330 2 521 (431) 61 527
Less accumulated depreciation (1 900) (13 422) (350) 321 (15 351)
-------- ------------ ------------- ------------ ------------
Net property and equipment 8 207 35 908 2 171 (110) 46 176
Other assets 76 798 59 - (60 261) 16 596
-------- ------------ ------------- ------------ ------------
Total assets $267 262 $147 747 $ 5 336 $ (211 506) $ 208 839
======== ============ ============= ============ ============
Current liabilities $ 95 706 $ 57 945 $ 1 903 $ (142 896) $ 12 658
Other liabilities 4 646 - 2 204 (2 117) 4 733
-------- ------------ ------------- ------------ ------------
Total liabilities 100 352 57 945 4 107 (145 013) 17 391
Total stockholders' equity 166 910 89 802 1 229 (66 493) 191 448
-------- ------------ ------------- ------------ ------------
Total liabilities and
stockholders' equity $267 262 $147 747 $ 5 336 $ (211 506) $ 208 839
======== ============ ============= ============ ============
</TABLE>
<TABLE>
<CAPTION>
For the Nine Months Ended August 31, 1999
-----------------------------------------
(in thousands)
Guarantor Non-Guarantor Total
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by
operating activities $ 9 466 $ 4 066 ($ 248) $ 615 $ 13 899
--------- ------------ ------------- ------------ ------------
Cash flows provided by (used in)
investing activities
Capital expenditures ( 163) ( 4 547) ( 32) - ( 4 742)
Proceeds from sale of assets - - - - -
Purchases of marketable
securities ( 63 966) - - - ( 63 966)
Sales of marketable
securities 151 346 - - - 151 346
--------- ------------ ------------- ------------ ------------
Net Cash provided by (used in)
investing activities 87 217 ( 4 547) ( 32) - 82 638
--------- ------------ ------------- ------------ ------------
Cash provided by (used in)
financing activities
Dividends paid ( 3 720) - - - ( 3 720)
Proceeds from issuance of
preferred stock 106 000 - - - 106 000
Proceeds from subordinated
debt 124 103 - - - 124 103
Proceeds from bank debt 94 900 - - - 94 900
Common stock retired ( 415 636) - - - ( 415 636)
Other financing activities ( 7 245) - ( 20) 20 ( 7 245)
--------- ------------ ------------- ------------ ------------
Net cash used in financing
activities ( 101 598) - ( 20) 20 ( 101 598)
--------- ------------ ------------- ------------ ------------
Net increase (decrease)
in cash ( 4 915) ( 481) ( 300) 635 ( 5 061)
Cash at beginning of period 9 162 958 349 29 10 498
--------- ------------ ------------- ------------ ------------
Cash at end of period $ 4 247 $ 477 $ 49 $ 664 $ 5 437
========= ============ ============= ============ ============
<PAGE 15>
</TABLE>
<TABLE>
<CAPTION>
GUARANTORS' FINANCIAL INFORMATION (CONTINUED)
For the Nine Months Ended August 31, 1998
-----------------------------------------
(in thousands)
Guarantor Non-Guarantor Total
Parent Subsidiaries Subsidiaries Eliminations Consolidated
-------- ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Net cash provided by
operating activities $ 13 256 $ 437 $ ( 159) $ ( 142) $ 13 392
-------- ------------ ------------- ------------ ------------
Cash flows provided by (used in)
investing activities:
Capital expenditures ( 2 550) (1 475) 249 - ( 3 776)
Proceeds from sale of assets 4 605 - - - 4 605
Purchases of marketable
securities (39 491) - - - (39 491)
Sales of marketable
securities 29 194 - - - 29 194
--------- ------------ ------------- ------------ ------------
Net Cash provided by (used in)
investing activities ( 8 242) (1 475) 249 - ( 9 468)
--------- ------------ ------------- ------------ ------------
Cash provided by (used in)
financing activities:
Dividends paid ( 5 013) - - - ( 5 013)
Other financing activities 385 - ( 19) 19 385
--------- ------------ ------------- ------------ ------------
Net cash used in financing
activities ( 4 628) - ( 19) 19 ( 4 628)
--------- ------------ ------------- ------------ ------------
Net increase (decrease)
in cash 386 (1 038) 71 ( 123) ( 704)
Cash at beginning of period 4 947 1 580 156 123 6 806
--------- ------------ ------------- ------------ ------------
Cash at end of period 5 333 542 227 0 6 102
========= ============ ============= ============ ============
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
===========================================================
RESULTS OF OPERATIONS:
- ----------------------
Three Months Ended August 31, 1999 Compared With Three Months
- -------------------------------------------------------------
Ended August 31, 1998
- ---------------------
During the third quarter ended August 31, 1999, net sales decreased
3.2% to $42,979,000 compared to $44,419,000 for the like period in 1998. In
the opinion of management, this decrease is due primarily to the Company's
inability to replace sales to a principal customer of approximately $3.4
million in the third quarter of 1998 and fewer orders from distributors who
have chosen to reduce their inventories. Sales through Juno's Canadian
subsidiary increased 11.8% to $2,954,000 compared to $2,642,000.
Cost of sales as a percentage of net sales increased to 50.1% for the
quarter, compared to 48.6% for the like period in 1998 due primarily to
unfavorable direct labor productivity variances and modest increases in
indirect labor and manufacturing overhead measured against lower sales.
<PAGE 16>
Selling, general and administrative expenses expressed as a percentage
of sales increased to 32.2% for the third quarter of 1999 compared with 25.7%
for the like period in 1998 due primarily to one-time charges of approximately
$1,088,000 for a bonus paid to Juno officers pursuant to Change of Control
Benefit Agreements and $149,000 for the loss on the early extinguishment of an
Industrial Revenue Bond that was paid off on June 30, 1999. To a lesser
extent, this relationship was affected by increases in amortization of
deferred financing costs, salaries, benefits and legal expenses.
As a result of the above factors, operating income decreased to 17.7%
of sales as compared to 25.7% for the like period in 1998.
Nine Months Ended August 31, 1999 Compared With Nine Months
- -----------------------------------------------------------
Ended August 31, 1998
- ---------------------
During the nine month period ended August 31, 1999, net sales increased
5.1% to $125,761,000 compared to $119,651,000 for the like period in 1998. In
the opinion of management, sales increases were due primarily to market share
gains.
Cost of sales as a percentage of net sales increased to 50.1% compared
to 49.8% for the like period in 1998. This increase is due primarily to
changes in sales mix for Juno's Canadian and Indy Lighting subsidiaries and
increases in indirect labor.
Selling, general and administrative expenses as a percentage of sales
increased to 29.0% as compared to 27.4% in 1998 due to the one-time charges
cited above along with increases in amortization of deferred financing costs,
salaries and benefits.
INFLATION
- ---------
While Juno believes that it generally has been successful in
controlling the prices it pays for materials and passing on increased costs by
increasing its prices, the Company may not have future success in limiting
material price increases or reflecting any material price increases in the
prices it charges its customers or offsetting such price increases through
improved efficiencies.
INTEREST EXPENSE
- ----------------
Interest expense of $3,958,000 for the nine month period ended August
31, 1999 increased by $3,832,000 from the nine month period ended August 31,
1998. The increase principally reflects interest related to borrowings used
to finance the Merger in the third quarter of 1999.
LIQUIDITY AND CAPITAL RESOURCES:
- --------------------------------
During the nine month period ended August 31, 1999, the Company
generated positive net cash flow from operating activities of $13,899,000.
This was comprised principally of net income, depreciation and amortization, a
decrease in prepaid expenses and increase in accounts payable and accrued
expenses, (collectively aggregating $27,654,000), net of increases in accounts
receivable of $2,266,000 and inventory of $1,541,000 and other assets of
$9,948,000. The increase in other assets was due primarily to fees in
<PAGE 17>
connection with the acquisition of the secured and subordinated debt. The
Company used the net cash provided from operating activities to finance
capital expenditures of $4,742,000 and pay cash dividends of $3,720,000.
Net cash flow from investing activities amounted to $82,638,000
comprised of the liquidation of the Company's marketable securities portfolio
used to partially finance the merger and recapitalization.
Net cash used in financing activities amounted to $101,598,000 which
is due primarily to common stock retired in the recapitalization of
$415,636,000 less proceeds from the issuance of Preferred Stock, Subordinated
Debt and Bank Debt aggregating $325,003,000. In addition, principal payments
on long-term debt of $8,276,000 were made.
The Company historically has funded its operations principally from
cash generated from operations, available cash and income from marketable
securities. The Company incurred substantial indebtedness in connection with
the Merger. The Company's liquidity needs are expected to arise primarily
from operating activities and servicing indebtedness incurred in connection
with the Merger.
Principal and interest payments under the Senior Credit Facility and
the Notes represent significant liquidity requirements for the Company. As of
August 31, 1999, the Company had cash of approximately $5.4 million and total
indebtedness of approximately $215 million.
The Company's $35 million Revolving Line of Credit Facility is
available to finance its working capital and had an outstanding balance of
zero on August 31, 1999. The Company's principal source of cash to fund its
liquidity needs will be net cash from operating activities and borrowings
under the Senior Credit Facility. The Company believes these sources will be
adequate to meet its anticipated future requirements for working capital,
capital expenditures, and scheduled payments of principal and interest on its
existing indebtedness for at least the next 12 months. However, the Company
may not generate sufficient cash flow from operations or have future working
capital borrowings available in an amount sufficient to enable it to service
its indebtedness, including the notes, or to make necessary capital
expenditures.
OTHER MATTERS:
- -------------
We have has been assessing our "Year 2000" readiness and exposure to
Year 2000 issues. Partly in connection with such assessment, we initiated a
program to upgrade our systems hardware and software. Our assessment has been
focused on information technology systems and has also included a limited
review of non-information technology systems, principally imbedded building
and facility systems. We entered into an agreement to acquire new enterprise
system software and certain related consulting services. The vendor has
advised us that the system is Year 2000 compliant. We tested and fully
implemented the new system in our U.S. facilities and expect the new system to
be fully implemented and operational in our Canadian facility by November 30,
1999. We have also solicited confirmation from our principal suppliers that
they are Year 2000 compliant.
We believe that the principal cost of addressing our Year 2000
issues are costs associated with implementing our new enterprise system.
Through August 31, 1999, we incurred costs of approximately $5,003,000 with
respect to such system and estimate that we will incur no significant
additional costs with respect to such system. However, the ultimate costs
that we may incur with respect to such system or Year 2000 matters may be
significantly greater.
<PAGE 18>
The failure of one or more of our systems to be Year 2000 compliant
or of our vendors or customers to be Year 2000 compliant could (i) prevent us
from engaging in our normal business operations for a time period, (ii) cause
us 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 our results of operation, liquidity and financial condition,
although the ultimate impact of such events is uncertain. Based on our
assessment of our principal information technology systems, including the
advice of our enterprise systems vendor, we believe that our material systems
will be Year 2000 compliant. However, the impact of the failure of such
systems to be compliant is uncertain and we are unable to determine our most
reasonably likely worst case scenario. We have not undertaken and do not
anticipate undertaking further analysis of the uncertainty or development of a
plan to address this uncertainty or the potential that we or our 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.
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 and Item 1 of the Company's Quarterly Report on Form 10-Q for
the quarterly period ended February 28, 1999 for descriptions of
Nilssen vs. Juno Lighting, Inc.
Reference is made to Item 1 of the Company's Quarterly Report on
Form 10-Q for the quarterly period ended February 28, 1999 for a
description of Linda Parnes 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.
Item 2. Changes in Securities and Use of Proceeds - In connection with the
Merger, the Company filed an Amended and Restated Certificate of
Incorporation on June 30, 1999 that authorized the issuance of
preferred stock and designated 1,060,000 shares of Series A
Convertible Preferred ("Series A Preferred") with certain rights
and preferences superior to the Company's common stock. The
issuance of the Series A Preferred had the effect of limiting or
qualifying the rights evidenced by the common stock with respect
to dividends, distributions, redemptions, repurchases and rights
in the event of liquidation, dissolution or winding up. On June
30, 1999, the Company sold 1,060,000 shares of the Series A
Preferred to Fremont Investors I, LLC and to key employees of the
Company for an aggregate price of $106,000,000 in a private
placement exempt from registration pursuant to Regulation D under
the Securities Act of 1933. The Series A Preferred is convertible,
at the option of the holder, into a number of shares of common
<PAGE 19>
stock equal to the stated amount of the Series A Preferred then in
effect plus accrued but unpaid dividends, if any, divided by the
conversion price or $26.25 per share. Reference is made to the
Company's Amended and Restated Certificate of Incorporation filed
as Exhibit 3.1 hereto for a full explanation of the terms described
in the summary above.
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders
(a) On June 29, 1999 the Company held a special meeting
of stockholders.
(b) At the June 29, 1999 special meeting, the stockholders voted on
the following three proposals:
(i) to approve an Agreement and Plan of Recapitalization and
Merger, dated as of March 26, 1999, by and among the Company, Fremont
Investors I, LLC and Jupiter Acquisition Corp., and the transactions
contemplated by such merger agreement, including (A) the merger of Jupiter, a
wholly-owned subsidiary of Fremont Investors I, LLC, with and into the
Company, with the Company being the surviving corporation, and (B) the
purchase by Fremont Investors I, LLC or its assigns of $106 million of a new
series of convertible preferred stock of the Company;
(ii) to adopt an amended and restated certificate of
incorporation of the Company; and
(iii) to adopt the Juno Lighting, Inc. 1999 Stock Award and
Incentive Plan.
The stockholders approved each of these proposals. The following sets
forth the number of votes on each of the proposals:
Proposal For Against Abstain
- -------- ---- ------- -------
(i) Agreement and Plan of 10,310,337 6,785,343 20,776
Recapitalization and Merger
(ii) Amended and restated 10,224,342 6,849,238 42,876
certificate of incorporation
(iii) 1999 Stock Award and 9,822,920 7,244,188 49,348
Incentive Plan
Item 5. Other Information - None
Item 6. (a) Exhibits -
3.1 Amended and Restated Certificate of Incorporation of Juno.
Filed as Exhibit 3.1 to the Company's Registration Statement on
Form S-4 (SEC File No. 0-11631) filed on August 27, 1999 and
incorporated herein by reference.
<PAGE 20>
3.2 By-Laws of Juno Lighting, Inc., as amended. Filed as Exhibit
3.1 to the Company's Annual Report on Form 10-K (SEC File No.
0-11631) for the fiscal year ended November 30, 1990 and
incorporated herein by reference.
4.1 Indenture, dated as of June 30, 1999 by and among Juno
Lighting, Inc., Juno Manufacturing, Inc., Indy Lighting, Inc.,
Advanced Fiberoptic Technologies, Inc. and Firstar Bank of
Minnesota, N.A., as Trustee for the 11-7/8% Senior Subordinated
Notes due 2009. Filed as Exhibit 4.1 to the Company's Registration
Statement on Form S-4 (SEC File No. 0-11631) filed on August 27,
1999 and incorporated herein by reference.
4.2 Registration Rights Agreement, dated as of June 30, 1999, by
and among Juno Lighting, Inc., Juno Manufacturing, Inc., Indy
Lighting, Inc., Advanced Fiberoptic Technologies, Inc., Banc of
America Securities LLC and Credit Suisse First Boston Corporation.
Filed as Exhibit 4.2 to the Company's Registration Statement on
Form S-4 (SEC File No. 0-11631) filed on August 27, 1999 and
incorporated herein by reference.
10.1 Management Services Agreement, dated as of June 30, 1999, by
and between Juno Lighting, Inc., and Fremont Partners LLC. Filed
as Exhibit 10.9 to the Company's Registration Statement on Form S-4
(SEC File No. 0-11631) filed on August 27, 1999 and incorporated
herein by reference.
10.2 Credit Agreement, dated as of June 29, 1999, by and among Juno
Lighting, Inc. and NationsBank, N.A., Credit Suisse First Boston
Corporation and certain other lenders party thereto. Filed as
Exhibit 10.10 to the Company's Registration Statement on Form S-4
(SEC File No. 0-11631) filed on August 27, 1999 and incorporated
herein by reference.
10.3 1999 Stock Award and Incentive Plan. Filed as Annex D to the
proxy statement/prospectus which formed a part of the Registration
Statement on Form S-4 (SEC File No. 0-11631) filed on May 28, 1999
and incorporated herein by reference.
(b) Reports on Form 8-K
During the quarter for which this report is filed the following
reports on Form 8-K were filed with the Securities and Exchange
Commission.
(i) On June 28, 1999 to report the completion of the
Company's offering of $125 million of senior subordinated notes
in a private placement;
(ii) On June 29, 1999 to report that Company stockholders
voted at the special meeting of stockholders held on the same
day to approve the merger pursuant to an Agreement and Plan of
Recapitalization and Merger dated March 26, 1999
(the "Merger"), by and among the Company, Fremont Investors I,
LLC ("Fremont") and its wholly-owned subsidiary Jupiter
Acquisition Corp. and to approve two related proposals;
(iii) On July 1, 1999 to report the consummation of the Merger
on June 30, 1999 and to report the sale by the Company of
1,060,000 shares of its Series A Convertible Preferred Stock,
$.001 par value per share ("Series A Preferred"), to Fremont
and certain members of the Company's management for an
aggregate purchase price of $106,000,000; and
<PAGE 21>
(iv) On July 15, 1999 to report a change of control in the
Company that occurred on June 30, 1999 upon consummation of the
Merger and pursuant to Fremont's purchase of 1,052,000 shares
of the Company's newly issued Series A Preferred and to report
that Fremont thereby acquired an initial approximate 63.6%
voting interest in the Company, barring any withdrawal of
dissenters rights by stockholders who exercised them in a
timely manner.
<PAGE 22>
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 15, 1999
<TABLE> <S> <C>
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<PERIOD-END> AUG-31-1999
<CASH> 5437
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<ALLOWANCES> 1248
<INVENTORY> 29656
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0
108120
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