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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q

(Mark One)

 

 

X

 

QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

For the quarterly period ended February 28, 2003
OR

 

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

 

 

For the transition period from

 

to

 

.  

 

Commission file number 0-11631

 




JUNO LIGHTING, INC.
(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)

 

36-2852993
(I.R.S. Employer Identification No.)

 

1300 S. Wolf Road
P.0. Box 5065
Des Plaines, Illinois

 

60017-5065
(Zip code)

 

(Address of principal executive offices)

 

 

Registrant's telephone number, including area code:

(847) 827-9880

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

 

Name of each exchange on which registered

 

 

Common Stock, $.001 par value

 

 

The NASDAQ SmallCap Market

 

 Securities registered pursuant to Section 12(g) of the Act: None

 


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        

There were 2,529,534 shares of common stock outstanding as of March 31, 2003.

1

 

 

JUNO LIGHTING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

February 28,

November 30,

 

2003

 

2002

(Unaudited)

(Unaudited)

Assets

 

 

 

 

 

Current:

 

 

 

 

 

     Cash

$

1,200

$

1,221

 

     Accounts receivable, less allowance for doubtful accounts of $928

 

 

 

     and $926

 

32,641

 

32,225

 

     Inventories, net

 

24,411

 

22,870

 

     Prepaid expenses and miscellaneous

 

5,134

 

4,724

 

               Total current assets

 

63,386

 

61,040

 

Property and equipment:

 

 

 

     Land

 

7,297

 

7,267

 

     Building and improvements

 

33,527

 

33,376

 

     Tools and dies

 

12,563

 

12,116

 

     Machinery and equipment

 

7,871

 

7,690

 

     Computer equipment

 

8,910

 

8,963

 

     Office furniture and equipment

 

3,481

 

3,213

 

 

 

73,649

 

72,625

 

Less accumulated depreciation

 

(31,551

)

(30,619

)

 

               Net property and equipment

 

42,098

 

42,006

 

Other assets:

 

 

 

     Goodwill

 

11,790

 

11,766

 

     Deferred financing costs, net of accumulated amortization of $4,751

 

 

 

      and $4,426

 

5,592

 

5,917

 

     Miscellaneous

 

3,332

 

3,123

 

               Total other assets

 

20,714

 

20,806

 

Total assets

$

126,198

$

123,852

 

Liabilities and Stockholders' Deficit

 

 

 

 

 

 

Current:

 

 

 

 

 

 

   Accounts payable

$

11,960

$

10,960

 

   Accrued liabilities

 

11,606

 

 

18,471

 

   Short term borrowings

 

12,500

 

 

6,050

 

   Current maturities of long-term debt

 

3,901

 

 

4,681

 

   Total current liabilities

 

39,967

 

 

40,162

 

Long-term debt, less current maturities

 

154,448

 

 

155,626

 

Deferred income taxes payable

 

3,569

 

 

3,215

 

Commitments and Contingencies

 

 

 

 

 

Stockholders' Deficit

 

 

 

 

 

  Preferred stock, Series A and B convertible $.001

 

 

 

 

     par value, $100 stated value, 5,000,000 shares

 

 

 

 

     authorized and 1,063,500 shares issued.

 

143,089

 

140,283

 

  Common stock, $.001 par value;

 

 

 

 

 

     Shares authorized 45,000,000;

 

 

 

 

 

     Issued 2,529,534

 

2

 

2

 

  Paid-in capital

 

1,035

 

1,035

 

  Accumulated other comprehensive loss

 

(226

)

 

(772

)

 

  Shareholder note receivable

 

(200

)

 

(200

)

 

  Accumulated deficit

 

(215,486

)

 

(215,499

)

 

  Total stockholders' deficit

 

(71,786

)

 

(75,151

)

 

Total liabilities and stockholders' equity

$

126,198

 

$

123,852

 

(See Notes To Condensed Consolidated Financial Statements)

2

 

 

JUNO LIGHTING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In Thousands Except For Share Amounts)

Three Months Ended

February 28,

February 28,

 

2003

 

2002

(Unaudited)

(Unaudited)

Net sales

$

43,523

$

41,406

 

 

Cost of sales

 

22,118

21,067

 

Gross profit

 

21,405

 

20,339

 

Selling, general and administrative expenses

 

14,182

 

13,073

 

Costs of terminated acquisition

-

3,050

   Operating income

 

7,223

 

4,216

 

Other income (expense):

 

 

 

 

 

   Interest expense

 

(4,109

(4,397

)

 

 

 

   Interest and dividend income

3

4

   Unrealized gain on interest rate swap

1,263

227

 

 

 

   Miscellaneous

 

14

 

19

 

      Total other income (expense)

 

(2,829

)

(4,147

Income before taxes on income

 

4,394

 

69

 

 

 

 

Taxes on income

 

1,575

 

27

 

Net income

 

2,819

 

42

 

Less: preferred dividends

 

2,806

 

2,592

 

Net income (loss) available to common shareholders

$

13

$

(2,550

)

Net income (loss) per common share (basic and diluted)

$

.01

$

(1.02

)

(See Notes To Condensed Consolidated Financial Statements)

3

 

 

JUNO LIGHTING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF ACCUMULATED DEFICIT

(In Thousands)

Three Months Ended

February 28, 2003

 

(Unaudited)

Accumulated deficit, beginning of period

(215,499

)

Preferred dividend

(2,806

)

Net income, three months ended February 28, 2003

2,819

Accumulated deficit, end of period

(215,486

)

 

(See Notes To Condensed Consolidated Financial Statements)

4

 

 

JUNO LIGHTING, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

Three Months Ended

February 28,

 

February 28,

 

2003

2002

(Unaudited)

(Unaudited)

Cash Flows used in operating activities:

Net income

$

2,819

$

42

Adjustments to reconcile net income to net cash used in operating activities:

      Depreciation and amortization

1,434

1,466

      Unrealized (gain) on interest rate swap

(1,263

)

(227

)

      Deferred income taxes

354

(72

)

      Gain on sale of assets

1

-

      Deferred compensation

-

18

   Changes in operating assets and liabilities:

      (Increase) decrease in accounts receivable

(416

)

590

      (Increase) in inventory

(1,541

)

(955

)

      Decrease in prepaid expenses and miscellaneous

600

587

      Decrease in other assets

172

132

     (Decrease) in accounts payable and accrued liabilities

(5,615

)

(2,445

)

Net cash used in operating activities

(3,455

)

(864

)

Cash flows used in investing activities:

   Capital expenditures

(1,041

)

(421

)

Net cash used in investing activities

(1,041

)

(421

)

Cash flows provided by financing activities:

  Proceeds from bank debt

19,650

15,550

  Principal payments on long-term debt and bank debt

(15,175

)

(14,199

)

Net cash provided by financing activities

4,475

1,351

Net (decrease) increase in cash

(21

)

66

Cash at beginning of period

 

1,221

1,280

Cash at end of period

$

1,200

$

1,346

Supplemental disclosures of cash flow information:

Cash paid during the period for:

   Interest

$

8,410

$

8,148

   Income taxes

774

311

(See Notes To Condensed Consolidated Financial Statements)

5

 

 

JUNO LIGHTING, INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

REVENUE RECOGNITION


Revenues from sales are recognized at the time goods are shipped when title and risk of loss passes to the customer.

GOODWILL


The Company adopted SFAS 142 "Goodwill and Other Intangibles" during fiscal 2002. The Company reviews goodwill for impairment during the fourth quarter of each year. No events have occurred, nor has there been a change in circumstances, that would reduce the fair value of the reporting unit below its carrying amount. Furthermore, the Company has not amortized any of its goodwill for the year ended November 30, 2002.

INCOME TAXES


The Company uses the asset and liability approach under which deferred taxes are provided for temporary differences between the financial reporting and income tax bases of assets and liabilities based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.

STOCK-BASED COMPENSATION


As permitted by Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), the Company has elected to continue to account for its stock-based awards in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25").


DERIVATIVE INSTRUMENTS

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. The Company entered into two interest rate swap agreements in fiscal 2001 (notional amounts of $30,000,000 pay-fixed rate swap and $60,000,000 pay-floating rate swap), which resulted in a net unrealized gain of $1,263,000 for the quarter ended February 28, 2003 and a net unrealized gain of $227,000 for the quarter ended February 28, 2002, based on the swaps' estimated market values as of February 28, 2003, and 2002, respectively. These derivatives do not qualify for hedge accounting. Accordingly, the net impact was recorded as other income on the consolidated statements of income for the quarters ended February 28, 2003 and 2002. The Company entered into these agreements to reduce the risk of adverse changes in variable interest rates on certain of the long-term deb t. These derivative instruments will be adjusted to estimated market values quarterly with any adjustment impacting current earnings until their respective maturities.

FINANCIAL INFORMATION


   The financial information presented in these condensed 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, 2002 was derived from the Company's 2002 audited consolidated financial statements.

6

 

 


INVENTORIES


   Inventories are summarized as follows:

(In Thousands)

February 28,

November 30,

2003

2002

Finished goods

$

14,224

$

12,873

Raw materials

10,919

10,745

Reserve for Obsolescence

(732

)

(748

)

$

24,411

$

22,870


LONG-TERM DEBT AND SHORT-TERM BORROWINGS


Long-term debt consists of the following:

 

 

 

 

(In Thousands)

 

 

 

 

February 28,

November 30,

 

 

 

 

2003

2002

Bank of America, N.A. and certain other lenders,

 

 

 

 

 

 

 

 

 

 

   Tranche A Term Loan, payable in escalating

 

 

 

 

 

 

 

 

 

 

   installments through November, 2005, plus

 

 

 

 

 

 

 

 

 

 

   interest at a variable rate, generally

 

 

 

 

 

 

 

 

 

 

   approximating 3 month LIBOR plus 2.25%

 

 

$

10,989

 

 

$

12,683

 

 

Bank of America, N.A. and certain other lenders,

 

 

 

 

 

 

 

 

 

 

   Tranche B Term Loan, payable in escalating

 

 

 

 

 

 

 

 

 

 

   interest at a variable rate, generally

 

 

 

 

 

 

 

 

 

 

   approximating 3 month LIBOR plus 3.0%

 

 

 

 23,035

 

 

 

23,318

 

 

Senior Subordinated Notes due July 2009, plus

 

 

 

 

 

 

 

 

 

 

   interest at 11 7/8%, net of discount of $675

 

 

 

 

 

 

 

 

 

 

   and $694, respectively

 

 

 

124,325

 

 

 

124,306

 

 

 

 

 

 

158,349

 

 

 

160,307

 

 

Less current maturities

 

 

 

3,901

 

 

 

4,681

 

 

Total long-term debt

 

 

154,448

 

 

$

155,626

 

 


   The Company has a senior credit facility (the "Senior 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 Senior 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 variable applicable percentages. At February 28, 2003, the nominal interest rates for Term Loan A and Term Loan B were 3.84% and 4.34%, respectively. Term Loan A and Term Loan B are each payable in separate quarterly installments.

   The final maturity of Term Loan A is November 30, 2005 and the final maturity of Term Loan B is November 30, 2006. Amounts outstanding under the Revolving Credit Facility at February 28, 2003 and November 30, 2002 were $12,500,000 and $6,050,000 respectively. At February 28, 2003, the nominal interest rate for borrowing on the Revolving Credit Facility was 4.75%. 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 of 1933, which notes were then exchanged for new notes registered under the Securities Act of 1933 with substantially identical economic terms, 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 . 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 Senior Credit Facility. Each of the aforementioned debt facilities contain restrictive covenants. The credit agreement related to the Senior Credit Facility (the "Secured Credit Agreement") requires the Company to maintain certain financial ratios, as defined therein.

   Relating to the Senior Credit Facility and the Notes, the Company incurred approximately $3.9 million and $6.3 million of financing fees, respectively, which are being amortized over the life of the related debt.

7

 

   The Senior Credit Facility is collateralized by substantially all of the assets of the Company and its domestic subsidiaries as more particularly described in the Secured Credit Agreement dated June 29, 1999 and filed as an exhibit hereto. The aggregate amounts of existing long-term debt maturing in each of the next three years are as follows: 2004 - $3,901,000; 2005 - $4,817,000; 2006 - $22,380,000.

SERIES A AND SERIES B PREFERRED STOCK


   On June 30, 1999, the Company issued 1,060,000 shares of Series A convertible preferred stock ("Series A") to Fremont Investors and certain employees of the Company. On November 30, 2000, the Company issued 3,500 shares of Series B convertible preferred stock ("Series B", and together with the Series A, the "Preferred Stock") to the Company's Chief Executive Officer. 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 or Series B, as the case may be, in such
     quarter had they converted their 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 Series A will be payable by an increase in the stated amount of such stock, and through November 30, 2005, the dividends for the Series B will be payable by an increase in the stated amount of such stock. After June 30, 2004, the dividends on the Series A will be paid in cash until redemption or conversion, and after November 30, 2005, the dividends on the Series B will be paid in cash until redemption or conversion. The Preferred Stock is convertible into shares of the Company's common stock at a price of $26.25 per share. Holders of Preferred Stock are entitled to one 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, winding up or sale of the Company.

BUSINESS SEGMENTS AND GEOGRAPHICAL INFORMATION

The Company operates in one product segment - the design, manufacture and marketing of lighting fixtures. The aggregation criteria for sales are based on point of shipment while the aggregation criteria for assets are based on their physical location.

Financial information by geographic area is as follows:

Three months ended February 28,

 

 

2003

 

 

2002

 

 

 

Net Sales:

 

 

 

 

 

 

 

 

 

   United States

     (including Puerto Rico)

 

$

39,960

 

$

38,120

 

 

   Canada

 

 

3,563

 

 

3,286

 

 

   Total

 

$

43,523

 

$

41,406

 

 

February 28,

November 30,

 

 

2003

 

 

2002

 

 

 

Total Assets:

 

 

 

 

 

 

 

 

 

   United States

 

$

113,319

 

$

111,294

 

 

   Canada

 

 

12,879

 

 

12,558

 

 

   Total

 

$

126,198

 

$

123,852

 

 

8

 

 

NET INCOME (LOSS) PER COMMON SHARE


   Basic earnings per share is calculated by dividing net income (loss) by the weighted average number of common shares outstanding. Diluted earnings per share is calculated by dividing net income (loss) 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,

2003

2002

   Basic and Diluted

2,529,534

2,500,389

COMPREHENSIVE (LOSS) INCOME


   As of December 1, 1998, the Company adopted Statement of Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS 130). SFAS 130 established new rules for the reporting and display of comprehensive income and its components. SFAS 130 requires foreign currency translation adjustments to be included in other comprehensive income.

The components of comprehensive income, net of related tax, are as follows (in thousands):

Three Months Ended

February 28, 2003

February 28, 2002

Net income

$

2,819

$

42

Foreign currency

   translation adjustment

546

(144

)

Comprehensive income

$

3,365

$

(102

)

The components of accumulated other comprehensive loss, net of related tax, are as follows (in thousands):

 

 

 

 

Three Months Ended

 

 

 

 

 

 

February 28, 2003

 

 

 

 

November 30, 2002

 

 

Foreign currency

 

 

 

 

 

 

 

   translation adjustment

$

(226

 

$

(772

 

Accumulated other

 

 

 

 

 

 

   comprehensive loss

$

(226

 

$

(772

 

9

 

 

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. Th e sources of this funding included the Company's available cash and marketable securities, a $106 million preferred stock investment by Fremont and key employees of Juno ("Series A"), 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, the Company incurred approximately $9.9 million in transaction costs and $10.2 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"), which notes were exchanged for the notes that were sold earlier in a private placement offering to qualified institutional buyers. Pursuant to terms of the Senior Subordinated Notes, the Company's domestic subsidiaries, Juno Manufacturing, Inc., Alfa Lighting, Inc., and Indy Lighting, Inc., 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.

For the Three Months Ended February 28, 2003

(in thousands)

Non-

Guarantor

Guarantor

Total

 

 

Parent

 

 

Subsidiaries

 

 

Subsidiaries

 

 

Eliminations

 

 

Consolidated

Net sales

$

36,152

 

$

36,582

$

4,017

$

(33,228

)

$

43,523

Cost of sales

 

29,336

 

 

21,651

 

2,941

 

(31,810

)

 

22,118

Gross profit

 

6,816

 

 

14,931

 

1,076

 

(1,418

)

 

21,405

Selling, general and

   administrative

 

6,901

 

 

6.407

 

846

 

28

 

14,182

Operating (loss) income

 

(85

)

 

8,524

 

230

 

(1,446

)

 

7,223

Other income (expense)

 

(2,715

)

 

(14

)

 

(100

)

 

-

 

(2,829

)

(Loss) income before

   taxes on income

 

(2,800

)

 

8,510

 

130

 

(1,446

)

 

4,394

Taxes on income

 

(1,580

)

 

3,107

 

50

 

(2

)

 

1,575

Net(loss) income

 

(1,220

)

 

5,403

 

80

 

(1,444

)

 

2,819

Less: Preferred dividends

 

(2,806

)

 

-

 

-

 

-

 

(2,806

)

Net(loss) income

   available to common

   shareholders

$

(4,026

)

$

5,403

$

80

$

(1,444

)

$

13

10

 

 

GUARANTORS' FINANCIAL INFORMATION (CONTINUED)

For the Three Months Ended February 28, 2002

(in thousands)

Non-

Guarantor

Guarantor

Total

 

 

Parent

 

 

Subsidiaries

 

 

Subsidiaries

 

 

Eliminations

 

 

Consolidated

Net sales

$

33,486

$

33,399

$

3,400

$

(28,879

)

$

41,406

Cost of sales

 

28,309

 

20,193

 

2,320

 

(29,755

)

 

21,067

Gross profit

 

5,177

 

13,206

 

1,080

 

876

 

20,339

Selling, general and

   administrative

 

6,840

 

5,456

 

749

 

28

 

13,073

Costs of terminated acquisition

-

3,050

-

-

3,050

Operating (loss) income

 

(1,663

)

 

4,700

 

331

 

848

 

4,216

Other (expense)

 

(4,034

)

 

(7

)

 

(106

)

 

-

 

(4,147

)

(Loss) income before

   taxes on income

 

(5,697

)

 

4,693

 

225

 

848

 

69

Taxes on income

 

(1,739

)

 

1,675

 

92

 

(1

)

 

27

Net (loss) income

 

(3,958

)

 

3,018

 

133

 

849

 

42

Less: Preferred dividends

 

(2,592

)

 

-

 

-

 

-

 

(2,592

)

Net (loss) income

   available to common

   shareholders

$

(6,550

)

$

3,018

$

133

$

849

$

(2,550

)

 

February 28, 2003

(in thousands)

Non-

Guarantor

Guarantor

Total

 

 

Parent

 

 

Subsidiaries

 

 

Subsidiaries

 

 

Eliminations

 

 

Consolidated

Cash

$

1,079

 

$

(131

)

$

252

 

$

-

$

1,200

Accounts receivable, net

29,565

 

 

20,498

 

3,842

 

 

(21,264

)

 

32,641

Inventories

 

22,371

 

 

11,373

 

3,219

 

 

(12,552

)

 

24,411

Other current assets

 

3,430

 

 

1,597

 

107

 

 

-

 

5,134

Total current assets

 

56,445

 

 

33,337

 

7,420

 

 

(33,816

)

 

63,386

Property and equipment

 

10,888

 

 

60,081

 

3,056

 

 

(376

)

 

73,649

Less accumulated depreciation 

3,654

 

 

27,327

 

850

 

 

(280

)

 

31,551

Net property and equipment

 

7,234

 

32,754

 

2,206

 

 

(96

)

 

42,098

Other assets

 

79,537

 

122

 

6,283

 

 

(65,228

)

 

20,714

Total assets

$

143,216

$

66,213

$

15,909

 

$

(99,140

)

$

126,198

Current liabilities

$

36,565

$

15,647

$

9,017

 

$

(21,262

)

$

39,967

Other liabilities

 

157,762

 

-

 

2,268

 

 

(2,013

)

 

158,017

Total liabilities

 

194,327

 

15,647

 

11,285

 

 

(23,275

)

 

197,984

Total stockholders'

   (deficit) equity

 

(51,111

)

 

50,566

 

4,624

 

 

(75,865

)

 

(71,786)

Total liabilities and stockholders'

   (deficit) equity

$

143,216

$

66,213

$

15,909

 

$

(99,140

)

$

126,198

11

 

 

GUARANTORS' FINANCIAL INFORMATION (CONTINUED)

November 30, 2002

(in thousands)

Non-

Guarantor

Guarantor

Total

 

 

Parent

 

 

Subsidiaries

 

 

Subsidiaries

 

 

Eliminations

 

 

Consolidated

Cash

$

1,413

 

$

(202

$

10

 

$

-

 

$

1,221

Accounts receivable, net

28,600

 

 

14,769

 

 

4,373

 

 

(15,517

)

 

32,225

Inventories

 

19,786

 

 

11,353

 

 

2,840

 

 

(11,109

)

 

22,870

Other current assets

 

2,922

 

 

1,720

 

 

82

 

 

-

 

 

4,724

Total current assets

 

52,721

 

 

27,640

 

 

7,305

 

 

(26,626

)

 

61,040

Property and equipment

 

10,888

 

 

59,241

 

 

2,873

 

 

(377

)

 

72,625

Less accumulated depreciation 

3,582

 

 

26,538

 

 

778

 

 

(279

)

 

30,619

Net property and equipment

 

7,306

 

 

32,703

 

 

2,095

 

 

(98

)

 

42,006

Other assets

 

79,912

 

 

113

 

 

5,959

 

 

(65,178

)

 

20,806

Total assets

$

139,939

 

$

60,456

 

$

15,359

 

$

(91,902

)

$

123,852

Current liabilities

$

31,217

 

$

15,248

 

$

9,214

 

$

(15,517

)

$

40,162

Other liabilities

 

158,613

 

 

-

 

 

2,248

 

 

(2,020

)

 

158,841

Total liabilities

 

189,830

 

 

15,248

 

 

11,462

 

 

(17,537

)

 

199,003

Total stockholders'

   (deficit) equity

 

(49,891

 

45,208

 

 

3,897

 

 

(74,365

)

 

(75,151)

Total liabilities and stockholders'

   equity (deficit)

$

139,939

 

$

60,456

 

$

15,359

 

$

(91,902

)

$

123,852

 

For the Three Months Ended February 28, 2003

(in thousands)

Non-

Guarantor

Guarantor

Total

 

 

Parent

 

 

Subsidiaries

 

 

Subsidiaries

 

 

Eliminations

 

 

Consolidated

Net cash (used in) provided by

   operating activities

$

(4809

)

$

1,084

 

$

279

$

(9

)

$

(3,455)

Cash flows (used in) investing

   activities: Capital expenditures

-

 

(1,013

)

 

(28

)

 

-

 

(1,041)

Net cash (used in) investing

   activities

 

-

 

(1,013

)

 

(28

)

 

-

 

(1,041)

Cash flows provided by (used in)

   financing activities:

Proceeds from bank debt

 

19,650

 

-

 

-

 

-

 

19,650

Principal payments on

 

 

 

 

   long term debt 

(15,175

)

-

(9

)

9

(15,175)

Net cash provided by (used in)

   financing activities

4,475

-

(9

)

9

4,475

Net (decrease) increase in cash

(334

)

71

242

-

(21)

Cash at beginning of year

 

1,413

 

 

(202

)

 

10

 

-

 

1,221

Cash at end of year

$

1,079

 

$

(131

)

$

252

$

-

$

1,200

12

 

 

GUARANTORS' FINANCIAL INFORMATION (CONTINUED)

 

For the Three Months Ended February 28, 2002

(in thousands)

Non-

Guarantor

Guarantor

Total

 

 

Parent

 

 

Subsidiaries

 

 

Subsidiaries

 

 

Eliminations

 

 

Consolidated

Net cash (used in) provided by

   operating activities

$

(1,591

)

$

559

$

160

$

8

$

(864)

Cash flows (used in) investing

   activities: Capital expenditures

(8

)

 

(387

)

 

(26

)

 

-

 

(421)

Net cash (used in) investing

   activities

 

(8

)

 

(387

)

 

(26

)

 

-

 

(421)

Cash flows provided by (used in)

   financing activities:

Proceeds from bank debt

 

15,550

 

-

 

-

 

-

 

15,550

Principal payments on

   long term debt 

(14,199

)

-

(8

)

8

(14,199)

Net cash provided by (used in)

   financing activities

1,351

-

(8

)

8

1,351

Net (decrease) increase in cash

 

(248

)

 

172

 

126

 

16

 

66

Cash at beginning of year

 

1,141

 

(541

)

 

674

 

6

 

1,280

Cash at end of year

$

893

$

(369

)

$

800

$

22

$

1,346

ITEM 2.   MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

REVENUE RECOGNITION


Revenues from sales are recognized at the time goods are shipped when title and risk of loss passes to the customer.

GOODWILL


The Company adopted SFAS 142 "Goodwill and Other Intangibles" during fiscal 2002. The Company reviews goodwill for impairment during the fourth quarter of each year. No events have occurred, nor has there been a change in circumstances, that would reduce the fair value of the reporting unit below its carrying amount. Furthermore, the Company has not amortized any of its goodwill for the year ended November 30, 2002.

INCOME TAXES


The Company uses the asset and liability approach under which deferred taxes are provided for temporary differences between the financial reporting and income tax bases of assets and liabilities based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income.

STOCK-BASED COMPENSATION


As permitted by Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), the Company has elected to continue to account for its stock-based awards in accordance with Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25").

13

 

DERIVATIVE INSTRUMENTS

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. The Company entered into two interest rate swap agreements in fiscal 2001 (notional amounts of $30,000,000 pay-fixed rate swap and $60,000,000 pay-floating rate swap), which resulted in a net unrealized gain of $1,263,000 for the quarter ended February 28, 2003 and a net unrealized gain of $227,000 for the quarter ended February 28, 2002, based on the swaps' estimated market values as of February 28, 2003, and 2002, respectively. These derivatives do not qualify for hedge accounting. Accordingly, the net impact was recorded as other income on the consolidated statements of income for the quarters ended February 28, 2003 and 2002. The Company entered into these agreements to reduce the risk of adverse changes in variable interest rates on certain of the long-term deb t. These derivative instruments will be adjusted to estimated market values quarterly with any adjustment impacting current earnings until their respective maturities.

RESULTS OF OPERATIONS:


Three Months Ended February 28, 2003 Compared With Three Months Ended February 28, 2002

   During the first quarter ended February 28, 2003, net sales increased 5.1% to $43,523,000 compared to $41,406,000 for the like period in 2002 due to favorable trends in all product offerings for the Juno Division, offset by lower volumes in some of the Company's commercial product lines and continued selling price pressures.

   Cost of sales as a percentage of net sales remained relatively unchanged at 50.8% for the first quarter of 2003 compared to 50.9% for the like period in 2002 as favorable product line selling mix was substantially offset by unfavorable purchase price variance on commodity raw materials, and a continued competitive selling price environment in commercial end markets.

   Selling, general and administrative expenses expressed as a percentage of sales decreased to 32.6% for the first quarter of 2003 compared with 38.9% for the like period in 2002. First quarter 2002 results included $3,050,000 of one-time expenses incurred in connection with a proposed major acquisition that was not consummated.

   As a result of the above factors, operating income increased to 16.6% of sales as compared to 10.2% for the like period in 2002.

   Interest expense amounted to $4,109,000 for the first quarter of 2003 compared to $4,397,000 for the like period in 2002. This decrease is due to the reduction of debt from $178,170,000 at February 28, 2002 to $170,849,000 at February 28, 2003 and reductions in interest rates on the Company's floating rate debt.

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, reflecting any material price increases in the prices it charges its customers or offsetting such price increases through improved efficiencies.

LIQUIDITY AND CAPITAL RESOURCES:


   During the three month period ended February 28, 2003, operating activities used cash flow of $3,455,000. This was comprised principally of net income, depreciation and amortization, deferred income taxes, decreases in prepaid expenses and other assets (collectively aggregating $5,379,000), net of increases in inventory and accounts receivable, unrealized gain on interest rate swap, and decreases in accounts payable and accrued liabilities, collectively aggregating $8,835,000.

   Net cash used in investing activities amounted to $1,041,000 used to purchase capital assets.

   The net cash used in financing activities of $4,475,000 consisted primarily of proceeds from the Revolving Credit Facility of $19,650,000 less principal payments on the Senior Credit Facility of $15,175,000.

14

 


   Prior to the June 1999 Merger, the Company historically had funded its operations principally from cash generated from operations and available cash. 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 Subordinated Debt, both entered into in connection with the Merger, represent significant liquidity requirements for the Company. As of February 28, 2003, the Company had cash of approximately $1.2 million, a $12.5 million balance on the Company's Revolving Credit Facility and total term debt of approximately $158.3 million. Detailed information concerning the terms of the Senior Credit Facility and the Subordinated Debt can be found in the Company's audited financial statements included in the November 30, 2002 Annual Report on Form 10-K.


   The Company's $35 million Revolving Credit Facility is available to finance its working capital and had an outstanding balance of $12.5 million on February 28, 2003. 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 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 Subordinated Debt, or to make necessary capital expenditures.

OTHER MATTERS:


   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.

15

 

 

RECENTLY ISSUED ACCOUNTING STANDARDS


   In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activites, " effective for exit or disposal activities initiated after December 31, 2002. Under the new rules, EITF, 94-3 has been nullified and now costs associated with an exit or disposal activity will be recognized when the liability is incurred rather than when the entity committed to an exit plan. Effective November 30, 2002, the Company adopted SFAS No. 146, which did not have an effect on the financial statements of the Company.

In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation-Transition and Disclosure". This standard amends the disclosure requirements of FASB Statement No. 123, "Accounting for Stock-Based Compensation," to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the method used on reported results. This statement is effective for all interim periods beginning after December 15, 2002.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK


The Company is exposed to market risks arising from changes in interest rates. As of February 28, 2003, the Company had both floating-rate and fixed rate long-term debt that is exposed to changes in interest rates. In order to manage the Company's risk, at February 28, 2003 the Company had two interest rate swap agreements. The net unrealized gain from these swaps for the quarter ended February 2003 was $1,263,000 based on the swaps' estimated market values as of February 28, 2003. Detailed information concerning the terms of interest rate swaps can be found in the Company's audited financial statements and notes thereto appearing in the November 30, 2002 Annual Report on Form 10-K.

  
ITEM 4. CONTROLS AND PROCEDURES


   Based on the evaluation of the Company's disclosure controls and procedures as of a date within 90 days of the filing date of this quarterly report, each of T. Tracy Bilbrough, the Chief Executive Officer, and George J. Bilek, Vice President-Finance, have concluded that in their judgment the Company's disclosure controls and procedures are designed to ensure that material information relating to the Company, including the Company's subsidiaries, is made known to such officers by others within the Company or its subsidiaries.

   There were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


PART II - OTHER INFORMATION

Item 1.   Legal Proceedings - On or about May 17, 2002, Juno filed a Complaint against U.S. Industries, Inc. in the Superior Court of the State of Delaware in and for New Castle County and issued written discovery to U.S. Industries. In the Complaint, Juno alleges that U.S. Industries breached an exclusivity agreement with Juno related to a proposed acquisition, by engaging in negotiations with another company, Hubbell Incorporated, during an exclusivity period with Juno. The Complaint seeks damages of $8,500,000 based on a liquidated damages provision contained in the exclusivity agreement to cover expenses incurred and additional losses by Juno, as well as attorneys' fees and costs. U.S. Industries has answered the Complaint and denied liability. The parties are proceeding with discovery.

Item 2.   Changes in Securities and Use of Proceeds - 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.

16

 

 

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: /s/ George J. Bilek
George J. Bilek, Vice President Finance
(Principal Financial Officer and Duly
Authorized Officer of the Registrant)

Dated: April 11, 2003

17

 

 

I, T. Tracy Bilbrough, certify that:


1.   I have reviewed this quarterly report on Form 10-Q of Juno Lighting, Inc., a Delaware corporation;

2.   Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.   Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.   The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

   a)   designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

   b)   evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date");
and

   c)   presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function);

   a)   all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weakness in internal controls;
and

   b)   any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.   The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.


Date: April 11, 2003

/s/ T. Tracy Bilbrough
T. Tracy Bilbrough
Chief Executive Officer

18

 

 

I, George J. Bilek, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Juno Lighting, Inc., a Delaware corporation;

2.   Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.   Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.   The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

   a)   designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

   b)   evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date");
and

   c)   presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.   The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function);

   a)   all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weakness in internal controls;
and

   b)   any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.   The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.



Date: April 11, 2003

/s/ George J. Bilek
George J. Bilek
Vice President Finance

19