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Form 10-Q for JPE INC filed on May 15 2000
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended March 31, 2000
[ ] 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 0-22580
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
(Exact name of registrant as specified in its charter)
MICHIGAN
(State or other jurisdiction of incorporation or organization)
38-2958730
(I.R.S. Employer Identification No.)
30400 TELEGRAPH ROAD, SUITE 401, BINGHAM FARMS, MICHIGAN, 48025
(Address of principal executive offices) (Zip Code)
(248) 723-5531
(Registrant's telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed, since
last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
As of March 31, 2000, there were 14,043,600 shares of the registrant's common
stock outstanding. This Quarterly Report on Form 10-Q contains 22 pages, of
which this is page 1.
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
INDEX
Page
----
Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets 3
- At March 31, 2000 and 1999 (Unaudited)
- At December 31, 1999
Consolidated Condensed Statements of Operations (Unaudited) 4
- For the Three Months Ended
- March 31, 2000 (Successor Company)
- March 31, 1999 (Predecessor Company)
Consolidated Condensed Statements of
Shareholders' Equity (Unaudited) 5
- For the Three Months Ended March 31, 2000
Consolidated Condensed Statements of Cash Flows (Unaudited) 6
- For the Three Months Ended March 31, 2000 (Successor Company)
- For the Three Months Ended March 31, 1999 (Predecessor Company)
Notes to Unaudited Consolidated Condensed Financial Statements 7-15
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 15
Item 3. Quantative and Qualitative Disclosures About Market Risk 19
Part II. Other Information
Item 6. Exhibits and Reports 21
Signature 22
2
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
CONSOLIDATED CONDENSED BALANCE SHEETS
($ Amounts in Thousands)
AT MARCH 31,
(UNAUDITED)
-----------
1999 AT DECEMBER 31,
2000 RESTATED (NOTE A) 1999
---- ---------------- ----
ASSETS
Current assets:
Cash and cash equivalents $ 338 $ 695 $ 639
Accounts receivables trade, net 21,219 8,448 20,205
Inventory, net 22,064 13,724 22,589
Other current assets 1,369 1,243 1,396
-------- ------- --------
Total current assets 44,990 24,110 44,829
Investment in affiliated companies -- 17,233 --
Property, plant and equipment, net 26,211 10,350 26,797
Goodwill, net 3,832 5,445 3,902
Deferred income taxes 2,844 -- 2,778
Other assets 678 654 599
-------- ------- --------
Total assets $ 78,555 $ 57,792 $ 78,905
======== ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Notes Payable $ 42,972 $ -- $ 45,877
Current portion of long term debt -- 67,448 --
Accounts payable trade 9,380 4,737 8,306
Accrued liabilities and other
current liabilities 4,569 2,388 3,451
-------- -------- --------
Total current liabilities 56,921 74,573 57,634
Deferred income taxes and other liabilities 1,924 319 1,873
Long-term debt, non-current 219 38 246
-------- -------- --------
Total liabilities 59,064 74,930 59,753
-------- -------- --------
Shareholders' equity (deficit):
Warrants 293 -- 293
First Series Preferred Shares, no par value,
3,000,000 authorized, 1,973,002 shares
issued and outstanding at March 31, 2000
and December 31, 1999 and no shares issued
and outstanding at March 31, 1999 16,590 -- 16,590
Common stock, no par value, 15,000,000
authorized, 14,043,600 shares issued and
outstanding at March 31, 2000 and December
31, 1999 and 4,602,180 issued and outstanding
at March 31, 1999 2,379 28,051 2,379
Retained earnings (accumulated deficit) 229 (45,189) (110)
-------- -------- --------
Total shareholders' equity
(deficit) 19,491 (17,138) 19,152
-------- -------- --------
Total liabilities and
shareholders' equity (deficit) $ 78,555 $ 57,792 $ 78,905
======== ======== ========
The accompanying notes are an integral part
of the consolidated condensed financial statements.
3
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
For the Three Months Ended March 31, 2000 and 1999
($ Amounts in Thousands, Except Per Share Data)
(Unaudited)
SUCCESSOR PREDECESSOR
COMPANY COMPANY
------- -------
THREE MONTHS THREE MONTHS
ENDED ENDED
MARCH 31, MARCH 31,
2000 1999
---- ----
RESTATED (NOTE A)
Net sales $37,727 $14,276
Cost of goods sold 30,922 10,284
------- -------
Gross profit 6,805 3,992
Selling, general and administrative expenses 5,000 3,234
Other expense (income) (2) 258
Affiliate companies' (income) -- (4,134)
Interest expense, net 1,213 1,804
------- -------
Income from continuing operations before
income taxes and extraordinary item 594 2,830
Income tax expense 255 71
------- -------
Income from continuing operations before
extraordinary item 339 2,759
Discontinued operation:
Income from operations of IAF -- 214
Loss on sale of stock of IAF -- (2,321)
Extraordinary item:
Forgiveness of IAF debt -- 2,015
------- -------
Net income $ 339 $ 2,667
======= =======
Basic earnings per share from continuing
operations before extraordinary item:
Common Shares $0.00 $0.60
First Series Preferred Shares 0.15 --
Earnings per share from continuing operations
before extraordinary item assuming dilution:
Common Shares $0.00 $0.59
First Series Preferred Shares 0.15 --
Basic earnings per share:
Common Shares $0.00 $0.58
First Series Preferred Shares 0.15 --
Earnings per share assuming dilution:
Common Shares $0.00 $0.57
First Series Preferred Shares 0.15 --
The accompanying notes are an integral part
of the consolidated condensed financial statements.
4
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
($ Amounts in Thousands)
(Unaudited)
NET INCOME
BALANCES AT FOR THE PERIOD BALANCES AT
DECEMBER 31, JANUARY 1 TO MARCH 31,
1999 MARCH 31, 2000 2000
---- -------------- ----
Common Stock:
Shares Outstanding 14,043,600 14,043,600
Amount $ 2,379 $ 2,379
First Series Preferred Shares:
Shares Outstanding 1,973,002 1,973,002
Amount $ 16,590 $ 16,590
Warrants:
Warrants Outstanding 422,601 422,601
Amount $ 293 $ 293
Retained Earnings (Deficit) $ (110) $ 339 $ 229
------------ ----- -------------
Total Shareholder Equity $ 19,152 $ 339 $ 19,491
============ ===== =============
The accompanying notes are an integral part
of the consolidated condensed financial statements.
5
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
($ Amounts in Thousands)
(Unaudited)
PREDECESSOR
COMPANY
SUCCESSOR -------
COMPANY THREE MONTHS
-------
THREE MONTHS ENDED
ENDED MARCH 31,
MARCH 31, 1999
2000 RESTATED (NOTE A)
---- ----------------
Cash flows from operating activities:
Net income $ 339 $ 2,667
Adjustments to reconcile net income to net
cash provided by (used for) operating activities:
Extraordinary items, forgiveness of liabilities -- (2,015)
Depreciation and amortization 930 895
Loss on sale of subsidiary -- 2,549
Affiliate companies' income -- (4,134)
Other -- 98
Changes in operating assets and liabilities:
Accounts receivable (1,014) (2,972)
Inventory 525 (67)
Other current assets 27 588
Accounts payable 1,074 (1,644)
Accrued liabilities and other current liabilities 1,103 (192)
Deferred income taxes -- (11)
------- -------
Net cash provided by (used for)
operating activities 2,984 (4,238)
Cash flows from investing activities:
Purchase of property and equipment (274) (204)
Other (79) --
Cash proceeds from sale of Industrial &
Automotive Fasteners, Inc. -- 20,000
Cash loaned to equity investees -- 1,799
------- -------
Net cash provided by (used for)
investing activities (353) 21,595
Cash flows from financing activities:
Net borrowings (payments) under demand notes (2,905) --
Net borrowings (payments) under revolving loan -- (17,052)
Repayments of other debt (27) (4)
------- -------
Net cash provided by (used for)
financing activities (2,932) (17,056)
Cash and cash equivalents:
Net increase (decrease) in cash (301) 301
Cash, beginning of period 639 394
------- -------
Cash, end of period $ 338 $ 695
======= =======
The accompanying notes are an integral part
of the consolidated condensed financial statements
6
JPE, INC. (D/B/A ASCET INC AND ASC EXTERIOR TECHNOLOGIES)
NOTES TO UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
A. BASIS OF PRESENTATION:
The accompanying unaudited condensed consolidated financial statements
of JPE, Inc. (d/b/a ASCET INC and ASC Exterior Technologies (together
with its subsidiaries, the "Company")) have been prepared in accordance
with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results
for the periods presented are not necessarily indicative of the results
that may be expected for the year ended December 31, 2000. These
financial statements should be read in conjunction with the Company's
consolidated financial statements and footnotes for the year ended
December 31, 1999. Certain financial statement items have been
reclassified to conform to the current quarter's format. In addition,
net earnings for the Predecessor Company for the three months ended
March 31, 1999 has been restated from unaudited amounts as originally
reported to reflect additional income of $582 thousand principally
related to additional revenue, inventory valuation and certain accrual
adjustments.
The balance sheet at December 31, 1999 has been derived from the
audited financial statements at that date but does not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
For further information, refer to the consolidated financial statements
and footnotes thereto included in the Registrant Company and
Subsidiaries' annual report on Form 10-K for the year ended December
31, 1999.
During 1998 and throughout the first quarter of 1999, the Company
experienced operational and financial difficulties and a plan to
restructure its financial affairs was formulated. During the third
quarter of 1998, three of the Company's subsidiaries were placed under
court ordered protection. On September 15, 1998, Plastic Trim, Inc.
("PTI") and Starboard Industries, Inc. ("Starboard") filed voluntary
petitions for relief under Chapter 11 of the Federal Bankruptcy Code in
the United States Bankruptcy Court for the Eastern Division of
Michigan. On August 27, 1998, the Ontario Court (General Division)
Commercial List issued an order to appoint an Interim Receiver for JPE
Canada, Inc. ("JPEC") pursuant to Section 47 of the Bankruptcy and
Insolvency Act of Canada. On February 8, 1999, the net assets of JPEC
were sold, to the Ventra Group, as more fully described in Note I.
Under these conditions, generally accepted accounting principles do not
allow the Company to consolidate these subsidiaries from the dates of
their respective filings. The Company has utilized the equity method of
accounting in preparing the financial statements for the three months
ended March 31, 1999.
Certain non-core operations of the Company were divested of March 26,
1999. The stock of the Company's subsidiary, Industrial and Automotive
Fasteners, Inc., was sold to MacLean-Fogg Company, as more fully
described in Note J. The remaining subsidiaries of the Company were
included in the Investment Transaction, as more fully described below.
On May 27, 1999 in accordance with the terms of an Investment Agreement
(the "Investment Agreement") among JPE, Inc., ASC Holdings LLC ("ASC")
and Kojaian Holdings LLC ("Kojaian") dated April 28, 1999 the Company
issued 1,952,352.19 shares of First Series Preferred Shares on May 27,
1999 (the "Closing Date"), in equal proportions to ASC and Kojaian for
an aggregate purchase price of $16,413,274 payable in cash. Each First
Series Preferred Share possesses voting and equity rights equal to 50
common shares of the Company. In addition, the Investment Agreement
provided that the shareholders of record of JPE, Inc. common stock on
June 11, 1999 (the "Record Date") were entitled to receive warrants to
purchase First Series Preferred Shares (the "Warrants"). Each holder of
common stock received .075 Warrants for each share of common stock held
on the record date, and each full Warrant entitled the holder to
purchase one First Series Preferred Share. The Warrants were
distributed as a dividend to such shareholders. The Warrants carry an
initial exercise price of $9.99 per First Series Preferred Share,
subject to price adjustments based on the Final Actual EBITDA (as
defined in the Investment Agreement) and the cost of certain
environmental remediation for a 24 month period occurring after the
consummation of the
7
Investment Agreement. The Warrants are exercisable for the 90 day
period following the providing of notice by the Company to the holders
thereof of the Final Actual EBITDA.
In addition, on May 27, 1999 ASC and Kojaian (in equal proportions)
subscribed and paid for 9,441,420 newly issued shares of common stock
for an aggregate purchase price of $1,986,726 payable in cash. These
newly issued shares of common stock were distributed to ASC and Kojaian
on June 12, 1999.
As a precondition to the consummation of the Investment Transaction,
the Company's existing bank lenders (the "Bank Group") agreed on May
27, 1999 to a $16.5 million forgiveness of the Company's existing bank
debt, under the terms of the Company's Forbearance Agreement dated
August 10, 1998, as amended. In consideration for the debt forgiveness
and pursuant to the Investment Agreement, the Company issued 20,650.115
shares of Preferred Stock to the Bank Group on May 27, 1999 for $1,000
of consideration (see Note K). In addition, the Company granted the
Bank Group 77,437.937 Warrants (which Warrants contain the same terms
and conditions as granted to the shareholders of common stock of the
Company on the Record Date), except the exercise price for each First
Series Preferred Shares is approximately $8.16 per share.
The immediate effect of these transactions transferred (a)
approximately 47.5% of the voting securities of the Company to Kojaian,
(b) approximately 47.5% of the voting securities of the Company to ASC,
and (c) approximately 1% of the voting securities of the Company to the
Bank Group (these transactions are hereafter referred to as the
"Investment Transaction"). The remaining amount of the voting
securities continues to be held by the public shareholders of the
Company and the Bank Group. Thus, as of December 29, 1999 each of ASC
and Kojaian beneficially owned approximately 95% of the voting
securities of the Company, and after the exercise of all of the
Warrants, would have beneficially owned approximately 80% of the voting
securities of the Company.
Pursuant to the terms of a letter agreement (the " Letter Agreement")
dated August 30, 1999 among ASC and the sole member of ASC (Heinz C.
Prechter) and Kojaian and the members of Kojaian (Mike Kojaian and C.
Michael Kojaian), Heinz C. Prechter agreed to purchase (through ASC or
otherwise) 4,720,710 common shares and 976,176.095 First Series
Preferred Shares of JPE, Inc. from Kojaian for $9.2 million. The Letter
Agreement was subject to the conditions precedent of (i) obtaining the
consent of Comerica Bank, the Company's post-Investment Transaction
lender, and (ii) the termination of the applicable waitin |
