-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JWZvw9D3A7l9Ug5CqbzTQ4YyNQt3pEEFsp2FeWBs2LhNmR6rc2rEPbtT6cLgtRus PSkVNe8jQPbxRkbolbejXA== 0000052971-00-000005.txt : 20000214 0000052971-00-000005.hdr.sgml : 20000214 ACCESSION NUMBER: 0000052971-00-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19991231 FILED AS OF DATE: 20000211 FILER: COMPANY DATA: COMPANY CONFORMED NAME: JACO ELECTRONICS INC CENTRAL INDEX KEY: 0000052971 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-ELECTRONIC PARTS & EQUIPMENT, NEC [5065] IRS NUMBER: 111978958 STATE OF INCORPORATION: NY FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-05896 FILM NUMBER: 535567 BUSINESS ADDRESS: STREET 1: 145 OSER AVE CITY: HAUPPAUGE STATE: NY ZIP: 11788 BUSINESS PHONE: 5162735500 MAIL ADDRESS: STREET 1: 145 OSER AVE CITY: HAUPPAUGE STATE: NY ZIP: 11788 10-Q 1 QUARTERLY REPORT FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 {X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period ended December 31, 1999 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 0-5896 JACO ELECTRONICS, INC. (Exact name of registrant as specified in its charter) NEW YORK 11-1978958 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 145 OSER AVENUE, HAUPPAUGE, NEW YORK 11788 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: (631) 273-5500 Indicated 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 report), and (2) has been subject to such filing requirements for the past 90 days. YES X NO __ Number of Shares of Registrant's Common Stock Outstanding as of February 7, 2000 - - 3,653,521 (Excluding 412,200 Shares of Treasury Stock).
FORM 10-Q December 31, 1999 Page 2 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS JACO ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) December 31, June 30, 1999 1999 -------------- ------------ ASSETS Current Assets Cash $ 479,127 $ 922,247 Marketable securities 896,729 881,622 Accounts receivable - net 29,239,832 23,408,900 Inventories 35,179,108 33,224,719 Prepaid expenses and other 692,200 660,782 Prepaid and refundable income taxes 990,855 Deferred income taxes 738,000 336,000 ----------- ----------- Total current assets 67,224,996 60,425,125 Property, plant and equipment - net 6,559,097 6,983,761 Deferred income taxes 397,000 390,000 Excess of cost over net assets acquired - net 3,494,217 3,588,449 Other assets 1,456,542 1,543,328 ----------- ----------- $79,131,852 $72,930,663 =========== =========== See accompanying notes to condensed consolidated financial statements.
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FORM 10-Q December 31, 1999 Page 3 JACO ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) December 31, June 30, 1999 1999 --------------- ------------- LIABILITIES & SHAREHOLDERS' EQUITY Current Liabilities Accounts payable and accrued expenses $ 20,803,690 $ 17,635,319 Current maturities of long term debt and capitalized lease obligations 843,936 791,814 Income taxes payable 183,758 ------------- ------------ Total current liabilities 21,831,384 18,427,133 Long term debt and capitalized lease obligations 20,526,364 18,885,664 Deferred compensation 775,000 750,000 SHAREHOLDERS' EQUITY Preferred stock - authorized, 100,000 shares, $10 par value; none issued Common stock - authorized 10,000,000 shares, $.10 par value; issued 4,065,721 shares and 3,653,521 shares outstanding 406,572 406,572 Additional paid-in capital - net 22,598,795 22,531,295 Retained earnings 15,018,356 13,920,807 Accumulated other comprehensive income 179,896 213,707 Treasury stock (2,204,515) (2,204,515) ------------ ------------ Total shareholders' equity 35,999,104 34,867,866 ---------- ---------- $79,131,852 $72,930,663 ========== ========== See accompanying notes to condensed consolidated financial statements.
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FORM 10-Q December 31, 1999 Page 4 JACO ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED DECEMBER 31, (UNAUDITED) 1999 1998 -------------- ------------- NET SALES $45,100,259 $34,966,098 COST AND EXPENSES Cost of goods sold 35,232,148 28,271,002 ---------- ---------- Gross profit 9,868,111 6,695,096 Selling, general and administrative expenses 7,978,814 6,467,866 ------------ ------------ Operating profit 1,889,297 227,230 Interest expense 345,823 341,022 ------------ ------------ Earnings (Loss) before income taxes 1,543,474 (113,792) Income tax provision (benefit) 660,000 (46,000) ------------ ------------ NET EARNINGS (LOSS) $ 883,474 $ (67,792) ============ ============ Net earnings (loss) per common share Basic and diluted $ 0.24 $ (0.02) ============ ============ Weighted average common shares outstanding Basic 3,653,521 3,654,182 Diluted 3,705,505 3,654,182 ============ ============ See accompanying notes to condensed consolidated financial statements.
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FORM 10-Q December 31, 1999 Page 5 JACO ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED DECEMBER 31, (UNAUDITED) 1999 1998 -------------- ------------- NET SALES $87,117,622 $68,222,554 COST AND EXPENSES Cost of goods sold 69,313,906 54,825,070 ---------- ---------- Gross profit 17,803,716 13,397,484 Selling, general and administrative expenses 15,227,411 13,262,918 ------------ ------------ Operating profit 2,576,305 134,566 Interest expense 668,756 654,464 ------------ ------------ Earnings (Loss) before income taxes 1,907,549 (519,898) Income tax provision (benefit) 810,000 (210,000) ------------ ------------ NET EARNINGS (LOSS) $ 1,097,549 $ (309,898) ============ ============ Net earnings (loss) per common share Basic and diluted $ 0.30 $ (0.08) ============ ============ Weighted average common shares outstanding Basic 3,653,521 3,725,441 Diluted 3,707,424 3,725,441 ============ ============ See accompanying notes to condensed consolidated financial statements.
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FORM 10-Q December 31, 1999 Page 6 JACO ELECTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE SIX MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED) Accumulated Additional other paid-in Retained comprehensive Shares Amount capital earnings income --------------- -------------- ---------------- ---------------- ---------------- Balance at July 1, 1999 4,065,721 $406,572 $ 22,801,295 $ 13,920,807 $ 213,707 Net earnings 1,097,549 Unrealized loss on marketable securities - net (33,811) Comprehensive income Deferred compensation --------------- -------------- ---------------- ---------------- ---------------- Balance at December 31, 1999 4,065,721 $406,572 $ 22,801,295 $ 15,018,356 $ 179,896 =============== ============== ================ ================ ================ Total Treasury Deferred shareholders' stock compensation equity --------------- -------------- ---------------- Balance at July 1, 1999 $ (2,204,515) $ (270,000) $34,867,866 ---------- Net earnings 1,097,549 Unrealized loss on marketable securities - net (33,811) ---------- Comprehensive income 1,063,738 ---------- Deferred compensation 67,500 67,500 --------------- -------------- ---------------- Balance at December 31, 1999 $ (2,204,515) $ (202,500) $35,999,104 =============== ============== ================ See accompanying notes to condensed consolidated financial statements.
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FORM 10-Q December 31, 1999 Page 7 JACO ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED DECEMBER 31, (UNAUDITED) 1999 1998 ------------------ ----------------- Cash flows from operating activities Net earnings (loss) $ 1,097,549 $ (309,898) Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities Depreciation and amortization 877,159 781,948 Deferred compensation 92,500 92,500 Deferred income tax benefit (389,000) (70,000) Provision for doubtful accounts 259,075 253,687 Gain on sale of equipment (1,655) Changes in operating assets and liabilities, (Increase) decrease in operating assets - net (7,084,959) 575,494 Increase (decrease) in operating liabilities - net 3,352,129 (2,618,043) ------------------ ----------------- Net cash used in operating activities (1,795,547) (1,295,967) ------------------ ----------------- Cash flows from investing activities Capital expenditures (220,923) (1,200,316) Increase in marketable securities (68,918) (35,298) Proceeds from sale of equipment 9,689 Decrease (increase) in other assets 75,675 (84,507) ------------------ ----------------- Net cash used in investing activities (214,166) (1,310,432) ------------------ ----------------- Cash flows from financing activities Borrowings under line of credit 29,094,235 28,698,555 Payments under line of credit (27,119,478) (25,089,672) Principal payments under equipment financing and term loans (408,164) (390,463) Purchase of treasury stock (784,553) ------------------ ----------------- Net cash provided by financing activities 1,566,593 2,433,867 ------------------ ----------------- NET DECREASE IN CASH (443,120) (172,532) ------------------ ----------------- Cash at beginning of period 922,247 562,556 ------------------ ----------------- Cash at end of period $ 479,127 $ 390,024 ================== ================= Supplemental schedule of non-cash financing and investing activities Equipment under capital leases $ 126,229 $ 552,544 See accompanying notes to condensed consolidated financial statements.
7 FORM 10-Q December 31, 1999 Page 8 JACO ELECTRONICS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE A - BASIS OF PRESENTATION 1) The accompanying condensed consolidated financial statements reflect all adjustments, consisting only of normal recurring accrual adjustments, which are in the opinion of management, necessary for a fair presentation of the consolidated financial position and the results of operations at and for the periods presented. Such financial statements do not include all the information or footnotes necessary for a complete presentation. Therefore, they should be read in conjunction with the Company's audited consolidated statements for the year ended June 30, 1999 and the notes thereto included in the Company's annual report on Form 10-K. The results of operations for the interim periods are not necessarily indicative of the results for the entire year. 2) The Company has a $30,000,000 term loan and revolving line of credit facility with its banks, which are based principally on eligible accounts receivables and inventories as defined in the agreement. The agreement was amended twice during the first six months of fiscal 2000. Effective September 1, 1999, the agreement was amended to extend the maturity date to September 13, 2001 and effective December 31, 1999, the requirements of certain financial covenants were amended. The interest rate is based on the average 30 day LIBOR rate plus 3/4 % to 1 1/4% depending on the Company's performance for the immediately preceding four fiscal quarters measured by a certain financial ratio. The applicable interest rate may be adjusted quarterly and borrowings under this facility are collateralized by substantially all of the assets of the Company. 3) The Board of Directors of the Company has authorized the purchase of up to 650,000 shares of its outstanding common stock under a stock repurchase program. The purchases may be made by the Company from time to time on the open market. The Company has made purchases of 412,200 shares of its common stock from July 31, 1996 through October 16, 1998 for aggregate consideration of $2,204,515. Since October 17, 1998 the Company has made no additional purchases of treasury stock. 4) For interim financial reporting purposes, the Company uses the gross profit method for computing inventories, which consists of goods held for resale. 8
FORM 10-Q December 31, 1999 Page 9 5) The number of shares used in the Company's basic and diluted earnings per share computations are as follows: Three Months Ended Six Months Ended December 31, December 31, --------------------------------- -------------------------------- 1999 1998 1999 1998 -------------- -------------- ------------- ------------- Weighted average common shares outstanding net of treasury shares, for basic earnings per share 3,653,521 3,654,182 3,653,521 3,725,441 Common stock equivalents for stock options 51,984 53,903 -------------- -------------- ------------- ------------- Weighted average common shares outstanding for diluted earnings per share 3,705,505 3,654,182 3,707,424 3,725,441 ============== ============== ============= =============
For the three and six months ended December 31, 1999 options to purchase 614,796 shares of common stock at a price range of $2.69 to $12.75 were outstanding during the period. The stock options with exercise prices greater than the average quoted market prices, have been excluded from the computation of diluted earnings per share as there affect is anti-dillutive. 6) The Company has two reportable segments: electronics parts distribution and contract manufacturing. The Company's primary business activity is conducted with small and medium size manufacturers, located in North America, that produce electronic equipment used in a variety of industries. Information pertaining to the Company's operations in different geographic areas for the three months and six months ended December 31, 1999 and 1998 is not considered material to the financial statements. The Company's chief operating decision maker utilizes net sales and net earnings (loss) information in assessing performance and making overall operating decisions and resource allocations. The accounting policies of the operating segments are the same as those described in the summary of significant accounting policies included in the Company's annual report to shareholders. Information about the Company's segments is as follows: 9
FORM 10-Q December 31, 1999 Page 10 Three Months Ended Six Months Ended December 31, December 31, ------------ ------------ 1999 1998 1999 1998 --------- --------- --------- ------- (in thousands) (in thousands) Net sales from external customers Electronics components distribution $42,215 $31,315 $81,439 $61,358 Contract manufacturing 2,885 3,651 5,679 6,865 ------- ------- ------- ------- $45,100 $34,966 $87,118 $68,223 ====== ====== ====== ====== Intersegment net sales Electronics components distribution $ 63 $ 91 $ 131 $ 162 Contract manufacturing _____ 51 _____ 111 ------- ------- $ 63 $ 142 $ 131 $ 273 ======== ======= ======= ======= Operating profit (loss) Electronics components distribution $ 1,704 $ 110 $ 2,286 $ (116) Contract manufacturing 185 117 290 251 ------- ------- ------- ------- $ 1,889 $ 227 $ 2,576 $ 135 ===== ======= ====== ======= Interest expense Electronics components distribution $ 220 $ 205 $ 412 $ 390 Contract manufacturing 126 136 257 264 -------- -------- ------- ------- $ 346 $ 341 $ 669 $ 654 ======= ======= ======= ====== Income tax provision (benefit) Electronics components distribution $ 635 $ (39) $ 796 $ (205) Contract manufacturing 25 (7) 14 (5) -------- --------- -------- ---------- $ 660 $ (46) $ 810 $ (210) ======= ========= ======= ========= Identifiable assets Electronics components distribution $69,329 $61,530 $69,329 $61,530 Contract manufacturing 9,803 12,048 9,803 12,048 ------- ------- ------- ------- $79,132 $73,578 $79,132 $73,578 ====== ====== ====== ====== Capital expenditures Electronics components distribution $ 63 $ 404 $ 129 $ 624 Contract manufacturing 46 53 92 576 ------- ------- ------- ------- $ 109 $ 457 $ 221 $ 1,200 ======= ======= ======= ====== Depreciation and amortization Electronics components distribution $ 283 $ 274 $ 571 $ 521 Contract manufacturing 155 133 306 261 -------- -------- ------- ------- $ 438 $ 407 $ 877 $ 782 ======= ======= ======= ======
10 FORM 10-Q December 31, 1999 Page 11 JACO ELECTRONICS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995: Statements in this filing, and elsewhere, which look forward in time involve risks and uncertainties which may effect the actual results of operations. The following important factors, among others, have affected and, in the future, could affect the Company's actual results: dependence on a limited number of suppliers for products which generate a significant portion of the Company's sales, the effect upon the Company of increases in tariffs or duties, changes in trade treaties, strikes or delays in air or sea transportation and possible future United States legislation with respect to pricing and/or import quotas on products imported from foreign countries, and general economic downturns in the electronics distribution industry which may have an adverse economic effect upon manufacturers, end-users of electronic components and electronic component distributors. GENERAL Jaco is a distributor of electronic components and provider of contract manufacturing and value-added services. Products distributed by Jaco include semiconductors, capacitors, resistors, electromechanical devices, flat panel displays and monitors, and power supplies used in the assembly and manufacturing of electronic equipment. The Company's customers are primarily small and medium sized manufacturers. The trend for these customers has been to shift certain manufacturing functions to third parties (outsourcing). The Company intends to seek to capitalize on this trend toward outsourcing by increasing sales of products enhanced by value-added services. Value-added services currently provided by Jaco consist of automated inventory management services, kitting (e.g. supplying sets of specified quantities of products to a customer that are prepackaged for ease of feeding the customer's production lines), and contract manufacturing through Nexus Custom Electronics, Inc., a wholly owned subsidiary of the Company. The Company is also expanding in the flat panel display value-added market which includes full system integration, kitting and the implementation of touch technologies. 11
FORM 10-Q December 31, 1999 Page 12 Results of Operations The following table sets forth certain items in the Company's statements of operations as a percentage of net sales for the periods shown: Three Months Ended Six Months Ended December 31, December 31, ------------------------------ --------------------------- 1999 1998 1999 1998 ---------- ---------- ---------- ---------- Net Sales 100.0% 100.0% 100.0% 100.0% Cost of goods sold 78.1 80.9 79.6 80.4 ---------- ---------- ---------- ---------- Gross Profit 21.9 19.1 20.4 19.6 Selling, general and administrative expenses 17.7 18.5 17.4 19.4 ---------- ---------- ---------- ---------- Operating profit 4.2 0.6 3.0 0.2 Interest expense 0.8 0.9 0.8 1.0 ---------- ---------- ---------- ---------- Earnings (Loss) before income taxes 3.4 (0.3) 2.2 (0.8) Income tax provision (benefit) 1.4 (0.1) 0.9 (0.3) ---------- ---------- ---------- ---------- NET EARNINGS (LOSS) 2.0% (0.2)% 1.3% (0.5)% ========= ========= ========== ==========
COMPARIS0N OF THE THREE AND SIX MONTHS ENDED DECEMBER 31,1999 AND DECEMBER 31,1998 Net sales for the three and six months ended December 31,1999 were $45.1 million and $87.1 million, respectively, compared to $35.0 million and $68.2 million for the three and six months ended December 31,1998, respectively representing increases in net sales of 29.0% and 27.7%, respectively. The Company's net sales were impacted by strong demand for both active and passive components including record quarterly sales of flat panel displays and monitors. The Company has continued to invest in increasing the number of sales, marketing and engineering personnel, which in conjunction with, the electronic automated inventory management systems, provides a value-added service to enable the Company to increase net sales, in addition, there has been increases resulting from the strong demand for product. Gross profit margins as a percentage of net sales were 21.9% and 20.4% for the three and six months ended December 31,1999, respectively, compared to 19.1% and 19.6% for the three and six months ended December 31,1998, respectively. The increases are attributable to the strong demand for components that currently exist throughout the electronics industry. During the second quarter, there has been a world-wide shortage in capacitors which has historically represented a significant portion of the Company's sales. 12 FORM 10-Q December 31, 1999 Page 13 Selling, general and administrative expenses ("S,G&A") for the three and six months ended December 31, 1999 were $8.0 million and $15.2 million, respectively, increases of $1.5 million and $2.0 million when compared to the three and six months ended December 31, 1998, respectively. As a percentage of net sales, S,G&A for the three and six months ended December 31, 1999 were 17.7% and 17.4%, respectively, compared to 18.5% and 19.4% for the three and six months ended December 31, 1998, respectively. These trends reflect operating efficiencies achieved with higher revenue levels. Interest expense for the three and six months ended December 31, 1999 were $346,000 and $669,000, respectively, compared to $341,000 and $654,000 for the three and six months ended December 31, 1998, respectively. The Company has been able to maintain its borrowings at comparable levels to the prior year. Additionally, the rates have remained relatively constant. The net earnings for the three and six months ended December 31, 1999 were $883,000 and $1,098,000 or $.24 and $.30 per share diluted, respectively, compared to net losses of $68,000 and $310,000 or $.02 and $.08 per share diluted, respectively, during the same periods in the last fiscal year. The increase in earnings was attributable to the increase in net sales, the increase in gross profit margins and the operating efficiencies achieved in S,G&A. The Company continues to be cautiously optimistic that it is positioned to see increased performance based on the strong demand for electronic components, continuing growth in the Company's flat panel division, and the automated inventory management programs. LIQUIDITY AND CAPITAL RESOURCES The Company's agreement with its banks, as amended, provides the Company with a $30,000,000 term loan and revolving line of credit facility based principally on eligible accounts receivable and inventories of the Company as defined in the agreement expiring September 13, 2001. The interest rate of the credit facility is based on the average 30 day LIBOR rate plus 3/4% to 1-1/4% depending on the Company's performance for the immediately preceding four fiscal quarters measured by a certain financial ratio, and may be adjusted quarterly. The outstanding balance on the revolving line of credit facility was $18,938,332 at December 31, 1999. The term loan, with a remaining balance of $267,857 at December 31, 1999, requires monthly principal payments of $17,857, together with interest through March 1, 2001. Borrowings under this facility are collateralized by substantially all of the assets of the Company. The agreement contains provisions for maintenance of certain financial ratios, all of which the Company is in compliance with at December 31, 1999, and prohibits the payment of cash dividends. For the six months ended December 31, 1999, the Company's net cash used in operating activities was approximately $1.8 million, as compared to net cash used in operating activities of $1.3 million for the six months ended December 31, 1998. The increase is primarily attributable to an increase in inventory and accounts receivable which was partially offset by an increase in accounts payable and accrued expenses and net earnings for the six months ended December 31, 1999. Net cash used in investing activities decreased to $0.2 million for the six months ended December 31, 1999, as compared to $1.3 million for the six months ended December 31, 1998. The decrease is primarily attributable to a reduction in capital expenditures. Net borrowings under the Company's line of credit was approximately $2.0 million for the six months ended December 31, 1999, as compared to net borrowings of $3.6 million for the six months ended December 31, 1998. The change of $1.6 million is primarily attributable to a reduction in capital expenditures and no additional purchases of treasury stock during the six months ended December 31, 1999. The Company's cash expenditures may vary significantly from current levels, based on a number of factors, including, but not limited to, future acquisitions, if any. For the first six months of Fiscal 2000 and Fiscal 1999, inventory turnover was 4.1x and 3.2x, respectively. The average days outstanding of the Company's accounts receivable at December 31, 1999 was 55 days, as compared to 58 days at December 31, 1998. The Board of Directors of the Company had authorized the purchase of up to 250,000 shares of its common stock under a stock repurchase program. During Fiscal 1999, the Board of Directors authorized the repurchase of up to an additional 400,000 shares of the Company's common stock. The purchases may be made by the Company from time to time on the open market at the Company's discretion and will be dependent on market conditions. Through October 16, 1998, the Company has purchased 412,200 shares 13 FORM 10-Q December 31, 1999 Page 14 of its common stock for aggregate consideration of $2,204,515 under this program. Since October 17, 1998, the Company has made no additional purchases of treasury stock. The Company believes that cash flow from operations and funds available under its credit facility will be sufficient to fund the Company's capital needs for at least the next twelve months. Year 2000 Compliance The year 2000 ("Y2K") issue was the result of computer programs using a two-digit format, as opposed to four digits, to indicate the year. Such computer systems would have been unable to interpret dates beyond the year 1999, which would cause a system failure or other computer errors, leading to disruptions in operations. In April 1996, the Company developed a three-phase program for Y2K information systems compliance. Phase I was to identify those systems with which the Company had exposure to Y2K issues. Phase II was the development and implementation of action plans to be Y2K compliant in all areas by late 1998. Phase III, which was fully completed by late 1999, was the final major area of exposure to ensure compliance. The Company had identified three major areas determined to be critical for successful Y2K compliance: (1) financial and informational system applications, (2) manufacturing applications and (3) third party relationships. As of September 1, 1998, Jaco completed the redesign and development of an entirely new distribution software system. All of the dates in this new database are 8 characters, including the century. The system has been tested and has been in production as of September 1, 1998. The systems include customer order entry, purchase order entry to the Company's manufacturers, warehousing and inventory control. The financial systems, Accounts Payable and General Ledger have been Y2K compliant since April 1997. The Accounts Receivable system is Y2K compliant as of September 1, 1998. Jaco's distribution facilities: warehouse, shipping and other physical handling have been tested and are Y2K compliant. At this time, the Company has tested substantially all of its programs and has experienced no system problems as it relates to Y2K issues. There were only minor corrections that needed to be made to certain non-essential applications. In general, the Y2K compliance efforts continue to be part of the Company's ongoing software development process. The Company has spent to date approximately $1.8 million to replace the core financial and reporting software systems for its distribution business. The Company has utilized outside consultants to undertake a portion of the work. Inflation Inflation has not had a significant impact on the Company's operations during the last three fiscal years. Quantitative and Qualitative Disclosure about Market Risk The Company is exposed to interest rate change market risk with respect to its credit facility with a financial institution which is priced based on the average 30 day LIBOR rate plus 3/4% to 1 1/4% depending on the Company's performance for the immediately preceding four fiscal quarters measured by a certain financial ratio, and may be adjusted quarterly. At January 31, 2000, $15,701,266 was outstanding under the credit facility. Changes in the LIBOR interest rate during the fiscal year ending June 30, 2000 will have a positive or negative effect on the Company's interest expense. Each 1% fluctuation in the LIBOR interest rate will increase or decrease interest expense for the Company by approximately $157,000. 14 FORM 10-Q December 31, 1999 Page 15 PART II - OTHER INFORMATION Item 1. Legal Proceedings Nothing to Report Item 2. Changes in Securities and Use of Proceeds Nothing to Report Item 3. Defaults Upon Senior Securities Nothing to Report Item 4. Submission of Matters to a Vote of Security Holders Nothing to Report Item 5. Other Information Nothing to Report Item 6. Exhibits and Reports on Form 8-K a) Exhibits 27.1 Financial Data Schedule 99.8.6 Amendment to Second Restated and Amended Loan and Security Agreement dated December 31, 1999 b) Reports on Form 8-K None 15 S I G N A T U R E 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. JACO ELECTRONICS, INC. (Registrant) BY: /s/ Jeffrey D. Gash Jeffrey D. Gash, Vice President/Finance (Principal Financial Officer) DATED: February 11, 2000 EX-27.1 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the unaudited condensed consolidated balance sheet as of December 31, 1999 and the unaudited condensed consolidated statement of operations for the six months ended December 31, 1999 and is qualified in its entirety by reference to such financial statements. 6-MOS JUN-30-2000 JUL-01-1999 DEC-31-1999 479,127 896,729 29,942,673 702,841 35,179,108 67,224,996 11,739,521 5,180,424 79,131,852 21,831,384 21,301,364 0 0 406,572 35,592,532 79,131,852 87,117,622 87,117,622 69,313,906 69,313,906 15,227,411 0 668,756 1,907,549 810,000 1,097,549 0 0 0 1,097,549 0.30 0.30
EX-99.8.6 3 AMENDMENT TO LOAN December 31, 1999 JACO ELECTRONICS, INC. 145 Oser Avenue Hauppauge, NY 11788 NEXUS CUSTOM ELECTRONICS, INC. Prospect Street Brandon, VT 05733 Gentlemen: Reference is made to the Second Restated and Amended Loan and Security Agreement between us bearing an effective date of September 13, 1995, as amended and supplemented (the "Agreement"). All initially capitalized terms not otherwise defined herein shall have such meaning as are ascribed to them under the Agreement. It is hereby agreed by and between us that the Agreement is hereby amended effective December 31, 1999, as follows: 1. The first sentence of Paragraph 17(d) is amended to read in its entirety as follows: "Maintain at all times a ratio of consolidated current assets of Debtor and its Subsidiaries to consolidated current liabilities of Debtor and its Subsidiaries of not less than 1.5 to 1.0." 2. The first sentence of Paragraph 18(e) is amended to read in its entirety as follows: "Permit at any time the ratio of Indebtedness to Tangible Net Worth to be greater than 1.60 to 1.0; "Indebtedness" shall mean consolidated total liabilities of Debtor and its Subsidiaries determined in accordance with generally accepted accounting principles consistently applied." Except as herein specifically amended, the Agreement shall remain in full force and effect in accordance with its original terms, except as previously amended. If the foregoing accurately reflects our understanding, kindly sign the enclosed copy of this letter and return it to our office as soon as practicable. Very truly yours, GMAC COMMERCIAL CREDIT LLC,successor by merger to BNY FINANCIAL CORPORATION, successor in interest to THE BANK OF NEW YORK COMMERCIAL CORPORATION, as Agent and Lender By: /s/ Daniel Murray_ Title: Senior Vice President FLEET BANK, N.A. f/k/a NATWEST BANK N.A., as Lender By: /s/ Alice Aliceberg Title: Vice President ACCEPTED & AGREED TO: JACO ELECTRONICS, INC. By:/s/ Jeffrey D. Gash Title: Vice President NEXUS CUSTOM ELECTRONICS, INC. By:/s/ Jeffrey D. Gash Title: Vice President -----END PRIVACY-ENHANCED MESSAGE-----