-----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, VzlXwQZ0BV4m9qohaAZPqYeN0koa3y0aR36qjg0o7leEJMwcSVdxNaN2ai1CcCnD dq58XA+u6bKcECKnesaa9g== 0000052971-00-000014.txt : 20000516 0000052971-00-000014.hdr.sgml : 20000516 ACCESSION NUMBER: 0000052971-00-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000331 FILED AS OF DATE: 20000515 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: 634583 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 March 31, 2000 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 May 12, 2000- 3,683,271 (Excluding 412,200 Shares of Treasury Stock). FORM 10-Q March 31, 2000 Page 2 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS JACO ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) March 31, June 30, 2000 1999 ----------- --------- ASSETS Current Assets Cash $ 427,287 $ 922,247 Marketable securities 903,868 881,622 Accounts receivable - net 29,799,762 23,408,900 Inventories 43,210,928 33,224,719 Prepaid expenses and other 653,926 660,782 Prepaid and refundable income taxes 990,855 Deferred income taxes 1,008,000 336,000 ----------- ----------- Total current assets 76,003,771 60,425,125 Property, plant and equipment - net 6,426,398 6,983,761 Deferred income taxes 394,000 390,000 Excess of cost over net assets acquired - net 3,655,418 3,588,449 Other assets 1,722,155 1,543,328 ----------- ----------- $88,201,742 $72,930,663 =========== =========== See accompanying notes to condensed consolidated financial statements.
FORM 10-Q March 31, 2000 Page 3 JACO ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) March 31, June 30, 2000 1999 ---------------- -------------- LIABILITIES & SHAREHOLDERS' EQUITY Current Liabilities Accounts payable and accrued expenses $ 25,159,115 $ 17,635,319 Current maturities of long term debt and capitalized lease obligations 859,324 791,814 Income taxes payable 1,130,136 ------------- ----------- Total current liabilities 27,148,575 18,427,133 Long term debt and capitalized lease obligations 22,373,398 18,885,664 Deferred compensation 787,500 750,000 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 and 4,080,721 shares, respectively, and 3,653,521 and 3,668,521 shares outstanding, respectively 408,072 406,572 Additional paid-in capital - net 22,721,645 22,531,295 Retained earnings 16,784,584 13,920,807 Accumulated other comprehensive income 182,483 213,707 Treasury stock (2,204,515) (2,204,515) ------------ ------------ Total shareholders' equity 37,892,269 34,867,866 ---------- ---------- $88,201,742 $72,930,663 =========== ========== See accompanying notes to condensed consolidated financial statements.
FORM 10-Q March 31, 2000 Page 4 JACO ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, (UNAUDITED) 2000 1999 ----------- -------- NET SALES $51,693,699 $36,187,676 COST AND EXPENSES Cost of goods sold 39,680,844 29,193,984 ---------- ---------- Gross profit 12,012,855 6,993,692 Selling, general and administrative expenses 8,691,425 6,538,685 ------------ ------------ Operating profit 3,321,430 455,007 Interest expense 334,202 335,630 ------------ ------------ Earnings before income taxes 2,987,228 119,377 Income tax provision 1,221,000 48,000 ------------ ------------ NET EARNINGS $ 1,766,228 $ 71,377 ============ ============ Net earnings per common share Basic $ 0.48 $ 0.02 ============ ============ Diluted $ 0.45 $ 0.02 ============ ============ Weighted average common shares outstanding Basic 3,657,642 3,653,521 ============ ============ Diluted 3,924,887 3,663,882 ============ ============ See accompanying notes to condensed consolidated financial statements.
FORM 10-Q March 31, 2000 Page 5 JACO ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED MARCH 31, (UNAUDITED) 2000 1999 -------------- ----------- NET SALES $138,811,321 $104,410,230 COST AND EXPENSES Cost of goods sold 108,994,750 84,019,054 ----------- ---------- Gross profit 29,816,571 20,391,176 Selling, general and administrative expenses 23,918,836 19,801,603 ------------ ------------ Operating profit 5,897,735 589,573 Interest expense 1,002,958 990,094 ------------ ------------ Earnings (Loss) before income taxes 4,894,777 (400,521) Income tax provision (benefit) 2,031,000 (162,000) ------------ ------------ NET EARNINGS (LOSS) $ 2,863,777 $ (238,521) ============ ============ Net earnings (loss) per common share Basic $ 0.78 $ (0.06) ============ ============ Diluted $ 0.76 $ (0.06) ============ ============ Weighted average common shares outstanding Basic 3,654,885 3,713,132 ============ ============ Diluted 3,768,395 3,713,132 ============ ============ See accompanying notes to condensed consolidated financial statements.
FORM 10-Q March 31, 2000 Page 6 JACO ELECTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE NINE MONTHS ENDED MARCH 31, 2000 (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 2,863,777 Unrealized loss on marketable securities - net (31,224) Comprehensive income Exercise of Stock Options 15,000 1,500 89,100 Deferred compensation --------------- -------------- ---------------- ---------------- ---------------- Balance at March 31, 2000 4,080,721 $408,072 $ 22,890,395 $ 16,784,584 $ 182,483 =============== ============== ================ ================ ================ Total Treasury Deferred shareholders' stock compensation equity ------------- -------------- -------------- Balance at July 1, 1999 $ (2,204,515) $ (270,000) $34,867,866 ----------- Net earnings 2,863,777 Unrealized loss on marketable securities - net (31,224) --------- Comprehensive income 2,832,553 ---------- Exercise of Stock Options 90,600 Deferred compensation 101,250 101,250 ---------------- --------------- ------------- Balance at March 31, 2000 $ (2,204,515) $ (168,750) $37,892,269 ================ =============== ============== See accompanying notes to condensed consolidated financial statements.
FORM 10-Q March 31, 2000 Page 7 JACO ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE MONTHS ENDED MARCH 31, (UNAUDITED) 2000 1999 ------------------ ----------------- Cash flows from operating activities Net earnings (loss) $ 2,863,777 $ (238,521) Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities Depreciation and amortization 1,323,241 1,192,647 Deferred compensation 138,750 138,750 Deferred income tax (benefit) expense (658,000) 1,000 Provision for doubtful accounts 455,125 347,255 Gain on sale of equipment (1,655) Changes in operating assets and liabilities, Increase in operating assets - net (14,863,982) (2,959,292) Increase in operating liabilities - net 8,653,932 618,076 ------------------ ----------------- Net cash used in operating activities (2,087,157) (901,740) ------------------ ----------------- Cash flows from investing activities Capital expenditures (453,582) (1,461,827) Increase in marketable securities (71,470) (35,298) Proceeds from sale of equipment 9,689 Acquisition of operating assets (1,212,428) Increase in other assets (189,938) (147,634) ------------------ ----------------- Net cash used in investing activities (1,927,418) (1,635,070) ------------------ ----------------- Cash flows from financing activities Borrowings under line of credit 45,247,667 40,346,052 Payments under line of credit (41,208,947) (36,954,685) Principal payments under equipment financing and term loans (609,705) (602,583) Borrowings under term loan 575,000 Proceeds from exercise of stock options 90,600 Purchase of treasury stock (784,553) ------------------ ----------------- Net cash provided by financing activities 3,519,615 2,579,231 ------------------ ----------------- NET (DECREASE) INCREASE IN CASH (494,960) 42,421 ------------------ ----------------- Cash at beginning of period 922,247 562,556 ------------------ ----------------- Cash at end of period $ 427,287 $ 604,977 ================== ================= 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.
FORM 10-Q March 31, 2000 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. 5) On February 25, 2000, the Company purchased the operating assets of PGI Industries, Inc., an exporter of electronic components, located in Ronkokoma, New York. The purchase price of approximately $1.2 million was paid exclusively by cash. In addition, $100,000 is payable over the next two years based on certain events defined in the purchase agreement. This acquisition has been accounted for by the purchase method and, as such, the fair value of the assets acquired has been recorded on the date of the purchase. The results of operations are included with those of the Company's from the date of acquisition. The excess of the purchase price, as adjusted will be amortized using the straight line method over a period not to exceed 20 years. Proforma results of operations not expected to be material, presently, they are not materially different from those of the Company. 6) The Company has entered into a definitive agreement to acquire privately held Interface Electronics Corporation (IEC), a distributor of electronic components primarily serving the Northeast and Southeast. Under the terms of the agreement, Jaco will acquire IEC for approximately $15.4 million in cash plus an earn out based on IEC's performance. Jaco will also assume approximately $3.5 million of IEC's debt. The transaction is expected to be consummated in the second calendar quarter of 2000 and is subject to the expiration of the applicable Hart-Scott-Rodino waiting period and other customary closing conditions. To finance the consideration for the transaction, the Company received a commitment from its commercial banks to increase its credit facility from $30,000,000 to $50,000,000, based on eligible accounts receivable and inventories of the Company. FORM 10-Q March 31, 2000 Page 9 7) The number of shares used in the Company's basic and diluted earnings per share computations are as follows: Three Months Ended Nine Months Ended March 31, March 31, --------------------------------- -------------------------------- 2000 1999 2000 1999 -------------- -------------- ------------- ------------- Weighted average common shares outstanding net of treasury shares, for basic earnings per share 3,657,642 3,653,521 3,654,885 3,713,132 Common stock equivalents for stock options 267,245 10,361 113,510 -------------- -------------- ------------- ------------- Weighted average common shares outstanding for diluted earnings per share 3,924,887 3,663,882 3,768,395 3,713,132 ============== ============== ============= =============
As of March 31, 2000 options to purchase 584,430 shares of common stock at a price range of $2.69 to $12.75 were outstanding compared to 573,229 shares as of March 31, 1999. 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 antidilutive. Stock options to purchase 52,000 shares of the Company's common stock have been excluded from the computation of diluted earnings per share for the three and nine months ended March 31, 2000 as compared to 319,230 and 573,229 shares for the three and nine months ended March 31, 1999, respectively. 8) 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 nine months ended March 31, 2000 and 1999 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: FORM 10-Q March 31, 2000 Page 10 Three Months Ended Nine Months Ended March 31, March 31, --------- --------- 2000 1999 2000 1999 --------- --------- --------- ------- (in thousands) (in thousands) Net sales from external customers Electronics components distribution $47,510 $32,833 $128,948 $94,190 Contract manufacturing 4,184 3,355 9,863 10,220 ------- ------- ------- -------- $51,694 $36,188 $138,811 $104,410 ====== ====== ======= ======= Intersegment net sales Electronics components distribution $ 86 $ 93 $ 217 $ 255 Contract manufacturing 111 ------- --------- -------- ------- $ 86 $ 93 $ 217 $ 366 ======== ====== ======= ======= Operating profit Electronics components distribution $ 3,118 $ 325 $ 5,404 $ 209 Contract manufacturing 203 130 494 381 ------- ------- ------- ------- $ 3,321 $ 455 $ 5,898 $ 590 ===== ======= ====== ======= Interest expense Electronics components distribution $ 215 $ 198 $ 627 $ 588 Contract manufacturing 119 138 376 402 -------- -------- ------- ------- $ 334 $ 336 $ 1,003 $ 990 ======= ======= ========= ====== Income tax provision (benefit) Electronics components distribution $ 1,186 $ 51 $ 1,982 $ (154) Contract manufacturing 35 (3) 49 (8) -------- --------- -------- ---------- $ 1,221 $ 48 $ 2,031 $ (162) ========= ======= ========= ========= Identifiable assets Electronics components distribution $77,262 $66,265 $77,262 $66,265 Contract manufacturing 10,940 10,819 10,940 10,819 ------- ------- -------- ------- $88,202 $77,084 $88,202 $77,084 ====== ====== ====== ====== Capital expenditures Electronics components distribution $ 120 $ 194 $ 249 $ 818 Contract manufacturing 113 68 205 644 -------- ------- ------- ------- $ 233 $ 262 $ 454 $ 1,462 ======= ======= ======= ====== Depreciation and amortization Electronics components distribution $ 279 $ 275 $ 850 $ 796 Contract manufacturing 167 136 473 397 -------- -------- ------- ------- $ 446 $ 411 $ 1,323 $ 1,193 ======= ======= ========= ========
FORM 10-Q March 31, 2000 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. FORM 10-Q March 31, 2000 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 Nine Months Ended March 31, March 31, ------------------------------ --------------------------- 2000 1999 2000 1999 ---------- ---------- ---------- ---------- Net Sales 100.0% 100.0% 100.0% 100.0% Cost of goods sold 76.8 80.7 78.6 80.5 ---------- ---------- ---------- ---------- Gross Profit 23.2 19.3 21.4 19.5 Selling, general and administrative expenses 16.8 18.1 17.2 18.9 ---------- ---------- ---------- ---------- Operating profit 6.4 1.2 4.2 0.6 Interest expense 0.6 0.9 0.7 1.0 ---------- ---------- ---------- ---------- Earnings (Loss) before income taxes 5.8 0.3 3.5 (0.4) Income tax provision (benefit) 2.4 0.1 1.4 (0.2) ---------- ---------- ---------- ---------- NET EARNINGS (LOSS) 3.4% 0.2% 2.1% (0.2)% ========== ========= ========= =========
COMPARIS0N OF THE THREE AND NINE MONTHS ENDED MARCH 31, 2000 AND MARCH 31, 1999 - ------------------------------------------------------------------------------- Net sales for the three and nine months ended March 31, 2000 were $51.7 million and $138.8 million, respectively, compared to $36.2 million and $104.4 million for the three and nine months ended March 31, 1999, respectively, representing increases in net sales of 42.8% and 32.9%. The Company's net sales continue to be positively impacted by strong industry-wide demand for many components. There is an extremely strong demand for passive components, which represents approximately fifty percent of the Company's net sales. Additionally, the Company continues to experience strong results from the sales of flat panels and monitors as well as growth in providing value-added services to the Company's key customers. Most of these value-added services relate to assisting the customer in all aspects of inventory management. Gross profit margins as a percentage of net sales were 23.2% and 21.4% for the three and nine months ended March 31, 2000, respectively, compared to 19.3% and 19.5% for the three and nine months ended March 31, 1999, respectively. The increases are primarily attributable to the strong demand for components that continues to exist throughout the electronics industry. Selling, general and administrative expenses ("SG&A") for the three and nine months ended March 31, 2000 were $8.7 million and $23.9 million, respectively, increases of $2.2 million and $4.1 million when compared to the three and nine months ended March 31, 1999, respectively. As a percentage of net sales, SG&A for the three and nine months ended March 31, 2000 were 16.8% and 17.2%, FORM 10-Q March 31, 2000 Page 13 respectively, compared to 18.1% and 18.9% for the three and nine months ended March 31, 1999, respectively. These trends reflect operating efficiencies achieved by the Company with higher revenue levels. The Company has continued to invest in sales and marketing personnel, which it believes is required for continued growth. Interest expense for the three and nine months ended March 31, 2000 were $334,000 and $1,003,000, respectively, compared to $336,000 and $990,000 for the three and nine months ended March 31, 1999, respectively. The Company has been able to maintain borrowings at comparable levels to last year. The net earnings for the three and nine months ended March 31, 2000 were $1,766,000 and $2,864,000 or $0.45 and $0.76 per share diluted, respectively, compared to net earnings of $71,000 or $0.02 per share diluted for the three months ended March 31, 1999 and a net loss of $239,000 or $0.06 per share diluted for the nine months ended March 31, 1999. The increase in earnings was attributable to the increase in net sales, the increase in gross profit margins, and the operating efficiencies achieved in SG&A. The Company is cautiously optimistic that it is positioned to see continued strong performance based on the demand for electronic components, the Company's flat panel product group and the value-added service programs in place to assist customers in the management of their inventory and procurement 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 $21,002,295 at March 31, 2000. The term loan, with a remaining balance of $214,285 at March 31, 2000, 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 March 31, 2000, and prohibits the payment of cash dividends. For the nine months ended March 31, 2000, the Company's net cash used in operating activities was approximately $2.1 million, as compared to net cash used in operating activities of $0.9 million for the nine months ended March 31, 1999. 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 nine months ended March 31, 2000. Net cash used in investing activities increased to $1.9 million for the nine months ended March 31, 2000 as compared to $1.6 million for the nine months ended March 31, 1999. The increase of $0.3 million is primarily attributable to the acquisition of the operating assets of PGI Industries, Inc. for $1,212,000 which was partially offset by a decrease in capital expenditures of approximately $1.0 million. 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 nine months of Fiscal 2000 and Fiscal 1999, inventory turnover was 3.8x and 3.2x, respectively. The average days outstanding of the Company's accounts receivable at March 31, 2000 was 52 days, as compared to 61 days at March 31, 1999. 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 FORM 10-Q March 31, 2000 Page 14 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 May 12, 2000, the Company has purchased 412,200 shares 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 has been Y2K compliant since 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 April 30, 2000, $17,948,267 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 $179,000. FORM 10-Q March 31, 2000 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 b) Reports on Form 8-K The Company filed one report on Form 8-K on May 15, 2000, to report under Item 5 the issuance of the May 9, 2000 press release announcing that it has entered into a definitive agreement to acquire Interface Electronics Corporation. 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: May 15, 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 March 31, 2000 and the unaudited condensed consolidated statement of operations for the nine months ended March 31, 2000 and is qualified in its entirety by reference to such financial statements. 9-MOS JUN-30-2000 JUL-01-1999 MAR-31-2000 427,287 903,868 30,717,367 917,605 43,210,928 76,003,771 12,004,038 5,577,640 88,201,742 27,148,575 23,160,898 0 0 408,072 37,484,197 88,201,742 138,811,321 138,811,321 108,994,750 108,994,750 23,918,836 0 1,002,958 4,894,777 2,031,000 2,863,777 0 0 0 2,863,777 0.78 0.76
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