-----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, HfVgXV9AVGQtkGOk3ABfg2DU+GEf/xl3hjgODXzBzPbS1AmQp/FQOdLfn399Wof2 SgYMsdMJgvoJEKjpDvkNew== 0000052971-99-000011.txt : 19990518 0000052971-99-000011.hdr.sgml : 19990518 ACCESSION NUMBER: 0000052971-99-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990517 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: 99625914 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, 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: (516) 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 14, 1999 - 3,653,521 (Excluding 412,200 Shares of Treasury Stock).
FORM 10-Q March 31, 1999 Page 2 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS JACO ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) March 31, June 30, 1999 1998 ---------- ---------- ASSETS Current Assets Cash $ 604,977 $ 562,556 Marketable securities 824,539 764,810 Accounts receivable, net 25,906,750 21,887,618 Inventories 33,538,231 35,737,288 Prepaid expenses and other 1,810,165 1,203,198 Prepaid income taxes 795,127 610,132 Deferred income taxes 759,000 772,500 ----------- ----------- Total current assets 64,238,789 61,538,102 Property, plant and equipment, net 7,157,482 6,102,445 Deferred income taxes 336,000 333,000 Excess of cost over net assets acquired, net 3,635,564 3,776,912 Other assets 1,716,466 1,668,830 ----------- ----------- $77,084,301 $73,419,289 =========== =========== See accompanying notes to condensed consolidated financial statements.
FORM 10-Q March 31, 1999 Page 3 JACO ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) March 31, June 30, 1999 1998 ----------- ---------- LIABILITIES & SHAREHOLDERS' EQUITY Current Liabilities Accounts payable and accrued expenses $ 19,012,327 $ 18,394,251 Current maturities of long term debt and capitalized lease obligations 804,975 663,198 ------------- ------------ Total current liabilities 19,817,302 19,057,449 Long term debt and capitalized lease obligations 20,811,144 17,036,593 Deferred compensation 737,500 700,000 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 and 3,866,221 shares outstanding, respectively 406,572 406,572 Additional paid in capital, net 22,497,545 22,396,295 Accumulated other comprehensive income 179,317 164,385 Retained earnings 14,839,436 15,077,957 Treasury stock (2,204,515) (1,419,962) ------------ ------------ Total shareholders' equity 35,718,355 36,625,247 ---------- ---------- $77,084,301 $73,419,289 =========== =========== See accompanying notes to condensed consolidated financial statements.
FORM 10-Q March 31, 1999 Page 4 JACO ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS FOR THE THREE MONTHS ENDED MARCH 31, (UNAUDITED) 1999 1998 -------------- ------------- NET SALES $36,187,676 $38,334,936 COST AND EXPENSES Cost of goods sold 29,193,984 30,421,293 ---------- ---------- Gross profit 6,993,692 7,913,643 Selling, general and administrative expenses 6,538,685 7,190,963 ------------ ------------ Operating profit 455,007 722,680 Interest expense 335,630 280,821 ------------ ------------ Earnings before income taxes 119,377 441,859 Income tax provision 48,000 179,000 ------------ ------------ NET EARNINGS $ 71,377 $ 262,859 ============ ============ Net earnings per common share Basic and diluted $ 0.02 $ 0.07 ============ ============ Weighted average common shares outstanding Basic 3,653,521 3,798,010 ============ ============ Diluted 3,663,882 3,920,838 ============ ============ See accompanying notes to condensed consolidated financial statements.
FORM 10-Q March 31, 1999 Page 5 JACO ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS FOR THE NINE MONTHS ENDED MARCH 31, (UNAUDITED) 1999 1998 -------------- ------------- NET SALES $104,410,230 $115,001,364 COST AND EXPENSES Cost of goods sold 84,019,054 91,071,936 ---------- ---------- Gross profit 20,391,176 23,929,428 Selling, general and administrative expenses 19,801,603 21,217,183 ------------ ------------ Operating profit 589,573 2,712,245 Interest expense 990,094 823,173 ------------ ------------ (Loss) earnings before income taxes (400,521) 1,889,072 Income tax benefit (provision) 162,000 (765,000) ------------ ------------ NET (LOSS) EARNINGS $ (238,521) $ 1,124,072 ============ ============ Net (loss) earnings per common share Basic and diluted $ (0.06) $ 0.29 ============ ============ Weighted average common shares outstanding Basic 3,713,132 3,856,787 ============ ============ Diluted 3,713,132 3,932,061 ============ ============ See accompanying notes to condensed consolidated financial statements.
FORM 10-Q March 31, 1999 Page 6 JACO ELECTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE NINE MONTHS ENDED MARCH 31, 1999 (UNAUDITED) Accumulated Additional Other Common Stock Paid-In Comprehensive Retained Shares Amount Capital Income Earnings --------------- -------------- ---------------- -------------- ----------------- Balance at July 1, 1998 4,065,721 $ 406,572 $ 22,801,295 $ 164,385 $ 15,077,957 Deferred compensation expense Purchase of treasury stock Unrealized gain on marketable securities, net 14,932 Net loss (238,521) --------------- -------------- ---------------- -------------- ----------------- Balance at March 31, 1999 4,065,721 $ 406,572 $ 22,801,295 $ 179,317 $ 14,839,436 =============== ============== ================ ============== =================
Total Treasury Deferred Shareholders' Stock Compensation Equity ---------------- ---------------- ----------------- Balance at July 1, 1998 $ (1,419,962) $ (405,000) $ 36,625,247 Deferred compensation expense 101,250 101,250 Purchase of treasury stock (784,553) (784,553) Unrealized gain on marketable securities, net 14,932 Net loss (238,521) --------------- -------------- ---------------- Balance at March 31, 1999 $ (2,204,515) $ (303,750) $ 35,718,355 =============== ============== =============== See accompanying notes to condensed consolidated financial statements.
FORM 10-Q March 31, 1999 Page 7 JACO ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED MARCH 31, (UNAUDITED) 1999 1998 ----------------- ----------------- Cash flows from operating activities Net (loss) earnings $ (238,521) $ 1,124,072 Adjustments to reconcile net (loss) earnings to net cash provided by (used in) operating activities Depreciation and amortization 1,192,647 993,183 Deferred compensation 138,750 110,625 Deferred income tax expense (benefit) 1,000 (215,000) Provision for doubtful accounts 347,255 364,965 Gain on sale of equipment (1,655) Changes in operating assets and liabilities, Increase in operating assets, net (2,959,292) (3,741,708) Increase in operating liabilities, net 618,076 2,401,338 ----------------- ----------------- Net cash (used in) provided by operating activities (901,740) 1,037,475 ----------------- ----------------- Cash flows from investing activities Capital expenditures (1,461,827) (783,323) Increase in marketable securities, net (35,298) (62,696) Proceeds from sale of equipment 9,689 Increase in other assets (147,634) (171,073) ----------------- ----------------- Net cash used in investing activities (1,635,070) (1,017,092) ----------------- ----------------- Cash flows from financing activities Borrowings under line of credit 40,346,052 112,863,510 Payments under line of credit (36,954,685) (111,670,859) Principal payments under equipment financing and term loans (602,583) (670,683) Borrowings under term loan 575,000 Purchase of treasury stock (784,553) (719,962) ----------------- ----------------- Net cash provided by (used in) financing activities 2,579,231 (197,994) ----------------- ----------------- NET INCREASE (DECREASE) IN CASH 42,421 (177,611) ----------------- ----------------- Cash at beginning of period 562,556 463,352 ----------------- ----------------- Cash at end of period $ 604,977 $ 285,741 ================= ================= Supplemental schedule of non-cash financing and investing activities Equipment under capital leases $ 552,544 $ 614,620 See accompanying notes to condensed consolidated financial statements.
FORM 10-Q March 31, 1999 Page 8 JACO ELECTRONICS, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS MARCH 31, 1999 (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, 1998 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 to: (i) extend the maturity date to September 13, 2000, (ii) change the interest rate to a rate 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 (iii) changed the requirements of certain financial covenants. 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 as of May 14, 1999 for aggregate consideration of $2,204,515. 4) For interim financial reporting purposes, the Company uses the gross profit method for computing inventories, which consists of goods held for resale, work in process and raw materials. 5) In fiscal 1998, the Company adopted the provisions of Statement of Financial Accounting Standards No. 128 ("SFAS No. 128"), "Earnings per Share." SFAS No. 128 replaces the calculation of primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options, warrants and convertible securities. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. All earnings per share amounts for all periods have been presented to conform to the SFAS No. 128 computation.
FORM 10-Q March 31, 1999 Page 9 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, ------------------------------ ------------------------------ 1999 1998 1999 1998 -------------- ---------------- ------------- ------------ Weighted average common shares outstanding net of treasury shares, for basic earnings per share 3,653,521 3,798,010 3,713,132 3,856,787 Common stock equivalents for stock options 10,361 122,828 75,274 -------------- ---------------- ------------- ------------ Weighted average common shares outstanding for diluted earnings per share 3,663,882 3,920,838 3,713,132 3,932,061 ============== ================ ============= ============
The diluted loss per common share for the nine months ended March 31, 1999 is based only on the weighted average number of common shares outstanding during the period, as the inclusion of 3,656 common share equivalents would have been antidilutive. For the three and nine months ended March 31, 1999 options to purchase 584,230 and 613,564 shares of common stock, respectively, at a price range of $2.69 to $12.75 and warrants to purchase 70,000 shares of common stock at $22.95 were outstanding during the period. The stock options and warrants not included in the computation of diluted earnings per share was due to the exercise prices being greater than the average market price of the common shares. 6) The Company has adopted SFAS No. 130 "Reporting Comprehensive Income" which establishes guidelines for reporting and disclosure of comprehensive income and its components. The purpose of reporting comprehensive income is to report a measure of all changes in equity that resulted from recognized transactions and other economic events of the periods presented other than transactions with stockholders. Adoption of SFAS No. 130 had no economic impact on the Company's consolidated financial position, net earnings, stockholders' equity or cash flows, although the presentation of certain items has changed. Comprehensive income and its components, net of tax, are as follows:
Three Months Ended Nine Months Ended March 31, March 31, ----------------------------- ------------------------ 1999 1998 1999 1998 ------------- ------------ ---------- ----------- (in thousands) (in thousands) Net earnings (loss) $71 $263 $(239) $1,124 Other comprehensive income: Net unrealized investments gains 7 44 15 44 ------------- ------------ ---------- ----------- Comprehensive income (loss) $78 $307 $(224) $1,168 ============= ============ ========== ===========
The components of accumulated other comprehensive income included in the accompanying condensed consolidated balance sheets and consolidated statement of changes in shareholders' equity consists of net unrealized investment gains on debt and equity securities available for sale as of the end of the period. FORM 10-Q March 31, 1999 Page 10 7) The Financial Accounting Standard Board issued Statement of Financial Accounting Standards No. 131 "Disclosures about Segments of an Enterprise and Related Information" ( "SFAS 131"). SFAS 131 established standards to report information about operating segments and related discussions about products and services, geographic areas and major customers. SFAS 131 is effective for fiscal years beginning after December 15, 1997. This statement permits early application and requires restatement for all prior periods. SFAS 131 is not required to be applied to interim financial statements in the initial year of adoption. Management believes that the adoption of this statement will not have any material impact on previously reported information. 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, 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 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 full integration solutions with flat panel display, 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), automated inventory management services and contract manufacturing through the Company's wholly-owned subsidiary, Nexus Custom Electronics, Inc. FORM 10-Q March 31, 1999 Page 11 Results of Operations The following table sets forth certain items in the Company's statement of earnings as a percentage of net sales for the periods shown:
Three Months Ended Nine Months Ended March 31, March 31, ------------------------------ --------------------------- 1999 1998 1999 1998 ---------- ---------- ---------- ---------- Net Sales 100.0% 100.0% 100.0% 100.0% Cost of goods sold 80.7 79.4 80.5 79.2 ---------- ---------- ---------- ---------- Gross Profit 19.3 20.6 19.5 20.8 Selling, general and administrative expenses 18.1 18.7 18.9 18.4 ---------- ---------- ---------- ---------- Operating profit 1.2 1.9 0.6 2.4 Interest expense 0.9 0.7 1.0 0.7 ---------- ---------- ---------- ---------- Earnings (loss) before income taxes 0.3 1.2 (0.4) 1.7 Income tax (expense) benefit (0.1) (0.5) 0.2 (0.7) ---------- ---------- ---------- ---------- NET EARNINGS (LOSS) 0.2% 0.7% (0.2%) 1.0% ========== ========== ========== ==========
COMPARISON OF THE THREE AND NINE MONTHS ENDED MARCH 31, 1999 AND MARCH 31, 1998 Net sales for the three and nine months ended March 31, 1999 were $36.2 million and $104.4 million, respectively, compared to $38.3 million and $115.0 million for the three and nine months ended March 31, 1998, respectively, representing decreases in net sales of 5.6% and 9.2%. The Company's net sales were impacted by continued industry wide pricing pressures, compounded by the softening demand for electronic components which has affected the electronics industry for over two years. Sequentially, net sales has increased for two quarters. Net sales for the fiscal third quarter grew 3.5% and 8.8% compared to the fiscal second and fiscal first quarters, respectively. This growth is primarily attributable to an increased penetration at the Company's account base and an increased demand for active components (semiconductors and flat panel displays) during the third quarter. Active component sales increased 6.5% compared to the fiscal 1999 second quarter and 20.9% compared to the fiscal 1999 first quarter. Gross profit margins as a percentage of net sales were 19.3% and 19.5% for the three and nine months ended March 31, 1999, respectively, compared to 20.6% and 20.8% for the three and nine months ended March 31, 1998, respectively. The decreases are attributable to industry wide pricing pressures and a change in product mix toward a greater amount of active components which, historically, have a lower gross profit margin compared to passive components. FORM 10-Q March 31, 1999 Page 12 Selling, general and administrative (`SG&A') expenses for the three and nine months ended March 31, 1999 were $6.5 million and $19.8 million, respectively, representing decreases of $.7 and $1.4 million, or 9.1% and 6.7%, when compared to the three and nine months ended March 31, 1998. The decrease in SG&A is the result of cost saving initiatives which the Company had implemented in prior periods and a recovery during the quarter ended March 31, 1999 of previously expensed legal fees. Interest expense increased to $336,000 and $990,000 for the three and nine months ended March 31, 1999 compared to $281,000 and $823,000 for the three and nine months ended March 31, 1998, an increase of 19.5% and 20.3% respectively. The increases are primarily attributable to increased net borrowings due to the Company's purchases of its common stock under its stock repurchase program, fixed asset additions primarily for contract manufacturing and operational expenditures made to upgrade the Company's core financial and reporting software. Net earnings (loss) for the three and nine months ended March 31, 1999 were $71,000 and $(239,000) or $0.02 and $(0.06) per share, respectively, compared to $263,000 and $1,124,000 or $0.07 and $0.29 per share, during the same periods last fiscal year. The weighted average number of diluted shares outstanding were 3,663,882 and 3,713,132 for the three and nine months ended March 31, 1999, compared to 3,920,838 and 3,932,061 for the same periods last fiscal year. 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 which expires September 13, 2000. 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 $18,704,453 at March 31, 1999. The term loan, with a remaining balance of $428,571 at March 31, 1999, requires monthly principal payments of $17,857, together with interest through September 13, 2000, with a final payment of $107,146 due on September 13, 2000. 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, 1999 and prohibits the payment of cash dividends. For the nine months ended March 31, 1999 the Company's net cash used in operating activities was approximately $.9 million compared to net cash provided by operating activities of approximately $1.0 million for the nine months ended March 31, 1998. The decrease is primarily attributable to the increase in accounts receivable. Net borrowings under the Company's line of credit was approximately $3.4 million for the nine months ended March 31, 1999 compared to a $1.2 million for the nine months ended March 31, 1998. The additional borrowings is primarily attributable to the purchase of $.8 million of treasury stock along with fixed asset additions primarily for the contract manufacturing business. The Company's cash expenditure 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 1999 and fiscal 1998 inventory turnover was 3.2:1 and 3.5:1, respectively. The average days outstanding of the Company's accounts receivable at March 31, 1999 was 61 days, as compared to 53 days at March 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 FORM 10-Q March 31, 1999 Page 13 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 14, 1999 the Company has purchased 412,200 shares of its common stock for aggregate consideration of $2,204,515 under this program. 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 is the result of computer programs using a two-digit format, as opposed to four digits, to indicate the year. Such computer systems will be unable to interpret dates beyond the year 1999, which could 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 has 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, to be fully completed by mid 1999, is the final major area of exposure to ensure compliance. The Company has 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 had 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 operation since 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. The Company, as it relates to the contract manufacturing operations in accordance with Phase I of the program, is in the process of conducting an internal review of all systems and contacting all software suppliers to determine major areas of exposure to Y2K issues. In the financial and information system area a number of applications have been identified as Y2K compliant due to their recent implementation. The contract manufacturing core financial and reporting systems are not Y2K compliant, but are scheduled to be completed and fully tested by late 1999. The costs relating to Y2K compliance in the contract manufacturing area are not expected to be material to the Company. In the third party area, the Company has contacted most of its major third parties. These parties state that they intend to be Y2K compliant by the year 2000. The Company believes it will cost approximately $1.8 million to replace the core financial and reporting software systems for its distribution business. The Company is utilizing outside consultants to undertake a portion of such work. INFLATION Inflation has not had a significant impact on the Company's operations during the last three fiscal years. FORM 10-Q March 31, 1999 Page 14 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: None 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: Jeffrey D. Gash Jeffrey D. Gash, Vice President/Finance (Principal Financial Officer) DATED May 14, 1999 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, 1999 and the unaudited condensed consolidated statement of earnings for the nine months ended March 31, 1999 and is qualified in its entirety by reference to such financial statements. 9-MOS JUN-30-1999 JUL-01-1998 MAR-31-1999 604,977 824,539 27,284,848 1,378,098 33,538,231 64,238,789 11,254,163 4,096,681 77,084,301 19,817,302 21,548,644 0 0 406,572 35,311,783 77,084,301 104,410,230 104,410,230 84,019,054 84,019,054 19,801,603 0 990,094 (400,521) (162,000) (238,521) 0 0 0 (238,521) (0.06) (0.06)
-----END PRIVACY-ENHANCED MESSAGE-----