-----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, FKZDz0zKRJleDfRi6Rg4bp2XvqaP0HVL9x/La65JkXpf/OBEfBCDRs/f7v8GzgG3 KOmH6pRvEXm00B8ctUpuZw== 0000052971-99-000019.txt : 19991117 0000052971-99-000019.hdr.sgml : 19991117 ACCESSION NUMBER: 0000052971-99-000019 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991115 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: 99752202 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 September 30, 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 November 12,1999 - - 3,653,521 (Excluding 412,200 Shares of Treasury Stock).
FORM 10-Q September 30, 1999 Page 2 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS JACO ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) September 30, June 30, 1999 1999 ------------ ------------ ASSETS Current Assets Cash $ 936,178 $ 922,247 Marketable securities 817,869 881,622 Accounts receivable - net 25,668,271 23,408,900 Inventories 33,229,723 33,224,719 Prepaid expenses and other 776,773 660,782 Prepaid and refundable income taxes 741,778 990,855 Deferred income taxes 465,000 336,000 ----------- ----------- Total current assets 62,635,592 60,425,125 Property, plant and equipment - net 6,841,773 6,983,761 Deferred income taxes 395,000 390,000 Excess of cost over net assets acquired - net 3,541,333 3,588,449 Other assets 1,509,222 1,543,328 ----------- ----------- $74,922,920 $72,930,663 =========== ===========
See accompanying notes to condensed consolidated financial statements. 2
FORM 10-Q September 30, 1999 Page 3 JACO ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED) September 30, June 30, 1999 1999 ------------- ----------- LIABILITIES & SHAREHOLDERS' EQUITY Current Liabilities Accounts payable and accrued expenses $ 19,547,947 $ 17,635,319 Current maturities of long term debt and capitalized lease obligations 944,910 791,814 ------------- ------------ Total current liabilities 20,492,857 18,427,133 Long term debt and capitalized lease obligations 18,593,489 18,885,664 Deferred compensation 762,500 750,000 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 shares and 3,653,521 shares outstanding 406,572 406,572 Additional paid-in capital - net 22,565,045 22,531,295 Retained earnings 14,134,882 13,920,807 Accumulated other comprehensive income 172,090 213,707 Treasury stock (2,204,515) (2,204,515) ------------ ------------ Total shareholders' equity 35,074,074 34,867,866 ---------- ---------- $74,922,920 $72,930,663 =========== ============
See accompanying notes to condensed consolidatedfinancial statements. 3
FORM 10-Q September 30, 1999 Page 4 JACO ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, (UNAUDITED) 1999 1998 -------------- ------------- NET SALES $42,017,363 $33,256,456 COST AND EXPENSES Cost of goods sold 34,081,758 26,554,068 ---------- ---------- Gross profit 7,935,605 6,702,388 Selling, general and administrative expenses 7,248,597 6,795,052 ------------ ------------ Operating profit (loss) 687,008 (92,664) Interest expense 322,933 313,442 ------------ ------------ Earnings (Loss) before income taxes 364,075 (406,106) Income tax provision (benefit) 150,000 (164,000) ------------ ------------ NET EARNINGS (LOSS) $ 214,075 $ (242,106) ============ ============ Net earnings (loss) per common share Basic and diluted $ 0.06 $ (0.06) ============ ============ Weighted average common shares outstanding Basic 3,653,521 3,830,397 Diluted 3,709,450 3,830,397 ============ ============ See accompanying notes to condensed consolidated financial statements.
4
FORM 10-Q September 30, 1999 Page 5 JACO ELECTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE THREE MONTHS ENDED SEPTEMBER 30, 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 214,075 Unrealized loss on marketable securities - net (41,617) Comprehensive income Deferred compensation ----------- ---------- ----------- ----------- --------- Balance at September 30, 1999 4,065,721 $ 406,572 $ 22,801,295 $14,134,882 $ 172,090 =========== ========== =========== =========== ========== Total Treasury Deferred shareholders' stock compensation equity ----------- ---------- ----------- Balance at July 1, 1999 $ (2,204,515) $ (270,000) $ 34,867,866 ------------ Net earnings 214,075 Unrealized loss on marketable securities - net (41,617) -------- Comprehensive income 172,458 -------- Deferred compensation 33,750 33,750 ------------- ------------- ----------- Balance at September 30, 1999 $ (2,204,515) $ (236,250) $ 35,074,074 =========== ============ ============ See accompanying notes to condensed consolidated financial statements. 5 FORM 10-Q September 30, 1999 Page 6 JACO ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE THREE MONTHS ENDED SEPTEMBER 30, (UNAUDITED) 1999 1998 ------------ ----------- Cash flows from operating activities Net earnings (loss) $ 214,075 $ (242,106) Adjustments to reconcile net earnings (loss) to net cash provided by (used in) operating activities Depreciation and amortization 438,686 375,299 Deferred compensation 46,250 46,250 Deferred income tax benefit (110,000) (29,000) Provision for doubtful accounts 119,950 120,814 Changes in operating assets and liabilities, (Increase) decrease in operating assets- net(2,251,239) 392,090 Increase (decrease) in operating liabilities - net 1,912,628 (381,717) ------------ ----------- Net cash provided by operating activities 370,350 281,630 ------------ ----------- Cash flows from investing activities Capital expenditures (112,242) (742,538) Increase in marketable securities, net (1,864) Decrease in other assets 22,995 46,071 ------------ ----------- Net cash used in investing activities (91,111) (696,467) ------------ ----------- Cash flows from financing activities Borrowings under line of credit 12,795,589 15,987,250 Payments under line of credit (12,860,157) (13,656,102) Principal payments under equipment financing and term loans (200,740) (188,075) Purchase of treasury stock (771,250) ------------ ----------- Net cash (used in) provided by financing activities (265,308) 1,371,823 ------------ ----------- NET INCREASE IN CASH 13,931 956,986 ------------ ----------- Cash at beginning of period 922,247 562,556 ------------ ----------- Cash at end of period $ 936,178 $ 1,519,542 ============ =========== 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. 6 FORM 10-Q September 30, 1999 Page 7 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 to extend the maturity date to September 13, 2001. 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 November 8, 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 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. 7
FORM 10-Q September 30, 1999 Page 8 The number of shares used in the Company's basic and diluted earnings per share computations are as follows: Three Months Ended September 30, -------------------------------------------- 1999 1998 ----------------- ------------------ Weighted average common shares outstanding net of treasury shares, for basic earnings per share 3,653,521 3,830,397 Common stock equivalents for stock options 55,929 ----------------- ------------------ Weighted average common shares outstanding for diluted earnings per share 3,709,450 3,830,397 ================= ==================
For the three months ended September 30, 1999 options to purchase 574,796 shares of common stock 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) In fiscal 1999, the Company adopted Statement of Financial Accounting Standards No. 130 ("SFAS No. 130"), "Reporting Comprehensive Income." SFAS No. 130 establishes new rules for the reporting and display of comprehensive income and its components; however, the adoption of SFAS No. 130 has had no impact on the Company's earnings or stockholders' equity. SFAS No. 130 requires unrealized holding gains or losses on debt and equity securities available for sale, which prior to adoption were only reported separately in stockholders' equity, to be included in comprehensive income and accumulated other comprehensive income. Prior year financial statements have been reclassified to conform to the requirements of SFAS No. 130. 8 FORM 10-Q September 30, 1999 Page 9 7) The Company adopted Statement of Financial Accounting Standards No. 131, "Disclosures About Segments of an Enterprise and Related Information." SFAS No. 131 requires that the Company disclose certain information about its operating segments defined as "components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance." Generally, financial information is required to be reported on the basis that it is used internally for evaluating segment performance and deciding how to allocate resources to segments. 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 ended September 30, 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. Information about the Company's segments is as follows:
Three Months Ended, September 30, --------------------------------------- 1999 1998 (in thousands) Net sales from external customers Electronics components distribution $39,224 $30,043 Contract manufacturing 2,793 3,213 ------- ------- $42,017 $33,256 ====== ====== Intersegment net sales Electronics components distribution $ 68 $ 71 Contract manufacturing _ 60 ------- ------- $ 68 $ 131 ======== ======= Operating profit (loss) Electronics components distribution $ 582 $ (226) Contract manufacturing 105 133 ------- ------- $ 687 $ (93) ======= ======== Interest expense Electronics components distribution $ 192 $ 185 Contract manufacturing 131 128 -------- -------- $ 323 $ 313 ======== =======
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FORM 10-Q September 30, 1999 Page 10 Three Months Ended September 30, ------------------------------------- 1999 1998 (in thousands) Income tax provision (benefit) Electronics components distribution $ 161 $ (166) Contract manufacturing (11) 2 -------- ------ $ 150 $ (164) ======= ========= Identifiable assets Electronics components distribution $ 64,699 $ 62,533 Contract manufacturing 10,224 12,187 ---------- -------- $ 74,923 $ 74,720 ======== ======== Capital expenditures Electronics components distribution $ 66 $ 220 Contract manufacturing 46 523 --------- ---------- $ 112 $ 743 ========= ========= Depreciation and amortization Electronics components distribution $ 288 $ 247 Contract manufacturing 151 128 ---------- ---------- $ 439 $ 375 ========= ==========
10 FORM 10-Q September 30, 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, 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 configuring complete computer systems to customer specifications both in tower and desktop configurations, 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. 11
FORM 10-Q September 30, 1999 Page 12 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 September 30, -------------------------------------------- 1999 1998 ------------ ------------ Net sales 100.0% 100.0% Cost of goods sold 81.1 79.8 ------------ ------------ Gross profit 18.9 20.2 Selling, general and administrative expenses 17.3 20.4 ------------ ------------ Operating profit (loss) 1.6 (0.2) Interest expense 0.7 1.0 ------------ ------------ Earnings (Loss) before income taxes 0.9 (1.2) Income tax provision (benefit) 0.4 (0.5) ------------ ------------ NET EARNINGS (LOSS) 0.5% (0.7)% ============ =============
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1999 ("FISCAL 2000") WITH THREE MONTHS ENDED SEPTEMBER 30, 1998 ("FISCAL 1999") Net sales for the first quarter of Fiscal 2000 increased 26% to $42.0 million as compared to $33.3 million for the first quarter of Fiscal 1999. The increase in net sales was attributed to an improving demand for components in all product segments. The Company continues to experience growth in the sale of flat panel displays division and has seen strong demand for its inventory management systems with targeted small to mid-size customers. This program enables the Company to increase the level of sales generated at these focus accounts. Gross profit margin as a percentage of net sales was 18.9% for the three months ended September 30, 1999 compared to 20.2% for the comparable period in the last fiscal year. The decrease was attributable to industry wide pressures on pricing and a shift in product mix toward a greater amount of active components, including flat panel devices, which historically, have a lower gross profit margin compared to passive components. Prior to the end of the current quarter, the Company experienced an increase in demand for products, resulting in a stabilizing of resale pricing. 12 FORM 10-Q September 30, 1999 Page 13 Selling, General and Administrative expenses ("SG&A") were $7.3 million during the first quarter of Fiscal 2000, an increase of $.5 million, or 6.7%, compared to $6.8 million during the first quarter of Fiscal 1999. The increase in SG&A was attributable to higher commissions paid due to the increase in gross profit dollars, the additional staffing of sales, marketing and corporate personnel in anticipation of an improvement in demand for electronic components and to provide the services required to support the inventory management programs and technical support offered to customers. Interest expense increased slightly to approximately $323,000 during the first quarter of Fiscal 2000, as compared to $313,000 during the comparable quarter of Fiscal 1999. The 3.0% increase in interest expense was attributable to an increase in the Company's borrowing rate. Net earnings for the three months ended September 30, 1999 was $214,000, or $.06 per share diluted compared to a net loss for Fiscal 1999 of $242,000, or $.06 per share diluted. The increase in earnings was attributable to the increase in net sales. The Company is cautiously optimistic that it is positioned to see increased performance based on the continued strengthening of the electronics component industry in addition to the Company's expenditures during prior periods in the flat panel division, automated inventory management programs and field application engineers. 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 $16,899,007 at September 30, 1999. The term loan, with a remaining balance of $321,428 at September 30, 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 September 30, 1999, and prohibits the payment of cash dividends. For the three months ended September 30, 1999, the Company's net cash provided by operating activities was approximately $0.4 million, as compared to net cash provided by operating activities of $0.3 million for the three months ended September 30, 1998. The principal portion of cash flow resulted from the increase in accounts payable and accrued expenses. This was offset by an increase in accounts receivable. Net cash used in investing activities decreased to $0.1 million for the three months ended September 30, 1999, as compared to $0.7 million for the three months ended September 30, 1998. The decrease is primarily attributable to a reduction in capital expenditures. Net payments under the Company's line of credit was approximately $0.1 million for the three months ended September 30, 1999, as compared to net borrowings of $2.3 million for the three months ended September 30, 1998. The change is primarily attributable to a reduction in capital expenditures and no additional purchases of treasury stock during the three months ended September 30, 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 three months of Fiscal 2000 and Fiscal 1999, inventory turnover was 4.1x and 3.0x, respectively. The average days outstanding of the Company's accounts receivable at September 30, 1999 was 53 days, as compared to 59 days at September 30, 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 November 8, 1999, the Company has purchased 412,200 shares of its common stock for aggregate consideration of $2,204,515 under this program. 13 FORM 10-Q September 30, 1999 Page 14 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 late 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 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. 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 complete and fully tested by late 1999. As a contingency plan, these systems can be performed manually. 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 suppliers and vendors. These parties state that they intend to be Y2K compliant by the year 2000. The Company's management is in the process of developing a "worst-case scenario" with respect to Y2K non-compliance and to develop contingency plans designed to minimize the effects of such scenario. Although management believes that it is very unlikely that the worst-case scenario will occur, contingency plans will be developed and will address both IT (Information Technology) system and non-IT system (items containing embedded chips, such as elevators electronic door locks, telephone, etc.) failure. In the event of Y2K - related IT system failure, the Company would be unable to ship orders because its power system would not be functioning. In such event, the Company plans to use its own generators as a back-up power source. In terms of non-IT and third-party Y2K non compliance, the worst - case scenario for the Company would involve the loss of supply of component parts or other materials from one or more of its major suppliers. The Company believes it has made contingency plans with its vendors to have product available. 14 FORM 10-Q September 30, 1999 Page 15 There is still uncertainty about the broader scope of the Year 2000 issue as it may affect the Company and third parties that are critical to the Company's operations. For example, lack of readiness by electrical and water utilities, financial institutions, governmental agencies or other providers of general infrastructure could pose significant impediments to the Company's ability to carry on its normal operations. The Company intends to request assurances of Y2K readiness from its telephone and utilities suppliers. However, management has been informed that some suppliers have either declined to provide the requested assurances, or have limited the scope of assurances to which they are willing to permit. If suppliers of services that are critical to the Company's operations were to experience business disruptions as a result of their lack of Y2K readiness, their problems could have a material adverse affect on the financial position and results of operations of the Company. The impact of a failure of readiness by critical suppliers cannot be estimated with confidence, and the effectiveness of contingency plans to mitigate the effect of any such failure is largely untested. Management cannot provide an assurance that there will be no material adverse effects to the financial condition or results of operations of the Company as a result of Y2K issues. 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 October 31, 1999, $16,187,227 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 $162,000. 15 FORM 10-Q September 30, 1999 Page 16 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 99.8.5 Amendment to Second Restated and Amended Loan and Security Agreement dated October 26, 1999 b) Reports on Form 8-K None 16 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: November 12, 1999 17 EX-27.1 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from the unaudited condensed consolidated balance sheet as of September 30, 1999 and the unaudited condensed consolidated statement of operations for the three months ended September 30, 1999 and is qualified in its entirety by reference to such financial statements. 3-MOS JUN-30-2000 JUL-01-1999 SEP-30-1999 936,178 817,869 26,260,475 592,204 33,229,723 62,635,592 11,630,840 4,789,067 74,922,920 20,492,857 19,355,989 0 0 406,572 34,667,502 74,922,920 42,017,363 42,017,363 34,081,758 34,081,758 7,248,597 0 322,933 364,075 150,000 214,075 0 0 0 214,075 0.06 0.06
EX-99.8.3 3 AMENDMENT TO LOAN October 26, 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 in effect between GMAC Commercial Credit LLC (as successor by merger to BNY Financial Corporation), the other Lenders and you, with an effective date of September 13, 1995, as supplemented and amended from time to time (the "Agreement") and more specifically to a letter amendment dated August 1, 1997 (the "Amendment"). Initially capitalized terms not defined herein shall have the meanings ascribed to such terms in the Agreement or if applicable in the Amendment. It is hereby agreed by and between us that effective as of September 1, 1999, that the first sentence of paragraph 21 of the Agreement, as amended by the Amendment, is hereby amended to read, in its entirety as follows: "This (Second Restated and Amended Loan and Security) Agreement shall (subject to compliance with the Conditions Precedent) become effective on the Closing Date hereof, without any interruption or break in continuity (as more fully described in the second paragraph hereof) and shall continue until the sixth anniversary of the Closing Date." Except as herein specifically amended, the Agreement and the Amendment shall remain in full force and effect in accordance with their 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 (as successor by merger to BNY FINANCIAL CORPORATION as successor in interest to THE BANK OF NEW YORK COMMERCIAL CORPORATION) as Agent and Lender By: /s/ Frank Imperto Title: Senior Vice President FLEET BANK, N.A. f/k/a/ NATWEST BANK N.A., as Lender By: /s/Alice Adleberg Title: Vice President AGREED AND ACCEPTED: JACO ELECTRONICS, INC. By: /s/ Jeffrey D. Gash Title: Secretary NEXUS CUSTOM ELECTRONICS, INC. By:/s/ Jeffrey D. Gash Title: Vice President/Finance Continued on Page 3. We, the undersigned entities, as guarantors of the Obligations under the Agreement, hereby agree to the above amendment to the Agreement and hereby ratify and confirm that the guarantees shall continue to guaranty the Obligations under the Agreement as amended in the preceding Amendment above, and such guarantees shall remain in full force and effect and apply to the Agreement as previously supplemented and amended and as amended above. RATIFIED AND CONFIRMED: DISTEL, INC. By: /s/ Jeffrey D. Gash Title: Vice President/Finance JACO OVERSEAS, INC. By: /s/ Jeffrey D. Gash Title: Vice President/Finance QUALITY COMPONENTS, INC. By: /s/ Jeffrey D. Gash Title: Vice President/Finance R.C. COMPONENTS, INC. By: /s/ Jeffrey D. Gash Title: Vice President/Finance NEXUS CUSTOM ELECTRONICS, INC. By: /s/ Jeffrey D. Gash Title: Vice President/Finance -----END PRIVACY-ENHANCED MESSAGE-----