-----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, Rfmb5Fq924VjIXWDzH81DpJhJZYphVEJfgM3SHv4kPDGrHn349f/ft4JlPyErGWt 6w95819GTKrWtT8nQqUAvw== 0000950123-97-001161.txt : 19970222 0000950123-97-001161.hdr.sgml : 19970222 ACCESSION NUMBER: 0000950123-97-001161 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970213 SROS: NASD 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: 1934 Act SEC FILE NUMBER: 000-05896 FILM NUMBER: 97529824 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 10-Q FOR JACO ELECTRONICS: PERIOD END 12/31/96 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 {X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period ended December 31, 1996 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 of 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 February 10, 1997 - 3,888,221 (Excluding 87,500 shares of Treasury Stock) 2 FORM 10-Q December 31, 1996 Page 2 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS JACO ELECTRONICS, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, June 30, 1996 1996 ----------- ----------- ASSETS Current Assets: Cash $ 400,497 $ 164,161 Marketable securities 551,164 493,281 Accounts receivable - net 21,371,973 22,217,130 Inventories 29,029,055 30,089,508 Prepaid expenses and other 954,543 739,530 Prepaid income taxes 301,075 Deferred income taxes 669,500 708,000 ----------- ----------- Total current assets 53,277,807 54,411,610 Property, plant and equipment - net 4,616,557 4,226,617 Deferred income taxes 219,000 189,000 Excess of cost over net assets acquired 1,235,268 1,241,533 Other assets 1,547,403 1,073,969 ----------- ----------- $60,896,035 $61,142,729 =========== ===========
See accompanying notes to condensed consolidated financial statements. 3 FORM 10-Q December 31, 1996 Page 3 JACO ELECTRONICS, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
December 31, June 30, LIABILITIES & SHAREHOLDERS' EQUITY: 1996 1996 ------------ ------------ Current Liabilities: Accounts payable and accrued expenses $ 14,789,741 $ 16,589,852 Current maturities of long term debt and capitalized lease obligations 484,111 474,082 Income taxes payable 383,970 ------------ ------------ Total current liabilities 15,273,852 17,447,904 Long term debt and capitalized lease obligations 9,792,823 8,791,270 Deferred compensation 625,000 600,000 SHAREHOLDERS' EQUITY: Preferred stock - authorized, 100,000 shares, $10 par value; none issued Common stock - authorized 10,000,000 shares, $.10 par value; issued 3,975,721 and 3,955,721 shares, respectively, and 3,888,221 and 3,955,721 outstanding, respectively 397,572 395,572 Additional paid-in capital 22,180,295 22,024,795 Unrealized gain on marketable securities 102,628 68,245 Retained earnings 13,223,865 11,814,943 Treasury stock (700,000) ------------ ------------ Total shareholders' equity 35,204,360 34,303,555 ------------ ------------ $ 60,896,035 $ 61,142,729 ============ ============
See accompanying notes to condensed consolidated financial statements. 4 FORM 10-Q December 31, 1996 Page 4 JACO ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS FOR THE THREE MONTHS ENDED DECEMBER 31, (UNAUDITED) 1996 1995 ---- ---- NET SALES $38,194,939 $43,589,877 ----------- ----------- COST AND EXPENSES: Cost of goods sold 30,183,146 34,768,681 ---------- ---------- Gross profit 8,011,793 8,821,196 Selling, general and administrative expenses 6,761,206 6,613,261 ---------- ---------- Operating profit 1,250,587 2,207,935 Interest expense 206,306 377,028 ---------- ---------- Earnings before income taxes 1,044,281 1,830,907 Income tax provision 423,000 751,000 ---------- ---------- NET EARNINGS $ 621,281 $1,079,907 ========== ========== Net earnings per common share $ .16 $ .30 ========== ========== Weighted average common shares and common equivalent shares outstanding 3,940,394 3,641,647 ========== ========== See accompanying notes to condensed consolidated financial statements. 5 FORM 10-Q December 31, 1996 Page 5 JACO ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS FOR THE SIX MONTHS ENDED DECEMBER 31, (UNAUDITED)
1996 1995 ------ ------ NET SALES $76,516,729 $83,673,362 ----------- ----------- COST AND EXPENSES: Cost of goods sold 60,389,434 66,310,952 ----------- ----------- Gross profit 16,127,295 17,362,410 Selling, general and administrative expenses 13,353,450 13,226,402 ----------- ----------- Operating profit 2,773,845 4,136,008 Interest expense 405,923 935,150 ----------- ----------- Earnings before income taxes 2,367,922 3,200,858 Income tax provision 959,000 1,313,000 ----------- ----------- NET EARNINGS $ 1,408,922 $ 1,887,858 =========== =========== Net earnings per common share $ .36 $ .61 =========== =========== Weighted average common shares and common equivalent shares outstanding 3,961,315 3,089,743 =========== ===========
See accompanying notes to condensed consolidated financial statements. 6 FORM 10-Q December 31, 1996 Page 6 JACO ELECTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 (UNAUDITED)
Unrealized Common Stock Additional Gain on Total -------------------- Paid-In Marketable Retained Treasury Shareholders' Shares Amount Capital Securities Earnings Stock Equity ------ ------ ------- ---------- -------- ----- ------ Balance at July 1, 1996 3,955,721 $ 395,572 $ 22,024,795 $ 68,245 $ 11,814,943 $ 34,303,555 Issuance of common stock in connection with acquisition 20,000 2,000 155,500 157,500 Unrealized gain on marketable securities 34,383 34,383 Purchase of treasury stock $ (700,000) (700,000) Net earnings 1,408,922 1,408,922 ------------ ------------ ------------ ------------ ------------ ------------ ------------ Balance at December 31, 1996 3,975,721 $ 397,572 $ 22,180,295 $ 102,628 $ 13,223,865 $ (700,000) $ 35,204,360 ============ ============ ============ ============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements 7 FORM 10-Q December 31, 1996 Page 7 JACO ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED DECEMBER 31, (UNAUDITED)
1996 1995 ---- ---- Cash flows from operating activities Net earnings $ 1,408,922 $ 1,887,858 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities Depreciation and amortization 372,618 349,800 Deferred compensation 25,000 25,000 Deferred income tax provision (15,000) (82,000) Amortization of intangible assets 91,168 35,749 (Gain) loss on sale of equipment (11,094) 8,918 Provision for doubtful accounts 162,450 326,190 Changes in operating assets and liabilities, net of effect of acquisition Decrease (increase) in operating assets - net 2,785,845 (5,612,787) Decrease in operating liabilities - net (2,760,155) (3,041,878) ------------ ------------ Net cash provided (used in) operating activities 2,059,754 (6,103,150) ------------ ------------ Cash flows from investing activities Capital expenditures (782,641) (266,774) Proceeds from sales of equipment 34,000 17,037 Acquisition of operating assets - net (1,257,369) Decrease in due from officers - net 309,808 (Increase) decrease in other assets (128,989) 5,168 ------------ ------------ Net cash (used in) provided by investing activities (2,134,999) 65,239 ------------ ------------ Cash flows from financing activities Proceeds from public offering - net 17,175,095 Borrowings under line of credit 81,253,959 89,522,388 Payments under line of credit (80,002,019) (92,567,064) Principal payments under equipment financing and term loans (240,359) (8,128,113) Purchase of treasury stock (700,000) Proceeds from exercise of stock options 11,925 Payments for fractional shares (1,267) ------------ ------------ Net cash provided by financing activities 311,581 6,012,964 ------------ ------------ NET INCREASE (DECREASE) IN CASH 236,336 (24,947) ------------ ------------ Cash at beginning of period 164,161 393,671 ------------ ------------ Cash at end of period $ 400,497 $ 368,724 ============ ============
See accompanying notes to condensed consolidated financial statements 8 FORM 10-Q December 31, 1996 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, 1996 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) On October 20, 1995, the Company completed a public offering of 1,600,000 shares of its common stock at $12.75 per share. The offering consisted of 1,325,000 shares offered by the Company and 275,000 shares offered by certain officers and directors of the Company. On December 8, 1995, the underwriters of the public offering exercised a portion of their over-allotment option for an additional 160,000 shares at a price per share equal to that of the public offering. The Company's net proceeds from the public offering of $17,139,966, as adjusted, after deducting the underwriters commission and costs of the public offering, were used to reduce its bank indebtedness. In connection with the public offering the Company also issued stock warrants, to the representative underwriters, to purchase up to 70,000 shares of common stock at an exercise price per share equal to 180% of the public offering price which expire on October 20, 1999. 3) In April 1996, the Company announced that its Board of Directors authorized the purchase of up to 250,000 shares of its outstanding common stock under a stock repurchase program. The purchases may be made by the Company from time to time in the open market at the Company's discretion. Through December 31, 1996, the Company purchased 87,500 shares of its common stock for aggregate consideration of $700,000. 4) For interim financial reporting purposes, the Company uses the gross profit method in computing inventories which consists of goods held for resale 5) Earnings per share has been computed based on weighted average number of shares outstanding, including approximately 51,000 and 52,000 common stock equivalents for the three and six months ended December 31, 1996, respectively, and approximately 82,000 and 78,000 common stock equivalents for the three and six months ended December 31, 1995, respectively. 6) During August 1996, and January 1997, the Company purchased QPS Electronics, Inc. and Corona Electronics, Inc. respectively, both of which are electronic component distributors. Aggregate consideration paid for the acquisitions approximated $5.6 million of which $157,500 was paid through the issuance of 20,000 shares of the Company's common stock and $1.05 million payable upon certain events as defined in the purchase agreements. These acquisitions have been accounted for by the purchase method and, as such, the fair value of the assets and liabilities acquired have been recorded on the date of the respective purchases. The respective results of their 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. Pro forma results of operations are not expected to be material. 9 FORM 10-Q December 31, 1996 Page 9 JACO ELECTRONICS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 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 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 and electromechanical devices and motors 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 services through the Company's wholly-owned subsidiary, Nexus Custom Electronics, Inc. 10 FORM 10-Q December 31, 1996 Page 10 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 Six months ended December 31, December 31, 1996 1995 1996 1995 ------ ------ ------ ------ Net sales 100% 100% 100% 100% Cost of goods sold 79.0 79.8 78.9 79.3 ------ ------ ------ ------ Gross profit 21.0 20.2 21.1 20.7 Selling, general and administrative expenses 17.7 15.2 17.5 15.8 ------ ------ ------ ------ Operating profit 3.3 5.0 3.6 4.9 Interest expense .6 .8 .5 1.1 ------ ------ ------ ------ Earnings before income taxes 2.7 4.2 3.1 3.8 Income tax provision 1.1 1.7 1.3 1.5 ------ ------ ------ ------ NET EARNINGS 1.6% 2.5% 1.8% 2.3% ====== ====== ====== ======
Comparison of the three and six months ended December 31, 1996 and December 31, 1995 Net sales for the second quarter and six months ended December 31, 1996 were $38.2 million and $76.5 million as compared to $43.6 million and $83.7 million reported for the three months and six months ended December 31, 1995. This represented a 12% and 9% decrease in net sales, respectively. Net sales continue to be affected by the softness in the electronics industry. The Company believes that the decrease in net sales as compared to the previous quarter is the result of customers requiring shorter lead times and a reduction of pricing in certain components. The Company believes it is positioned for growth as a result of two strategic acquisitions including Corona Electronics, Inc., acquired January 1997 (see Note A-6), additional sales and sales management personnel, a new product offering (flat panel displays), and the anticipated improvement in the contract manufacturing group. 11 FORM 10-Q December 31, 1996 Page 11 Gross profit margins increased for the three and six months ended December 31, 1996, compared to the comparable periods last year. The Company was able to improve margins despite weak conditions in the electronics industry. While the sale of active components continue to represent approximately 52% of the component revenue, the margins on this product has increased. Selling, General and Administrative expenses (SG&A) were $6.8 million and $13.4 million for the three and six months ended December 31, 1996, compared to $6.6 million and $13.2 million last year. The increases in SG&A incurred during the current fiscal year were primarily the result of overhead expenses for the new Chicago location (see QPS acquisition - Note A-6) and the addition of sales and sales management personnel in existing locations. Interest expense decreased to $206,000 and $406,000 for the three and six months ended December 31, 1996, compared to $377,000 and $935,000 for the same period last year. This represented a 45% and 57% reduction, respectively. The decrease is primarily attributable to the reduction of indebtedness under the Company's credit facility by application of the net proceeds of $17,140,000, from the Company's public offering which was completed in October 1995. Net earnings for the three months ended December 31, 1996 were $621,000 or $.16 per share as compared to $1,080,000, or $.30 per share, reported in the comparable fiscal 1996 quarter. Weighted average shares outstanding during the second quarter of fiscal 1997 and second quarter of fiscal 1996 were 3,940,394 and 3,641,647, respectively. Net earnings for the six months ended December 31, 1996 were $1,409,000, or $.36 per share, as compared to $1,888,000, or $.61 per share, reported for the first six months of fiscal 1996. Weighted average shares outstanding during the six months ended December 31, 1996 and 1995 were 3,961,315 and 3,089,743 respectively. The decrease in net earnings was primarily attributable to the decrease in net sales. The SG&A expenses increased only slightly as the Company continues to monitor costs. The Company believes it is necessary to maintain current cost levels to continue to develop new customers and to provide the support our existing customers require. LIQUIDITY AND CAPITAL RESOURCES The Company maintains a total credit facility of $30,000,000, $1,500,000 (the outstanding balance as of December 31, 1996 was approximately $911,000) is structured as a term loan, payable in equal monthly installments of $17,857 and the balance of which is structured as a revolving line of credit. The credit facility carries a borrowing rate equal to the higher of prime rate or the federal funds rate +1/2% or , at the Company's option, LIBOR plus 2.0% for fixed periods of time. The Company must comply with various financial covenants, all of which the Company believes itself to be in compliance. As of December 31, 1996, the Company had outstanding borrowings of $9.3 million, with additional borrowing capacity of $20.7 million available under the revolving line of credit. 12 FORM 10-Q December 31, 1996 Page 12 Working capital was $38.0 million as of December 31, 1996, as compared to $37.0 million as of June 30, 1996 an increase of $1.0 million or approximately 3%. The increase was primarily attributable to a net decrease in current liabilities. During October 1995, the Company completed a public offering of 1,600,000 shares of its common stock at $12.75 per share. The offering consisted of 1,325,000 shares offered by the Company and 275,000 shares offered by certain officers and directors of the Company. On December 8, 1995, the underwriters of the public offering exercised a portion of their over-allotment option for an additional 160,000 shares at a price per share equal to that of the public offering. The Company's net proceeds from the public offering of $17,140,000, was used to reduce its bank indebtedness. In April 1996, the Company's Board of Directors authorized the purchase of up to 250,000 shares of its common stock under a stock repurchase program. As of February 10, 1997 the Company has repurchased 87,500 shares at an average market price of $8.00 per share. For the six months ended December 31, 1996, the Company's net cash provided by operating activities was approximately $2.1 million as compared to net cash used in operating activities of approximately $6.1 million for the six months ended December 31, 1995, an increase of $8.2 million or 134%. The increase is primarily attributable to the reduction of accounts receivable and inventory levels in the first six months of fiscal 1997 as compared to increases in these elements in the first six months of fiscal 1996. Net cash used in investing activities increased to $2.1 million for the six months ended December 31, 1996, as compared to net cash provided by investing activities of $65,000 for the six months ended December 31, 1995, a decrease of $2.2 million. The acquisition of the assets of QPS accounted for approximately $1,257,000 of the decrease. Net cash provided by financing activities decreased $5.7 million or 95% to $312,000 for the six months ended December 31, 1996 when compared to 6.0 million for the six months ended December 31, 1995. The decrease is primarily attributable to the net proceeds received from the Company's public offering which was completed in October 1995. 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. In connection with the January 1997 acquisition of Corona Electronics, Inc. the Company will increase borrowings under its existing revolving line of credit by approximately $4.2 million. Additionally, the Company will increase borrowings by approximately $.5 million for capital expenditures related to additional equipment for the contract manufacturing facility and computer software for its core distribution business. 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. INFLATION Inflation has not had a significant impact on the Company's operations during the last three fiscal years. 13 PART II - OTHER INFORMATION Item 1. Legal Proceedings. Nothing to Report Item 2. Changes in Securities. 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. (A) Exhibits Exhibit No. Description ----------- ----------- 27.1 Financial Data Schedule (B) Reports on Form 8-K. None. 9 14 SIGNATURE 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) Date: February 13, 1997 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1996 AND THE UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF EARNINGS FOR THE SIX MONTHS ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1996 JUN-30-1997 400,497 551,164 22,268,405 896,432 29,029,055 53,277,807 6,551,497 1,934,940 60,896,035 15,273,852 10,417,823 0 0 397,572 34,806,788 60,896,035 76,516,729 76,516,729 60,389,434 60,389,434 13,353,450 0 405,923 2,367,922 959,000 1,408,922 0 0 0 1,408,922 0.36 0.36
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