-----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, UbK13KEYs3AKr4innmAGqHNn9J3mpf0OxTS7ONGP+oUme9EPSyoiXmfr/We23Z1V 7kayWfjwwSjTTFJD0ZNWqw== 0000950123-97-004366.txt : 19970520 0000950123-97-004366.hdr.sgml : 19970520 ACCESSION NUMBER: 0000950123-97-004366 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 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: 97606517 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 FORM 10-Q 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 March 31, 1997 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 7, 1997 - 3,888,221 - --------- (Excluding 87,500 Shares of Treasury Stock) 2 FORM 10-Q March 31, 1997 Page 2 PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS JACO ELECTRONICS, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, June 30, 1997 1996 ----------- ----------- ASSETS Current Assets: Cash $ 355,297 $ 164,161 Marketable securities 552,848 493,281 Accounts receivable - net 23,848,505 22,217,130 Inventories 32,437,371 30,089,508 Prepaid expenses and other 1,496,530 739,530 Prepaid income taxes 390,782 Deferred income taxes 788,000 708,000 ----------- ----------- Total current assets 59,869,333 54,411,610 Property, plant and equipment - net 4,824,301 4,226,617 Deferred income taxes 226,000 189,000 Excess of cost over net assets acquired 4,169,390 1,241,533 Other assets 1,618,309 1,073,969 ----------- ----------- $70,707,333 $61,142,729 =========== ===========
See accompanying notes to condensed consolidated financial statements. 3 FORM 10-Q March 31, 1997 Page 3 JACO ELECTRONICS, INC. AND SUBSIDIARIES UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
March 31, June 30, LIABILITIES & SHAREHOLDERS' EQUITY: 1997 1996 ------------ ----------- Current Liabilities: Accounts payable and accrued expenses $ 17,863,325 $16,589,852 Current maturities of long term debt and capitalized lease obligations 566,721 474,082 Income taxes payable 383,970 ------------ ----------- Total current liabilities 18,430,046 17,447,904 Long term debt and capitalized lease obligations 16,086,905 8,791,270 Deferred compensation 637,500 600,000 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 103,812 68,245 Retained earnings 13,571,203 11,814,943 Treasury stock (700,000) ------------ ----------- Total shareholders' equity 35,552,882 34,303,555 ------------ ----------- $ 70,707,333 $61,142,729 ============ ===========
See accompanying notes to condensed consolidated financial statements. 4 FORM 10-Q March 31, 1997 Page 4 JACO ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS FOR THE THREE MONTHS ENDED MARCH 31, (UNAUDITED)
1997 1996 ---- ---- NET SALES $38,661,610 $43,176,834 ----------- ----------- COST AND EXPENSES: Cost of goods sold 30,798,265 34,543,777 ----------- ----------- Gross profit 7,863,345 8,633,057 Selling, general and administrative expenses 7,012,577 6,523,812 ----------- ----------- Operating profit 850,768 2,109,245 Interest expense 266,430 222,505 ----------- ----------- Earnings before income taxes 584,338 1,886,740 Income tax provision 237,000 774,000 ----------- ----------- NET EARNINGS $ 347,338 $ 1,112,740 =========== =========== Net earnings per common share $ .09 $ .28 =========== =========== Weighted average common shares and common equivalent shares outstanding 3,937,253 4,025,060 =========== ===========
See accompanying notes to condensed consolidated financial statements. 5 FORM 10-Q March 31, 1997 Page 5 JACO ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS FOR THE NINE MONTHS ENDED MARCH 31, (UNAUDITED)
1997 1996 ---- ---- NET SALES $115,178,339 $126,850,196 ------------ ------------ COST AND EXPENSES: Cost of goods sold 91,187,699 100,854,729 ------------ ------------ Gross profit 23,990,640 25,995,467 Selling, general and administrative expenses 20,366,027 19,750,214 ------------ ------------ Operating profit 3,624,613 6,245,253 Interest expense 672,353 1,157,655 ------------ ------------ Earnings before income taxes 2,952,260 5,087,598 Income tax provision 1,196,000 2,087,000 ------------ ------------ NET EARNINGS $ 1,756,260 $ 3,000,598 ============ ============ Net earnings per common share $ .45 $ .88 ============ ============ Weighted average common shares and common equivalent shares outstanding 3,937,384 3,399,293 ============ ============
See accompanying notes to condensed consolidated financial statements. 6 FORM 10-Q March 31, 1997 Page 6 JACO ELECTRONICS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY FOR THE NINE MONTHS ENDED MARCH 31, 1997 (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 35,567 35,567 Purchase of treasury stock $(700,000) (700,000) Net earnings 1,756,260 1,756,260 --------- -------- ----------- -------- ----------- --------- ----------- Balance at March 31, 1997 3,975,721 $397,572 $22,180,295 $103,812 $13,571,203 $(700,000) $35,552,882 ========= ======== =========== ======== =========== ========= ===========
See accompanying notes to condensed consolidated financial statements. 7 FORM 10-Q March 31, 1997 Page 7 JACO ELECTRONICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE NINE MONTHS ENDED MARCH 31, (UNAUDITED)
1997 1996 ---- ---- Cash flows from operating activities Net earnings $ 1,756,260 $ 3,000,598 Adjustments to reconcile net earnings to net cash provided by (used in) operating activities Depreciation and amortization 571,052 505,740 Deferred compensation 37,500 37,500 Deferred income tax provision (141,000) (181,000) Amortization of intangible assets 166,846 53,623 (Gain) loss on sale of equipment (10,094) 8,918 Provision for doubtful accounts 220,206 514,640 Changes in operating assets and liabilities, net of effect of acquisitions Increase in operating assets - net (1,847,191) (5,861,674) Decrease in operating liabilities - net (574,142) (2,561,994) ------------- ------------- Net cash provided by (used in) operating activities 179,437 (4,483,649) ------------- ------------- Cash flows from investing activities Capital expenditures (682,586) (487,575) Proceeds from sales of equipment 36,683 17,037 Business acquisitions - net (4,694,519) Decrease in due from officers - net 309,808 Increase in other assets (218,449) (12,015) ------------- ------------- Net cash used in investing activities (5,558,871) (172,745) ------------- ------------- Cash flows from financing activities Proceeds from public offering - net 17,139,966 Borrowings under line of credit 118,419,608 128,785,498 Payments under line of credit (111,773,984) (132,901,107) Principal payments under equipment financing and term loans (375,054) (8,347,882) Purchase of treasury stock (700,000) Proceeds from exercise of stock options 20,300 Payments for fractional shares (1,268) ------------- ------------- Net cash provided by financing activities 5,570,570 4,695,507 ------------- ------------- NET INCREASE IN CASH 191,136 39,113 ------------- ------------- Cash at beginning of period 164,161 393,671 ------------- ------------- Cash at end of period $ 355,297 $ 432,784 ============= ============= Supplemental schedule of noncash financing and investing activities: Equipment under capital leases $ 355,824
See accompanying notes to condensed consolidated financial statements 8 FORM 10-Q March 31, 1997 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 March 31, 1997, 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 49,000 and 51,000 common stock equivalents for the three and nine months ended March 31, 1997 respectively, and approximately 70,000 and 75,000 common stock equivalents for the three and nine months ended March 31, 1996, 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 $4.9 million of which $157,500 was paid through the issuance of 20,000 shares of the Company's common stock. 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 acquisitions. 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 is being amortized using the straight line method over a period of 20 years. Pro forma historical results of operations are not presented as such results, would not be materially different from the historical results of the Company. 9 FORM 10-Q March 31, 1997 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 downturns in the electronic distribution industry which may have 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 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 March 31, 1997 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 Nine months ended March 31, March 31, 1997 1996 1997 1996 ---- ---- ---- ---- Net sales 100% 100% 100% 100% Cost of goods sold 79.7 80.0 79.2 79.5 ---- ---- ---- ---- Gross profit 20.3 20.0 20.8 20.5 Selling, general and administrative expenses 18.1 15.1 17.7 15.6 ---- ---- ---- ---- Operating profit 2.2 4.9 3.1 4.9 Interest expense .7 .5 .6 .9 ---- ---- ---- ---- Earnings before income taxes 1.5 4.4 2.5 4.0 Income tax provision .6 1.8 1.0 1.6 ---- ---- ---- ---- NET EARNINGS .9% 2.6% 1.5% 2.4% ==== ==== ==== ====
Comparison of the three and nine months ended March 31, 1997 and March 31, 1996 Net sales for the three and nine months ended March 31, 1997 were $38.7 million and $115.2 million as compared to $43.2 million and $126.9 million for the three and nine months ended March 31, 1996. This represented a 10.5% and 9.2% decrease in net sales, respectively. The Company believes that the decrease in net sales as compared to the previous quarter is primarily the result of an overall industry weakness as it relates to component pricing. The Company is selling a greater number of components than last year, but has not been able to offset the price reductions that have taken place. The Company believes it is positioned for growth as a result of two strategic acquisitions that incurred during the current fiscal year, including Corona Electronics, Inc. ("Corona"), a component distributor located in Southern California, acquired January, 1997 (see note A-6). 11 FORM 10-Q March 31, 1997 Page 11 Gross profit margins increased slightly for the three and nine months ended March 31, 1997 as compared to the same periods last year. Though unit pricing has continued to decline, sales of passive components, which historically have maintained a slightly higher gross profit margin as compared to active components, have increased during the three months ended March 31, 1997 and now represents 50% of component revenues for the current fiscal year. Selling, general and administrative expenses ("SG&A") were $7.0 million and $20.4 million for the three and nine months ended March 31, 1997 compared to $6.5 million and $19.8 million for the comparable prior periods. The Company continues to monitor costs. The increase in SG&A during the quarter, was primarily the result of a one-time charge, net of insurance recovery, to settle an action and the expenses relating to the operations of Corona. Interest expense increased to $266,000 for the three months ended March 31, 1997 compared to $223,000 for the same period last year. This increase was primarily attributable to the additional borrowings required due to the acquisition of Corona (see note A-6) and the increase during the quarter in inventory. When comparing the nine months ended March 31, 1997 compared to the same period last year, interest expense decreased as a result of 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 completed in October, 1995. Net earnings for the three and nine months ended March 31, 1997 were $347,000 and $1,756,000 or $.09 and $.45 per share, respectively, as compared to $1,113,000 and $3,001,000, or $.28 and $.88 per share, respectively, for the comparable periods during the last fiscal year. The decrease in net earnings was primarily attributable to the decrease in net sales. The one-time charge, net of insurance recovery and income taxes, incurred during the quarter, to settle an action resulted in a decrease in net earnings of $201,000 or $.05 per share. The Company believes it is necessary to maintain current cost levels to continue to develop new customers and to provide the value-added services that 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 March 31, 1997 was approximately $857,000) 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 the 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 March 31, 1997, the Company had outstanding borrowings of $15.4 million, with additional borrowing capacity of $14.6 million available under the revolving line of credit. Working capital was $41.4 million as of March 31, 1997, as compared to $37.0 million as of June 30, 1996, an increase of $4.4 million or approximately 12%. The increase was primarily attributable to a net increase in current assets from the acquisition of Corona during January, 1997. 12 FORM 10-Q March 31, 1997 Page 12 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 May 9, 1997 the Company has repurchased 87,500 shares at an average market price of $8.00 per share. For the nine months ended March 31, 1997, the Company's net cash provided by operating activities was approximately $.2 million as compared to net cash used in operating activities of approximately $4.5 million for the nine months ended March 31, 1996, an increase of $4.7 million. The increase is primarily attributable to accounts receivable and inventory increasing by $1.1 million (net of assets acquired from business acquisitions) for the nine months ended March 31, 1997, as compared to a $6.3 million increase in these assets for the nine months ended March 31, 1996. In addition, current liabilities increased by $1.0 million for the nine months ended March 31, 1997, as compared to a reduction in current liabilities of $2.5 million for the nine months ended March 31, 1996. Net cash used in investing activities increased to $5.6 million for the nine months ended March 31, 1997, as compared to $.2 million for the nine months ended March 31, 1996 an increase of $5.4 million. The two acquisitions completed during fiscal 1997 required approximately $4.7 million which were financed through the Company's line of credit. Net cash provided by financing activities increased $.9 million to $5.6 million for the nine months ended March 31, 1997 when compared to $4.7 million for the nine months ended March 31, 1996. Fiscal 1996 reflects the proceeds of the Company's public offering, which reduced cash provided by financing activities, by application of such proceeds against the Company's bank borrowings. 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, the Company increased its borrowings under its existing revolving line of credit by approximately $4.2 million. Additionally, the Company increased its borrowings by approximately $2.0 million to finance an increase in inventory. 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 FORM 10-Q March 31, 1997 Page 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. Exhibits and Reports on Form 8-K a) Exhibits: 27. Financial Data Schedule b) Reports on Form 8-K: None 14 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 14, 1997 EX-27 2 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1997 AND THE UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF EARNINGS FOR THE NINE MONTHS ENDED MARCH 31, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS JUN-30-1997 MAR-31-1997 355,297 552,848 24,837,063 988,558 32,437,371 59,869,333 6,957,677 2,133,376 70,707,333 18,430,046 16,724,405 0 0 397,572 35,155,310 70,707,333 115,178,339 115,178,339 91,187,699 91,187,699 20,366,027 0 672,353 2,952,260 1,196,000 1,756,260 0 0 0 1,756,260 0.45 0.45
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