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FORM 10-Q
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 1-5863
JACLYN, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 22-1432053
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
635 59TH STREET, WEST NEW YORK, NEW JERSEY 07093
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(Address of principal executive offices)
(Zip Code)
(201) 868-9400
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(Registrant's telephone number, including area code)
NONE
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all the 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 reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 1, 1997
- ------------------------------------ --------------------------
Common Stock, par value $1 per share 2,691,405
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<PAGE>
JACLYN, INC. AND SUBSIDIARIES
INDEX
Page No.
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PART I. FINANCIAL INFORMATION:
Item 1
Condensed Consolidated Balance Sheets -
March 31, 1997 (unaudited) and June 30, 1996 (derived
from audited financial statements) 3
Condensed Consolidated Statements of Earnings -
Three Months and Nine Months Ended March 31, 1997
and 1996 (unaudited) 4
Condensed Consolidated Statements of Cash Flows - Nine Months
Ended March 31, 1997 and 1996 (unaudited) 5
Notes to Condensed Consolidated Financial Statements (unaudited) 6
Item 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION:
Item 1
Legal Proceedings
8
Item 6
Exhibits and reports on Form 8-K 8
Signatures 9
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<PAGE>
PART 1. FINANCIAL INFORMATION
JACLYN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
March 31, 1997 June 30, 1996
(Unaudited) (See Note)
-------------- -------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,537 $ 665
Securities available for sale 3,582 3,614
Accounts receivable, net 6,873 10,305
Inventories:
Raw materials 2,438 4,379
Work in process 970 1,797
Finished goods 2,212 4,896
------- -------
5,620 11,072
Prepaid expenses and other assets 2,883 3,087
------- -------
TOTAL CURRENT ASSETS 21,495 28,743
PROPERTY, PLANT AND EQUIPMENT, net 1,610 1,481
OTHER ASSETS 1,620 1,757
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TOTAL ASSETS $24,725 $31,981
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable - bank $ - $ 1,100
Accounts payable 1,795 6,279
Other current liabilities 3,171 5,371
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TOTAL CURRENT LIABILITIES 4,966 12,750
GUARANTEED BANK LOAN - ESOP 509 704
OTHER NON-CURRENT LIABILITIES 27 32
DEFERRED INCOME TAXES 1,647 1,657
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock 3,369 3,369
Additional paid-in capital 12,117 12,117
Retained earnings 9,584 9,026
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25,070 24,512
Less: Common shares in treasury at cost 7,011 7,011
Guaranteed bank loan - ESOP 509 704
Add: Unrealized gain on securities
available for sale 26 41
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TOTAL STOCKHOLDERS' EQUITY 17,576 16,838
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $24,725 $31,981
======= =======
Note: The June 30, 1996 Balance Sheet is derived from audited financial
statements. See notes to condensed consolidated financial statements.
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<PAGE>
JACLYN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
------------------------- -------------------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Net Sales $ 13,778 $ 18,045 $ 56,473 $ 51,042
Other Income 77 76 195 246
---------- ---------- ---------- ----------
13,855 18,121 56,668 51,288
---------- ---------- ---------- ----------
Costs and Expenses:
Cost of Goods Sold 9,758 13,501 41,997 38,140
Shipping, Selling and Administrative Expenses 3,982 4,385 13,605 12,273
Interest Expense 1 8 137 113
---------- ---------- ---------- ----------
13,741 17,894 55,739 50,526
---------- ---------- ---------- ----------
Earnings before income taxes 114 227 929 762
Provision for income taxes 46 92 371 304
---------- ---------- ---------- ----------
Net earnings $ 68 $ 135 $ 558 $ 458
========== ========== ========== ==========
Average number of shares outstanding 2,831,155 2,691,405 2,831,155 2,691,405
========== ========== ========== ==========
PER SHARE DATA:
Net earnings per common share $ 0.02 $ 0.05 $ 0.20 $ 0.17
========== ========== ========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
JACLYN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
------------------
1997 1996
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 558 $ 458
Adjustments to reconcile net earnings to net cash provided by (used in)
operating activities:
Unrealized loss from marketable securities 17 --
Depreciation and amortization 356 230
Deferred income taxes (10) 39
Changes in assets and liabilities:
Decrease in accounts receivable 3,432 1,207
Decrease in inventories 5,452 1,723
Decrease in prepaid expenses and other current assets 204 497
Decrease in security deposits and other assets 20 25
(Decrease) increase in accounts payable and other current liabilities (6,684) 389
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Net cash provided by operating activities 3,345 4,568
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CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (388) (129)
Proceeds from sale of property 20 4
Purchases of securities available for sale -- (1,752)
Maturities of securities available for sale -- 1,648
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Net cash used in investing activities (368) (229)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in notes payable - bank (1,100) (3,470)
(Decrease) increase in other non-current liabilities (5) 8
------- -------
Net cash used in financing activities (1,105) (3,462)
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NET INCREASE IN CASH AND CASH EQUIVALENTS 1,872 877
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 665 243
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,537 $ 1,120
======= =======
SUPPLEMENTAL INFORMATION:
Interest paid $ 137 $ 113
------- -------
Taxes paid $ 830 $ 152
------- -------
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
JACLYN, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. The condensed consolidated balance sheet as of March 31, 1997 and the
condensed consolidated statements of earnings for the three and nine month
periods ended March 31, 1997 and 1996, and the condensed consolidated
statement of cash flows for the nine month periods ended March 31, 1997 and
1996, have been prepared by the Company and are unaudited. In the opinion
of management, all adjustments (which include only normal recurring
adjustments) have been made that are necessary to present fairly the
financial position, results of operations and cash flows for all periods
presented. It is suggested that these condensed consolidated financial
statements be read in conjunction with the audited financial statements and
notes thereto included in the Company's 1996 Annual Report to Stockholders.
The results of operations for the period ended March 31, 1997 are not
necessarily indicative of operating results for the full fiscal year.
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents increased during the nine month period
ended March 31, 1997 to $2,537,000 from $665,000 at June 30, 1996. The increase
this period was due to a net increase in cash provided by operating activities
of $3,345,000, primarily from decreases in inventory and accounts receivable,
offset by a decrease in accounts payable and other current liabilities. The net
increase in cash provided by operating activities was used, in part, to pay down
$1,100,000 of short-term bank loans. The Company believes that funds provided by
operations, existing working capital and the Company's current bank lines will
be sufficient to meet foreseeable working capital needs. There are no plans for
significant capital expenditures in the near term.
RESULTS OF OPERATIONS
Net sales were $13,778,000 and $56,473,000 during the three and nine-month
periods ended March 31, 1997, compared to $18,045,000 and $51,042,000 in the
three and nine-month periods ended March 31, 1996, respectively. The decrease in
sales for the quarter ended March 31, 1997 compared to the 1996 comparable
quarter was primarily due to the elimination by one customer of a handbag
program from one division of the Company and, generally for certain of its other
divisions, the timing of orders shipped to customers. Higher sales from both the
Company's new sleepwear division and sales in the Children's division resulted
in an overall higher year-to-date sales volume. Cost of goods sold in proportion
to net sales was lower for the three month period ended March 31, 1997 compared
to the prior year comparable period due to higher licensed product sales and a
reduction in short-term promotional selling used during last year's third
quarter to establish or maintain market share. The lower shipping, selling and
administrative expenses in the current quarter compared to the prior third
quarter was mostly from reductions in shipping and commission expenses as a
result of lower sales volume this period vs. last year's comparable period. The
decrease in interest expense reflects lower average borrowing during the current
three month period compared to the same periods last year while for the
year-to-date period, higher overall average borrowing resulted in greater
interest expense.
The decrease in earnings before income taxes for this year's three month period
as compared to the equivalent period of last year were due mainly to lower sales
volume as indicated above. For this year's nine month period, earnings before
income taxes were higher due to relatively higher shipping volume with slightly
better margins compared to last year's comparable period. Net earnings for the
three and nine-month period ended March 31, 1997 were $68,000 and $558,000
compared to net earnings for the same periods last year of $135,000 and
$458,000, respectively.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Registrant is a party to two related lawsuits involving the manufacture
and sale by the registrant of certain handbag styles.
In order to resolve certain claims asserted by Leegin Creative Leather
Products, Inc. ("Leegin"), a manufacturer and seller of handbags, that the sale
of a limited number of handbag styles violated Leegin's intellectual property
rights, in November 1996 the Registrant instituted an action in the United
States District Court for the Southern District of New York in which it is
seeking, among other things, a declaratory judgment that it has not violated
Leegin's rights under applicable law. The Registrant also is seeking unspecified
monetary damages from Leegin on the grounds that certain written statements made
by Leegin to certain of the Registrant's customers constituted libel. Leegin is
contesting the relief requested by the Registrant. Leegin was also granted leave
to counterclaim against the Registrant. The Registrant understands that Leegin's
counterclaims may include allegations of trademark and trade dress infringement
and unfair competition, and that Leegin may seek permanent injunctive relief
against the continued manufacture and sale of the handbag styles, an accounting
of profits and unspecified damages.
After the Registrant instituted the declaratory judgment action described
above, Leegin instituted an action in the District Court of Dallas County, Texas
against the Registrant, several of the Registrant's customers and one of the
Registrant's independent sales representatives. Leegin has alleged that the
manufacture and sale of the handbag styles violated Leegin's rights under Texas
law. Leegin is asking for permanent injunctive relief against the further
manufacture and sale of the handbag styles, as well as for unspecified
compensatory and punitive monetary damages, plus attorney's fees. The Registrant
has denied Leegin's allegations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a) Exhibit 27. Financial Data Schedule.
b) Reports on Form 8-K. The registrant did not file any reports on Form 8-K
during the three months ended March 31, 1997.
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<PAGE>
SIGNATURES
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.
JACLYN, INC.
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(Registrant)
May 7, 1997 /s/ ROBERT CHESTNOV
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Robert Chestnov
President
Chief Executive Officer
May 7, 1997 /s/ ANTHONY CHRISTON
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Anthony Christon
Vice President
Chief Financial Officer
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<PAGE>
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- --------
27 Financial Data Schedule 11
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Jaclyn, Inc. Condensed Consolidated Balance Sheet at March 31, 1997 and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,537
<SECURITIES> 3,582
<RECEIVABLES> 6,873
<ALLOWANCES> 0
<INVENTORY> 5,620
<CURRENT-ASSETS> 21,495
<PP&E> 1,610
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,620
<CURRENT-LIABILITIES> 4,966
<BONDS> 0
0
0
<COMMON> 3,369
<OTHER-SE> 14,207
<TOTAL-LIABILITY-AND-EQUITY> 24,725
<SALES> 13,778
<TOTAL-REVENUES> 13,855
<CGS> 9,758
<TOTAL-COSTS> 3,982
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1
<INCOME-PRETAX> 114
<INCOME-TAX> 46
<INCOME-CONTINUING> 68
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 68
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0.02
</TABLE>
