<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1998
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______________to _____________________.
Commission File No. 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)
Registrant's telephone number, including area code: (201) 868-9400
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of Class on which registered
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Common Stock, $1 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate 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 reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock (based on the closing price of
such stock on the American Stock Exchange) held by non-affiliates of the
Registrant at September 15, 1998 was approximately $11,184,000.
There were 2,711,391 shares of Common Stock outstanding at September 15, 1998.
1
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DOCUMENTS INCORPORATED BY REFERENCE
PART III Certain Portions of the Registrant's Proxy Statement for the
Registrant's Annual Meeting of Stockholders scheduled to be held
on December 2, 1998.
2
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TABLE OF CONTENTS
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Item Page
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PART I 1. Business......................................... 1
2. Properties....................................... 4
3. Legal Proceedings................................ 5
4. Submission of Matters to a
Vote of Security Holders......................... 5
PART II 5. Market for the Registrant's Common Equity
and Related Stockholder Matters.................. 6
6. Selected Financial Data.......................... 7
7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations....................................... 8
7A. Quantitative and Qualitative disclosures about
Market & Risk.................................... 12
8. Financial Statements and Supplementary
Data............................................. 12
9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure....................................... 12
PART III 10. Directors and Executive Officers
of the Registrant................................ 12
11. Executive Compensation........................... 12
12. Security Ownership of Certain
Beneficial Owners and Management................. 13
13. Certain Relationships and Related
Transactions..................................... 13
PART IV 14. Exhibits, Financial Statement
Schedules and Reports on Form 8-K....... 13
SIGNATURES.......................................................... 17
<PAGE>
PART I
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Item 1. Business.
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Jaclyn, Inc. (incorporated in the State of Delaware in 1968)
("Jaclyn") and its subsidiaries (collectively the "Registrant") are primarily
engaged in the design, manufacture, distribution and sale of vinyl, leather
and fabric handbags, sport bags and related products (collectively, "handbag
products"), and apparel items. The Registrant markets its handbag products in a
variety of popularly priced fashions and designs, with an emphasis on casual,
travel and sport styles. The Registrant's apparel lines are wide ranging and
include vests, loungewear, sleepwear, dresses, sportswear, as well as lingerie.
General. Styling is an important factor in the merchandising of all
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of the Registrant's products. The Registrant's staff of full-time designers
studies fashion trends in order to anticipate consumer demand. The design staff
works closely with the purchasing department to determine the styling and
material components for its handbag products, and concepts and fabrics for its
apparel products. The design staff also works with the production and
engineering staffs to determine the costs of production and the technical
problems involved in producing a new style. The Registrant changes many of its
designs from season to season.
Finished merchandise is received at the Registrant's warehouses
located in West New York, New Jersey and Ferris, Texas, and in several
independently owned warehouses in New Jersey, Florida, Indiana and California,
and from these locations is shipped under different selling names to customers
all over the country. The Registrant's handbag products are intended to retail
at between $6 and $275. The Registrant's better price and designer lines of
handbag products, which are sold under the "Anne Klein"(TM) and "Susan Gail"
names, are marketed through better department stores and specialty shops. The
Registrant's other handbag products are marketed primarily through general
merchandise, chain and department stores. In addition, the Registrant markets
its apparel lines to existing customers of its handbag products as premium
and/or special order items, as well as to major mail order catalog chains and
other retailers.
The Registrant markets its handbag products under trademarks and trade
names which it owns, including "Saddle River," "Shane," "Aetna," "Susan Gail,"
"Robyn Lyn" and "Marilyn USA." In addition, the Registrant is licensed to
manufacture and market handbag products under the names "Looney Tunes"(TM) under
an agreement which expires December 31, 1998, "Riders"(TM) under an agreement
which expires December 31, 1998, "Crayola"(TM) under an agreement which expires
December 31, 1998, "Dr. Seuss"(TM) under an agreement which expires December 31,
1999, and "Anne Klein"(TM) under an agreement which expires December 31, 2001.
The Registrant's apparel lines are marketed under the names "Robyn Lyn," "Saddle
River," "Susan Gail," and "Emerson Road." The Registrant also manufactures
apparel items for sale as private-label merchandise. The Registrant considers
all of its trademarks, trade names and other intellectual property rights to be
of significant value in the marketing of its products.
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The Registrant sells throughout the United States through its own
salesmen and through independent sales representatives. Sales of domestically
manufactured merchandise, including those assembled in Central America and in
Mexico from domestically produced components, accounted for approximately 33% of
the Registrant's consolidated net sales for the fiscal year ended June 30, 1998.
During fiscal 1997, sales of such merchandise, including those assembled in
Central America and in Mexico from domestically manufactured components,
accounted for approximately 29% of consolidated net sales.
In fiscal 1998, the Registrant's imports of merchandise manufactured
in the Far East accounted for approximately 67% of consolidated net sales,
compared to approximately 71% of consolidated net sales in fiscal 1997. Imports
offer the Registrant the benefit of a greater diversification of styling
resulting from volume purchases and the benefit of cost savings related to such
purchases. While the Registrant's operations are subject to the usual risks
associated with purchases from foreign countries, the Registrant's other foreign
and domestic manufacturing sources provide it with alternative sources and
facilities.
Approximately 64% of the Registrant's consolidated net sales for
fiscal 1998 were to general merchandise, chain and department stores, with the
balance consisting of sales to smaller specialty shops, smaller retail stores
and cosmetic firms. During the fiscal year ended June 30, 1998, four customers
of the Registrant accounted for 44% of the Registrant's consolidated net sales,
of which the Registrant's three largest customers ( Estee Lauder, Wal-Mart
Stores, Inc., and Target Stores) accounted for 15%, 12% and 10% of such sales,
respectively. Three major customers of the Registrant accounted for
approximately 34% of the Registrant's consolidated net sales for the fiscal year
ended June 30, 1997, of which the Registrant's two largest customers (Wal-Mart
Stores, Inc. and Estee Lauder) accounted for 13% and 12% of such sales,
respectively. Sales of apparel items during each of the fiscal years ended June
30, 1998, 1997 and 1996 represented 38%, 36% and 30%, respectively, of
consolidated net sales. Sales of handbag products represented the remainder of
the Registrant's consolidated net sales. The Registrant's sales are customarily
offered on credit terms. The Registrant does not have long-term contracts with
any of its customers.
The Registrant purchases its handbag and apparel raw materials,
primarily fabrics, vinyl and urethane plastics, leather, frames, ornaments, trim
and other materials, and certain of its finished products, from a variety of
sources. In most cases, the Registrant assists its suppliers and contractors in
the design and style of the materials it purchases. The Registrant's largest
expenditures for raw materials are for fabrics, leather, vinyl and urethane
plastics, which the Registrant purchases from several suppliers, one of which
provided about 14% of its raw material needs in fiscal 1998. While the
Registrant has no long-term supply contracts, the raw materials it uses are
available from various sources and it anticipates no difficulty in the future in
obtaining the necessary raw materials for its operations. With respect to its
domestic manufacturing and imported purchases from the Far East and Europe of
finished handbags and related products, the Registrant deals with a number of
sources, both domestically and in the Far East and Europe, no one of which
accounted for more than 15% of the Registrant's total cost of goods sold. The
Registrant has no long-term supply contracts with its Far East or European
sources of finished handbags and related products or apparel items and is
subject to the usual risks associated therewith.
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The Registrant generally offers Fall/Winter, Holiday and Spring/Summer
product lines and in most instances manufactures product to meet the specific
requirements of its customers. The Registrant's business is somewhat seasonal in
nature, with shipments historically being greater in the first two quarters of
its fiscal years and lower in the third and fourth quarters. Reference is made
to Note O, "Unaudited Quarterly Financial Data," of the Notes to Consolidated
Financial Statements on page F-23 of this Form 10-K for additional information
about quarterly results.
At September 15, 1998, the Registrant had unfilled orders of
approximately $18,834,000, compared to approximately $31,735,000 at September
15, 1997. The decrease in backlog is primarily attributable to decreases in the
volume of certain of the Company's divisions due to the non-renewal of the
Registrant's "Winnie The Pooh"(TM) license which expired June 30, 1997 and from
lower retail demand for non-brand handbag and accessories merchandise. In the
ordinary course of business, the amount of unfilled orders at a particular point
in time is affected by several factors, including scheduling of the manufacture
and shipping of goods (which, in turn, may be dependent on the requirements of
customers). Accordingly, a comparison of backlog from period to period is not
necessarily meaningful and may not be indicative of future sales patterns or
shipments.
The Registrant employed 221 persons as of June 30, 1998, of whom 101
were on a salaried basis and the balance on an hourly basis. At June 30, 1998,
22 of the Registrant's employees were members of the Four Joint Boards of New
York, New Jersey, Pennsylvania and New England, affiliated with the
International Leather Goods, Plastics and Novelty Workers Union, AFL-CIO. The
Registrant considers its relations with its employees to be satisfactory.
The Registrant competes with hundreds of domestic and foreign
manufacturers of popular priced handbags and apparel, very few of which are
believed to account for as much as 1% of industry sales. In addition, the
Registrant competes with numerous manufacturers of apparel items. The
Registrant believes its sales of apparel items are not significant in light of
total apparel industry sales. The Registrant's business is dependent, among
other things, on its ability to anticipate and respond to changing consumer
preferences, to remain competitive in price, style and quality and to meet its
customers' production and delivery requirements. While some of the Registrant's
competitors may be larger or may have greater resources than the Registrant, the
Registrant believes that its size and financial position will allow it to
continue to respond to changes in consumer demand and meet its competition.
In January 1996, the Registrant entered into a sales agreement to
manufacture and distribute an existing line of women's robes and sleepwear. In
addition, in April 1998, the Registrant entered into a sales agreement to
manufacture and distribute an existing line of junior intimates and daywear. The
Registrant did not incur any significant expenditures as a result of either of
these agreements.
On June 18, 1996, the Registrant acquired certain trademarks and other
assets from McCrackin Industries, Inc. ("McCrackin") and its affiliates for a
purchase price of $1,500,000. The trademarks included "Saddle River," under
which the Registrant has been manufacturing and distributing ladies' handbags
for more than 9 years. The Registrant also acquired certain office equipment,
furnishings and fixtures located at McCrackin's New York City showroom, which is
now operated by the Registrant.
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In addition, two of the principals of McCrackin have entered into a consulting
agreement to make available to the Registrant marketing and consulting services.
The Registrant also granted to those principals an option (which was not
exercised) to repurchase the trademarks on or prior to December 31, 1997.
Item 2. Properties.
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The Registrant's executive offices and one of its warehouse
facilities, containing 140,000 square feet, are located in West New York, New
Jersey. The Registrant occupied these facilities under long-term leases from
1968 to 1981, when these facilities were purchased by the Registrant. The
Registrant currently leases to outside parties approximately 59,000 square feet
of the West New York facilities. The Registrant also leases three showroom and
office facilities in New York City totaling approximately 20,000 square feet.
The executive offices, and manufacturing, distribution and warehouse facilities,
of JLN, Inc., containing 93,250 square feet, are located in Ferris, Texas. All
of the Registrant's facilities are well maintained structures, in good physical
condition and are adequate to meet its current and foreseeable needs.
Reference is made to Note E, "Commitments," of the Notes to
Consolidated Financial Statements on page F-13 of this Form 10-K for additional
information about the Registrant's commitments under the terms of non-cancelable
leases.
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Item 3. Legal Proceedings.
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(a) The Registrant is not a party to, nor is any of its property
the subject of, any material pending legal proceeding.
(b) No material pending legal proceeding was terminated during the
three-months ended June 30, 1998.
Item 4. Submission of Matters to a Vote of Security Holders.
- ------ ---------------------------------------------------
The Registrant did not submit any matters to a vote of its security
holders, through the solicitation of proxies or otherwise, during the three-
months ended June 30, 1998.
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PART II
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Item 5. Market for the Registrant's Common Equity
- ------ and Related Stockholder Matters.
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The Registrant's Common Stock, $1.00 par value per share, is
traded on the American Stock Exchange (Symbol: "JLN"). The following table sets
forth the high and low closing sales prices for the Registrant's Common Stock,
as reported by the American Stock Exchange, for each quarterly period during the
Registrant's fiscal years ended June 30, 1998 and June 30, 1997 .
<TABLE>
<CAPTION>
Fiscal Year Ended June 30, 1998 High Low
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<S> <C> <C>
First Quarter 5 1/8 3 7/8
Second Quarter 4 15/16 4 3/16
Third Quarter 5 5/16 4
Fourth Quarter 5 13/16 4 3/4
Fiscal Year Ended June 30, 1997 High Low
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First Quarter 5 3/4 4 1/16
Second Quarter 5 7/16 4 7/16
Third Quarter 5 7/16 4 3/4
Fourth Quarter 4 7/8 3 11/16
</TABLE>
The Registrant did not pay cash dividends during fiscal 1998 or
1997 and does not anticipate the payment of cash dividends in the foreseeable
future.
At June 30, 1998, there were approximately 711 holders of
record of the Registrant's Common Stock.
In accordance with a letter agreement dated December 29, 1997,
the Registrant granted to Robert Chestnov, President and Chief Executive Officer
of the Registrant, a restricted stock award of 20,000 shares of Common Stock
(the "Award Shares") in consideration for services rendered to the Registrant.
The Award Shares have not been registered under the Securities Act of 1933, as
amended (the "Act"), in reliance upon the exemption from registration afforded
by Section 4(2) of the Act for transactions by an issuer which do not involve a
public offering. Mr. Chestnov has represented that he is acquiring the Award
Shares for his own account and not with a view to the distribution thereof
within the meaning of the Act and has agreed not to pledge, sell, assign,
transfer or otherwise dispose of all or any of the Award Shares until January 1,
2000.
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Item 6. Selected Financial Data.
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<TABLE>
<CAPTION>
Years ended June 30, 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Sales $68,263,000 $77,156,000 $72,312,000 $73,577,000 $82,393,000
Cost of Goods Sold 51,401,000 56,825,000 53,836,000 58,639,000 58,298,000
Gross Profit 16,862,000 20,331,000 18,476,000 14,938,000 24,095,000
Shipping, selling and administrative
expenses 16,822,000 19,185,000 17,543,000 17,834,000 21,741,000
Restructuring costs - - 995,000 -
Interest expense 182,000 181,000 119,000 309,000 224,000
Other income, net 246,000 266,000 328,000 317,000 422,000
Provision (benefit) for income taxes 37,000 468,000 457,000 (1,563,000) 965,000
NET EARNINGS (LOSS) $ 67,000 $ 763,000 $ 685,000 $(2,320,000) $ 1,587,000
Weighted average shares outstanding 2,707,000 2,705,000 2,692,000 2,691,000 2,689,000
Net Earnings per common share-
Basic and Diluted $0.02 $0.28 $0.25 $ (0.86) $ 0.59
Cash dividends paid $ - $ - $ - $ 0.25 $ 0.50
TOTAL ASSETS $24,572,000 $34,063,000 $31,981,000 $28,409,000 $34,886,000
Long term debt:
Guaranteed bank loan - ESOP $ 56,000 $ 509,000 $ 704,000 $ 888,000 $ 1,150,000
Other non-current liabilities $ 20,000 $ 28,000 $ 32,000 $ 33,000 $ 31,000
Stockholders' equity $18,395,000 $17,785,000 $16,838,000 $15,942,000 $18,703,000
Stockholders' equity per share $ 6.80 $ 6.57 $ 6.26 $ 5.92 $ 6.95
</TABLE>
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Item 7. Management's Discussion and Analysis of
- ------ Financial Condition and Results of Operations.
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Liquidity and Capital Resources
The net increase in cash and cash equivalents in the fiscal years ended June 30,
1998, 1997 and 1996 was $596,000, $915,000 and $422,000, respectively. The net
increase in fiscal 1998 was the result of an excess of funds provided from
operating activities totaling $4,042,000 and investing activities of $633,000,
over funds used in financing activities of $4,079,000. Funds provided by
operating activities were principally from a $1,985,000 decrease in inventory
(resulting from lower first quarter fiscal 1999 shipping) and a $5,505,000
decrease in accounts receivable (attributable to a lower level of shipping in
the fourth quarter of fiscal 1998 compared to the comparable quarter in fiscal
1997). The resulting cash flows were mostly used to decrease accounts payable
and other current liabilities by $5,056,000. Cash provided by investing
activities resulted mainly from an excess of proceeds from securities available
for sale over purchases of such securities and the purchases of property and
equipment. Funds used in financing activities were mostly to pay down all
outstanding notes payable to the Company's bank under the existing credit
facility.
Through a $23,000,000 credit line with its bank, the Company has short-term
borrowing capabilities, under which letters of credit for purchase commitments
and bankers acceptances may be issued. Within this line of credit, the Company
has available up to $10,000,000 of short-term loans and bankers acceptances at
either prime or LIBOR rates. All borrowing, with the exception of bankers
acceptances, is unsecured. There were no amounts outstanding under the Company's
line of credit at June 30, 1998. Reference is made to Note F "Credit
Facilities," of the Notes to Consolidated Financial Statements on page F-13 of
this Form 10-K for additional information about the Company's credit lines.
There were no material commitments for capital expenditures at June 30,
1998.
The net increase in cash and cash equivalents in fiscal 1997 was the result
of an excess of funds from financing activities (bank borrowings under the
Company's credit line) of $3,063,000 over funds used in investing activities of
$467,000 and funds used in operating activities of $1,681,000. Funds from
operating activities were used mainly to reduce accounts payable and other
current liabilities totaling $1,677,000 and to finance the $1,179,000 increase
in accounts receivable. These funds were principally offset by a decrease in
inventories of $1,010,000 which resulted from higher shipping in June 1997
compared to June 1996 and net earnings from operations of $763,000. Cash used in
investing activities was primarily for property and equipment additions.
The net increase in cash and cash equivalents in the fiscal year ended June
30, 1996 was $422,000. This increase was the result of an excess of funds
provided by operating activities of $3,176,000 over funds used in investing
activities of $315,000 and financing activities of $2,439,000. Funds provided by
operating activities increased mainly due to an increase in accounts payable of
$5,010,000 mostly financing the increase in inventory and net earnings from
operations totaling $685,000. These funds were principally offset by an increase
in inventories of $3,330,000 due to increased orders for goods planned to be
shipped in the first quarter of fiscal 1997. Cash used in investing activities
was primarily for the purchase of bonds (securities available for sale) of
$3,673,000 and for the purchase of certain trademarks and other assets from
McCrackin Industries, Inc. for $1,500,000. Reference is made to Note M "Purchase
of Trademarks" of the Notes to Consolidated Financial Statements on page F-21 of
this Form 10-K. These items were offset, in part,
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by sales of securities available for sale totaling $5,034,000. Funds used in
financing activities of $2,439,000 were entirely related to the pay down of
outstanding notes payable to the Company's bank under an existing bank line of
credit.
The Company has an Employee Stock Ownership Plan ("ESOP"). During fiscal
1994, the Company guaranteed a bank loan to the ESOP in the amount of
$1,150,000, the proceeds of which were also used to purchase shares of the
Company's Common Stock. At June 30, 1998, the loan balance was $56,000.
Reference is made to Note L, "Employee Stock Ownership Plan and Trust," of the
Notes to Consolidated Financial Statements on page F-21 of this Form 10-K.
As of June 30, 1998, 1997 and 1996, working capital was $16,715,000,
$16,697,000 and $15,993,000 , respectively. The ratio of current assets to
current liabilities for those same periods was 4.4 to 1, 2.2 to 1 and 2.3 to 1,
respectively. The increase in the current ratio in fiscal 1998 is the result of
the relative relationship of lower levels of inventory and accounts receivable
and a corresponding lower level of both notes payable to the Company's bank and
of accounts payable and other current liabilities. The Company's cash, cash
equivalents and marketable securities totaled $4,911,000, $5,187,000 and
$4,279,000, at June 30, 1998, 1997 and 1996, respectively. The Company
believes that funds provided by operations, existing working capital and the
Company's current bank lines will be sufficient to meet its anticipated short-
term and long-term working capital needs.
Results of Operations
1998 Compared to 1997
Net sales of $68,263,000 were $8,893,000 below fiscal 1997. This
decrease was due primarily to significantly lower sales volume in the Company's
children's division resulting mostly from the non-renewal of the Company's
"Winnie The Pooh"(TM) license and lower volume in the Company's medium priced
handbag business, due to lower retail demand for non-brand handbag and
accessories merchandise, offset partly by improved premium and women's apparel
sales.
The gross profit margin for fiscal 1998 was 24.7%, or a decline of 1.7%
from the prior year, which resulted from a higher level of inventory markdowns
and off-price sales in the children's and medium priced handbag business.
Margins improved somewhat, however, in the premium and the women's apparel
business. Shipping, selling and administrative expenses decreased by $2,363,000.
As a percentage of net sales, this decrease in the current fiscal year was 24.6%
compared to 24.9% in the prior fiscal year, attributable to lower fiscal 1998
shipping, royalty and product development costs.
Other income, comprised almost exclusively from interest income,
declined slightly from the prior fiscal year generally due to a lower level of
interest rates on the investment portfolio.
The decrease in earnings before income taxes for the fiscal year ended
June 30, 1998 compared to the prior year was primarily due to the decrease in
sales and the 1.7% decrease in the gross profit margin discussed above.
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1997 Compared to 1996
Net sales were $77,156,000, or $4,844,000 greater than fiscal 1996. This
increase was primarily due to increased apparel sales, an increase in the
premium business and an increase in the children's licensing business offset
somewhat by a decrease in moderately priced handbag line.
Gross profit margins totaling 26.4% improved slightly due to stronger
margins from licensed products and from improved apparel business margins.
Other income, almost exclusively from investments, declined due to a
lower level of investments in fiscal 1997 compared to fiscal 1996.
The earnings increase for the fiscal year ended June 30, 1997 compared
to the prior year was due to slightly higher gross profit margins on increased
sales and a slightly lower effective tax rate compared to the prior fiscal year
offset by higher shipping, selling and administrative expenses.
1996 Compared to 1995
Net sales were $72,312,000 which was slightly lower than net sales of
$73,577,000 in fiscal 1995. This reduction was part of lower anticipated sales
based on the Company's 1995 restructuring which included emphasis on improving
the gross profit margin and of buying inventory for certain divisions by
specific order rather than for stock.
Gross profit in 1996 increased due to relatively fewer markdowns taken
after the Company's fiscal 1995 restructuring. Shipping, selling and
administrative expense decreased due to a reduction in certain fixed expenses
following the Company's fiscal 1995 restructuring. Interest expense decreased
due to lower aggregate average borrowing in fiscal 1996 compared to fiscal 1995.
Other income, almost exclusively from investments, was slightly higher
than the same 1995 period due to a small increase in the overall average
investment interest rate.
The earnings increase for the fiscal year ended June 30, 1996 was due
mainly to better gross profit margins, lower shipping, selling and
administrative expense as well as lower interest expense. The loss for the
fiscal year ended June 30, 1995 was due mainly from decreased sales volume and
lower margins, offset by decreased shipping, selling, administrative expenses as
well as costs associated with the restructuring.
Recently Issued Accounting Standards
In June 1997, the Financial Accounting Standards Board issued SFAS No.
130, "Reporting Comprehensive Income" and SFAS 131, "Disclosure about Segments
of an Enterprise and Related Information." These statements, which are effective
for the Company for the year ending June 30, 1999, expand and modify disclosures
and accordingly will have no impact on the Company's consolidated balance sheet
or statement of earnings.
Year 2000 Compliance
The Company has completed its assessment of the changes that are needed
to make its critical and other data processing systems year 2000 compliant. The
changes, which include a combination of software modifications and upgrades and
hardware changes, have substantially been
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completed, with significant customer testing underway. The Company's internal
target date to be fully compliant and tested is March 1999. The Company has
targeted March 1999 in an effort to provide it with a full nine months to
continue to test its systems, thereby minimizing the risks associated with Year
2000 systems changes.
Existing data processing personnel are being utilized in implementing
Year 2000 changes. To date, total costs incurred have been approximately
$6,000, with total aggregate costs to become Year 2000 compliant not expected to
exceed $10,000.
Most of the Company's major customers have already indicated that they
are or will be year 2000 compliant by the end of calendar year 1998. The Company
is not computer interdependent with its significant suppliers and, accordingly,
does not believe that the failure of suppliers to be Year 2000 compliant will
pose any significant risk to the Company's business operation. In any event, the
Company presently has and expects it will have alternative sources of supply if
existing vendors are unable to supply the Company if they are not Year 2000
compliant.
The foregoing constitute forward looking statements based upon
management's best estimates concerning future events. Actual results could
differ as a result of a number of factors, including future costs of Year 2000
compliance, success of testing, successful completion by third parties with
their respective Year 2000 compliance programs, and similar uncertainties.
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Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
- ------- ----------------------------------------------------------
The Registrant, in the normal course of doing business, is theoretically
exposed to interest rate change market risk with respect to its Securities
Available for Sale and its line of credit. As borrowing patterns are seasonal,
the Registrant is not dependant on borrowing throughout the year. Therefore, a
sudden increase in interest rates (which under the line of credit is at the
prime rate or lower) may, during peak borrowing, have a negative impact on
short-term results, but would unlikely impact longer-term results since a cost
pass-through would offset such higher interest expense.
All of the Registrant's Securities Available for Sale are state
government or municipal bonds. As of June 30, 1998, the cost and market value of
such bonds was $2,625,000 and $2,683,540, respectively. A significant increase
in interest rates would result in a decrease in the bond prices. However, to
minimize risk, the Registrant has a policy of investing only in high rated
instruments ( substantially all have Aa or better Moody's bond ratings) and
generally uses short-term maturities (currently the average life is about three
years). In addition, the proceeds from such securities are not essential to the
working capital needs of the business and therefore could be held to maturity
for full face value.
Item 8. Financial Statements and Supplementary Data.
- ------ -------------------------------------------
(a) Financial Statements
--------------------
The report dated September 25, 1998 of Deloitte & Touche LLP,
independent auditors, the consolidated balance sheets of Jaclyn, Inc. and
subsidiaries as of June 30, 1998 and 1997 and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended June 30, 1998 and Notes to Consolidated
Financial Statements appear on pages F-2 through F-15 of this Form 10-K.
(b) Supplementary Data
------------------
Selected unaudited quarterly financial data for the fiscal years
ended June 30, 1998 and June 30, 1997 is set forth at Note O, "Unaudited
Quarterly Financial Data" on page F-16 of this Form 10-K.
Item 9. Changes in and Disagreements with Accountants
- ------- on Accounting and Financial Disclosure.
---------------------------------------------
Not Applicable.
PART III
--------
Item 10. Directors and Executive Officers of the Registrant.
- ------- --------------------------------------------------
The information required by this item is incorporated herein by
reference to the Registrant's definitive Proxy Statement relating to the
Registrant's 1998 Annual Meeting of Stockholders to be filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended.
Item 11. Executive Compensation.
- ------- ----------------------
The information required by this item is incorporated herein by
reference to the Registrant's definitive Proxy Statement relating to the
Registrant's 1998 Annual Meeting of Stockholders to be filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended.
-12-
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management.
- -------- ---------------------------------------------------------------
The information required by this item is incorporated herein by
reference to the Registrant's definitive Proxy Statement relating to the
Registrant's 1998 Annual Meeting of Stockholders to be filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended.
Item 13. Certain Relationships and Related Transactions.
- -------- -----------------------------------------------
The information required by this item is incorporated herein by
reference to the Registrant's definitive Proxy Statement relating to the
Registrant's 1998 Annual Meeting of Stockholders to be filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended.
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
- -------- ----------------------------------------------------------------
(a) The following financial statements and financial statement schedules
are filed as part of this report:
(1) Financial Statements:
--------------------
Independent Auditors' Report
Consolidated Balance Sheets -- June 30, 1998 and 1997
Consolidated Statements of Operations -- years ended June 30,
1998, 1997 and 1996
Consolidated Statements of Stockholders' Equity -- years ended
June 30, 1998, 1997 and 1996
Consolidated Statements of Cash Flows -- years ended June 30,
1998, 1997 and 1996
Notes to Consolidated Financial Statements
(b) Financial Statement Schedules:
-----------------------------
Schedule II - Valuation and Qualifying Accounts
All other schedules are omitted because they are either
inapplicable, not required, or because the required information is included in
the consolidated financial statements or notes thereto.
(c) Exhibits:
--------
Exhibit No. Description
- ----------- -----------
3(a) Certificate of Incorporation of the Registrant (incorporated
herein by reference to Exhibit 3(a) to the Registrant's Annual
Report on Form 10-K, File No. 1-5863, for the fiscal year ended
June 30, 1994).
-13-
<PAGE>
3(b) By-Laws of the Registrant (incorporated herein by reference to
Exhibit 3(b) to the Registrant's Annual Report on Form 10-K, File
No. 1-5863, for the fiscal year ended June 30, 1991).
10(a) Lease dated as of February 11, 1993 with 33 East 33rd Street
Realty Associates relating to showroom, warehouse and
distribution facilities of the Registrant located in New York,
New York (incorporated herein by reference to Exhibit 10(d) to
the Registrant's Annual Report on Form 10-K, File No. 1-5863, for
the fiscal year ended June 30, 1993).
10(b) Lease dated January 28, 1994 with 330 Realty Company relating to
office and showroom facilities located in New York, New York
(incorporated herein by reference to Exhibit 10(e) to the
Registrant's Annual Report on Form 10-K, File No. 1-5863, for the
fiscal year ended June 30, 1994).
10(c) Lease dated January 28, 1994 between E.H. Handbag Co. and 330
Realty Company relating to office and showroom facilities located
in New York, New York (incorporated herein by reference to
Exhibit 10(f) to the Registrant's Annual Report on Form 10-K,
File No. 1-5863, for the fiscal year ended June 30, 1993)
10(d) Incentive Stock Option Plan of the Registrant (incorporated
herein by reference to Exhibit 10(f) to the Registrant's Annual
Report on Form 10-K, File No. 1-5863, for the fiscal year ended
June 30, 1988).*
10(e) 1984 Employee Stock Option Plan of the Registrant (incorporated
herein by reference to Exhibit 10(f) to the Registrant's Annual
Report on Form 10-K, File No. 1-5863, for the fiscal year ended
June 30, 1989).*
10(f) 1990 Stock Option Plan of the Registrant, as amended
(incorporated herein by reference to Exhibit 10(g) to the
Registrant's Annual Report on Form 10-K, File No. 1-5863, for the
fiscal year ended June 30, 1991).*
10(g) Amended and Restated Stockholders' Agreement dated July 30, 1996
among the Registrant and the persons listed on Schedule A thereto
(incorporated herein by reference to Exhibit 10(j) to the
Registrant's Annual Report on Form 10K, file number 1-5863, for
the fiscal year ended June 30, 1996).
10(h) Key Executive Disability Plan of the Registrant (incorporated
herein by reference to Exhibit 10(m) to the Registrant's Annual
Report on Form 10-K, File No. 1-5863, for the fiscal year ended
June 30, 1988).*
-14-
<PAGE>
10(i) Loan and Security Agreement dated February 15, 1994 between the
Jaclyn, Inc. Employee Stock Ownership Plan and Trust and National
Westminster Bank, New Jersey (incorporated herein by reference to
Exhibit 10(l) to the Registrant's Annual Report on Form 10-K,
File No. 1-5863, for the fiscal year ended June 30, 1994).
10(j) Guaranty dated February 15, 1994 of Empress Handbag Co., Inc.,
The Bag Factory Shops, Inc., JLN, Inc. and the Registrant in
favor of National Westminster Bank, New Jersey (incorporated
herein by reference to Exhibit 10(m) to the Registrant's Annual
Report on Form 10-K, File No. 1-5863, for the fiscal year ended
June 30, 1994).
10(k) Amendment to Loan and Security Agreement dated August 2, 1994
between the Jaclyn, Inc. Employee Stock Ownership Plan and Trust
and National Westminster Bank, New Jersey (incorporated herein by
reference to Exhibit 10(n) to the Registrant's Annual Report on
Form 10-K, File No. 1-5863, for the fiscal year ended June 30,
1994).
10(l) Split-Dollar Insurance Agreement dated August 15, 1987 between
the Registrant and Robert Chestnov (incorporated herein by
reference to Exhibit 10(m) to the Registrant's Annual Report on
Form 10-K, File No. 1-5863, for the fiscal year ended June 30,
1990).*
10(m) Split-Dollar Insurance Agreement dated August 15, 1987 between
the Registrant and Howard Ginsburg (incorporated herein by
reference to Exhibit 10(n) to the Registrant's Annual Report on
Form 10-K, File No. 1-5863, for the fiscal year ended June 30,
1990).*
10(n) Split-Dollar Insurance Agreement dated August 15, 1987 between
the Registrant and Allan Ginsburg (incorporated herein by
reference to Exhibit 10(o) to the Registrant's Annual Report on
Form 10-K, File No. 1-5863, for the fiscal year ended June 30,
1990).
10(o) 1996 Non-Employee Director Stock Option Plan (incorporated by
reference to Exhibit 10(o) to the Registrant's Annual Report on
Form 10-K, File No. 1-5863, for the fiscal year ended June 30,
1997).*
10(p) Non-Qualified Stock Option Contract dated December 3,1996 between
the Registrant and Martin Brody (incorporated by reference to
Exhibit 10(p) to the Registrant's Annual Report on Form 10-K,
File No. 1-5863, for the fiscal year ended June 30, 1997).
10(q) Non-Qualified Stock Option Contract dated December 3, 1996
between the Registrant and Richard Chestnov (incorporated by
-15-
<PAGE>
reference to Exhibit 10(q) to the Registrant's Annual Report on
Form 10-K, File No. 1-5863, for the fiscal year ended June 30,
1997).
10(r) Non-Qualified Stock Option Contract dated August 19, 1997 between
the Registrant and Al Safer (incorporated by reference to Exhibit
10(r) to the Registrant's Annual Report on Form 10-K, File No. 1-
5863, for the fiscal year ended June 30, 1997).
10(s) Non-Qualified Stock Option Contract dated December 3, 1997
between the Registrant and Martin Brody.
10(t) Non-Qualified Stock Option Contract dated December 3, 1997
between the Registrant and Richard Chestnov.
10(u) Non-Qualified Stock Option Contract dated December 3, 1997
between the Registrant and Albert Safer.
10(v) Letter Agreement dated as of December 29, 1997 between the
Registrant and Robert Chestnov.*
21 Subsidiaries of the Registrant (incorporated herein by reference
to Exhibit 21 to the Registrant's Annual Report on Form 10-K,
File No. 1-5863, for the fiscal year ended June 30, 1995).
27 Financial Data Schedule.
____________________
*Management contract or compensatory plan or arrangement
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Registrant during the
three months ended June 30, 1998.
(c) Exhibits.
Exhibits are listed in response to Item 14(a)3.
(d) Financial Statement Schedules.
Financial Statement Schedules are listed in response to Item
14(a)2.
-16-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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.
By: /s/ Allan Ginsburg
------------------------
September 25, 1998 ALLAN GINSBURG, Chairman
of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
<TABLE>
<S> <C> <C>
/s/ Allan Ginsburg Chairman of the Board September 25, 1998
- ------------------------ and Director
ALLAN GINSBURG
/s/ Robert Chestnov President, Principal September 25, 1998
- ------------------------ Executive Officer and
ROBERT CHESTNOV Director
/s/ Anthony Christon Chief Financial Officer, September 25, 1998
- ------------------------ Principal Financial and
ANTHONY CHRISTON Accounting Officer
/s/ Abe Ginsburg Director September 25, 1998
- ------------------------
ABE GINSBURG
/s/ Howard Ginsburg Director September 25, 1998
- ------------------------
HOWARD GINSBURG
Director September 25, 1998
- ------------------------
MARTIN BRODY
/s/ Richard Chestnov Director September 25, 1998
- ------------------------
RICHARD CHESTNOV
/s/ Al Safer Director September 25, 1998
- ------------------------
AL SAFER
</TABLE>
-17-
<PAGE>
JACLYN, INC. AND SUBSIDIARIES
Consolidated Financial Statements and
Additional Information for the Years Ended
June 30, 1998, 1997 and 1996 and
Independent Auditors' Report
<PAGE>
JACLYN, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
Page
INDEPENDENT AUDITORS' REPORT F-1
FINANCIAL STATEMENTS:
Consolidated Balance Sheets F-2
Consolidated Statements of Earnings F-4
Consolidated Statements of Cash Flows F-5-6
Consolidated Statements of Changes in Stockholders' Equity F-8
Notes to Consolidated Financial Statements F-9-23
SUPPLEMENTAL SCHEDULE:
Valuation and Qualifying Accounts F-24
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Stockholders of
Jaclyn, Inc.
West New York, New Jersey
We have audited the accompanying consolidated balance sheets of Jaclyn, Inc. and
Subsidiaries as of June 30, 1998 and 1997, and the related consolidated
statements of earnings, stockholders' equity and cash flows for each of the
three years in the period ended June 30, 1998. Our audits also included the
consolidated financial statement schedule of Jaclyn Inc. and Subsidiaries listed
in item 14(a)2. These financial statements and financial statement schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements and financial statement schedule based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Jaclyn, Inc. and Subsidiaries as of
June 30, 1998 and 1997, and the results of their operations and their cash flows
for each of the three years in the period ended June 30, 1998 in conformity with
generally accepted accounting principles.
Also, in our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects, the information set forth therein.
Deloitte & Touche, LLP
September 24, 1998
New York, New York
F-1
<PAGE>
JACLYN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
ASSETS
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 2,176,000 $ 1,580,000
SECURITIES AVAILABLE FOR SALE 2,735,000 3,607,000
ACCOUNTS RECEIVABLE, LESS ALLOWANCE FOR DOUBTFUL
ACCOUNTS: 1998, $483,000, 1997, $724,000 5,979,000 11,484,000
INVENTORIES 8,077,000 10,062,000
PREPAID EXPENSES AND OTHER CURRENT ASSETS 533,000 1,258,000
DEFERRED INCOME TAXES 2,050,000 2,329,000
PREPAID AND REFUNDABLE INCOME TAXES 82,000 513,000
TOTAL CURRENT ASSETS 21,632,000 30,833,000
PROPERTY, PLANT AND EQUIPMENT - NET 1,516,000 1,638,000
OTHER ASSETS 1,424,000 1,592,000
$24,572,000 $34,063,000
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
NOTES PAYABLE - BANK $ - $ 4,163,000
ACCOUNTS PAYABLE 2,676,000 6,477,000
COMMISSIONS PAYABLE 144,000 150,000
ACCRUED PAYROLL AND RELATED EXPENSES 829,000 1,046,000
OTHER CURRENT LIABILITIES 1,268,000 2,300,000
TOTAL CURRENT LIABILITIES 4,917,000 14,136,000
GUARANTEED BANK LOAN - ESOP 56,000 509,000
OTHER NON-CURRENT LIABILITIES 20,000 28,000
DEFERRED INCOME TAXES 1,185,000 1,605,000
COMMITMENTS
STOCKHOLDERS' EQUITY:
PREFERRED STOCK, PAR VALUE $1: AUTHORIZED,
1,000,000 SHARES; ISSUED AND OUTSTANDING, NONE - -
COMMON STOCK, PAR VALUE $1: AUTHORIZED,
5,000,000 SHARES 3,369,000 3,369,000
ADDITIONAL PAID-IN CAPITAL 12,117,000 12,117,000
RETAINED EARNINGS 9,733,000 9,789,000
25,219,000 25,275,000
LESS: TREASURY STOCK AT COST 6,804,000 7,011,000
GUARANTEED BANK LOAN - ESOP 56,000 509,000
ADD: UNREALIZED GAIN ON SECURITIES AVAILABLE FOR
SALE 35,000 30,000
TOTAL STOCKHOLDERS' EQUITY 18,394,000 17,785,000
</TABLE>
F-2
<PAGE>
<TABLE>
<S> <C> <C>
$24,572,000 $34,063,000
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS.
F-3
<PAGE>
JACLYN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
YEARS ENDED JUNE 30, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Net sales $68,263,000 $77,156,000 $72,312,000
Cost of goods sold 51,401,000 56,825,000 53,836,000
Gross profit 16,862,000 20,331,000 18,476,000
Shipping, selling and administrative
expenses 16,822,000 19,185,000 17,543,000
Earnings from operations 40,000 1,146,000 933,000
Interest expense 182,000 181,000 119,000
Other income, net 246,000 266,000 328,000
EARNINGS BEFORE INCOME TAXES 104,000 1,231,000 1,142,000
PROVISION FOR INCOME TAXES 37,000 468,000 457,000
NET EARNINGS $ 67,000 $ 763,000 $ 685,000
NET EARNINGS PER COMMON SHARE -
BASIC AND DILUTED $ 0.02 $ 0.28 $ 0.25
Weighted average number of shares
outstanding 2,707,000 2,705,000 2,692,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-4
<PAGE>
JACLYN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 67,000 $ 763,000 $ 685,000
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities:
Depreciation and amortization 362,000 316,000 311,000
Deferred income taxes (141,000) 14,000 (367,000)
Loss (gain) on sale of equipment 4,000 (10,000) (2,000)
Amortization of goodwill 155,000 155,000 108,000
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 5,505,000 (1,179,000) 245,000
Decrease (increase) in inventories 1,985,000 1,010,000 (3,330,000)
Decrease (increase) in prepaid expenses
and other current assets 725,000 (837,000) 162,000
Decrease (increase) in prepaid and refundable
income taxes 431,000 (242,000) 325,000
Decrease in security deposits, other assets
and non current liabilities 5,000 6,000 29,000
(Decrease) increase in accounts payable
and other current liabilities (5,056,000) (1,677,000) 5,010,000
Net cash provided by (used in) operating activities 4,042,000 (1,681,000) 3,176,000
</TABLE>
(Continued)
F-5
<PAGE>
JACLYN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1998, 1997 AND 1996
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (304,000) (515,000) (202,000)
Proceeds from sale of property 60,000 52,000 26,000
Purchases of securities available for sale (1,103,000) (184,000) (3,673,000)
Proceeds from sales of securities available for sale 1,980,000 180,000 5,034,000
Purchase of trademarks - - (1,500,000)
Net cash provided by (used in) investing activities 633,000 (467,000) 1,185,000
CASH FLOWS FROM FINANCING ACTIVITIES:
(Decrease) increase in notes payable - bank (4,163,000) 3,063,000 (2,439,000)
Proceeds from issuance of treasury stock 84,000 - -
Net cash (used in) provided by financing activities (4,079,000) 3,063,000 (2,439,000)
NET INCREASE IN CASH AND CASH EQUIVALENTS 596,000 915,000 422,000
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,580,000 665,000 243,000
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 2,176,000 $1,580,000 $ 665,000
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest $ 182,000 $ 181,000 $ 119,000
Income taxes $ 872,000 $ 863,000 $ 203,000
NON-CASH ITEMS:
Unrealized gain on securities available for sale $ 35,000 $ 30,000 $ 41,000
</TABLE>
The accompanying notes are an integral part of these financial statements
(Concluded)
F-6
<PAGE>
F-7
<PAGE>
JACLYN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
Unrealized
Gain (Loss)
COMMON STOCK Additional Securities
Shares Amount Paid-in Available Retained
Capital for Sale Earnings
<S> <C> <C> <C> <C> <C>
BALANCE, JUNE 30, 1995 3,368,733 $ 3,369,000 $ 12,117,000 $ 14,000 $ 8,341,000
Unrealized gain on securities
available for sale at July 1, 1995 - - - 27,000 -
Net earnings, year ended June 30, 1996 - - - - 685,000
ESOP loan repayment - - - - -
BALANCE, JUNE 30, 1996 3,368,733 3,369,000 12,117,000 41,000 9,026,000
Unrealized loss on securities
available for sale at July 1, 1996 - - - (11,000) -
Net earnings, year ended June 30,1997 - - - - 763,000
ESOP loan repayment - - - - -
BALANCE, JUNE 30, 1997 3,368,733 $ 3,369,000 $ 12,117,000 $ 30,000 $ 9,789,000
Unrealized gain on securities
available for sale at July 1, 1997 5,000
Net earnings, year ended June 67,000
Issuance of treasury shares - - - - (123,000)
ESOP loan repayment - - - - -
BALANCE, JUNE 30, 1998 3,368,733 $ 3,369,000 $ 12,117,000 $ 35,000 $ 9,733,000
<CAPTION>
TREASURY STOCK
Guaranteed
Bank Loan -
Shares Amount ESOP
BALANCE, JUNE 30, 1995 677,328 $ 7,011,000 $ 888,000
Unrealized gain on securities
available for sale at July 1, 1995 - - -
Net earnings, year ended June 30, 1996 - - -
ESOP loan repayment - - (184,000)
BALANCE, JUNE 30, 1996 677,328 7,011,000 704,000
Unrealized loss on securities
available for sale at July 1, 1996 - - -
Net earnings, year ended June 30,1997 - - -
ESOP loan repayment - - (195,000)
BALANCE, JUNE 30, 1997 677,328 $ 7,011,000 $ 509,000
Unrealized gain on securities
available for sale at July 1, 1997
Net earnings, year ended June
Issuance of treasury shares (20,000) (207,000)
ESOP loan repayment - - (453,000)
BALANCE, JUNE 30, 1998 $ 657,328 $ 6,804,000 $ 56,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-8
<PAGE>
JACLYN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Jaclyn, Inc. and its subsidiaries (the "Company") are engaged in the design,
manufacture, marketing and sale of handbags, accessories, apparel and related
products. The Company sells its products to retailers, including department and
specialty stores, national chains, major discounters and mass volume retailers,
throughout the United States.
The consolidated financial statements include the accounts of the Company and
all of its wholly-owned subsidiaries. All significant intercompany transactions
and balances have been eliminated.
Use of estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expense during the reporting period. Actual
results could differ from those estimates.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
Property, plant and equipment
Property, plant and equipment are stated at cost. The Company provides for
depreciation and amortization on the straight-line method over the following
estimated useful lives:
Buildings 25 to 40 years
Machinery and equipment 5 years
Furniture and fixtures 5 years
Leasehold improvements Lesser of life of the asset or life of the lease
Automobiles and trucks 3 to 5 years
Intangible Assets
F-9
<PAGE>
Goodwill and trademarks arising from acquisitions are being amortized on a
straight-line basis over periods not exceeding 20 years. The Company regularly
reviews the individual components of the balances by evaluating the future cash
flows of the businesses to determine the recoverability of the assets and
recognizes, on a current basis, any diminution in value.
F-10
<PAGE>
Revenue Recognition
Revenue is recognized at the time merchandise is shipped. Retail factory outlet
store revenues are recognized at the time of sale.
Recently Issued Accounting Standards
In June 1997, the Financial Accounting Standards Board issued SFAS No. 130,
"Reporting Comprehensive Income", SFAS No. 131, "Disclosure about Segments of an
Enterprise and Related Information", SFAS No. 132, "Employers' Disclosures about
Pension and Other Post Retirement Benefits." These statements, which are
effective for the Company for the year ended June 30, 1999, expand and modify
disclosures and accordingly will have no impact on the Company's Consolidated
Balance Sheet or Statement of Earnings.
Cash and Cash Equivalents
Cash in excess of daily requirements is invested in certificates of deposits and
money market funds with maturities of three months or less. Such investments are
deemed to be cash equivalents.
Fair Value of Financial Instruments
The carrying amount of cash, accounts receivable, accounts and notes payable and
accrued expenses are assumed to approximate fair value due to their short
maturities. The carrying value of the long-term bank loan, which bears interest
at a variable rate, approximates fair value. Securities are recorded at fair
value, which is based principally on quoted market prices.
Net Earnings per common share
During the second quarter of fiscal 1998, the Company adopted Statement of
Financial Accounting Standards No. 128, "Earnings per Share," as required. The
Company has restated all previously recorded net earnings per share for all
periods presented.
Reclassifications
Certain items in prior years of the accompanying consolidated financial
statements and notes to consolidated financial statements have been reclassified
for comparative purposes.
F-11
<PAGE>
NOTE B - SECURITIES
Securities available for sale at June 30, 1998 and June 30, 1997 follow:
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Cost: $2,676,000 at June 30, 1998 and
$3,558,000 at June 30, 1997 $ 2,735,000 $ 3,607,000
</TABLE>
As of June 30, 1998 and 1997, securities had net unrealized gains of $59,000 and
49,000 respectively.
NOTE C - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
June 30,
1998 1997
<S> <C> <C>
Raw material $2,937,000 $ 3,237,000
Work in process 835,000 1,319,000
Finished goods 4,305,000 5,506,000
$8,077,000 $10,062,000
</TABLE>
NOTE D - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is summarized as follows:
June 30,
1998 1997
Land $182,000 $182,000
Buildings 1,311,000 1,311,000
Machinery and equipment 1,697,000 1,561,000
Furniture and fixtures 394,000 390,000
Leasehold improvements 722,000 745,000
Automobiles and trucks 99,000 99,000
4,405,000 4,288,000
Less accumulated depreciation
and amortization 2,889,000 2,650,000
$1,516,000 $1,638,000
F-12
<PAGE>
NOTE E - COMMITMENTS
The Company leases office and retail sales facilities under non-cancelable
leases that expire in various years through the year 2001.
Future minimum payments under non-cancelable operating leases with initial or
remaining terms of one year or more are as follows:
<TABLE>
<CAPTION>
Year Ended Office and
June 30, Showroom
Facilities
<S> <C> <C>
1999 $ 328,000
2000 196,000
2001 152,000
</TABLE>
Rental expense, including real estate taxes, for all operating leases, totaled
$634,000, $683,000, and $938,000 for 1998, 1997 and 1996, respectively.
NOTE F - CREDIT FACILITIES
The Company has a line of credit with a bank for short-term loans, letters of
credit and bankers acceptances amounting to $23,000,000. At June 30, 1998 and
1997, the Company was contingently obligated on open letters of credit for
approximately $3,257,000 and $14,789,000, respectively. Within the $23,000,000
credit line, the Company can borrow up to $10,000,000 on an unsecured short-term
line of credit and a banker's acceptance line. Borrowing on the unsecured
short-term line of credit was $-0- and $600,000 as of June 30, 1998 and 1997,
respectively. Borrowing on the bankers acceptance line was $-0- and $3,563,000
as of June 30, 1998 and 1997, respectively. These loans were at the bank's prime
rate or below (LIBOR) at the option of the Company. The bank's prime rate at
June 30, 1998 was 8.50%. During fiscal 1998, the average amount outstanding
under the short-term line was $2,569,000 with a weighted average interest rate
of 7.3%. During 1997, the average amount outstanding under the short-term line
was $2,259,000 with a weighted average interest rate of 8.0%. The maximum amount
outstanding during fiscal 1998 and fiscal 1997 was $9,130,000 and $6,800,000,
respectively.
F-13
<PAGE>
NOTE G - STOCK OPTIONS
The Company has an Incentive Stock Option Plan permitting the granting of
options to purchase up to 500,000 shares of common stock. Under the Plan, the
option price cannot be less than the fair market value of the stock as of the
date of the granting of the option and 110% of the fair market value for certain
management employees. Options, which may be granted to December 2000, are
exercisable as determined by the Board of Directors.
Statement of Financial Accounting Standards No. 123, "Accounting Stock-Based
Compensation" (SFAS 123) was effective for the Company for fiscal 1997. SFAS No.
123 encourages (but does not require) compensation expense to be measured based
on the fair value of the equity instrument awarded. In accordance with APB No.
25, no compensation cost has been recognized in the Consolidated Statements of
Operations for the Company's stock option plans. If compensation cost for the
Company's stock option plans had been determined in accordance with the fair
value method prescribed by SFAS No. 123, the Company's net earnings would have
been $43,000 and $739,000 for 1998 and 1997, or $.02 and $.26 per share,
respectively. This pro forma information may not be representative of the
amounts to be expected in future years as the fair value method of accounting
prescribed by SFAS No. 123 has not been applied to options granted prior to
1996.
Stock option transactions are summarized below:
<TABLE>
<CAPTION>
1998 1997 1996
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding - beginning of year
270,817 $ 9.33 133,168 $ 11.85 154,585 $ 11.73
Granted - - 159,000 4.29 - -
Exercised - - (6,739) 9.18 - -
Forfeited (3,772) 8.58 (14,612) 10.62 (21,417) 11.00
Outstanding - end of year 267,045 $ 9.35 270,817 $ 9.33 133,168 $ 11.85
Exercisable - end of year 267,045 $ 9.35 117,817 $ 11.96 120,668 $ 11.85
</TABLE>
F-14
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Weighted-average fair
value of options granted
during the year - $ - - $ 2.41 - $ -
</TABLE>
F-15
<PAGE>
The following table summarizes information about stock options outstanding at
June 30, 1998:
<TABLE>
<CAPTION>
Options Outstanding Option Exercisable
Weighted-
Number Average Number
Range of Outstanding at Remaining Weighted Average Exercisable at Weighted Average
Exercise June 30, 1998 Contractual Life Exercise Price June 30, 1998 Exercise Price
Prices (Yrs)
<S> <C> <C> <C> <C> <C>
$4.06-$13.61 267,045 3.96 $9.35 267,045 $9.35
</TABLE>
The fair value of each option grant is estimated on the date of each grant using
the Black-Scholes option-pricing model, there were no additional options granted
in 1998 and the following weighted average assumptions were used for grants in
1997: risk-free interest rate of 6.43%; expected life of 10 years; expected
volatility of 36.37%; dividend yield of 0%. The fair values generated by the
Black-Scholes model may not be indicative of the future benefit, if any, that
may be received by the option holder.
NOTE H- PREFERRED STOCK
The Board of Directors of the Company has authority (without action by the
stockholders) to issue the authorized and unissued preferred stock in one or
more series and, within certain limitations, to determine the voting rights,
preference as to dividends and in liquidation, conversion and other rights of
each such series. No shares of preferred stock have been issued.
NOTE I - INCOME TAXES
The components of the Company's tax provision (benefit) for each of the three
years ended June 30, follow:
<TABLE>
<CAPTION>
June 30,
1998 1997 1996
<S> <C> <C> <C>
Current:
Federal ($9,000) ($6,000) $148,000
State and Local 17,000 90,000 31,000
Foreign 170,000 370,000 645,000
178,000 454,000 824,000
Deferred:
Federal and State (141,000) 14,000 (367,000)
</TABLE>
F-16
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Provision (benefit) $37,000 $468,000 $457,000
</TABLE>
F-17
<PAGE>
A reconciliation between the provision for income taxes computed by applying the
federal statutory rate to income before income taxes and the actual provision
for income taxes is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Provision for income taxes at statutory rate 34.0% 34.0% 34.0%
State and local income taxes net of federal tax benefit 5.0 7.4 7.4
Tax exempt interest (2.0) (1.4) (1.7)
Other (1.0) (2.0) 0.3
Effective tax rate % 36.0% 38.0% 40.0%
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The income tax effects of
significant items comprising the Company's net deferred tax assets and
liabilities 30, 1998 and 1997 are as follows:
<TABLE>
<CAPTION>
June 30,
1998 1997
Assets Liabilities Assets Liabilities
<S> <C> <C> <C> <C>
Depreciation
and amortization - $852,000 $ - $824,000
Leases 169,000 199,000
Foreign taxes 140,000 561,000
Inventory 628,000 1,102,000
Bad debt and
other reserves 189,000 281,000
Reserve for
sales allowances 377,000 578,000
NOL and tax credit
carryforwards 518,000 149,000
Other 338,000 24,000 219,000 21,000
$2,050,000 $1,185,000 $2,329,000 $1,605,000
</TABLE>
F-18
<PAGE>
NOTE J - EMPLOYEE'S PENSION TRUST
The Company and its subsidiaries have a trusteed defined benefit pension plan
for certain of their salaried and hourly personnel. The plan provides pension
benefits that are based on a fixed amount of compensation per year of service,
career average pay or on the employee's compensation during a specified number
of years before retirement. The Company's funding policy is to make annual
contributions required by the Employee Retirement Security Act of 1974.
The net pension expense includes the following components:
<TABLE>
<CAPTION>
June 30,
1998 1997 1996
<S> <C> <C> <C>
Service cost - benefits earned during the period $194,000 $214,000 $184,000
Interest cost on projected benefit obligations 176,000 164,000 175,000
Actual return on assets (163,000) (143,000) (155,000)
Net amortization and deferral 3,000 (11,000) 12,000
Net pension expense $210,000 $224,000 $216,000
</TABLE>
Assumptions used in determining the net pension charges were:
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Discount rates 6.75% 7.00% 7.25%
Rates of increase in compensation levels 3.00% 4.00% 3.00%
Expected long-term rate of return on assets 6.25% 6.25% 6.50%
</TABLE>
The following table sets forth the plan's funded status and amount recognized in
the Company's balance sheets:
<TABLE>
<CAPTION>
June 30,
1998 1997
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation $2,060,000 $1,633,000
Accumulated benefit obligation $2,179,000 $1,805,000
Plan assets at fair value $2,383,000 $2,423,000
Less projected benefit obligation 2,872,000 2,640,000
Projected benefit obligation in excess of plan
assets (489,000) (217,000)
Unrecognized prior service cost 4,000 5,000
Unrecognized net loss 555,000 530,000
Unrecognized net asset (243,000) (282,000)
</TABLE>
F-19
<PAGE>
<TABLE>
<S> <C> <C>
Prepaid (accrued) pension costs ($173,000) $36,000
</TABLE>
Plan assets as of June 30, 1998 and June 30, 1997, consisted primarily of U.S.
Government securities and high-grade corporate notes. Also included in plan
assets at those dates were 22,654 shares of the common stock of the Company with
a market value of $93,000 and $102,000, respectively.
F-20
<PAGE>
NOTE K - SALES TO MAJOR CUSTOMERS AND PURCHASES FROM MAJOR SUPPLIERS
During the year ended June 30, 1998, 1997 and 1996, revenues derived from sales
to one customer were 15%, 13% and 15%, respectively. Sales to a second customer
were 12%, 12% and 12%, respectively, and to a third customer were 10%, 9% and
11% respectively.
The Company relies on suppliers to purchase a variety of raw materials. The
Company had one supplier who in the aggregate constituted 14% of the Company's
purchases for the year ended June 30, 1998.
NOTE L - EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST
The Company maintains a non-contributory Employee Stock Ownership Plan (the
"ESOP") and Trust, for its employees who are not covered by a collective
bargaining agreement.
On February 15, 1994, the ESOP authorized the Trust to borrow $1,150,000 from a
bank, which loan is guaranteed by the Company. The debt bears interest at the
prime rate and is payable in a minimum of ten annual installments. As of June
30, 1998, the guaranteed ESOP bank loan was $56,000.
Contributions to the ESOP are at the discretion of the Company's Board of
Directors. ESOP expense was approximately $250,000 for the years ended June
30,1998 and June 30, 1997, which includes $211,000 and $195,000 of compensation
expense and $39,000 and $55,000 of interest expense, respectively. Compensation
expense related to the plan is based upon the number of shares allocated to
participants in the current year.
Vesting occurs after five years of service. However, if the ESOP is deemed
"top-heavy", vesting will occur at the rate of 20% per year after the completion
of the second year of service.
NOTE M - PURCHASE OF TRADEMARKS
During June 1996, the Company acquired certain trademarks and other assets from
McCrackin Industries, Inc. and its affiliates, for a purchase price of
$1,500,000. The trademarks include "Saddle River," under which the Company has
been manufacturing and distributing women's handbags for the past 9 years. In
connection with the acquisition, two of the principals of McCrackin Industries
have entered into a separate consulting agreement with the Company for a period
of 18 months for marketing and consulting services. During this period, those
principals had an option to buy back the trademarks for pre-determined prices
in excess of the purchase price, which has not been exercised.
F-21
<PAGE>
NOTE N - NET EARNINGS PER SHARE
The Company's calculation of Basic and Diluted Net Earnings Per Share are as
follows (in thousands, except per share amounts):
<TABLE>
<CAPTION>
Year Ended June 30,
1998 1997 1996
<S> <C> <C> <C>
Basic Net Income Per Share:
- --------------------------
Net Earnings $ 67 $ 763 $ 685
Basic Weighted Average Shares Outstanding 2,701 2,691 2,691
Basic Net Income Per Common Share $.02 $.28 $.25
Diluted Net Income Per Share:
- ----------------------------
Net Earnings $ 67 $ 763 $ 685
Basic Weighted Average Shares Outstanding 2,701 2,691 2,691
Add: Dilutive Options 6 14 1
Diluted Weighted Average Shares Outstanding 2,707 2,705 2,692
Diluted Net Earnings Per Common Share $.02 $.28 $.25
</TABLE>
Options to purchase 89,92, and 131 common shares were outstanding as of June 30,
1998, 1997, and 1996, respectively, but were not included in the computation of
diluted earnings per share because the exercise price of the options exceeds the
average market price and would have been anti-dilutive.
F-22
<PAGE>
NOTE O - UNAUDITED QUARTERLY FINANCIAL DATA
Summarized quarterly financial data, in thousands of dollars except for per
share amounts, for the fiscal years ended June 30, 1998 and 1997, are as
follows:
<TABLE>
<CAPTION>
Three Months Ended
=================================================================================
June 30, March 31, December 31, September 30,
1998 1998 1997 1997
<S> <C> <C> <C> <C>
Net sales $13,565 $13,999 $21,369 $19,330
Gross profit $3,474 $3,060 $5,472 $4,856
Net (loss) earnings ($394) $25 $147 $289
Net (loss) earnings per common share -
Basic and diluted ($.15) $.01 $.06 $.10
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended
=================================================================================
June 30, March 31, December 31, September 30,
1997 1997 1996 1996
<S> <C> <C> <C> <C>
Net sales $20,683 $13,778 $19,718 $22,977
Gross profit $5,855 $4,019 $5,211 $5,246
Net earnings $206 $68 $134 $355
Earnings per common share
- - Basic and diluted $.08 $.02 $.05 $.13
</TABLE>
F-23
<PAGE>
JACLYN, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
- ---------------------------------------------------------------------------
<TABLE>
<CAPTION>
Column A Column C Column D Column E
Additions
(Credited) Charged
Balance at Charged to costs to Balance at end
beginning of and expenses accounts (1) Deductions (2) of period
Description period
<S> <C> <C> <C> <C> <C>
Year ended June 30, $724,000 ($143,000) $1,000 $99,000 $483,000
1998
Year ended June 30, $760,000 ($38,000) $8,000 $6,000 $724,000
1997
Year ended June 30, $301,000 $527,000 $32,000 $100,000 $760,000
1996
</TABLE>
(1) Collection accounts previously written off.
(2) Doubtful accounts written off.
F-24
<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
________________________________________
EXHIBITS
to
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR
ENDED JUNE 30, 1998
________________________________________
JACLYN, INC.
================================================================================
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Description Page
- ---------- ----------- ----
3(a) Certificate of Incorporation of the Registrant (incorporated
herein by reference to Exhibit 3(a) to the Registrant's
Annual Report on Form 10-K, File No. 1-5863, for the fiscal
year ended June 30, 1994).
3(b) By-Laws of the Registrant (incorporated herein by reference
to Exhibit 3(b) to the Registrant's Annual Report on Form 10-
K, File No. 1-5863, for the fiscal year ended June 30, 1991).
10(a) Lease dated as of February 11, 1993 with 33 East 33rd Street
Realty Associates relating to showroom, warehouse and
distribution facilities of the Registrant located in New
York, New York (incorporated herein by reference to Exhibit
10(d) to the Registrant's Annual Report on Form 10-K, File
No. 1-5863, for the fiscal year ended June 30, 1993).
10(b) Lease dated January 28, 1994 with 330 Realty Company relating
to office and showroom facilities located in New York, New
York (incorporated herein by reference to Exhibit 10(e) to
the Registrant's Annual Report on Form 10-K, File No. 1-5863,
for the fiscal year ended June 30, 1994).
10(c) Lease dated January 28, 1994 between E.H. Handbag Co. and 330
Realty Company relating to office and showroom facilities
located in New York, New York (incorporated herein by
reference to Exhibit 10(f) to the Registrant's Annual Report
on Form 10-K, File No. 1-5863, for the fiscal year ended June
30, 1994).
10(d) Incentive Stock Option Plan of the Registrant (incorporated
herein by reference to Exhibit 10(f) to the Registrant's
Annual Report on Form 10-K, File No. 1-5863, for the fiscal
year ended June 30, 1988).*
10(e) 1984 Employee Stock Option Plan of the Registrant
(incorporated herein by reference to Exhibit 10(f) to the
Registrant's Annual Report on Form 10-K, File No. 1-5863, for
the fiscal year ended June 30, 1989).*
10(f) 1990 Stock Option Plan of the Registrant, as amended
(incorporated herein by reference to Exhibit 10(g) to the
Registrant's Annual Report on Form 10-K, File No.1-5863, for
the fiscal year ended June 30, 1991).*
10(g) Amended and Restated Stockholders' Agreement dated as of July
30, 1996 among the Registrant and the persons listed on
Schedule A thereto (incorporated herein by reference to
Exhibit 10(j) to the Registrant's Annual Report on Form 10K,
file number 1-5863, for the fiscal year ended June 30, 1996).
10(h) Key Executive Disability Plan of the Registrant (incorporated
herein by reference to Exhibit 10(m) to the Registrant's
Annual Report on Form 10-K, File No. 1-5863, for the fiscal
year ended June 30, 1988).*
<PAGE>
Exhibit No. Description Page
- ---------- ----------- ----
10(i) Loan and Security Agreement dated February 15, 1994 between
the Jaclyn, Inc. Employee Stock Ownership Plan and Trust and
National Westminster Bank, New Jersey (incorporated herein by
reference to Exhibit 10(l) to the Registrant's Annual Report
on Form 10-K, File No. 1-5863, for the fiscal year ended June
30, 1994).
10(j) Guaranty dated February 15, 1994 of Empress Handbag Co.,
Inc., The Bag Factory Shops, Inc., JLN, Inc. and the
Registrant in favor of National Westminster Bank, New Jersey
(incorporated herein by reference to Exhibit 10(m) to the
Registrant's Annual Report on Form 10-K, File No. 1-5863, for
the fiscal year ended June 30, 1994).
10(k) Amendment to Loan and Security Agreement dated August 2, 1994
between the Jaclyn, Inc. Employee Stock Ownership Plan and
Trust and National Westminster Bank, New Jersey (incorporated
herein by reference to Exhibit 10(n) to the Registrant's
Annual Report on Form 10-K, File No. 1-5863, for the fiscal
year ended June 30, 1994).
10(l) Split-Dollar Insurance Agreement dated August 15, 1987
between the Registrant and Robert Chestnov (incorporated
herein by reference to Exhibit 10(m) to the Registrant's
Annual Report on Form 10-K, File No. 1-5863, for the fiscal
year ended June 30, 1990).*
10(m) Split-Dollar Insurance Agreement dated August 15, 1987
between the Registrant and Howard Ginsburg (incorporated
herein by reference to Exhibit 10(n) to the Registrant's
Annual Report on Form 10-K, File No. 1-5863, for the fiscal
year ended June 30, 1990).*
10(n) Split-Dollar Insurance Agreement dated August 15, 1987
between the Registrant and Allan Ginsburg (incorporated
herein by reference to Exhibit 10(o) to the Registrant's
Annual Report on Form 10-K, File No. 1-5863, for the fiscal
year ended June 30, 1990).*
10(o) 1996 Non-Employee Director Stock Option Plan (incorporated by
reference to Exhibit 10(o) to the Registrant's Annual Report
on Form 10-K, File No. 1-5863, for the fiscal year ended June
30, 1997).*
10(p) Non-Qualified Stock Option Contract dated December 3,1996
between the Registrant and Martin Brody (incorporated by
reference to Exhibit 10(p) to the Registrant's Annual Report
on Form 10-K, File No. 1-5863, for the fiscal year ended June
30, 1997).
10(q) Non-Qualified Stock Option Contract dated December 3, 1996
between the Registrant and Richard Chestnov (incorporated by
reference to Exhibit 10(q) to the Registrant's Annual Report
on Form 10-K, File No. 1-5863, for the fiscal year ended June
30, 1997).
10(r) Non-Qualified Stock Option Contract dated August 19, 1997
between the Registrant and Al Safer (incorporated by
reference to Exhibit 10(r) to the Registrant's Annual Report
on Form 10-K, File No. 1-5863, for the fiscal year ended June
30, 1997).
<PAGE>
Exhibit No. Description Page
- ---------- ----------- ----
10(s) Non-Qualified Stock Option Contract dated December 3, 1997
between the Registrant and Martin Brody.
10(t) Non-Qualified Stock Option Contract dated December 3, 1997
between the Registrant and Richard Chestnov.
10(u) Non-Qualified Stock Option Contract dated December 3, 1997
between the Registrant and Albert Safer.
10(v) Letter Agreement dated as of December 29, 1997 between the
Registrant and Robert Chestnov.*
21 Subsidiaries of the Registrant (incorporated herein by
reference to Exhibit 21 to the Registrant's Annual Report on
Form 10-K, File No. 1-5863, for the fiscal year ended June
30, 1995).
27 Financial Data Schedule.
*Management contract or compensatory plan or arrangement.
<PAGE>
EXHIBIT NO. 10(s)
JACLYN, INC.
1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION CONTRACT
-----------------------------------
THIS NON-QUALIFIED STOCK OPTION CONTRACT entered into as of the 3rd day
of December 1997, between JACLYN, INC., a Delaware corporation (the "Company")
and Martin Brody (the "Optionee").
--------
WITNESSETH:
----------
1. The Company, in accordance with the terms and conditions of the
1996 Non-Employee Director Stock Option Plan of the Company (the "Plan"), grants
as of December 3, 1997 to the Optionee an option to purchase an aggregate of
2,000 shares of the Common Stock, $1.00 par value per share, of the Company
("Common Stock"), at $4.5625 per share, being 100% of the fair market value of
------------
such shares of Common Stock on such date.
2. The term of this option shall be 10 years, subject to earlier
termination as provided in the Plan. This option shall be exercisable
immediately as to 100% of the number of shares of Common Stock subject hereto;
provided, that this option shall not be exercisable at any time in an amount
- --------
less than 100 shares (or the remaining shares covered hereby if less than 100
shares).
3. This option shall be exercised by giving written notice to the
Company at its principal office, presently 635 59th Street, West New York, New
Jersey 07093, Attention: Chief Financial Officer, stating that the Optionee is
exercising this option, specifying the number of shares being purchased and
accompanied by payment in full of the aggregate purchase price therefor (a) in
cash or by certified check, (b) with previously acquired shares of Common Stock
having an aggregate fair market value on the date of exercise (determined in
accordance with Article 5 of the Plan) equal to the aggregate exercise price of
all options being exercised, or (c) any combination of the foregoing. In
addition, the Optionee agrees to pay to the Company in cash, upon demand, the
amount, if any, which the Company determines is necessary to satisfy its
obligation to withhold federal, state and local income and other taxes or other
amounts incurred by reason of the grant or exercise of this option. In no event
may a fraction of a share of Common Stock be purchased hereunder.
<PAGE>
4. Notwithstanding the foregoing, and without limiting the provisions
of Article II of the Plan, this option shall not be exercisable by the Optionee
unless (a) a registration statement under the Securities Act of 1933, as amended
(the "Securities Act") with respect to the shares of Common Stock issuable upon
--------------
the exercise of this option shall be effective and current at the time of
exercise or (b) there is an exemption from registration under the Securities Act
for the issuance of such shares of Common Stock upon exercise. At the request of
the Board of Directors, the Optionee shall execute and deliver to the Company
representations and warranties, in form and substance satisfactory to counsel to
the Company, that the shares of Common Stock to be issued upon the exercise of
the option are being acquired by the Optionee for his own account, for
investment only and not with a view to the resale or distribution thereof within
the meaning of the Securities Act. Nothing herein shall be construed so as to
obligate the Company to register the shares subject to this option under the
Securities Act.
5. Nothing in the Plan or herein shall confer upon the Optionee any
right to continue as a director of the Company.
6. The Company may endorse such legends upon the certificates for
shares of Common Stock issued upon exercise of this option and may issue such
"stop transfer" instructions to its transfer agent in respect of such shares as
it determines, in its discretion, to be necessary or appropriate to prevent a
violation of, or to perfect an exemption from, the registration requirements of
the Securities Act.
7. The Company and the Optionee agree that they will both be subject
to and bound by all of the terms and conditions of the Plan, a copy of which is
attached hereto and made a part hereof In the event the Optionee is no longer a
director of the Company or in the event of his death or disability (as defined
in the Plan), his rights hereunder shall be governed by and be subject to the
provisions of the Plan. In the event of a conflict between the terms of this
Contract and the terms of the Plan, the terms of the Plan shall govern.
8. The Optionee represents and agrees that he will comply with all
applicable laws relating to the Plan and to the grant and exercise of this
option and the disposition of the shares of Common Stock acquired upon exercise
of this option, including without limitation, federal and state securities and
"blue sky" laws.
9. This option is not transferable otherwise than by will or the laws
of descent and distribution and may be exercised during the lifetime of the
Optionee only by him.
10. This Contract shall be binding upon and inure to the benefit of
any successor or assign of the Company and to any heir, distributee, executor,
administrator or legal representative entitled under the Plan and by law to the
Optionee's rights hereunder.
11. This Contract shall be governed by and construed in accordance
with the laws of the State of Delaware.
<PAGE>
12. The invalidity or illegality of any provision herein shall not
affect the validity of any other provision.
13. The Optionee agrees that the Company may amend the Plan and the
options granted to the Optionee under the Plan, subject to the limitations
contained in the Plan.
IN WITNESS WHEREOF, the parties hereto have executed this Contract as
of the day and year first above written.
JACLYN, INC.
By: /s/ Robert Chestnov
----------------------
Its: President
----------------------
Optionee /s/ Martin Brody
---------------------------
c/o HMK Associates
----------------------
30 Columbia Tpke.
----------------------
Florham Park, NJ 07932
----------------------
Address
###-##-####
-----------------------------
Tax Id. or Social Security No.
<PAGE>
EXHIBIT NO. 10(t)
JACLYN, INC.
1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION CONTRACT
-----------------------------------
THIS NON-QUALIFIED STOCK OPTION CONTRACT entered into as of the 3rd day
of December 1997, between JACLYN, INC., a Delaware corporation (the "Company")
and Richard Chestnov (the "Optionee").
--------
WITNESSETH:
----------
1. The Company, in accordance with the terms and conditions of the
1996 Non-Employee Director Stock Option Plan of the Company (the "Plan"), grants
as of December 3, 1997 to the Optionee an option to purchase an aggregate of
2,000 shares of the Common Stock, $1.00 par value per share, of the Company
("Common Stock"), at $4.5625 per share, being 100% of the fair market value of
------------
such shares of Common Stock on such date.
2. The term of this option shall be 10 years, subject to earlier
termination as provided in the Plan. This option shall be exercisable
immediately as to 100% of the number of shares of Common Stock subject hereto;
provided, that this option shall not be exercisable at any time in an amount
- --------
less than 100 shares (or the remaining shares covered hereby if less than 100
shares).
3. This option shall be exercised by giving written notice to the
Company at its principal office, presently 635 59th Street, West New York, New
Jersey 07093, Attention: Chief Financial Officer, stating that the Optionee is
exercising this option, specifying the number of shares being purchased and
accompanied by payment in full of the aggregate purchase price therefor (a) in
cash or by certified check, (b) with previously acquired shares of Common Stock
having an aggregate fair market value on the date of exercise (determined in
accordance with Article 5 of the Plan) equal to the aggregate exercise price of
all options being exercised, or (c) any combination of the foregoing. In
addition, the Optionee agrees to pay to the Company in cash, upon demand, the
amount, if any, which the Company determines is necessary to satisfy its
obligation to withhold federal, state and local income and other taxes or other
amounts incurred by reason of the grant or exercise of this option. In no event
may a fraction of a share of Common Stock be purchased hereunder.
4. Notwithstanding the foregoing, and without limiting the provisions
of Article II of the Plan, this option shall not be exercisable by the Optionee
unless (a) a registration statement under the Securities Act of 1933, as amended
(the "Securities Act") with respect to the shares of Common Stock issuable upon
--------------
the exercise of this option shall be effective and current at the time of
exercise or (b) there is an exemption from registration under the Securities Act
for the issuance of
<PAGE>
such shares of Common Stock upon exercise. At the request of the Board of
Directors, the Optionee shall execute and deliver to the Company representations
and warranties, in form and substance satisfactory to counsel to the Company,
that the shares of Common Stock to be issued upon the exercise of the option are
being acquired by the Optionee for his own account, for investment only and not
with a view to the resale or distribution thereof within the meaning of the
Securities Act. Nothing herein shall be construed so as to obligate the Company
to register the shares subject to this option under the Securities Act.
5. Nothing in the Plan or herein shall confer upon the Optionee any
right to continue as a director of the Company.
6. The Company may endorse such legends upon the certificates for
shares of Common Stock issued upon exercise of this option and may issue such
"stop transfer" instructions to its transfer agent in respect of such shares as
it determines, in its discretion, to be necessary or appropriate to prevent a
violation of, or to perfect an exemption from, the registration requirements of
the Securities Act.
7. The Company and the Optionee agree that they will both be subject
to and bound by all of the terms and conditions of the Plan, a copy of which is
attached hereto and made a part hereof In the event the Optionee is no longer a
director of the Company or in the event of his death or disability (as defined
in the Plan), his rights hereunder shall be governed by and be subject to the
provisions of the Plan. In the event of a conflict between the terms of this
Contract and the terms of the Plan, the terms of the Plan shall govern.
8. The Optionee represents and agrees that he will comply with all
applicable laws relating to the Plan and to the grant and exercise of this
option and the disposition of the shares of Common Stock acquired upon exercise
of this option, including without limitation, federal and state securities and
"blue sky" laws.
9. This option is not transferable otherwise than by will or the laws
of descent and distribution and may be exercised during the lifetime of the
Optionee only by him.
10. This Contract shall be binding upon and inure to the benefit of
any successor or assign of the Company and to any heir, distributee, executor,
administrator or legal representative entitled under the Plan and by law to the
Optionee's rights hereunder.
11. This Contract shall be governed by and construed in accordance
with the laws of the State of Delaware.
12. The invalidity or illegality of any provision herein shall not
affect the validity of any other provision.
13. The Optionee agrees that the Company may amend the Plan and the
options granted to the Optionee under the Plan, subject to the limitations
contained in the Plan.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Contract as
of the day and year first above written.
JACLYN, INC.
By: /s/ Robert Chestnov
----------------------
Its: President
----------------------
Optionee /s/ Richard Chestnov
------------------------
17142 Whitehaven Dr.
---------------------
Boca Raton, Fl 33496
---------------------
Address
###-##-####
------------------------------
Tax Id. or Social Security No.
<PAGE>
EXHIBIT NO. 10(u)
JACLYN, INC.
1996 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION CONTRACT
-----------------------------------
THIS NON-QUALIFIED STOCK OPTION CONTRACT entered into as of the 3rd day
of December 1997, between JACLYN, INC., a Delaware corporation (the "Company")
and Albert Safer (the "Optionee").
--------
WITNESSETH:
----------
1. The Company, in accordance with the terms and conditions of the
1996 Non-Employee Director Stock Option Plan of the Company (the "Plan"), grants
as of December 3, 1997 to the Optionee an option to purchase an aggregate of
2,000 shares of the Common Stock, $1.00 par value per share, of the Company
("Common Stock"), at $4.5625 per share, being 100% of the fair market value of
------------
such shares of Common Stock on such date.
2. The term of this option shall be 10 years, subject to earlier
termination as provided in the Plan. This option shall be exercisable
immediately as to 100% of the number of shares of Common Stock subject hereto;
provided, that this option shall not be exercisable at any time in an amount
- --------
less than 100 shares (or the remaining shares covered hereby if less than 100
shares).
3. This option shall be exercised by giving written notice to the
Company at its principal office, presently 635 59th Street, West New York, New
Jersey 07093, Attention: Chief Financial Officer, stating that the Optionee is
exercising this option, specifying the number of shares being purchased and
accompanied by payment in full of the aggregate purchase price therefor (a) in
cash or by certified check, (b) with previously acquired shares of Common Stock
having an aggregate fair market value on the date of exercise (determined in
accordance with Article 5 of the Plan) equal to the aggregate exercise price of
all options being exercised, or (c) any combination of the foregoing. In
addition, the Optionee agrees to pay to the Company in cash, upon demand, the
amount, if any, which the Company determines is necessary to satisfy its
obligation to withhold federal, state and local income and other taxes or other
amounts incurred by reason of the grant or exercise of this option. In no event
may a fraction of a share of Common Stock be purchased hereunder.
4. Notwithstanding the foregoing, and without limiting the provisions
of Article II of the Plan, this option shall not be exercisable by the Optionee
unless (a) a registration statement under the Securities Act of 1933, as amended
(the "Securities Act") with respect to the shares of Common Stock issuable upon
--------------
the exercise of this option shall be effective and current at the time of
exercise or (b) there is an exemption from registration under the Securities Act
for the issuance of such shares of Common Stock upon exercise. At the request of
the Board of Directors, the Optionee shall execute
<PAGE>
and deliver to the Company representations and warranties, in form and substance
satisfactory to counsel to the Company, that the shares of Common Stock to be
issued upon the exercise of the option are being acquired by the Optionee for
his own account, for investment only and not with a view to the resale or
distribution thereof within the meaning of the Securities Act. Nothing herein
shall be construed so as to obligate the Company to register the shares subject
to this option under the Securities Act.
5. Nothing in the Plan or herein shall confer upon the Optionee any
right to continue as a director of the Company.
6. The Company may endorse such legends upon the certificates for
shares of Common Stock issued upon exercise of this option and may issue such
"stop transfer" instructions to its transfer agent in respect of such shares as
it determines, in its discretion, to be necessary or appropriate to prevent a
violation of, or to perfect an exemption from, the registration requirements of
the Securities Act.
7. The Company and the Optionee agree that they will both be subject
to and bound by all of the terms and conditions of the Plan, a copy of which is
attached hereto and made a part hereof In the event the Optionee is no longer a
director of the Company or in the event of his death or disability (as defined
in the Plan), his rights hereunder shall be governed by and be subject to the
provisions of the Plan. In the event of a conflict between the terms of this
Contract and the terms of the Plan, the terms of the Plan shall govern.
8. The Optionee represents and agrees that he will comply with all
applicable laws relating to the Plan and to the grant and exercise of this
option and the disposition of the shares of Common Stock acquired upon exercise
of this option, including without limitation, federal and state securities and
"blue sky" laws.
9. This option is not transferable otherwise than by will or the laws
of descent and distribution and may be exercised during the lifetime of the
Optionee only by him.
10. This Contract shall be binding upon and inure to the benefit of
any successor or assign of the Company and to any heir, distributee, executor,
administrator or legal representative entitled under the Plan and by law to the
Optionee's rights hereunder.
11. This Contract shall be governed by and construed in accordance
with the laws of the State of Delaware.
12. The invalidity or illegality of any provision herein shall not
affect the validity of any other provision.
13. The Optionee agrees that the Company may amend the Plan and the
options granted to the Optionee under the Plan, subject to the limitations
contained in the Plan.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Contract as
of the day and year first above written.
JACLYN, INC.
By: /s/ Robert Chestnov
----------------------
Its: President
Optionee /s/ Albert Safer
----------------------
876 Aztec Trail
---------------
Franklin Lakes, NJ 07417
------------------------
Address
###-##-####
------------------------------
Tax Id. or Social Security No.
<PAGE>
EXHIBIT NO. 10(v)
JACLYN, INC.
635 59th Street
West New York, NJ 07093
December 29, 1997
Mr. Robert Chestnov
602 Orchard Lane
Franklin Lakes, NJ 07417
Dear Mr. Chestnov:
In recognition of and in consideration for, among other things, services
rendered to Jaclyn, Inc. (the "Company") by you as its President and Chief
-------
Executive Officer, the Board of Directors of the Company has determined to grant
to you, upon the terms and subject to the conditions set forth below, a
restricted stock award of Twenty Thousand (20,000) shares (the "Shares") of the
------
common stock, $1.00 par value per share, of the Company, subject to your
representations, warranties and agreements set forth below.
1. You hereby represent and warrant that you (a) are acquiring the Shares
for your own account and not with a view to the distribution of the Shares
within the meaning of the Securities Act of 1933, as amended (the "Securities
----------
Act"), (b) have no present agreement, understanding or arrangement to pledge,
- ---
sell, assign, transfer or otherwise dispose of all or any of the Shares, (c)
have adequate means of providing for your current needs and possible future
contingencies and have no need, and anticipate no need in the foreseeable
future, to pledge, sell, assign, transfer or otherwise dispose of all or any of
the Shares.
2. You agree that you may not pledge, sell, assign, transfer or otherwise
dispose of all or any of the Shares until January 1, 2000. You also acknowledge
that the Shares have not been registered under the under the Securities Act or
any state securities laws, and that any pledge, sale, assignment, transfer or
other disposition of the Shares by you may be made only pursuant to a
registration statement under the Securities Act which is effective and current
with respect to the sale of the Shares, or a specific exemption from the
registration requirements of the Securities Act, and, in any event, in
accordance with all applicable state securities laws. Nothing herein shall be
construed as requiring the Company to register the Shares under the Securities
Act or to qualify or register the Shares under any applicable state securities
laws. Any attempted pledge, sale, assignment, transfer or other disposition of
any or all of the Shares in violation of this letter agreement shall be void and
of no force or effect.
3. In addition, and notwithstanding anything herein to the contrary, if at
any time the Company shall determine that the listing or qualification of the
Shares on any securities exchange or under any applicable law, or the consent or
approval of any governmental regulatory body, is necessary or desirable as a
condition to, or in connection with, the pledge, sale, assignment, transfer or
other disposition of the Shares, the Shares may not be pledged, sold, assigned,
transferred or otherwise disposed of unless same may be effected or obtained
free of any conditions not acceptable to the Company.
4. The Company may affix legends upon the certificates for the Shares and
may issue such "stop transfer" instructions to its transfer agent in respect of
the Shares as may be necessary or appropriate to prevent a violation of, or to
perfect an exemption from, the registration requirements of the Securities Act
and any applicable state securities laws, or to otherwise effect the intent and
purposes of this Agreement.
5. In the event of a breach or threatened breach by you of the provisions
of this letter agreement, the Company shall be entitled to an injunction by any
court or tribunal to restrain you from committing or continuing any such breach
or threatened breach. In any proceeding for an injunction, you hereby agree
that your ability to
<PAGE>
answer in damages shall not be a bar or be interposed as a defense to the
granting of a temporary or permanent injunction against you. You also
acknowledge that the Company will not have an adequate remedy at law in the
event of any such breach or threatened breach by you and that the Company may
suffer irreparable damage and injury in the event of such a breach or threatened
breach. Nothing contained herein shall be construed as prohibiting the Company
from pursuing any other remedy or remedies available to the Company in respect
of such breach or threatened breach. The provisions of this paragraph 5 shall
survive the termination of the your employment with the Company.
6. This letter agreement may be executed in any number of counterparts,
each of which shall be deemed an original, but all of which, when taken
together, shall constitute one and the same instrument. This letter agreement
shall be governed by, and construed and enforced in accordance with, the laws of
the State of New York, without regard to principles of conflicts of law.
Please acknowledge your agreement to the foregoing by signing and returning
this Agreement to the Company. Please retain the attached copy for your
records.
Very truly yours,
JACLYN, INC.
By: /s/ Allan Ginsburg
-------------------------------------
Allan Ginsburg, Chairman of the Board
AGREED:
/s/ Robert Chestnov
- --------------------------
Robert Chestnov
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the Jaclyn,
Inc. Condensed Consolidated Balance Sheet and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 2,176
<SECURITIES> 2,735
<RECEIVABLES> 5,979
<ALLOWANCES> 483
<INVENTORY> 8,077
<CURRENT-ASSETS> 21,632
<PP&E> 1,516
<DEPRECIATION> 0
<TOTAL-ASSETS> 24,572
<CURRENT-LIABILITIES> 4,917
<BONDS> 0
0
0
<COMMON> 3,369
<OTHER-SE> 12,117
<TOTAL-LIABILITY-AND-EQUITY> 24,572
<SALES> 68,263
<TOTAL-REVENUES> 68,509
<CGS> 51,401
<TOTAL-COSTS> 16,822
<OTHER-EXPENSES> 182
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 104
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 67
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
