<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1998
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OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission File Number 1-5863
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JACLYN INC.
_______________________________________________________________________________
(Exact name of registrant as specified in its charter)
Delaware 22-1432053
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
635 59th Street, West New York, New Jersey 07093
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(Address of principal executive offices)
(Zip Code)
(201) 868-9400
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(Registrant's telephone number, including area code)
NONE
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(Former name, former address and former fiscal year, if changed since last
report)
Indicate by check mark whether the registrant (1) has filed all the reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No____
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Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 1, 1998
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Common Stock, par value $1 per share 2,711,405
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JACLYN, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION:
<TABLE>
<CAPTION>
Page No.
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Item 1
<S> <C>
Condensed Consolidated Balance Sheets -
March 31, 1998 (unaudited) and June 30, 1997 (derived from audited financial
statements) 3
Condensed Consolidated Statements of Earnings -
Three Months and Nine Months Ended March 31, 1998 and 1997 (unaudited) 4
Condensed Consolidated Statements of Cash Flows - Nine Months
Ended March 31, 1998 and 1997 (unaudited) 5
Notes to Condensed Consolidated Financial Statements (unaudited) 6
Item 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION:
Item 6
Exhibits and reports on Form 8-K 8
Signatures 8
</TABLE>
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<PAGE>
PART 1. FINANCIAL INFORMATION
JACLYN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
March 31, June 30,
1998 1997
(Unaudited) (See Note)
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ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 3,101 $ 1,580
Securities available for sale 3,480 3,607
Accounts receivable, net 7,757 11,484
Inventories:
Raw materials 1,828 3,237
Work in process 671 1,319
Finished goods 2,496 5,506
4,995 10,062
Prepaid expenses and other assets 2,551 4,100
TOTAL CURRENT ASSETS 21,884 30,833
PROPERTY, PLANT AND EQUIPMENT, net 1,586 1,638
OTHER ASSETS 1,461 1,592
TOTAL ASSETS $24,931 $34,063
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable - bank $ - $ 4,163
Accounts payable 1,811 6,477
Other current liabilities 2,622 3,496
TOTAL CURRENT LIABILITIES 4,433 14,136
GUARANTEED BANK LOAN - ESOP 159 509
OTHER NON-CURRENT LIABILITIES 35 28
DEFERRED INCOME TAXES 1,613 1,605
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock 3,369 3,369
Additional paid-in capital 11,994 12,117
Retained earnings 10,249 9,789
25,612 25,275
Less: Common shares in treasury at cost 6,804 7,011
Guaranteed bank loan - ESOP 159 509
Add: Unrealized gain on securities available for sale 42 30
TOTAL STOCKHOLDERS' EQUITY 18,691 17,785
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $24,931 $34,063
STOCKHOLDERS'EQUITY EQUIT EQUITY
</TABLE>
Note: The June 30, 1997 Balance Sheet is derived from audited financial
statements. See notes to condensed consolidated financial statements.
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JACLYN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
1998 1997 1998 1997
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<S> <C> <C> <C> <C> <C>
Net Sales $ 13,999 $ 13,778 $ 54,697 $ 56,473
Cost of Goods Sold 10,939 9,758 41,310 41,997
Gross Profit 3,060 4,020 13,387 14,476
Shipping, Selling and Administrative Expenses 3,090 3,982 12,662 13,605
Interest Expense 11 1 182 137
Other Income, net 81 77 199 195
3,020 3,906 12,645 13,547
Earnings before income taxes 40 114 742 929
Provision for income taxes 15 46 282 371
Net earnings $ 25 $ 68 $ 460 $ 558
Average number of shares outstanding 2,704,514 2,831,155 2,704,514 2,831,155
Basic and Diluted Net Earnings per Common Share $0.01 $0.02 $0.17 $0.20
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
JACLYN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
1998 1997
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 460 $ 558
Adjustments to reconcile net earnings to net cash provided by operating activities:
Depreciation and amortization 340 356
Unrealized loss from marketable securities - 17
Deferred Income Taxes 8 (10)
Changes in assets and liabilities:
Decrease in accounts receivable 3,727 3,432
Decrease in inventories 5,067 5,452
Decrease in prepaid expenses and other current assets 1,404 204
Decrease in other assets 14 20
Decrease in accounts payable and other current liabilities (5,394) (6,684)
Net cash provided by operating activities 5,626 3,345
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (225) (388)
Proceeds from sale of property 53 20
Purchases of securities available for sale (1,141) -
Proceeds from maturities of securities available for sale 1,280 -
Net cash used in investing activities (33) (368)
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in notes payable - bank (4,163) (1,100)
Issuance of treasury stock 84 -
Increase (decrease) in other non-current liabilities 7 (5)
Net cash used in financing activities (4,072) (1,105)
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,521 1,872
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,580 665
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 3,101 $ 2,537
SUPPLEMENTAL INFORMATION:
Interest paid $182 $137
Taxes paid $837 $830
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
JACLYN, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. The condensed consolidated balance sheet as of March 31, 1998 and the
condensed consolidated statements of earnings for the three and nine
month periods ended March 31, 1998 and 1997, and the condensed
consolidated statement of cash flows for the nine month periods ended
March 31, 1998 and 1997, have been prepared by the Company and are
unaudited. In the opinion of management, all adjustments (which include
only normal recurring adjustments) have been made that are necessary to
present fairly the financial position, results of operations and cash
flows for all periods presented. It is suggested that these condensed
consolidated financial statements be read in conjunction with the
audited financial statements and notes thereto included in the
Company's 1997 Annual Report to Stockholders. The results of operations
for the period ended March 31, 1998 are not necessarily indicative of
operating results for the full fiscal year.
2. In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments
of an Enterprise and Related Information," which is effective for the
Company for the year ended June 30, 1999. SFAS No. 131 requires
disclosure about operating segments in complete sets of financial
statements and in condensed financial statements of interim periods
issued to shareholders. The new standard also requires that the Company
report certain information about its products and services, the
geographic areas in which they operate, and major customers. The
Company has not yet determined the impact, if any, of the adoption of
SFAS No. 131.
3. Net earnings per share - Effective December 31, 1997 the Company
adopted SFAS No. 128 "Earnings Per Share." As required by SFAS 128 all
earnings per share have been restated to present Basic and Diluted
Earnings Per Share.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents increased during the nine month period
ended March 31, 1998 to $3,101,000 from $1,580,000 at June 30, 1997. The
increase this period was due to a net increase in cash provided by operating
activities of $5,626,000, primarily from decreases in inventory, accounts
receivable and prepaid expenses and other current assets, offset by a decrease
in accounts payable and other current liabilities. The net increase in cash
provided by operating activities was used mostly to repay $4,163,000 of short-
term bank loans. The Company believes that funds provided by operations,
existing working capital and the Company's current bank lines will be sufficient
to meet foreseeable working capital needs. There are no plans for significant
capital expenditures in the near term.
RESULTS OF OPERATIONS
Net sales were $13,999,000 and $54,697,000 during the three and nine-month
periods ended March 31, 1998, compared to $13,778,000 and $56,473,000 in the
three and nine-month periods ended March 31, 1997, respectively. The increase in
sales for the quarter ended March 31, 1998 was primarily due to higher net sales
from the Company's premium division. However, gross profit of 21.9% was lower
for the three-month period ended March 31, 1998 compared to 29.2% in the prior
year's comparable period due, in part, to season-end closeouts in the apparel
division. For the nine month period, the decrease in net sales was due to
overall lower apparel sales. The slightly lower overall gross profit of 24.5%
for the nine-month period ended March 31, 1998 vs. 25.6 % in the prior year's
nine-month period resulted for the most part from lower gross profit on apparel
sales. Shipping, selling and administrative expenses decreased in the third
quarter ended March 31, 1998, and for this year's nine-month period versus last
year. As a percentage of net sales, the three-month period dropped from 28.9% to
22.1% primarily attributable to lower shipping, royalty and product development
related costs, while the nine-month period declined slightly to 23.1% from 24.1%
for last year's nine-month comparable period. The increase in interest expense
reflects higher average borrowing during the current three and nine month
periods compared to the same periods last year.
The decrease in earnings before income taxes for both the three and nine month
periods as compared to the equivalent periods last year was due mainly to this
year's lower overall gross profit. Net earnings for the three and nine-month
period ended March 31, 1998 were $25,000 and $460,000 compared to net earnings
for the same periods last year of $68,000 and $558,000, respectively.
OTHER ITEM
The Company has completed a preliminary assessment of the changes that are
needed to make its systems year 2000 compliant. Based on this initial
assessment, any required modifications are anticipated to be completed timely
and the cost of such modifications is not expected to have a material impact on
the Company's results of operations.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
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a) Exhibit 27. Financial Data Schedule.
b) Reports on Form 8-K. The registrant did not file any reports on Form 8-K
during the three months ended March 31, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JACLYN, INC.
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(Registrant)
May 14, 1998 /s/ Robert Chestnov
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Robert Chestnov
President
Chief Executive Officer
May 14, 1998 /s/ Anthony Christon
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Anthony Christon
Vice President
Chief Financial Officer
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<PAGE>
EXHIBIT INDEX
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EXHIBIT NO. DESCRIPTION PAGE NO.
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27 Financial Data Schedule 10
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JACLYN,
INC. CONDENSED CONSOLIDATED BALANCE SHEET AT MARCH 31, 1998 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 3,101
<SECURITIES> 3,480
<RECEIVABLES> 9,142
<ALLOWANCES> 626
<INVENTORY> 4,995
<CURRENT-ASSETS> 21,884
<PP&E> 4,361
<DEPRECIATION> 2,775
<TOTAL-ASSETS> 24,931
<CURRENT-LIABILITIES> 4,433
<BONDS> 0
0
0
<COMMON> 3,369
<OTHER-SE> 11,994
<TOTAL-LIABILITY-AND-EQUITY> 24,931
<SALES> 54,697
<TOTAL-REVENUES> 54,896
<CGS> 41,310
<TOTAL-COSTS> 12,662
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 182
<INCOME-PRETAX> 742
<INCOME-TAX> 282
<INCOME-CONTINUING> 460
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 460
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.17
</TABLE>
