<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 December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from_____ to______
Commission File Number 1-5863
JACLYN, INC.
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(Exact name of registrant as specified in its charter)
Delaware 22-1432053
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
635 59th Street, West New York, New Jersey 07093
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(Address of principal executive offices)
(Zip Code)
(201) 868-9400
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(Registrant's telephone number, including area code)
NONE
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all the reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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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 February 1, 1998
- ----------------------------------- --------------------------------
Common Stock, par value $1 per share 2,711,405
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JACLYN, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
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PART I. FINANCIAL INFORMATION:
Item 1
<S> <C>
Condensed Consolidated Balance Sheets -
December 31, 1997 (unaudited) and June 30, 1997 (derived from audited
financial statements) 3
Condensed Consolidated Statements of Earnings -
Three Months and Six Months Ended December 31, 1997 and 1996 (unaudited) 4
Condensed Consolidated Statements of Cash Flows - Six Months
Ended December 31, 1997 and 1996 (unaudited) 5
Notes to Condensed Consolidated Financial Statements (unaudited) 6
Item 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
PART II. OTHER INFORMATION:
Item 6
Exhibits and reports on Form 8-K 8
Signatures 8
</TABLE>
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PART 1. FINANCIAL INFORMATION
JACLYN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
December 31, June 30,
1997 1997
(Unaudited) (See Note)
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ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 2,924 $ 1,580
Securities available for sale 3,696 3,607
Accounts receivable, net 9,426 11,484
Inventories:
Raw materials 1,323 3,237
Work in process 823 1,319
Finished goods 3,865 5,506
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6,011 10,062
Prepaid expenses and other assets 2,707 4,100
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TOTAL CURRENT ASSETS 24,764 30,833
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PROPERTY, PLANT AND EQUIPMENT, net 1,597 1,638
OTHER ASSETS 1,500 1,592
================= ================
TOTAL ASSETS $ 27,861 $ 34,063
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LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable - bank $ 1,625 $ 4,163
Accounts payable 2,157 6,477
Other current liabilities 3,601 3,496
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TOTAL CURRENT LIABILITIES 7,383 14,136
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GUARANTEED BANK LOAN - ESOP 334 509
OTHER NON-CURRENT LIABILITIES 28 28
DEFERRED INCOME TAXES 1,617 1,605
COMMITMENTS
STOCKHOLDERS' EQUITY
Common stock 3,369 3,369
Additional paid-in capital 11,994 12,117
Retained earnings 10,225 9,789
----------------- ----------------
25,588 25,275
Less: Common shares in treasury at cost 6,804 7,011
Guaranteed bank loan - ESOP 334 509
Add: Unrealized gain on securities available for sale 49 30
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TOTAL STOCKHOLDERS' EQUITY 18,499 17,785
----------------
=================
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 27,861 $ 34,063
================= ================
</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 Six Months Ended
December 31, December 31,
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $ 21,369 $ 19,718 $ 40,699 $ 42,695
Cost of Goods Sold 15,897 14,507 30,371 32,238
--------------- ---------------- --------------- ---------------
Gross Profit 5,472 5,211 10,328 10,457
--------------- ---------------- --------------- ---------------
Shipping, Selling and Administrative Expenses 5,239 4,997 9,572 9,623
Interest Expense 54 47 171 136
Other Income, net 57 58 117 118
--------------- ----------------
--------------- ---------------
5,236 4,986 9,626 9,641
--------------- ---------------- --------------- ---------------
Earnings before income taxes 236 225 702 816
Provision for income taxes 89 91 266 326
--------------- ---------------- --------------- ---------------
Net earnings $ 147 $ 134 $ 436 $ 490
=============== ================ =============== ===============
Average number of shares outstanding 2,691,624 2,793,405 2,691,624 2,793,405
=============== ================ =============== ===============
Basic and Diluted Net Earnings per Common Share $ 0.06 $ 0.05 $ 0.16 $ 0.18
=============== ================ =============== ===============
See notes to condensed consolidated financial statements.
</TABLE>
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JACLYN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
1997 1996
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CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net earnings $ 436 $ 490
Adjustments to reconcile net earnings to net cash provided by operating
activities:
Depreciation and amortization 229 177
Unrealized loss from marketable securities - 6
Deferred Income Taxes 12 -
Changes in assets and liabilities:
Decrease in accounts receivable 2,058 3,043
Decrease in inventories 4,051 5,115
Decrease in prepaid expenses and other current assets 1,393 552
Decrease in other assets 14 10
Decrease in accounts payable and other current liabilities (4,215) (4,561)
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Net cash provided by operating activities 3,978 4,832
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment (127) (151)
Proceeds from sale of property 17 12
Purchases of securities available for sale (1,150) -
Proceeds from maturities of securities available for sale 1,080 -
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Net cash used in investing activities (180) (139)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in notes payable - bank (2,538) (1,000)
Issuance of treasury stock 84 -
Decrease in other non-current liabilities - (5)
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Net cash used in financing activities (2,454) (1,005)
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NET INCREASE IN CASH AND CASH EQUIVALENTS 1,344 3,688
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,580 665
============= =============
CASH AND CASH EQUIVALENTS, END OF PERIOD $ $
2,924 4,353
============= =============
SUPPLEMENTAL INFORMATION:
Interest paid $ 171 $ 136
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Taxes paid $ 806 $ 514
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</TABLE>
See notes to condensed consolidated financial statements.
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JACLYN, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. The condensed consolidated balance sheet as of December 31, 1997 and
the condensed consolidated statements of earnings for the three and
six month periods ended December 31, 1997 and 1996, and the condensed
consolidated statement of cash flows for the six month periods ended
December 31, 1997 and 1996, have been prepared by the Company and are
unaudited. In the opinion of management, all adjustments (which
include only normal recurring adjustments) have been made that are
necessary to present fairly the financial position, results of
operations and cash flows for all periods presented. It is suggested
that these condensed consolidated financial statements be read in
conjunction with the audited financial statements and notes thereto
included in the Company's 1997 Annual Report to Stockholders. The
results of operations for the period ended December 31, 1997 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 their 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 six month period
ended December 31, 1997 to $2,924,000 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 $3,978,000, primarily from decreases in inventory and accounts
receivable, offset by a decrease in accounts payable and other current
liabilities. The net increases in cash provided by operating activities was used
mostly to pay down $2,538,000 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 $21,369,000 and $40,699,000 during the three and six-month
periods ended December 31, 1997, compared to $19,718,000 and $42,695,000 in the
three and six-month periods ended December 31, 1996, respectively. The increase
in sales for the quarter ended December 31, 1997 was primarily due to higher net
sales from the Company's sleepwear division and its premium division. However,
gross profit of 25.6% was slightly less for the three-month period ended
December 31, 1997 compared to the prior year comparable period of 26.4% due to
somewhat lower apparel division gross profit. For the six month period, the
decrease in net sales was due to overall lower apparel sales. However, the
slightly higher gross profit for the six-month period ended December 31, 1997
vs. 24.5% in the prior year's six-month period resulted for the most part from
improved premium division gross profit. Shipping, selling and administrative
expense increased in the second quarter ended December 31, 1997, but was lower
for this year's six-month period versus last year. As a percentage of net sales,
however, while the three-month period dropped from 25.3% to 24.5%, the six-month
period was up 1% to 23.5% from last year's six-month comparable period. The
increase in interest expense reflects higher average borrowing during the
current three and six month periods compared to the same periods last year.
The increase in earnings before income taxes for the three-month period as
compared to the equivalent period last year was due mainly to higher volume in
this year's three-month period and relatively lower percentage of shipping,
selling and administrative expenses. While the gross profit percentage increased
in this year's six-month period, earnings before income taxes for this period
decreased compared to last year's six-month period principally due to the
relatively higher shipping, selling and administrative expenses and due to
higher interest expense. Net earnings for the three and six-month period ended
December 31, 1997 were $147,000 and $436,000 compared to net earnings for the
same periods last year of $134,000 and $490,000, respectively.
OTHER ITEM
The Company has done a preliminary assessment of the changes that are needed to
make our systems year 2000 compliant. Based on this initial assessment, any
required modifications will 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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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 December 31, 1997.
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.
---------------
(Registrant)
February 13, 1998 /s/ Robert Chestnov
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Robert Chestnov
President
Chief Executive Officer
February 13, 1998 /s/ Anthony Christon
- ----------------- -------------------------
Anthony Christon
Vice President
Chief Financial Officer
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<PAGE>
This schedule contains summary financial information extracted from the
Jaclyn, Inc. Condensed Consolidated Statements of Earnings for the period ended
December 31, 1997 and is qualified in its entirety by reference to such
financial statements.
APPENDIX A TO ITEM 601((C)) OF REGULATION S-K
(ARTICLE 5 OF REGULATION S-X
COMMERCIAL AND INDUSTRIAL COMPANIES)
<TABLE>
<CAPTION>
Six Months Ended
Item Number Item Description December 31, 1997
- ----------- ---------------- -----------------
<S> <C> <C>
5-03 (b) 1 (a) Net sales of tangible products 40,699
5-03 (b) 1 Total revenues 40,816
5-03 (b) 2 (a) Cost of tangible goods sold 30,371
5-03 (b) 2 Total costs and expenses applicable to sales and revenues 9,572
5-03 (b) 3 Other costs and expenses
5-03 (b) 5 Provision for doubtful accounts and notes
5-03 (b) (8) Interest and amortization of debt discount 171
5-03 (b) (10) Income before taxes and other items 702
5-03 (b) (11) Income tax expense 266
5-03 (b) (14) Income/loss continuing operations 436
5-03 (b) (15) Discontinued operations
5-03 (b) (17) Extraordinary items
5-03 (b) (18) Cumulative effect - changes in accounting principles
5-03 (b) (19) Net income 436
5-03 (b) (20) Net earnings per share -basic 0.16
5-03 (b) (20) Net earnings per share - diluted 0.16
</TABLE>
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EXHIBIT INDEX
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EXHIBIT NO. DESCRIPTION PAGE NO.
- ----------- ----------- -------
27 Financial Data Schedule 10
<TABLE> <S> <C>
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JACLYN,
INC. CONDENSED CONSOLIDATED BALANCE SHEET & CONDENSED CONSOLIDATED STATEMENT OF
EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 2,924
<SECURITIES> 3,696
<RECEIVABLES> 11,650
<ALLOWANCES> 761
<INVENTORY> 6,011
<CURRENT-ASSETS> 24,764
<PP&E> 4,299
<DEPRECIATION> 2,702
<TOTAL-ASSETS> 27,861
<CURRENT-LIABILITIES> 7,383
<BONDS> 0
0
0
<COMMON> 3,369
<OTHER-SE> 11,994
<TOTAL-LIABILITY-AND-EQUITY> 27,861
<SALES> 40,699
<TOTAL-REVENUES> 40,816
<CGS> 30,371
<TOTAL-COSTS> 9,572
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 171
<INCOME-PRETAX> 702
<INCOME-TAX> 266
<INCOME-CONTINUING> 436
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 436
<EPS-PRIMARY> .16
<EPS-DILUTED> .16
</TABLE>
