<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 September 30, 1999
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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 November 1, 1999
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Common Stock, par value $1 per share 2,711,391
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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 -
September 30, 1999 (unaudited) and June 30, 1999 (derived from audited financial
statements) 3
Condensed Consolidated Statements of Earnings -
Three Months Ended September 30, 1999 and 1998 (unaudited) 4
Condensed Consolidated Statements of Cash Flows - Three Months
Ended September 30, 1999 and 1998 (unaudited) 5
Notes to Condensed Consolidated Financial Statements 6
Item 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 3
Quantitative and Qualitative Disclosures about Market Risk 10
Part II. Other Information:
Item 6
Exhibits and reports on Form 8-K 11
Signatures 11
</TABLE>
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PART 1. FINANCIAL INFORMATION
JACLYN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
September 30, June 30,
1999 1999
(Unaudited) (See below)
---------------------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 374 $ 1,051
Securities available for sale 1,670 1,674
Accounts receivable, net 9,057 9,675
Inventory 6,587 6,341
Prepaid expenses and other assets 3,689 4,141
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TOTAL CURRENT ASSETS 21,377 22,882
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PROPERTY, PLANT AND EQUIPMENT, net 1,126 1,193
OTHER ASSETS 1,478 1,520
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TOTAL ASSETS $ 23,981 $ 25,595
========= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable - bank $ 1,595 $ 1,775
Accounts payable 2,770 4,009
Other current liabilities 1,747 2,029
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TOTAL CURRENT LIABILITIES 6,112 7,813
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DEFERRED INCOME TAXES 1,123 1,123
COMMITMENTS
STOCKHOLDERS' EQUITY:
Common stock 3,369 3,369
Additional paid-in capital 12,117 12,117
Retained earnings 8,041 7,954
Accumulated other comprehensive income 23 23
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23,550 23,463
Less: Common shares in treasury at cost 6,804 6,804
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TOTAL STOCKHOLDERS' EQUITY 16,746 16,659
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $23,981 $ 25,595
========= ==========
</TABLE>
The June 30, 1999 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
September 30,
1999 1998
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<S> <C> <C>
Net sales $ 15,472 $ 15,645
Cost of goods sold 11,240 11,373
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Gross profit 4,232 4,272
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Shipping, selling and administrative expenses 4,081 4,176
Interest expense 38 1
Interest income 23 35
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4,096 4,142
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Earnings before income taxes 136 130
Provision for income taxes 49 47
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Net earnings $ 87 $ 83
=========== ==========
Net earnings per common share - basic and diluted $.03 $.03
=========== ==========
Weighted average number of shares outstanding 2,728,846 2,703,485
=========== ==========
</TABLE>
See notes to condensed consolidated financial statements.
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JACLYN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1999 1998
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<S> <C> <C>
Cash Flows From Operating Activities:
Net Earnings $ 87 $ 83
Adjustments to reconcile net earnings to net cash used in operating activities:
Depreciation and amortization 101 119
Deferred income tax (1)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 618 (4,380)
(Increase) decrease in inventories (246) 2,463
Decrease in prepaid expenses and other current assets 462 238
(Increase) decrease in prepaid and refundable income taxes (6) 59
(Increase) in security deposits, other assets and non current liabilities (1) (1)
Decrease in accounts payable and other current liabilities (1,502) (1,056)
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Net cash used in operating activities (487) (2,476)
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Cash Flows From Investing Activities:
Purchase of property and equipment (10) (67)
Proceeds from sale of property - 19
Maturities of marketable securities - at cost - available for sale - 555
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Net cash (used in) provided by investing activities (10) 507
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Cash Flows From Financing Activities:
(Decrease) increase in loans payable - bank (180) 2,270
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Net cash (used in) provided by financing activities (180) 2,270
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Net (Decrease) Increase in Cash and Cash Equivalents (677) 301
Cash and Cash Equivalents, beginning of period 1,051 2,176
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Cash and Cash Equivalents, end of period $ 374 $ 2,477
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Supplemental Information:
Interest paid $ 26 $ 1
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Taxes paid $ 2 $ 5
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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
1. The accompanying unaudited condensed consolidated balance sheet as of
September 30, 1999 and the condensed consolidated statements of earnings
and cash flows for the three month periods ended September 30, 1999 and 1998
have been prepared in accordance with generally accepted accounting
principles for interim financial information. Accordingly, they do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. 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 1999 Annual Report to Stockholders. The results of
operations for the period ended September 30, 1999 are not necessarily
indicative of operating results for the full fiscal year.
2. In June 1998 the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This
statement, which is effective for the Company for the year ending June 30,
2001, establishes accounting and reporting standards for derivative
instruments and hedging activities. The Company has not yet determined
whether the application of SFAS No. 133 will have a material impact on its
financial position or results of operations.
3. The Company's schedule of Net Comprehensive Income are as follows (in
thousands):
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<TABLE>
<CAPTION>
Three Months
Ended
September 30,
1999 1998
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<S> <C> <C>
Net earnings $ 87 $ 83
Other comprehensive income, net of tax:
Unrealized holding (loss) gain on securities arising during period - $ (1)
==================
Net comprehensive income $ 87 $ 82
==================
</TABLE>
4. The Company's calculation of Basic and Diluted Net (Loss) Earnings Per
Common Share are as follows (in thousands, except per share amounts) :
<TABLE>
<CAPTION>
Quarter Ended September 30,
1999 1998
<S> <C> <C>
Basic Net Income Per Common Share:
- ---------------------------------------------
Net Earnings $ 87 $ 83
___________ ____________
Basic Weighted Average Shares Outstanding 2,711,391 2,703,485
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Basic Net Income Per Common Share $ .03 $ .03
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Diluted Net Earnings Per Common Share:
- ---------------------------------------------
Net Earnings $ 87 $ 83
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Basic Weighted Average Shares Outstanding 2,711,391 2,703,485
Add: Dilutive Options 17,455 -
___________ _____________
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
___________ ___________
Diluted Weighted Average Shares Outstanding 2,728,846 2,703,485
___________ ___________
Diluted Net Earnings Per Common Share $ .03 $ .03
----------- -----------
</TABLE>
5. Inventories consist of the following components:
<TABLE>
<CAPTION>
September 30, June 30, 1999
1999 1999
<S> <C> <C>
Raw materials $ 2,572,000 $ 3,466,000
Work in process 1,397,000 1,057,000
Finished goods 2,618,000 1,818,000
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$6,587,000 $6,341,000
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</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents decreased during the three-month period
ended September 30, 1999 to $374,000 from $1,051,000 at June 30, 1999. Net cash
was used for operating activities mostly to pay down accounts payable and other
current liabilities of $1,502,000 and an increase in inventories of $246,000,
offset in part by a decrease in prepaid expenses and other current assets
totaling $462,000. In addition, net cash totaling $180,000 was used for
financing activities to pay bank borrowing.
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During fiscal 1999, the Company completed the renewal of a $23,000,000 line of
credit with a bank for short-term loans, letters of credit and banker's
acceptances which extends through June 30, 2000. Changes from the previous bank
line of credit include, among other things, an increase in loan availability
from $10,000,000 to $13,000,000 with the Company's inventory and accounts
receivable pledged to the bank as collateral, a minimum quick ratio requirement
of 1 to 1, and the maintenance of a minimum tangible net worth of $14,000,000.
The Company believes that funds provided by operations, existing working capital
and the Company's current bank line of credit 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 $15,472,000 during the three-month period ended September 30,
1999 compared to $15,645,000 in the three-month period ended September 30, 1998.
The decrease in sales was primarily due to the elimination of three divisions
(in fiscal 1999) which had limited growth potential, offset, in part, by sales
from the newly acquired women's apparel company that targets its sales to
customers selling through catalogues and over the internet, as well as increased
sales of licensed handbags.
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The gross profit percentage was slightly higher at 27.4% this quarter as
compared to 27.3% in last year's same quarter due to higher margins primarily in
the children's division.
Shipping, selling and administrative expenses decreased both in dollar terms and
as a percentage of net sales, mainly due to lower volume related expenses.
Interest expense of $38,000 in the first quarter of fiscal 1999 compares with
$1,000 in the prior comparable period as a result of higher bank borrowing used
to fund much higher levels of raw materials and work in process inventory this
period versus last year's same period in order to provide for the current
increased backlog of customer orders. Other income was lower by $12,000 in the
first quarter of the current fiscal year compared to the fiscal 1999 first
quarter due to the utilization of investment funds for current working capital
needs.
Earnings before income taxes this three-month period as compared to the
equivalent period of fiscal 1998 were slightly higher due primarily to lower
shipping, selling and administrative expenses. Net earnings for the quarter
ended September 30, 1999 of $88,000 compared to net earnings for the same period
last year of $83,000.
YEAR 2000 COMPLIANCE
Last year, the Company completed its assessment of the changes that are needed
to make its critical and other data processing systems Year 2000 compliant.
These changes included a combination of software modifications,
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upgrades and hardware changes. The Company has substantially completed the
conversion of all mission critical data processing systems and will continue to
test its systems through the end of 1999 in order to minimize the risks
associated with Year 2000 systems changes.
Existing data processing personnel are being utilized to implement Year 2000
changes. To date, total incremental costs incurred have been approximately
$25,000, with total aggregate costs to become Year 2000 compliant not expected
to exceed this amount.
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 1999. 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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
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<PAGE>
There have been no material changes in the information set forth under the
caption "Item 7A-Quantitative and Qualitative Disclosures About Market Risk" in
the Company's Annual Report on Form 10-K for the fiscal year ended June 30,
1999.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
a) Exhibit 27. Financial Data Schedule.
2) Reports on Form 8-K. The registrant did not file any reports on Form 8-K
- --
during the three months ended September 30, 1999.
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)
November 12, 1999 /s/Allan Ginsburg
- ----------------- ----------------------------
Allan Ginsburg
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<PAGE>
Chairman of the Board
November 12, 1999 /s/ Anthony Christon
- ----------------- ------------------------
Anthony Christon
Vice President
Chief Financial Officer
EXHIBIT INDEX
-------------
Exhibit No. Description Page No.
- ----------- ----------- --------
27 Financial Data Schedule 13
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 374
<SECURITIES> 1,670
<RECEIVABLES> 9,057
<ALLOWANCES> 427
<INVENTORY> 6,587
<CURRENT-ASSETS> 21,377
<PP&E> 1,126
<DEPRECIATION> 3,073
<TOTAL-ASSETS> 23,981
<CURRENT-LIABILITIES> 6,112
<BONDS> 0
0
0
<COMMON> 3,369
<OTHER-SE> 12,117
<TOTAL-LIABILITY-AND-EQUITY> 23,981
<SALES> 15,472
<TOTAL-REVENUES> 15,495
<CGS> 11,240
<TOTAL-COSTS> 4,081
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38
<INCOME-PRETAX> 136
<INCOME-TAX> 49
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 87
<EPS-BASIC> 0.03
<EPS-DILUTED> 0.03
</TABLE>
