<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, 2000
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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.
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(Exact name of registrant as specified in its charter)
Delaware 22-1432053
---------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
635 59th Street, West New York, New Jersey 07093
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(Address of principal executive offices)
(Zip Code)
(201) 868-9400
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(Registrant's telephone number, including area code)
NONE
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(Former name, former address and former fiscal year, if changed
since last report)
Indicate by check mark whether the registrant (1) has filed all the reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No____
-----
Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Outstanding at May 1, 2000
- ------------------------------------ --------------------------
Common Stock, par value $1 per share 2,711,391
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JACLYN, INC. AND SUBSIDIARIES
INDEX
Page No.
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Part I. Financial Information:
Item 1
Condensed Consolidated Balance Sheets -
March 31, 2000 (unaudited) and June 30, 1999 (derived from
audited financial statements) 3
Condensed Consolidated Statements of Operations -
Three Months and Nine Months Ended March 31, 2000 and 1999
(unaudited) 4
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended March 31, 2000 and 1999 (unaudited) 5
Notes to Condensed Consolidated Financial Statements 6
Item 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
Item 3
Quantitative and Qualitative Disclosures about Market Risk 13
Part II. Other Information:
Item 6
Exhibits and reports on Form 8-K 14
Signatures 14
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<PAGE>
PART 1. FINANCIAL INFORMATION
JACLYN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
March 31, June 30,
2000 1999
(Unaudited) (See below)
----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 874 $ 1,051
Securities available for sale 1,622 1,674
Accounts receivable, net 7,774 9,675
Inventory 5,297 6,341
Prepaid expenses and other assets 3,898 4,141
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TOTAL CURRENT ASSETS 19,465 22,882
------ ------
PROPERTY, PLANT AND EQUIPMENT, net 1,099 1,193
OTHER ASSETS 1,450 1,520
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TOTAL ASSETS $22,014 $25,595
====== ======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable - bank $ - $ 1,775
Accounts payable 2,340 4,009
Other current liabilities 1,702 2,029
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TOTAL CURRENT LIABILITIES 4,042 7,813
------ ------
DEFERRED INCOME TAXES 1,113 1,123
COMMITMENTS
STOCKHOLDERS' EQUITY:
Common stock 3,369 3,369
Additional paid-in capital 12,117 12,117
Retained earnings 8,169 7,954
Accumulated other comprehensive income 8 23
------ ------
23,663 23,463
Less: Common shares in treasury at cost 6,804 6,804
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TOTAL STOCKHOLDERS' EQUITY 16,859 16,659
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TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $22,014 $25,595
====== ======
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 OPERATIONS
(Unaudited)
(Dollars in Thousands, Except Share Amounts)
Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
---- ---- ---- ----
Net sales $16,093 $12,255 $50,080 $41,034
Cost of goods sold 11,953 9,595 37,059 31,158
------ ----- ------ ------
Gross profit 4,140 2,660 13,021 9,876
------ ----- ------ ------
Shipping, selling and
administrative expenses 4,140 4,123 12,661 11,972
Write-off of goodwill - 1,124 - 1,124
Interest expense 1 - 121 3
Other income 41 309 97 397
------ ----- ------ ------
4,100 4,938 12,685 12,702
------ ----- ------ ------
Earnings (loss) before
income taxes 40 (2,278) 336 (2,826)
Provision (benefit) for
income taxes 14 (820) 121 (1,017)
------ ----- ------ ------
Net earnings (loss) $ 26 $(1,458) $ 215 $(1,809)
====== ===== ====== ======
Net earnings (loss) per common
share - basic and diluted $ .01 $ (0.54) $ .08 $ (0.67)
====== ===== ====== ======
Weighted average number of
shares outstanding - diluted 2,716,589 2,711,405 2,727,238 2,711,405
========= ========= ========= =========
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
2000 1999
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<S> <C> <C>
Cash Flows From Operating Activities:
Net earnings (loss) $ 215 $(1,809)
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities:
Depreciation and amortization 239 364
Gain on sale of fixed assets - (252)
Write-off of goodwill - 1,087
Deferred income tax (10) (1)
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 1,901 (318)
Decrease in inventories 1,044 5,808
Decrease in prepaid expenses and other current assets 335 35
(Increase) decrease in prepaid and refundable income taxes (9) -
(Decrease) increase in security deposits,
other assets and non current liabilities (32) 1
Decrease in accounts payable and other current liabilities (2,011) (2,738)
--------- ------
Net cash provided by operating activities 1,672 2,177
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Cash Flows From Investing Activities:
Purchase of property and equipment (74) (160)
Proceeds from sale of property - 447
Maturities of marketable securities - 1,038
Acquisition Costs - (2,324)
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Net cash used in investing activities (74) (999)
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Cash Flows From Financing Activities:
Decrease in loans payable - bank (1,775) -
---------- ------
Net cash used in financing activities (1,775) -
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Net (Decrease) Increase in Cash and Cash Equivalents (177) 1,178
Cash and Cash Equivalents, beginning of period 1,051 2,176
---------- ------
Cash and Cash Equivalents, end of period $ 874 $ 3,354
---------- ------
Supplemental Information:
Interest paid $ 98 $ 2
--------- ------
Taxes paid $ 133 $ 11
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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 March
31, 2000, the condensed consolidated statements of operations for the three
and nine month periods ended March 31, 2000 and 1999, and the condensed
consolidated statement of cash flows for the nine month periods ended March
31, 2000 and 1999, 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 March 31, 2000 are not necessarily
indicative of operating results for the full fiscal year.
2. In June 1999 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.
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3. The Company's schedule of Net Comprehensive Income (Loss) are as follows
(in thousands):
Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
----- ---- ---- ----
Net earnings (loss) from operations $ 26 $(1,458) $ 215 $(1,809)
Other comprehensive income, net of tax:
Unrealized holding gain (loss) on
securities arising during period (15) 2 (15) (1)
----- ------ ---- ------
Net comprehensive earnings (loss) $ 11 $(1,456) $ 200 $(1,810)
===== ====== ==== ======
4. The Company's calculation of Basic and Diluted Net Earnings (Loss) Per
Common Share are as follows (in thousands, except share data):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Basic Net Earnings (Loss) Per Share:
- -----------------------------------
Net Earnings (Loss) $ 26 $ (1,458) $ 215 $ (1,809)
--------- --------- --------- ---------
Basic Weighted Average Shares 2,711,391 2,711,405 2,711,391 2,711,405
--------- --------- --------- ---------
Basic Net Earnings (Loss) Per
Common Share $ .01 $ (.54) $ .08 $ (.67)
--------- --------- --------- ---------
Diluted Net Earnings (Loss) Per
Common Share:
- ---------------------------------
Net Earnings (Loss) $ 26 $ (1,458) $ 215 $ (1,809)
--------- --------- --------- ---------
Basic Weighted Average Shares 2,711,391 2,711,405 2,711,391 2,711,405
--------- --------- --------- ---------
Add: Dilutive Options 5,198 - 15,847 -
--------- --------- --------- ---------
Diluted Weighted Average Shares 2,716,589 2,711,405 2,727,238 2,711,405
--------- --------- --------- ---------
Diluted Net Earnings (Loss) Per
Common Share $ .01 $ (.54) $ .08 $ (.67)
--------- --------- --------- ---------
</TABLE>
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<PAGE>
Options to purchase 66,000 and 74,000 shares of common stock were
outstanding at March 31, 2000 and 1999, respectively, but were not included
in the computation of diluted earnings per share because the exercise price
of the options exceeded the average market price and would have been anti-
dilutive.
5. Inventories consist of the following components (in thousands):
March 31, June 30,
2000 1999
Raw materials $2,031 $3,466
Work in process 1,328 1,057
Finished goods 1,938 1,818
----- -----
$5,297 $6,341
===== =====
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<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash and cash equivalents decreased during the nine-month period
ended March 31, 2000 to $874,000 from $1,051,000 at June 30, 1999. Net cash was
provided by operating activities, primarily from a decrease in accounts
receivable of $1,901,000, as well as a decrease in inventories of $1,044,000 and
in prepaid expenses and other current assets totaling $335,000. Funds were used
for operating activities mostly to pay down accounts payable and other current
liabilities of $2,011,000. In addition, funds totaling $1,775,000 were used for
financing activities to reduce bank borrowings.
The Company has a line of credit with a bank for short-term loans, letters of
credit and banker's acceptances, amounting to $23,000,000, which extends through
June 30, 2000. This line of credit includes, among other things, loan
availability of up to $13,000,000 with the Company's inventory and accounts
receivable pledged to the bank as collateral. Other terms of the line of credit
include a minimum quick ratio requirement of 1 to 1, and the maintenance of a
minimum tangible net worth of $14,000,000.
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<PAGE>
The Company believes that funds provided by operations, existing working capital
and the Company's 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 $16,093,000 and $50,080,000 during the three and nine-month
periods ended March 31, 2000 compared to $12,255,000 and $41,034,000 in the
three and nine-month periods ended March 31, 1999, respectively. The increase
in sales for the quarter ended March 31, 2000 was primarily due to higher volume
in the Company's apparel divisions, including its women's apparel company which
sells to customers who distribute through catalogues and over the internet. In
addition, the Company's higher-priced handbag division and its premium division
both experienced improvements in sales. Gross profit improved to 25.7 % for the
three-month period ended March 31, 2000 compared to 21.7 % in the prior year
comparable period, mostly due to higher gross profit for the Company's women's
sleepwear and premium business, and from the higher-priced handbag division.
For the nine-month period, net sales were higher mainly due to the addition of
the new women's apparel catalogue division, discussed above, as well as
increased volume for the Company's higher-priced handbag division. The gross
profit of 26.0 % for the nine-month period ended March 31, 2000 exceeded the
24.1 % gross profit achieved in the prior year's nine-month period, resulting
mostly from improved premium division and women's sleepwear division gross
profit.
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<PAGE>
Shipping, selling and administrative expenses increased slightly due to higher
volume related expenses in the third quarter and nine-month period ended
March 31, 2000, versus last year. As a percentage of net sales, however,
shipping, selling and administrative expenses for the three-month period
decreased by 7.9 %, from 33.6 % to 25.7 %, and for the nine-month period
decreased by 3.9 %, to 25.3 %, from last year's nine-month comparable period, in
each case, due to the relatively lower level of fixed costs compared to higher
net sales.
Interest expense increased by $1,000 and $118,000 for the three months and nine
months ended March 31, 2000, respectively. The higher average level of
borrowing under the Company's line of credit was used to finance the increased
volume of business in the current fiscal year.
Other income was lower by $268,000 and $300,000 in the three months and nine
months of the current fiscal year, respectively, compared to the prior year
comparable periods, primarily due to the inclusion of a $252,000 gain on the
sale of fixed assets from closing a divisional facility, in last year's third
quarter results, and due to lower interest income from the utilization of
investment funds for current working capital needs.
Earnings before income taxes improved in the three-month and nine-month periods,
compared to losses before taxes in the equivalent periods of fiscal 2000. The
improvement was mainly due to the increase in sales and gross profit in fiscal
2000 and because last year's results included a $1,124,000 write-off of goodwill
as well as integration costs and other costs, in connection with the closing of
certain divisions, all as previously disclosed. Net earnings for the quarter
and nine
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<PAGE>
month periods ended March 31, 2000 were $26,000 and $215,000, respectively,
compared to net losses for the same periods last year of $1,458,000 and
$1,809,000.
YEAR 2000 COMPLIANCE
Last year, the Company completed its systems conversion in order to make its
critical and other data processing systems Year 2000 compliant. These changes
included a combination of software modifications, upgrades and hardware changes.
The Company does not anticipate additional expenditures for Year 2000 compliance
matters.
In addition, the Company has been advised that its major customers are Year 2000
compliant and the Company has experienced no interruptions in conducting its
business with those customers. Further, while the Company is not computer
interdependent with its significant suppliers, there were no indications of any
Year 2000 compliance failures by suppliers that has or would impact the Company.
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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<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
- -------------------------------------------------------------------
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,
2000.
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<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
a) Exhibit 27. Financial Data Schedule.
b) Reports on Form 8-K. The registrant did not file any reports on Form 8-K
during the three months ended March 31, 2000.
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)
May 12, 2000 /s/Allan Ginsburg
- ------------ -----------------------
Allan Ginsburg
Chairman of the Board
May 12, 2000 /s/ Anthony Christon
- ------------ -----------------------
Anthony Christon
Vice President
Chief Financial Officer
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<PAGE>
EXHIBIT INDEX
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Exhibit No. Description Page No.
- ----------- ----------- --------
27 Financial Data Schedule 15
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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, 2000 and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-END> MAR-31-2000
<CASH> 874
<SECURITIES> 1,622
<RECEIVABLES> 7,774
<ALLOWANCES> 40
<INVENTORY> 7,774
<CURRENT-ASSETS> 19,465
<PP&E> 1,099
<DEPRECIATION> 3,165
<TOTAL-ASSETS> 22,014
<CURRENT-LIABILITIES> 4,042
<BONDS> 0
0
0
<COMMON> 3,369
<OTHER-SE> 12,117
<TOTAL-LIABILITY-AND-EQUITY> 16,859
<SALES> 50,080
<TOTAL-REVENUES> 50,177
<CGS> 37,059
<TOTAL-COSTS> 12,661
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 121
<INCOME-PRETAX> 336
<INCOME-TAX> 121
<INCOME-CONTINUING> 215
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 215
<EPS-BASIC> .08
<EPS-DILUTED> .08
</TABLE>
