<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 1999
-----------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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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
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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
--- ---
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, 2000
- ------------------------------------ -------------------------------
Common Stock, par value $1 per share 2,711,391
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<PAGE>
JACLYN, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
Page No.
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Part I. Financial Information:
<S> <C>
Item 1
Condensed Consolidated Balance Sheets -
December, 31 1999 (unaudited) and June 30, 1999 (derived from audited financial
statements) 3
Condensed Consolidated Statements of Operations -
Three Months and Six Months Ended December, 31 1999 and 1998 (unaudited) 4
Condensed Consolidated Statements of Cash Flows -Six Months Ended December, 31 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 9
Item 3
Quantitative and Qualitative Disclosures about Market Risk 12
Item 4
Submission of Matters to a Vote of Stockholders 12
Part II. Other Information:
Item 6
Exhibits and reports on Form 8-K 13
Signatures 13
</TABLE>
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<PAGE>
PART 1. FINANCIAL INFORMATION
JACLYN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
December, 31 June 30,
1999 1999
(Unaudited) (See below)
---------------- -----------------
ASSETS
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 1,352 $ 1,051
Securities available for sale 1,674 1,674
Accounts receivable, net 6,771 9,675
Inventory 5,891 6,341
Prepaid expenses and other assets 3,821 4,141
---------------- -----------------
TOTAL CURRENT ASSETS 19,509 22,882
---------------- -----------------
PROPERTY, PLANT AND EQUIPMENT, net 1,129 1,193
OTHER ASSETS 1,473 1,520
---------------- -----------------
TOTAL ASSETS $ 22,111 $ 25,595
================ =================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable - bank $ 95 $ 1,775
Accounts payable 1,879 4,009
Other current liabilities 2,166 2,029
---------------- -----------------
TOTAL CURRENT LIABILITIES 4,140 7,813
---------------- -----------------
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 8,143 7,954
Accumulated other comprehensive income 23 23
---------------- -----------------
23,652 23,463
Less: Common shares in treasury at cost 6,804 6,804
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TOTAL STOCKHOLDERS' EQUITY 16,848 16,659
---------------- -----------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY STOCKHOLDERS'EQUITY EQUIT EQUITY $ 22,111 $ 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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<PAGE>
JACLYN, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $ 18,514 $ 13,134 $ 33,987 $ 28,779
Cost of goods sold 13,864 10,190 25,104 21,563
--------------- ---------------- --------------- ---------------
Gross profit 4,650 2,944 8,883 7,216
--------------- ---------------- --------------- ---------------
Shipping, selling and administrative expenses 4,442 3,672 8,523 7,849
Interest expense 81 2 120 3
Other income 33 52 56 88
--------------- ---------------- --------------- ---------------
4,490 3,622 8,587 7,764
--------------- ---------------- --------------- ---------------
Earnings (loss) before income taxes 160 (678) 296 (548)
Provision (benefit) for income taxes 58 (244) 107 (197)
--------------- ---------------- --------------- ---------------
Net earnings (loss) $ 102 $ (434) $ 189 $ (351)
=============== ================ =============== ===============
Net earnings (loss) per common share - basic
and diluted $ .04 $ (.16) $ .07 $ (.13)
=============== ================ =============== ===============
Weighted average number of shares outstanding 2,711,391 2,711,405 2,711,391 2,711,405
=============== ================ =============== ===============
</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>
Six Months Ended
December, 31
1999 1998
---- ----
<S> <C> <C>
Cash Flows From Operating Activities:
Net earnings (loss) $ 189 $ (351)
Adjustments to reconcile net earnings (loss) to net cash used in operating activities:
Depreciation and amortization 155 155
Deferred income tax - 2
Changes in assets and liabilities:
Decrease in accounts receivable 2,904 155
Decrease in inventories 450 4,448
Decrease in prepaid expenses and other current assets 349 267
Increase in prepaid and refundable income taxes (29) -
(Increase) decrease in security deposits, other assets and non current liabilities (1) 77
Decrease in accounts payable and other current liabilities (1,993) (2,449)
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Net cash provided by operating activities 2,024 2,304
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Cash Flows From Investing Activities:
Purchase of property and equipment (43) (203)
Proceeds from sale of property - 139
Maturities of marketable securities - at cost - available for sale - 1,031
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Net cash (used in) provided by investing activities (43) 967
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Cash Flows From Financing Activities:
Decrease in loans payable - bank (1,680) -
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Net cash used in financing activities (1,680) -
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Net Increase in Cash and Cash Equivalents 301 3,271
Cash and Cash Equivalents, beginning of period 1,051 2,176
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Cash and Cash Equivalents, end of period $ 1,352 $ 5,447
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Supplemental Information:
Interest paid $ 61 $ 2
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Taxes paid $ 133 $ 8
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</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
JACLYN, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The accompanying unaudited condensed consolidated balance sheet as of
December 31, 1999 and the condensed consolidated statements of
operations or the three and six month periods ended December 31, 1999
and 1998, and the condensed consolidated statement of cash flows for
the six month periods ended December 31, 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 December 31, 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.
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3. The Company's schedule of Net Comprehensive Income are as follows (in
thousands):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net earnings (loss) from operations $ 102 $ (434) $ 189 $ (351)
Other comprehensive income, net of tax:
Unrealized holding gain on securities arising
during period - 1 - -
------------------- ---------------- --------------- ---------------
Net comprehensive earnings (loss) $ 102 $ (433) $ 189 $ (351)
=================== ================ =============== ===============
</TABLE>
4. The Company's calculation of Basic and Diluted Net Earnings (Loss) Per
Common Share are as follows (in thousands, except per share amounts) :
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Basic Net Earnings (Loss) Per Share:
------------------------------------
Net Earnings (Loss) $ 102 $ (434) $ 189 $ (351)
------------------- ------------------ ----------------- --------------------
Basic Weighted Average Shares Outstanding 2,711,391 2,711,405 2,711,391 2,711,405
------------------- ------------------ ----------------- --------------------
Basic Net Earnings (Loss) Per
Common Share $ .04 $ (.16) $ .07 $ (.13)
------------------- ------------------ ----------------- --------------------
Diluted Net Earnings (Loss) Per
-------------------------------
Common Share:
--------------
Net Earnings (Loss) $ 102 $ (434) $ 189 $ (351)
------------------- ------------------ ----------------- --------------------
Basic Weighted Average Shares Outstanding 2,711,391 2,711,405 2,711,391 2,711,405
Add: Dilutive Options 17,455 - 17,455 -
------------------- ------------------ ----------------- --------------------
Diluted Weighted Average Shares Outstanding 2,728,846 2,711,405 2,728,846 2,711,405
------------------- ------------------ ----------------- --------------------
Diluted Net Earnings (Loss) Per
Common Share $ .04 $ (.16) $ .07 $ (.13)
------------------- ------------------ ----------------- --------------------
</TABLE>
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<PAGE>
5. Inventories consist of the following components:
<TABLE>
<CAPTION>
December 31, June 30,
1999 1999
<S> <C> <C>
Raw materials $ 2,497,000 $ 3,466,000
Work in process 950,000 1,057,000
Finished goods 2,444,000 1,818,000
----------------------- ---------------------
$ 5,891,000 $ 6,341,000
======================= =====================
</TABLE>
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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 increased during the six-month period
ended December 31, 1999 to $1,352,000 from $1,051,000 at June 30, 1999. Net cash
was provided by operating activities, primarily from a decrease in accounts
receivable of $2,904,000, as well as a decrease in inventories of $450,000 and a
decrease in prepaid expenses and other current assets totaling $349,000. Funds
were used for operating activities mostly to pay down accounts payable and other
current liabilities of $1,993,000. In addition, funds totaling $1,680,000 were
used for financing activities to reduce bank borrowing.
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.
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<PAGE>
RESULTS OF OPERATIONS
Net sales were $18,514,000 and $33,987,000 during the three and six-month
periods ended December 31, 1999 compared to $13,134,000 and $28,779,000 in the
three and six-month periods ended December 31, 1998, respectively. The increase
in sales for the quarter ended December 31, 1999 was primarily due to net sales
from the Company's new women's apparel company that sells to customers who
distribute through catalogues and over the internet, offset by a decrease in net
sales due to the closing in fiscal 1999 of three divisions with limited growth
potential (all as previously disclosed). In addition, the Company's women's
sleepwear division, the moderate priced handbag and backpack division and
higher priced handbag division all experienced an improvement in sales. Gross
profit improved to 25.1% for the three-month period ended December 31, 1999
compared to 22.4% in the prior year comparable period, mostly due to much better
moderate priced handbag and backpack division gross profit, as well as higher
gross profit for the Company's premium and women's sleepwear business. For the
six 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 moderate priced handbag and backpack division and its higher
priced handbag division. The gross profit of 26.1% for the six-month period
ended December 31, 1999 exceeded the 25.1% gross profit achieved in the prior
year's six-month period, resulting mostly from improved premium division and
moderate priced handbag and backpack division gross profit.
Shipping, selling and administrative expenses increased mainly due to higher
volume related expenses in the second quarter and six-month period ended
December 31, 1999, versus last year. As a percentage of net sales, however,
shipping, selling and administrative expenses for the three-month period
decreased by 4.0%, from 28.0 % to 24.0 %, and for the six-month period decreased
by 2.5 %, to 25.1 %, from last year's six-month comparable period, in each case,
due to the relatively lower level of fixed costs compared to higher net sales.
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<PAGE>
Interest expense was greater by $79,000 and $117,000 in the second quarter and
first six months of fiscal 2000 versus the same fiscal 1999 periods,
respectively, resulting from a higher average level of borrowing under the
Company's line of credit used to finance the increased volume of business in the
current fiscal year to date periods.
Interest income was lower by $19,000 and $32,000 in the second quarter and first
half of the current fiscal year, respectively, compared to the fiscal 1999
comparable periods due to the utilization of investment funds for current
working capital needs.
Earnings before income taxes improved in the three-month and six-month periods,
as compared to losses before taxes in the equivalent periods of fiscal 1999,
mainly due to the increase in sales and gross profit which was not entirely
offset by higher shipping, selling and administrative expenses and interest
expense. Net earnings for the quarter and six month periods ended December 31,
1999 were $102,000 and $189,000, respectively, compared to net losses for the
same periods last year of $434,000 and $351,000.
YEAR 2000 COMPLIANCE
Last year, the Company successfully 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.
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<PAGE>
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 any possible future Year 2000 compliance issues,
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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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.
Item 4. Submission of Matters to a Vote of Stockholders.
- --------------------------------------------------------
(a) Date of Annual Meeting of Stockholders - November 30, 1999.
(b) See item 4(c)(i) below.
(c) (i) The election of seven directors to serve until the next annual
meeting of stockholders.
<TABLE>
<CAPTION>
Name of Director Votes For Votes Withheld
---------------- ---------- --------------
<S> <C> <C>
Abe Ginsburg 2,280,211 177,533
Allan Ginsburg 2,280,111 177,633
Robert Chestnov 2,281,397 176,347
Howard Ginsburg 2,281,397 176,347
Martin Brody 2,281,497 176,247
Richard Chestnov 2,281,497 176,247
Albert Safer 2,281,497 176,247
</TABLE>
(ii) Ratification of the appointment of Deloitte & Touche LLP as
independent accountants of the Company.
Votes Cast For: 2,299,285 Votes Against: 25,114 Abstentions: 133,345
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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 December, 31 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)
February 14, 2000 /s/ Allan Ginsburg
----------------- ---------------------------
Allan Ginsburg
Chairman of the Board
February 14, 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.
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27 Financial Data Schedule 15
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted form the Jaclyn,
Inc. Condensed Consolidated Balance Sheet at December 31, 1999 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,352
<SECURITIES> 1,674
<RECEIVABLES> 6,771
<ALLOWANCES> 42
<INVENTORY> 5,891
<CURRENT-ASSETS> 19,509
<PP&E> 1,129
<DEPRECIATION> 3,103
<TOTAL-ASSETS> 22,111
<CURRENT-LIABILITIES> 4,140
<BONDS> 0
0
0
<COMMON> 3,369
<OTHER-SE> 12,117
<TOTAL-LIABILITY-AND-EQUITY> 22,111
<SALES> 33,987
<TOTAL-REVENUES> 34,043
<CGS> 25,104
<TOTAL-COSTS> 8,523
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 120
<INCOME-PRETAX> 296
<INCOME-TAX> 107
<INCOME-CONTINUING> 189
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 189
<EPS-BASIC> .07
<EPS-DILUTED> .07
</TABLE>
