<PAGE>
FORM 10-Q
UNITED STATES
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, 1995
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 0-5896
JACO ELECTRONICS, INC.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW YORK 11-1978958
-------- ----------
(State of other jurisdiction of (I.R.S. Employer Identification No. )
incorporation or organization)
145 OSER AVENUE, HAUPPAUGE, NEW YORK 11788
-----------------------------------------------------
(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code: (516) 273-5500
Indicated by check mark whether the Registrant (1) has filed all 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 report), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
----- -----
Number of Shares of Registrant's Common Stock
Outstanding as of May 5, 1995 - 1,848,288
---------
<PAGE>
FORM 10-Q
Page 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
JACO ELECTRONICS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, 1995 June 30, 1994
---------------- ---------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 447,724 $ 434,798
Accounts receivable - net 20,004,772 17,135,923
Inventories 24,609,186 20,081,596
Prepaid expenses and other current assets 1,460,272 1,072,219
Due from officers 364,946 291,119
Deferred income taxes 544,000 433,000
------------ -----------
Total Current Assets 47,430,900 39,448,655
Property, Plant and Equipment - Net 4,076,609 3,560,786
Deferred Income Taxes 199,000 199,000
Excess of Cost Over Net Assets Acquired 1,455,248 1,515,900
Other Assets 1,006,831 960,687
------------ -----------
$54,168,588 $45,685,028
------------ -----------
------------ -----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
FORM 10-Q
Page 3
JACO ELECTRONICS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
LIABILITIES & SHAREHOLDERS' EQUITY: March 31, 1995 June 30, 1994
---------------- ---------------
<S> <C> <C>
Current Liabilities:
Notes payable -- bank $11,922,994 $ 8,938,087
Current maturities of long term debt 458,905 346,172
Accounts payable and accrued expenses 17,551,811 14,856,710
Income taxes payable 961,000 147,499
----------- -----------
Total Current Liabilities 30,894,710 24,288,468
Long Term Debt 10,161,244 9,694,108
Deferred Compensation 537,500 500,000
SHAREHOLDERS' EQUITY:
Common Stock 184,829 165,231
Additional Paid-In Capital 5,075,272 3,810,516
Retained Earnings 7,315,033 7,226,705
----------- -----------
Total Shareholders' Equity 12,575,134 11,202,452
----------- -----------
$54,168,588 $45,685,028
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
Form 10-Q
Page 4
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
NET SALES $35,825,167 $27,528,315
----------- -----------
COST AND EXPENSES:
Cost of goods sold 28,328,468 21,893,933
Selling, general and administrative expenses 6,050,211 4,743,592
------------ -----------
34,378,679 26,637,525
------------ -----------
Operating profit 1,446,488 890,790
Interest expense 522,204 262,262
------------ -----------
Income before income taxes 924,284 628,528
Income tax expense 370,000 246,000
------------ -----------
NET EARNINGS $ 554,284 $ 382,528
------------ -----------
------------ -----------
Net earnings per common share $ .30 $ .20
------------ -----------
------------ -----------
Weighted average common shares
and common stock equivalents 1,837,514 1,898,853
------------ -----------
------------ -----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
FORM 10-Q
Page 5
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE NINE MONTHS ENDED MARCH 31,
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
NET SALES $100,659,915 $76,591,516
------------ -----------
COST AND EXPENSES:
Cost of goods sold 79,850,049 60,353,417
Selling, general and administrative expenses 17,202,738 13,763,163
------------ -----------
97,052,787 74,116,580
------------ -----------
Operating profit 3,607,128 2,474,936
Interest expense 1,482,584 753,393
------------ -----------
Earnings before income taxes and
cumulative effect of a change in accounting 2,124,544 1,721,543
Income tax expense 860,000 683,000
------------ -----------
Earnings before cumulative effect of
a change in accounting 1,264,544 1,038,543
------------ -----------
Cumulative effect of a change in
accounting for income taxes -- 241,000
------------ -----------
NET EARNINGS $ 1,264,544 $ 1,279,543
------------ -----------
------------ -----------
Earnings per share before cumulative
effect of a change in accounting $ .69 $ .55
Cumulative effect per share of a change
in accounting for income taxes -- .12
------------ -----------
Net earnings per share $ .69 $ .67
------------ -----------
------------ -----------
Weighted average common shares
and common stock equivalents 1,824,514 1,900,702
------------ -----------
------------ -----------
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
FORM 10-Q
Page 6
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED JUNE 30, 1994 AND
THE NINE MONTHS ENDED MARCH 31, 1995
UNAUDITED
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
PAID-IN RETAINED SHAREHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
-------- -------- ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C>
Balance at June 30, 1993 1,708,637 $170,864 $3,936,613 $5,797,038 $ 9,904,515
Cancellation of shares in
satisfaction of amounts due
in connection with a previous
acquisition (56,953) (5,695) (126,972) (132,667)
Exercise of stock options 625 62 875 937
Net earnings 1,429,667 1,429,667
----------- --------- ----------- ----------- ------------
Balance at June 30, 1994 1,652,309 165,231 3,810,516 7,226,705 11,202,452
Exercise of stock options 28,000 2,800 105,700 108,500
10% stock dividend 167,979 16,798 1,159,056 (1,175,854) --
Payment for fractional shares
resulting from 10% stock
dividend (362) (362)
Net earnings 1,264,544 1,264,544
----------- --------- ----------- ----------- ------------
BALANCE AT MARCH 31, 1995 1,848,288 $184,829 $5,075,272 $7,315,033 $12,575,134
----------- --------- ----------- ----------- ------------
----------- --------- ----------- ----------- ------------
</TABLE>
See accompanying notes to condensed consolidated financial statements
<PAGE>
FORM 10-Q
Page 7
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31,
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
------ ------
<S> <C> <C>
Cash flows from operating activities
Net earnings $ 1,264,544 $ 1,279,543
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities
Depreciation and amortization 500,609 213,830
Deferred compensation 37,500 37,500
Deferred income tax provision (111,000) (209,000)
Amortization of goodwill 60,652 23,103
Loss on sale of equipment 18,403 5,651
Provision for doubtful accounts 313,126 106,705
Changes in operating assets and liabilities,
Increase in operating assets - net (8,097,618) (1,467,645)
Increase in operating liabilities - net 3,508,602 465,699
------------- ------------
Net cash provided by (used in) operating activities (2,505,182) 455,386
------------- ------------
Cash flows from investing activities
Capital expenditures (1,034,835) (668,936)
Proceeds from sales of assets - 16,888
Advances to officers (73,827) (45,627)
Purchase of subsidiary - (1,600,000)
Increase in other assets (46,144) (6,127)
------------- ------------
Net cash used in investing activities (1,154,806) (2,303,802)
------------- ------------
Cash flows from financing activities
Borrowings under line of credit 102,831,553 79,118,507
Payments under line of credit (99,846,646) (79,019,236)
Principal payments under equipment financing (313,177) (144,503)
Borrowings under term loan 893,046 1,759,230
Proceeds from exercise of stock options 108,500 938
Payments for fractional shares (362) --
------------- ------------
Net cash provided by financing activities 3,672,914 1,714,936
------------- ------------
NET INCREASE (DECREASE) IN CASH 12,926 (133,480)
Cash and cash equivalents at beginning of period 434,798 623,814
------------- ------------
Cash and cash equivalents at the end of period $ 447,724 $ 490,334
------------- ------------
------------- ------------
</TABLE>
See accompanying notes to condensed consolidated financial statements
<PAGE>
FORM 10-Q
Page 8
JACO ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 1995
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
1) The accompanying condensed consolidated financial statements reflect
all adjustments, consisting only of normal recurring accruals, which are in
the opinion of management, necessary for a fair presentation of the
consolidated financial position and the results of operations at and for
the periods presented. Such financial statements do not include all the
information or footnotes necessary for a complete presentation. Therefore,
they should be read in conjunction with the Company's audited consolidated
statements for the year ended June 30, 1994 and the notes thereto. The
results of operations for the interim periods are not necessarily
indicative of the results for the entire year.
2) For interim statement purposes, the Company uses the gross profit
method in computing inventories which consists of goods held for resale.
3) Earnings per share have been computed based on weighted average number
of shares outstanding including approximately 19,200 common stock
equivalents for the period ending March 31, 1994. No common stock
equivalents were included for the period ended March 31, 1995 as they were
antidilutive. (See Note A-6)
4) INCOME TAXES
In February 1992, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 109, "Accounting for Income Taxes".
Statement 109 requires a change from the deferred method of accounting for
income taxes of APB Opinion 11 to the asset and liability method of
accounting for incomes taxes. Under the asset and liability method of
Statement 109, deferred tax assets and liabilities are recognized for the
estimated future tax consequences attributable to differences between the
financial statement carrying amounts of existing assets and liabilities and
their respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates in effect for the year in which those
temporary differences are expected to be recovered or settled. Under
Statement 109, the effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
<PAGE>
FORM 10-Q
Page 9
JACO ELECTRONICS, INC. AND SUBSIDIARIES
NOTE TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Effective July 1, 1993, the Company adopted Statement 109 and has reported the
cumulative effect of that change in the method of accounting for income taxes of
$241,000 in the condensed consolidated statement of earnings for the nine months
ended March 31, 1994.
5) ACQUISITION
On March 11, 1994, the Company purchased all of the outstanding common
stock of a contract electronic assembly manufacturer for $1,796,355 in cash,
financed in part by the Company securing a term loan. The acquisition was
accounted for by the purchase method and accordingly, the purchase price was
allocated to assets acquired and liabilities assumed based upon their fair
market value as of the date of acquisition. The amount paid in excess of the
fair market value, $500,661, is being amortized over a ten (10) year period and
is included in the accompanying condensed consolidated financial statements as
of March 31, 1995, net of accumulated amortization of $50,000.
The pro-forma unaudited results of operations for the nine month and three
month periods ended March 31, 1994, assuming consummation of the purchase and
term loan borrowing as of July 1, 1993 is as follows:
Nine Months Three Months
----------- ------------
Net sales $82,709,000 $29,132,000
----------- -----------
----------- -----------
Net earnings $ 679,000 $ 32,000
----------- -----------
----------- -----------
Net earnings per share $ .36 $ .02
----------- -----------
----------- -----------
6) On February 3, 1995, the Company announced a ten percent stock
dividend, payable on March 10, 1995 to shareholders of record at the close of
business on February 16, 1995. All references to earnings per share data have
been restated to reflect the above stock dividend.
<PAGE>
FORM 10-Q
Page 10
ITEM II - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
COMPARISON OF THREE AND NINE MONTHS ENDED MARCH 31, 1995 AND MARCH 31, 1994
Net sales for the third quarter of fiscal 1995 increased 30% to $35,825,000 as
compared to $27,528,000 for the third quarter of the 1994 fiscal year.
Management is seeing increased sales in every segment of the business. This is
a result of several factors, including: (a) extremely strong overall demand for
products in the electronic component industry; (b) the efforts of sales and
marketing personnel hired in prior quarters; and (c) sales from Nexus Custom
Electronics, Inc., acquired in March, 1994. Net sales for the nine months
ended March 31, 1995 increased 31% to $100,660,000, compared to $76,592,000
for the nine months ended March 31, 1994.
Gross profit margins for the three months ended March 31, 1995 increased
slightly to 20.9% compared to 20.5% for the three months ended March 31, 1994.
The favorable current market conditions have enabled the company to realize a
modest increase. Gross profit margins for the nine months ended March 31, 1995,
decreased slightly to 20.7% compared to 21.2% for the nine months ended March
31, 1994. The decrease was a result of competitive pressure.
Selling, general and administrative expenses (SG&A) decreased as a percentage of
sales to 16.9% and 17.1% for the three and nine months, respectively, ended
March 31, 1995 as compared to 17.2% and 18.0% for the same periods ended March
31, 1994. SG&A expenses increased significantly comparing the three and nine
months ended March 31, 1995 to the respective periods last year. The
acquisition of Nexus, selling cost associated with sales increase, and support
cost necessary to handle the sales growth, all contributed to the increase.
Interest expense increased ninety nine percent (99%) and ninety seven percent
(97%) for the three and nine months, respectively, ended March 31, 1995 and
compared to the same periods ended March 31, 1994. This was primarily
attributable to rising interest rates, additional borrowings to support sales
growth and additional borrowings used in connection with the acquisition of
Nexus. Interest expense will continue to be significantly higher in fiscal 1995
than in fiscal 1994 because of higher rates due to the debt incurred with the
Nexus acquisition being carried for the full 1995 fiscal year.
Net earnings for the nine months ended March 31, 1995 were $1,264,000 as
compared to $1,280,000 for the nine months ended March 31, 1994, after taking
into account the cumulative effect of a change in accounting for income taxes of
$241,000 in the first quarter of fiscal 1994. Earnings before the change in
accounting for income taxes increased $226,000 (22%) for the current fiscal
year. Net earnings for the third quarter of fiscal 1995 were 45% higher than
net earnings in the comparable fiscal 1994 period, principally due to the
significant increase in net sales.
<PAGE>
FORM 10-Q
Page 11
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of capital to support operations and capital
expenditures are (i) cash from operations and (ii) short term borrowings under a
secured revolving $20,500,000 credit facility of which approximately $8,100,000
remains unused. Management believes that capital available from these sources
will be more than sufficient to support operations at projected levels and does
not anticipate making any significant capital expenditures during the balance of
Fiscal 1995 which will exceed its available capital. Working capital at March
31, 1995 was $16,500,000, compared to $15,000,000 at March 31, 1994.
The Company's credit facility was recently enlarged, increasing the revolving
credit portion to $20,500,000, resulting in a $30,000,000 total credit facility,
$8,000,000 of which is in the form of a term loan which matures in the first
quarter of the year ending June 30, 1997 and $1,500,000 of which is in the form
of a second term loan, payable in 84 consecutive monthly installments of
$17,857, which commenced in April, 1994. Additionally, the lender has reduced
the Company's borrowing rate from prime +1% to prime. The Company relies on
its credit facility as the principal source of working capital to fund
operations.
<PAGE>
FORM 10-Q
Page 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Nothing to Report
Item 2. Changes in Securities
Nothing to Report
Item 3. Defaults Upon Senior Securities
Nothing to Report
Item 4. Submission of Matters to a Vote of Security Holders
Nothing to Report
Item 5. Other Information
On February 3, 1995, the Company announced a ten percent
stock dividend, paid on March 10, 1995 to shareholders of
record at the close of business on February 16, 1995.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits: None
b) Reports on Form 8-K: None
<PAGE>
SIGNATURE
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.
JACO ELECTRONICS, INC.
(Registrant)
BY: /s/ Jeffrey D. Gash
---------------------
Jeffrey D. Gash - Vice President/Finance
(Principal Financial Officer)
DATED: May 12, 1995
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET AS OF MARCH 31, 1995 AND THE
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF EARNINGS FOR THE NINE MONTHS
ENDED MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-END> MAR-31-1995
<CASH> 447,724
<SECURITIES> 0
<RECEIVABLES> 20,780,256
<ALLOWANCES> 775,484
<INVENTORY> 24,609,186
<CURRENT-ASSETS> 47,430,900
<PP&E> 6,751,760
<DEPRECIATION> 2,675,151
<TOTAL-ASSETS> 54,168,588
<CURRENT-LIABILITIES> 30,894,710
<BONDS> 0
<COMMON> 184,829
0
0
<OTHER-SE> 12,390,305
<TOTAL-LIABILITY-AND-EQUITY> 54,168,588
<SALES> 100,659,915
<TOTAL-REVENUES> 100,659,915
<CGS> 79,850,049
<TOTAL-COSTS> 97,052,787
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 313,126
<INTEREST-EXPENSE> 1,482,584
<INCOME-PRETAX> 2,124,544
<INCOME-TAX> 860,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,264,544
<EPS-PRIMARY> 0.69
<EPS-DILUTED> 0.69
</TABLE>
