<PAGE> 1
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 September 30, 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
November 7, 1995 - 3,791,806
---------
<PAGE> 2
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>
September 30, 1995 June 30, 1995
------------------ -------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 423,220 $ 393,671
Accounts receivable - net 21,737,316 20,437,664
Inventories 33,958,022 26,653,881
Prepaid expenses and other 1,136,129 1,256,319
Due from officers 221,362 309,808
Deferred income taxes 691,000 571,000
-------------- --------------
Total current assets 58,167,049 49,622,343
Property, plant and equipment - net 4,119,559 4,106,221
Deferred income taxes 174,000 174,000
Excess of cost over net assets acquired 1,335,156 1,353,031
Other assets 1,169,615 1,067,643
------------ -------------
$ 64,965,379 $ 56,323,238
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 3
FORM 10-Q
Page 3
JACO ELECTRONICS, INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
LIABILITIES & SHAREHOLDERS' EQUITY: September 30, 1995 June 30, 1995
------------------ -------------
<S> <C> <C>
Current Liabilities:
Accounts payable and accrued expenses $ 21,169,044 $ 17,952,385
Current maturities of long term debt and
capitalized lease obligations 460,497 452,995
Income taxes payable 729,693 475,702
------------- ------------
Total current liabilities 22,359,234 18,881,082
Long term debt and capitalized lease obligations 28,009,990 23,665,624
Deferred compensation 562,500 550,000
SHAREHOLDERS' EQUITY:
Preferred stock - authorized, 100,000 shares,
$10 par value; none issued
Common stock - authorized 5,000,000 shares,
$.10 par value; issued and outstanding,
2,464,306 and 2,464,384 shares, respectively 246,430 246,438
Additional paid-in capital 5,013,671 5,013,663
Retained earnings 8,773,554 7,966,431
----------- -----------
Total shareholders' equity 14,033,655 13,226,532
----------- -----------
$64,965,379 $56,323,238
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 4
Form 10-Q
Page 4
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
NET SALES $40,083,485 $31,087,594
----------- -----------
COST AND EXPENSES:
Cost of goods sold 31,542,271 24,693,472
----------- -----------
Gross profit 8,541,214 6,394,122
Selling, general and administrative expenses 6,613,141 5,528,395
----------- -----------
Operating profit 1,928,073 865,727
Interest expense 558,122 428,233
----------- -----------
Earnings before income taxes 1,369,951 437,494
Income tax provision 562,000 175,000
----------- -----------
NET EARNINGS $ 807,951 $ 262,494
=========== ===========
Net earnings per common share $ .32 $ .11
=========== ===========
Weighted average common and common
equivalent shares outstanding 2,536,909 2,423,387
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 5
FORM 10-Q
Page 5
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED JUNE 30, 1995
THE THREE MONTHS ENDED SEPTEMBER 30, 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, 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)
4-for-3 stock split 616,096 61,609 ( 61,609)
Net earnings 1,915,942 1,915,942
--------- --------- ---------- ---------- ------------
Balance at June 30, 1995 2,464,384 246,438 5,013,663 7,966,431 13,226,532
--------- --------- ---------- ---------- ------------
Payment for fractional shares
resulting from 4-for-3 stock
split ( 78) ( 8) 8 ( 828) ( 828)
Net earnings 807,951 807,951
--------- --------- ---------- ---------- ------------
2,464,306 $ 246,430 $5,013,671 $8,773,554 $ 14,033,655
========= ========= ========== ========== ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 6
FORM 10-Q
Page 6
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities
Net earnings $ 807,951 $ 262,494
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities
Depreciation and amortization 174,900 155,616
Deferred compensation 12,500 12,500
Deferred income tax provision (120,000) ( 37,000)
Amortization of goodwill 17,875 20,218
Loss on sale of equipment 8,762
Provision for doubtful accounts 160,240
Changes in operating assets and liabilities,
Increase in operating assets - net (8,643,843) (6,127,731)
Increase in operating liabilities - net 3,470,650 4,530,398
---------- -----------
Net cash used in operating activities (4,110,965) ( 1,183,505)
----------- ------------
Cash flows from investing activities
Capital expenditures ( 201,600) ( 355,369)
Proceeds from sales of assets 4,600
Decrease (increase) in due from officers - net 88,446 ( 27,309)
Increase in other assets ( 101,972) ( 38,311)
--------- --------
Net cash used in investing activities ( 210,526) ( 420,989)
----------- ------------
Cash flows from financing activities
Borrowings under line of credit 44,114,000 32,975,464
Payments under line of credit (39,649,993) (31,406,755)
Principal payments under equipment financing
and term loan ( 112,139) ( 110,579)
Borrowings under term loan 125,992
Payments for fractional shares ( 828)
------------ -----------
Net cash provided by financing activities 4,351,040 1,584,122
----------- -----------
NET INCREASE (DECREASE) IN CASH 29,549 ( 20,372)
----------- ------------
Cash and cash equivalents at beginning of period 393,671 434,798
----------- -----------
Cash and cash equivalents at the end of period $ 423,220 $ 414,426
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements
<PAGE> 7
FORM 10-Q
Page 7
JACO ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE A - BASIS OF PRESENTATION
1) The accompanying condensed consolidated financial statements
reflect all adjustments, consisting only of normal recurring accrual
adjustments, 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, 1995 and the notes thereto included in the
Company's annual report on Form 10K. 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 72,600 common
stock equivalents for the period ending September 30, 1995. No common
stock equivalents were included for the period ended September 30,
1994 as they were antidilutive.
4) On February 3, 1995, the Company declared a 10% stock dividend
which was paid on March 10, 1995. Further, on August 30, 1995, the
Company declared a 4-for-3 stock split which was paid on October 3,
1995. All references to the number of common shares and earnings per
common shares have been restated to reflect the 10% stock dividend and
the 4-for-3 stock split.
5) Subsequent Event
On October 20, 1995, the Company completed a public offering of
1,600,000 shares of its common stock at $12.75 per share. The
offering consisted of 1,325,000 shares offered by the Company and
275,000 shares offered by selling shareholders. The Company's net
proceeds of approximately $15,711,000, before deducting expenses
estimated to be $396,000, was used to reduce its bank indebtedness.
<PAGE> 8
Form 10-Q
Page 8
JACO ELECTRONICS, INC. AND SUBSIDIARIES
MANAGEMENT'S' DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
GENERAL
Jaco is a distributor of electronic components and provider of contract
manufacturing and value-added services. Products distributed by Jaco include
semiconductors, capacitors, resistors and electromechanical devices and motors
used in the assembly and manufacturing of electronic equipment.
The Company's customers are primarily small and medium sized manufacturers.
The trend for these customers has been to shift certain manufacturing
functions to third parties (outsourcing). The Company intends to seek to
capitalize on this trend toward outsourcing by increasing sales of products
enhanced by value-added services. Value-added services currently provided by
Jaco consist of configuring complete computer systems to customer
specifications both in tower and desktop configurations, kitting (e.g.
supplying sets of specified quantities of products to a customer that are
prepackaged for ease of feeding the customer's production lines), assembling
fractional-horsepower electric motors and turnkey contract manufacturing
through the Company's wholly owned subsidiary, Nexus Custom Electronics, Inc.
RESULTS OF OPERATIONS
The following table sets forth certain items in the Company's statement of
earnings as a percentage of net sales for the periods shown;
<TABLE>
<CAPTION>
Three months ended
September 30,
1995 1994
---- ----
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of goods sold 78.7 79.4
----- -----
Gross profit 21.3 20.6
Selling, general and administrative expenses 16.5 17.8
----- -----
Operating profit 4.8 2.8
Interest expense 1.4 1.4
Earnings before income taxes 3.4 1.4
Income tax provision 1.4 .6
---- ----
NET EARNINGS 2.0% .8%
===== ====
</TABLE>
<PAGE> 9
FORM 10-Q
Page 9
COMPARISON OF THREE MONTHS ENDED SEPTEMBER 30, 1995 AND SEPTEMBER 30, 1994
Net sales were $40.1 million for the three months ended September 30, 1995, an
increase of $9.0 million or 29% as compared to $31.1 million for the three
months ended September 30, 1994. The increase in sales is the result of
continued strong demand for components in the electronic industry and the
increase of sales personnel in our new and existing offices. In addition,
revenue from contract manufacturing by Nexus increased slightly to $2.8 million
for the three months ended September 30, 1995 as compared to $2.6 million for
the three months ended September 30, 1994.
Gross profit margins, as a percentage of net sales, increased from 20.6% for
the three months ended September 30, 1994 to 21.3% for the three months ended
September 30, 1995. The strong demand for components was primarily
attributable for the increase.
Selling, general and administrative expenses were $6.6 million during the first
quarter of fiscal 1996, an increase of $1.1 million, or 19.6%, from $5.5
million during the first quarter of fiscal 1995. The increases were
attributable, principally, to the Company's sales growth which resulted in
increased selling expenses including commissions and the hiring of additional
sales personnel both for new and existing sales offices. The Company continues
to pay strict attention to cost containment. As a result, selling, general and
administrative expenses, as a percentage of net sales during the first quarter
of fiscal 1996 decreased to 16.5% as compared to 17.8% during the respective
period last year.
Interest expense increased to $558,000 or 30.4%, for the three months ended
September 30, 1995 compared to $428,000 for the same period last year. This
was primarily attributable to the increase in borrowings resulting from
additional inventory required to support the growth in sales. Interest expense
is expected to decrease during the remainder of fiscal 1996, as a result of the
reduction of indebtedness under the Company's Credit Facility by application of
the net proceeds of the stock offering (see Note A-5).
Net earnings for the three months ended September 30, 1995 were $808,000, an
increase of approximately $546,000, or 208%, as compared to $262,000 for the
three months ended September 30, 1994. The increase in the Company's sales and
the improvement in its gross profit margin were primarily responsible for the
growth in earnings.
LIQUIDITY AND CAPITAL RESOURCES
The Company maintains a total Credit Facility of $30,000,000, $8,000,000 of
which is structured as a term loan, $1,500,000 (the outstanding balance of
which at September 30, 1995 was approximately $1,179,000) of which is
structured as a term loan, payable in equal monthly installments of $17,857 and
the balance of which is structured as a revolving line of credit. During
fiscal 1995, the borrowing rate was reduced from prime +1% to a rate equal to
the higher of prime rate or the federal funds rate +1/2% or, at the Company's
option, LIBOR plus 2.5% for fixed periods of time. The Company must comply
with various financial covenants, with all of which
<PAGE> 10
FORM 10-Q
Page 10
the Company believes itself to be in compliance. As of September 30, 1995, the
Company had outstanding borrowings of $27.2 million, with additional borrowing
capacity of $2.8 million available under the revolving line of credit.
Working capital increased to $35.8 million as of September 30, 1995, as
compared to $15.2 million as of September 30, 1994, an increase of $20.6
million or 136%. The increase was primarily attributable to the Company's
restructuring of its Credit Facility which, among other things, extended its
maturity date to September 1998; the Company's profitable results; and higher
inventory necessary to support the Company's increased level of sales and
resulting increased account receivable.
During the three months ended September 30, 1995, the Company's net cash used
in operating activities increased to $4.1 million, from $1.2 million in fiscal
1995 as primarily a result of increases in inventory, which was partially
offset by increases in accounts payable , all of which is a reflection of
higher sales. During the quarter, the Company increased its borrowings under
its Credit Facility by $4.5 million principally to provide cash for operating
activities. The Company's cash expenditures may vary significantly from its
current expectation, based on a number of factors, including but not limited
to, future acquisitions, if any.
During October 1995, the Company completed a public offering of 1,600,000
shares of its common stock. The offering consisted of 1,325,000 shares offered
by the Company and 275,000 shares offered by selling shareholders. The net
proceeds to the Company from this offering, after deducting all costs, was
approximately $15.3 million. The net proceeds initially have been used to
reduce the outstanding balance of the bank indebtedness under its Credit
Facility. As a result of this reduction, the amount available under the Credit
Facility will be increased and available in the future for working capital or
potential acquisitions.
INFLATION
Inflation has not had a significant impact on the Company's operations during
the last three fiscal years.
<PAGE> 11
FORM 10-Q
Page 11
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
Nothing to Report
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits: None
b) Reports on Form 8-K: None
<PAGE> 12
S I G N A T U R E
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: November 13, 1995
<PAGE> 13
EXHIBIT INDEX
-------------
Exhibit 27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30, 1995 AND THE
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF EARNINGS FOR THE QUARTER ENDED
SEPTEMBER 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> SEP-30-1995
<CASH> 423,220
<SECURITIES> 0
<RECEIVABLES> 22,319,727
<ALLOWANCES> 582,411
<INVENTORY> 33,958,022
<CURRENT-ASSETS> 58,167,049
<PP&E> 7,087,800
<DEPRECIATION> 2,968,241
<TOTAL-ASSETS> 64,965,379
<CURRENT-LIABILITIES> 22,359,234
<BONDS> 0
<COMMON> 246,430
0
0
<OTHER-SE> 13,787,225
<TOTAL-LIABILITY-AND-EQUITY> 64,965,379
<SALES> 40,083,485
<TOTAL-REVENUES> 40,083,485
<CGS> 31,542,271
<TOTAL-COSTS> 38,155,412
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 160,240
<INTEREST-EXPENSE> 558,122
<INCOME-PRETAX> 1,369,951
<INCOME-TAX> 562,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 807,951
<EPS-PRIMARY> 0.32
<EPS-DILUTED> 0.32
</TABLE>
