<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 December 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 January 26, 1996 - 3,952,722
<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>
December 31, 1995 June 30, 1995
----------------- -------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 368,724 $ 393,671
Accounts receivable - net 22,323,990 20,437,664
Inventories 30,103,154 26,653,881
Prepaid expenses and other 1,207,317 1,256,319
Due from officers 309,808
Deferred income taxes 653,000 571,000
----------- -----------
Total current assets 54,656,185 49,622,343
Property, plant and equipment - net 3,997,240 4,106,221
Deferred income taxes 174,000 174,000
Excess of cost over net assets acquired 1,317,282 1,353,031
Other assets 1,062,475 1,067,643
----------- -----------
$61,207,182 $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: December 31, 1995 June 30, 1995
----------------- -------------
<S> <C> <C>
Current Liabilities:
Accounts payable and accrued expenses $15,267,166 $17,952,385
Current maturities of long term debt and
capitalized lease obligations 460,226 452,995
Income taxes payable 119,043 475,702
----------- -----------
Total current liabilities 15,846,435 18,881,082
Long term debt and capitalized lease obligations 12,485,604 23,665,624
Deferred compensation 575,000 550,000
SHAREHOLDERS' EQUITY:
Preferred stock - authorized, 100,000 shares,
$10 par value; none
issued Common stock - authorized 10,000,000 shares,
$.10 par value;
issued and outstanding,
3,951,806 and 2,464,384 shares, respectively 395,181 246,438
Additional paid-in capital 22,051,940 5,013,663
Retained earnings 9,853,022 7,966,431
----------- -----------
Total shareholders' equity 32,300,143 13,226,532
----------- -----------
$61,207,182 $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 DECEMBER 31,
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
NET SALES $43,589,877 $33,747,154
----------- -----------
COST AND EXPENSES:
Cost of goods sold 34,768,681 26,828,111
----------- -----------
Gross profit 8,821,196 6,919,043
Selling, general and administrative expenses 6,613,261 5,624,130
----------- -----------
Operating profit 2,207,935 1,294,913
Interest expense 377,028 532,148
----------- -----------
Earnings before income taxes 1,830,907 762,765
Income tax provision 751,000 315,000
----------- -----------
NET EARNINGS $ 1,079,907 $ 447,765
=========== ===========
Net earnings per common share $ .30 $ .18
=========== ===========
Weighted average common and common
equivalent shares outstanding 3,641,647 2,426,980
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 5
Form 10-Q
Page 5
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE SIX MONTHS ENDED DECEMBER 31,
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
NET SALES $83,673,362 $64,834,748
----------- -----------
COST AND EXPENSES:
Cost of goods sold 66,310,952 51,521,583
----------- -----------
Gross profit 17,362,410 13,313,165
Selling, general and administrative expenses 13,226,402 11,152,525
----------- -----------
Operating profit 4,136,008 2,160,640
Interest expense 935,150 960,381
----------- -----------
Earnings before income taxes 3,200,858 1,200,259
Income tax provision 1,313,000 490,000
----------- -----------
NET EARNINGS $ 1,887,858 $ 710,259
=========== ===========
Net earnings per common share $ .61 $ .29
=========== ===========
Weighted average common and common
equivalent shares outstanding 3,089,743 2,423,387
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE> 6
FORM 10-Q
Page 6
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY
FOR THE YEAR ENDED JUNE 30, 1995
THE SIX MONTHS ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
Additional Total
Common Paid-In Retained Shareholders'
Shares Stock 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
--------- -------- ----------- ----------- -----------
Issuance of common
stock for cash 1,485,000 148,500 17,026,595 17,175,095
Exercise of stock options 2,500 250 11,675 11,925
Payment for fractional shares
resulting from 4-for-3 split (78) (7) 7 (1,267) (1,267)
Net earnings 1,887,858 1,887,858
--------- -------- ----------- ----------- -----------
Balance at December 31, 1995 3,951,806 $395,181 $22,051,940 $ 9,853,022 $32,300,143
========= ======== =========== =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements
<PAGE> 7
FORM 10-Q
Page 7
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31,
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities
Net earnings $ 1,887,858 $ 710,259
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities
Depreciation and amortization 349,800 344,031
Deferred compensation 25,000 25,000
Deferred income tax provision (82,000) (78,000)
Amortization of goodwill 35,749 40,435
Loss on sale of equipment 8,918 9,403
Provision for doubtful accounts 326,190 110,620
Changes in operating assets and liabilities,
Increase in operating assets - net (5,612,787) (6,201,321)
(Decrease) increase in operating liabilities - net (3,041,878) 1,864,387
------------ ------------
Net cash used in operating activities (6,103,150) (3,175,186)
------------ ------------
Cash flows from investing activities
Capital expenditures (266,774) (722,247)
Proceeds from sales of equipment 17,037
Decrease (increase) in due from officers - net 309,808 (71,027)
Decrease (increase) in other assets 5,168 (76,464)
------------ ------------
Net cash provided by (used in) investing activities 65,239 (869,738)
------------ ------------
Cash flows from financing activities
Proceeds from public offering - net 17,175,095
Borrowings under line of credit 89,522,388 69,118,970
Payments under line of credit (92,567,064) (65,317,472)
Principal payments under equipment financing
and term loan (8,128,113) (219,649)
Borrowings under term loan 457,523
Proceeds from exercise of stock options 11,925
Payments for fractional shares (1,267)
------------ ------------
Net cash provided by financing activities 6,012,964 4,039,372
------------ ------------
NET DECREASE IN CASH (24,947) (5,552)
------------ ------------
Cash and cash equivalents at beginning of period 393,671 434,798
------------ ------------
Cash and cash equivalents at end of period $ 368,724 $ 429,246
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements
<PAGE> 8
FORM 10-Q
Page 8
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 10-K. The results of operations for
the interim periods are not necessarily indicative of the results for the
entire year.
2) 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. On December 8, 1995, the underwriters of
the public offering exercised a portion of their over-allotment option for
an additional 160,000 shares at a price of $12.75 per share. The Company's
net proceeds from the public offering of $17,175,095, after deducting the
underwriters commission and costs of the public offering, was used to
reduce its bank indebtedness. In connection with the public offering the
Company also issued stock warrants, to the representative underwriters, to
purchase up to 70,000 shares of common stock at an exercise price per share
equal to 180% of the public offering price expiring on October 20, 1999.
3) For interim statement purposes, the Company uses the gross profit method
in computing inventories which consists of goods held for resale.
4) Earnings per share has been computed based on weighted average number of
shares outstanding including approximately 82,000 and 78,000 common stock
equivalents for the three and six months ending December 31, 1995,
respectively. The effect of common stock equivalents were antidilutive for
the six months ended December 31, 1994, and approximately 3,200 common
stock equivalents were included in weighted average number of shares
outstanding for the three months ended December 31, 1994.
5) 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 share have been
restated to reflect the 10% stock dividend and the 4-for-3 stock split.
<PAGE> 9
Form 10-Q
Page 9
JACO ELECTRONICS, INC. AND SUBSIDIARIES
MANAGEMENTS' 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 Six months ended
December 31, December 31,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 79.8 79.5 79.3 79.5
----- ----- ----- -----
Gross profit 20.2 20.5 20.7 20.5
Selling, general and
administrative expenses 15.2 16.7 15.8 17.2
----- ----- ----- -----
Operating profit 5.0 3.8 4.9 3.3
Interest expense .8 1.6 1.1 1.4
----- ----- ----- -----
Earnings before income taxes 4.2 2.2 3.8 1.9
Income tax provision 1.7 .9 1.5 .8
----- ----- ----- -----
NET EARNINGS 2.5% 1.3% 2.3% 1.1%
===== ===== ===== =====
</TABLE>
<PAGE> 10
FORM 10-Q
Page 10
COMPARISON OF THREE AND SIX MONTHS ENDED DECEMBER 31, 1995 AND DECEMBER 31, 1994
Net sales for the second quarter of fiscal 1996 increased 29% to $43.6 million,
as compared to $33.8 million for the second quarter of fiscal 1995. The increase
in sales is the result of the Company's continued focus on internal expansion at
existing locations and growth in recently established sales offices. Net sales
for the six months ended December 31, 1995 increased 29% to $83.7 million,
compared to $64.8 million for the six months ended December 31, 1994.
Gross profit margins decreased for the three months ended December 31, 1995. The
decrease during the current quarter was primarily attributable to current market
conditions.
Selling, general and administrative (SG&A) expenses were $6.6 million and $13.2
million during the second quarter and first six months of fiscal 1996. As a
result of the increase in sales and the Company's attention to cost containment,
SG&A as a percentage of net sales decreased to 15.2% as compared to 16.7% for
the current quarter and to 15.8% from 17.2% for the six months ended December
31, 1995 as compared to the previous fiscal year.
Interest expense decreased to $377,000 or 29% for the three months ended
December 31, 1995. The decrease was the result of a reduction in borrowings
under the Company's credit facility by application of the net proceeds from a
stock offering completed during the second quarter (see Note A-2).
Net earnings for the second quarter of fiscal 1996 increased 141% compared to
the same period in fiscal 1995. Net earnings for the six months ended December
31, 1995 were $1.9 million, an increase of 166% as compared to $ .7 million for
the same period in fiscal 1995. The increase in net earnings for the current
quarter is principally the result of the increase in sales, control of SG&A and
reduction in interest expense.
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 December 31, 1995 was approximately $1,125,000) 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, all of which
<PAGE> 11
FORM 10-Q
Page 11
the Company is in compliance. As of December 31, 1995, the Company had
outstanding borrowings of $11.7 million, with additional borrowing capacity of
$18.3 million available under the revolving line of credit.
Working capital increased to $38.8 million as of December 31, 1995, as compared
to $15.7 million as of December 31, 1994, an increase of $23.1 million or 147%.
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
accounts receivable.
During the six months ended December 31, 1995, the Company's net cash used in
operating activities increased to $6.1 million, from $3.2 million in fiscal 1995
primarily as a result of increases in inventory, accounts receivables and
decreases in accounts payable. During the quarter, the Company decreased its
borrowings under its Credit Facility by $15.5 million principally due to the
completed stock offering. 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. On December 8, 1995
the underwriters partially exercised their over allotment option for an
additional 160,000 shares. The net proceeds to the Company from this offering,
after deducting all costs, was approximately $17.2 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 has increased and is 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> 12
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
Jaco's Annual Meeting of Shareholders was held on December 11,
1995. The Shareholders approved the following:
(i) The election of each of the following nominees to the
Board of Directors:
Stephen A. Cohen For: 3,278,250 Withheld: 19,453
Edward M. Frankel For: 3,278,250 Withheld: 19,453
Charles B. Girsky For: 3,278,250 Withheld: 19,453
Joel H. Girsky For: 3,278,250 Withheld: 19,453
(ii) An amendment to the Company's Certificate of Incorporation
to increase the aggregate number of shares of common
stock, $0.10 par value per share, which the Company shall
have the authority to issue from 5,000,000 shares to
10,000,000 shares.
For: 3,165,566 Against: 117,459 Abstention: 14,678
Item 5. Other Information
Properties
Jaco leases from Bemar Realty Company, a partnership consisting
of Messrs. Joel H. Girsky, President and Chairman of the Board,
and Charles B. Girsky, Executive Vice President, approximately
72,000 square feet of office and warehouse space at 145 Oser
Avenue, Hauppauge, New York. During January 1996, the Company
entered into a new lease agreement effective as of January 1,
1996 and ending December 31, 2004. The initial base rent is five
hundred four thousand dollars ($504,000) per annum and the lease
provides for increases on an
<PAGE> 13
FORM 10-Q
Page 13
annual basis, net of all expenses, including taxes, utilities,
insurance and maintenance and repairs. Approximately 26,000
square feet of space is sublet by Jaco to an unafilliated third
party. In addition to its headquarters, Jaco maintains purchasing
/sales offices and warehouse facilities at its Hauppauge
location.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits: None
b) Reports on Form 8-K:
The Company filed a Report on Form 8-K, dated
October 3, 1995, to report the Board of Directors
declarations of a 4-for-3 stock split, which was
paid on October 3, 1995 to shareholders of record
at the close of business on September 22, 1995, and
to report the Company's obligation to issue
additional shares of Common Stock as a result of
(i) previously exercised options and (ii) the
antidilutiion provisions contained in the Company's
option plans.
<PAGE> 14
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)
<PAGE> 15
EXHIBIT INDEX
-------------
Exhibit No. Description Page No.
- ---------- -------------- -------
EX-27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1995
<PERIOD-START> JUN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 368,724
<SECURITIES> 0
<RECEIVABLES> 23,109,071
<ALLOWANCES> 785,081
<INVENTORY> 30,103,154
<CURRENT-ASSETS> 54,656,185
<PP&E> 7,123,668
<DEPRECIATION> 3,126,428
<TOTAL-ASSETS> 61,207,182
<CURRENT-LIABILITIES> 15,846,435
<BONDS> 0
0
0
<COMMON> 395,181
<OTHER-SE> 31,904,962
<TOTAL-LIABILITY-AND-EQUITY> 61,207,182
<SALES> 83,673,362
<TOTAL-REVENUES> 83,673,362
<CGS> 66,310,952
<TOTAL-COSTS> 79,537,354
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 326,190
<INTEREST-EXPENSE> 935,150
<INCOME-PRETAX> 3,200,858
<INCOME-TAX> 1,313,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,887,858
<EPS-PRIMARY> 0.61
<EPS-DILUTED> 0.61
</TABLE>
