<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 March 31, 1996
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 6, 1996 -
3,995,721
- ---------
<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>
March 31, 1996 June 30, 1995
-------------- -------------
<S> <C> <C>
ASSETS:
Current Assets:
Cash and cash equivalents $ 432,784 $ 393,671
Accounts receivable - net 23,686,486 20,437,664
Inventories 29,107,498 26,653,881
Prepaid expenses and other 900,914 1,256,319
Due from officers 309,808
Deferred income taxes 752,000 571,000
----------- -----------
Total current assets 54,879,682 49,622,343
Property, plant and equipment - net 4,062,100 4,106,221
Deferred income taxes 174,000 174,000
Excess of cost over net assets acquired 1,299,408 1,353,031
Other assets 1,079,658 1,067,643
----------- -----------
$61,494,848 $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: March 31, 1996 June 30, 1995
-------------- -------------
Current Liabilities:
<S> <C> <C>
Accounts payable and accrued expenses $15,525,504 $17,952,385
Current maturities of long term debt and
capitalized lease obligations 467,159 452,995
Income taxes payable 340,588 475,702
----------- -----------
Total current liabilities 16,333,251 18,881,082
Long term debt and capitalized lease obligations 11,187,969 23,665,624
Deferred compensation 587,500 550,000
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,
3,955,721 and 2,464,384 shares, respectively 395,572 246,438
Additional paid-in capital 22,024,795 5,013,663
Retained earnings 10,965,761 7,966,431
----------- -----------
Total shareholders' equity 33,386,128 13,226,532
----------- -----------
$61,494,848 $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 MARCH 31,
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
NET SALES $43,176,834 $35,825,167
----------- -----------
COST AND EXPENSES:
Cost of goods sold 34,543,777 28,328,468
----------- -----------
Gross profit 8,633,057 7,496,699
Selling, general and administrative expenses 6,523,812 6,050,211
----------- -----------
Operating profit 2,109,245 1,446,488
Interest expense 222,505 522,204
----------- -----------
Earnings before income taxes 1,886,740 924,284
Income tax provision 774,000 370,000
----------- -----------
NET EARNINGS $ 1,112,740 $ 554,284
=========== ===========
Net earnings per common share $ .28 $ .23
=========== ===========
Weighted average common and common
equivalent shares outstanding 4,025,060 2,450,019
=========== ===========
</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 NINE MONTHS ENDED MARCH 31,
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
NET SALES $126,850,196 $100,659,915
------------ ------------
COST AND EXPENSES:
Cost of goods sold 100,854,729 79,850,049
------------ ------------
Gross profit 25,995,467 20,809,866
Selling, general and administrative expenses 19,750,214 17,202,738
------------ ------------
Operating profit 6,245,253 3,607,128
Interest expense 1,157,655 1,482,584
------------ ------------
Earnings before income taxes 5,087,598 2,124,544
Income tax provision 2,087,000 860,000
------------ ------------
NET EARNINGS $ 3,000,598 $ 1,264,544
============ ============
Net earnings per common share $ .88 $ .52
============ ============
Weighted average common and common
equivalent shares outstanding 3,399,293 2,432,685
============ ============
</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 NINE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Additional Total
Common Paid-In Retained Shareholders'
Shares Stock Capital Earnings Equity
---------- ----------- ----------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Balance at July 1, 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 16,991,466 17,139,966
Exercise of stock options 6,415 642 19,658 20,300
Payment for fractional shares
resulting from 4-for-3 split (78) ( 8) 8 (1,268) ( 1,268)
Net earnings 3,000,598 3,000,598
----------- ---------- ----------- ----------- ------------
Balance at March 31, 1996 3,955,721 $ 395,572 $22,024,795 $10,965,761 $ 33,386,128
=========== ========== =========== =========== ============
</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 NINE MONTHS ENDED MARCH 31,
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities
Net earnings $ 3,000,598 $ 1,264,544
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities
Depreciation and amortization 505,740 500,609
Deferred compensation 37,500 37,500
Deferred income tax provision (181,000) (111,000)
Amortization of goodwill 53,623 60,652
Loss on sale of equipment 8,918 18,403
Provision for doubtful accounts 514,640 313,126
Changes in operating assets and liabilities,
Increase in operating assets - net (5,861,674) (8,097,618)
(Decrease) increase in operating liabilities - net (2,561,994) 3,508,602
------------- -------------
Net cash used in operating activities (4,483,649) (2,505,182)
------------- -------------
Cash flows from investing activities
Capital expenditures (487,575) (1,034,835)
Proceeds from sales of equipment 17,037
Decrease (increase) in due from officers - net 309,808 (73,827)
Increase in other assets (12,015) (46,144)
------------- -------------
Net cash used in investing activities (172,745) (1,154,806)
------------- -------------
Cash flows from financing activities
Proceeds from public offering - net 17,139,966
Borrowings under line of credit 128,785,498 102,831,553
Payments under line of credit (132,901,107) (99,846,646)
Principal payments under equipment financing
and term loan (8,347,882) (313,177)
Borrowings under term loan -- 893,046
Proceeds from exercise of stock options 20,300 108,500
Payments for fractional shares (1,268) (362)
------------- -------------
Net cash provided by financing activities 4,695,507 3,672,914
------------- -------------
NET INCREASE IN CASH 39,113 12,926
------------- -------------
Cash and cash equivalents at beginning of period 393,671 434,798
------------- -------------
Cash and cash equivalents at end of period $ 432,784 $ 447,724
============= =============
</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 $17,139,966,
after deducting the underwriters commission and costs of the public
offering, were 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 which expire on October 20, 1999.
3) On April 15, 1996, the Company announced that its Board of Directors
has authorized the purchase of up to 250,000 shares of its outstanding
common stock or approximately 6.3% of the currently outstanding shares,
under a stock repurchase program. The purchases may be made by the
Company from time to time in the open market at the Company's
discretion.
4) For interim statement purposes, the Company uses the gross profit
method in computing inventories which consists of goods held for
resale.
5) Earnings per share has been computed based on weighted average
number of shares outstanding including approximately 70,000 and 75,000
common stock equivalents for the three and nine months ending March 31,
1996, respectively. The effect of common stock equivalents were
antidilutive and were not included in weighted average number of shares
outstanding for the three and nine months ended March 31, 1995.
6) 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
4-for-3 stock split.
<PAGE> 9
Form 10-Q
Page 9
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 Nine months ended
March 31, March 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 80.0 79.1 79.5 79.3
----- ----- ----- -----
Gross profit 20.0 20.9 20.5 20.7
Selling, general and
administrative expenses 15.1 16.9 15.6 17.1
----- ----- ----- -----
Operating profit 4.9 4.0 4.9 3.6
Interest expense .5 1.5 .9 1.5
----- ----- ----- -----
Earnings before income taxes 4.4 2.5 4.0 2.1
Income tax provision 1.8 1.0 1.6 .8
----- ----- ----- -----
NET EARNINGS 2.6% 1.5% 2.4% 1.3%
===== ===== ===== =====
</TABLE>
<PAGE> 10
FORM 10-Q
Page 10
COMPARISON OF THREE AND NINE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995
Net sales for the third quarter of fiscal 1996 increased 21 % to $43.2 million,
as compared to $35.8 million for the third quarter of fiscal 1995. The increase
in sales, compared to the comparable period last year, was the result of the
growth in our existing locations and demand for electronic components. Net sales
for the nine months ended March 31, 1996 increased 26% to $126.9 million,
compared to $100.7 million for the nine months ended March 31, 1995.
Gross profit margins decreased for the three and nine months ended March 31,
1996, compared to the comparable periods last year. The decrease was primarily
the result of increased availability of certain components, during the current
quarter; resulting in more competitive pricing.
Selling, general and administrative expenses (SG&A) were $6.5 million and $19.8
million during the three and nine months ended March 31, 1996, compared to $6.1
million and $17.2 million last year. Due to the Company's controlling of costs
while sales increased, SG&A as a percentage of net sales decreased to 15.1% as
compared to 16.9% for the current quarter and to 15.6% from 17.1% for the nine
months ended March 31, 1996, as compared to the previous fiscal year.
Interest expense decreased to $223,000 for the three months ended March 31,
1996, compared to $522,000 for the three months ended March 31, 1995. The 57%
decrease was primarily the result of a reduction in borrowing 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 third quarter of fiscal 1996 increased 101% compared to the
same period in fiscal 1995. Net earnings for the nine months ended March 31,
1996 were $3.0 million, an increase of 137% as compared to $1.3 million for the
same period in fiscal 1995. The increase in net earnings 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, $1,500,000 (the
outstanding balance of which at March 31, 1996 was approximately $1,071,000) 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 the prime rate or the federal funds rate +1/2% or, at the
Company's option, LIBOR plus 2.0% for fixed periods of time. The Company must
comply with various
<PAGE> 11
FORM 10-Q
Page 11
financial covenants, all of which the Company is in compliance. As of March 31,
1996, the Company had outstanding borrowings of $10.5 million, with additional
borrowing capacity of $19.5 million available under the revolving line of
credit.
Working capital increased to $38.5 million as of March 31, 1996, as compared to
$16.5 million as of March 31, 1995, an increase of $22.0 million or 133%. The
increase was 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 nine months ended March 31, 1996, the Company's net cash used in
operating activities increased to $4.5 million, from $2.5 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 $1.2 million principally due to the
Company's net earnings. 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 $17.1 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
Nothing to Report
Item 5. Other Information
Stock Repurchase
The Company's Board of Directors has authorized the Company to
purchase up to 250,000 shares of its outstanding common stock
or approximately 6.3% of the currently outstanding shares,
under a stock repurchase program. Purchases may be made by the
Company from time to time in the open market at the Company's
discretion.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits:
27: Financial Data Schedule
b) Reports on Form 8-K: None
<PAGE> 13
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: May 14, 1996
<PAGE> 14
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 MARCH 31, 1996 AND THE
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF EARNINGS FOR THE NINE MONTHS ENDED
MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> MAR-31-1996
<CASH> 432,784
<SECURITIES> 0
<RECEIVABLES> 24,477,855
<ALLOWANCES> 791,399
<INVENTORY> 29,107,498
<CURRENT-ASSETS> 54,879,682
<PP&E> 7,074,998
<DEPRECIATION> 3,012,898
<TOTAL-ASSETS> 61,494,848
<CURRENT-LIABILITIES> 16,333,251
<BONDS> 11,775,469
0
0
<COMMON> 395,572
<OTHER-SE> 32,990,556
<TOTAL-LIABILITY-AND-EQUITY> 61,494,848
<SALES> 126,850,196
<TOTAL-REVENUES> 126,850,196
<CGS> 100,854,729
<TOTAL-COSTS> 100,854,729
<OTHER-EXPENSES> 19,750,214
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,157,655
<INCOME-PRETAX> 5,087,598
<INCOME-TAX> 2,087,000
<INCOME-CONTINUING> 3,000,598
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,000,598
<EPS-PRIMARY> 0.88
<EPS-DILUTED> 0.88
</TABLE>
