<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, 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 or 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, 1996
- - 3,888,221 (Excluding 87,500 Shares of Treasury Stock).
<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, June 30,
1996 1996
----------- -----------
ASSETS:
Current Assets:
<S> <C> <C>
Cash $ 452,658 $ 164,161
Marketable securities 512,592 493,281
Accounts receivable - net 22,090,529 22,217,130
Inventories 30,790,480 30,089,508
Prepaid expenses and other 675,302 739,530
Deferred income taxes 751,000 708,000
----------- -----------
Total current assets 55,272,561 54,411,610
Property, plant and equipment - net 4,264,757 4,226,617
Deferred income taxes 204,000 189,000
Excess of cost over net assets acquired 1,234,499 1,241,533
Other assets 1,593,456 1,073,969
----------- -----------
$62,569,273 $61,142,729
=========== ===========
</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>
September 30, June 30,
1996 1996
------------ -----------
LIABILITIES & SHAREHOLDERS' EQUITY:
Current Liabilities:
<S> <C> <C>
Accounts payable and accrued expenses $ 16,822,058 $16,589,852
Current maturities of long term debt and
capitalized lease obligations 478,927 474,082
Income taxes payable 457,075 383,970
------------ -----------
Total current liabilities 17,758,060 17,447,904
Long term debt and capitalized lease obligations 9,638,706 8,791,270
Deferred compensation 612,500 600,000
SHAREHOLDERS' EQUITY:
Preferred stock - authorized, 100,000 shares,
$10 par value; none issued
Common stock - authorized 10,000,000 shares,
$.10 par value; issued 3,975,721 and 3,955,721
shares, respectively, and 3,888,221 and
3,955,721 outstanding, respectively 397,572 395,572
Additional paid-in capital 22,180,295 22,024,795
Unrealized gain on marketable securities 79,556 68,245
Retained earnings 12,602,584 11,814,943
Treasury stock (700,000)
------------ -----------
Total shareholders' equity 34,560,007 34,303,555
------------ -----------
$ 62,569,273 $61,142,729
============ ===========
</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>
1996 1995
----------- -----------
<S> <C> <C>
NET SALES $38,321,790 $40,083,485
----------- -----------
COST AND EXPENSES:
Cost of goods sold 30,206,288 31,542,271
----------- -----------
Gross profit 8,115,502 8,541,214
Selling, general and administrative expenses 6,592,245 6,613,141
----------- -----------
Operating profit 1,523,257 1,928,073
Interest expense 199,616 558,122
----------- -----------
Earnings before income taxes 1,323,641 1,369,951
Income tax provision 536,000 562,000
----------- -----------
NET EARNINGS $ 787,641 $ 807,951
=========== ===========
Net earnings per common share $ .20 $ .32
=========== ===========
Weighted average common and common
equivalent shares outstanding 3,982,259 2,536,909
=========== ===========
</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 THREE MONTHS ENDED SEPTEMBER 30, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
Unrealized
Additional Gain on Total
Common Stock Paid-In Marketable Retained Treasury Shareholders'
Shares Amount Capital Securities Earnings Stock Equity
------ ------- ------- ----------- -------- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at July 1, 1996 3,955,721 $395,572 $22,024,795 $68,245 $11,814,943 $34,303,555
Issuance of common stock in
connection with acquisition 20,000 2,000 155,500 157,500
Unrealized gain on marketable
securities 11,311 11,311
Purchase of treasury stock $(700,000) (700,000)
Net earnings 787,641 787,641
--------- -------- ----------- ------- ----------- --------- -----------
Balance at September 30, 1996 3,975,721 $397,572 $22,180,295 $79,556 $12,602,584 $(700,000) $34,560,007
========= ======== =========== ======= =========== ========= ===========
</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, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
------------ ------------
Cash flows from operating activities
<S> <C> <C>
Net earnings $ 787,641 $ 807,951
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities
Depreciation and amortization 207,082 174,900
Deferred compensation 12,500 12,500
Deferred income tax provision (66,000) (120,000)
Amortization of goodwill 16,584 17,875
(Gain) loss on sale of equipment (11,094) 8,762
Provision for doubtful accounts 117,125 160,240
Changes in operating assets and liabilities, net
of effect of acquisition
Decrease (increase) in operating assets - net 630,430 (8,643,843)
Increase in operating liabilities - net 30,311 3,470,650
------------ ------------
Net cash provided by (used in) operating activities 1,724,579 (4,110,965)
------------ ------------
Cash flows from investing activities
Capital expenditures (243,083) (201,600)
Proceeds from sales of equipment 34,000 4,600
Acquisition of operating assets - net (1,240,327)
Decrease in due from officers - net 88,446
Increase in other assets (138,953) (101,972)
------------ ------------
Net cash used in investing activities (1,588,363) (210,526)
------------ ------------
Cash flows from financing activities
Borrowings under line of credit 41,420,780 44,114,000
Payments under line of credit (40,449,000) (39,649,993)
Principal payments under equipment financing
and term loan (119,499) (112,139)
Purchase of treasury stock (700,000)
Payments of fractional shares (828)
------------ ------------
Net cash provided by financing activities 152,281 4,351,040
------------ ------------
NET INCREASE IN CASH 288,497 29,549
------------ ------------
Cash at beginning of period 164,161 393,671
------------ ------------
Cash at end of period $ 452,658 $ 423,220
============ ============
</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, 1996 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 certain officers and directors of the Company. 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 per share equal to that of the public offering. 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) In April 1996, the Company announced that its Board of Directors
has authorized the purchase of up to 250,000 shares of its outstanding
common stock 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. Through September 30, 1996, the Company purchased
87,500 shares of its common stock for aggregate consideration of
$700,000.
4) For interim financial reporting 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 51,000 and 73,000
common stock equivalents for the three months ending September 30, 1996
and 1995, respectively.
6) On August 2, 1996, the Company purchased the operating assets of QPS
Electronics, Inc., ("QPS") an electronic components distributor,
located in Schaumburg, Illinois. The purchase price of $1,672,827 was
paid by the issuance of 20,000 shares of the Company's common stock,
cash of $1,240,327 and $275,000 to be paid six months from the date of
acquisition, subject to certain adjustments as defined in the
agreement. In addition, the Company received a three year covenant not
to compete from the sellers of the assets at a cost to the Company of
$400,000. A summary of the fair value of the assets acquired at the
date of acquisition are as follows:
<TABLE>
<CAPTION>
<S> <C>
Accounts Receivable $613,587
Inventory 644,111
Covenant Not to Compete 400,000
Office Equipment and Other 15,129
----------
$1,672,827
==========
</TABLE>
<PAGE> 8
FORM 10-Q
Page 8
JACO ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The acquistion of the assests was accounted for as a purchase and,
accordingly, the results of QPS's operations are included with those of
the Company from the date of acquisition. Pro forma historical results
are not presented as such results, would not be materially different
from the historical results of the Company.
<PAGE> 9
FORM 10-Q
Page 9
JACO ELECTRONICS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Statements in this filing, and elsewhere, which look forward in time involve
risks and uncertainties which may effect the actual results of operations. The
following important factors, among others, have affected and, in the future,
could affect the Company's actual results: dependence on a limited number of
suppliers for products which generate a significant portion of the Company
sales, the effect upon the Company of increases in tariffs or duties, changes in
trade treaties, strikes or delays in air or sea transportation and possible
future United States legislation with respect to pricing and/or import quotas on
products imported from foreign countries, and general economic effect upon
manufacturers, end-users of electronic components and electronic component
distributors.
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 contract
manufacturing services through the Company's wholly-owned subsidiary, Nexus
Custom Electronics, Inc.
<PAGE> 10
FORM 10-Q
Page 10
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,
1996 1995
------ ------
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of goods sold 78.8 78.7
------ ------
Gross profit 21.2 21.3
Selling, general and
administrative expenses 17.2 16.5
------ ------
Operating profit 4.0 4.8
terest expense .5 1.4
------ ------
Earnings before income taxes 3.5 3.4
Income tax provision 1.4 1.4
------ ------
NET EARNINGS 2.1 2.0
====== ======
</TABLE>
Comparison of the three months ended September 30, 1996 and September 30, 1995
______________________________________________________________________________
Net sales for the first quarter of fiscal 1997 decreased 4% to $38.3 million as
compared to $40.1 million for the first quarter of fiscal 1996. Net sales during
the quarter decreased as the electronic components market continues to be
affected by customers reducing excess inventory and the reduction in pricing of
certain components such as dynamic rams (DRAMS) and static rams (SRAMS). The
Company anticipates that sales from contract manufacturing should have a
positive impact on sales in future periods. With the acquisition of the
operating assets of QPS Electronics, Inc. and the opening of a new sales office
in Phoenix, Arizona, the Company now services approximately 95% of the United
States market .
<PAGE> 11
FORM 10-Q
Page 11
Gross profit margins, as a percentage of net sales, were 21.2% for the quarter
ended September 30, 1996 as compared to 21.3% for the quarter ended September
30, 1995. The Company was able to maintain its margins despite the weak demand
for electronic components during the current quarter, and does not anticipate
any material change in margins based on its current product offerings.
Selling, general and administrative expenses decreased to $6,592,000 for the
first quarter of fiscal 1997 as compared to $6,613,000 for the first quarter of
fiscal 1996. This decrease was achieved even though the Company opened new sales
facilities in Colorado and Arizona, completed the acquisition of the assets of
QPS and added a marketing group for flat panel displays.
Interest expense decreased to $200,000 for the three months ended September 30,
1996 as compared to $558,000 for the three months ended September 30, 1995 or
64%. The decrease is primarily attributable to the reduction of indebtedness
under the Company's credit facility by application of the net proceeds of
$17,140,000, from the Company's public offering which was completed in October
1995.
Net earnings for the three months ended September 30, 1996 was $788,000, (with
earnings per share of $.20 on weighted average shares outstanding of 3,982,259)
a decrease of $20,000 as compared to $808,000, (with earnings per share of $.32
on weighted average shares outstanding of 2,536,909), for the three months ended
September 30, 1995. The decline in net sales was primarily offset by the
interest expense reduction during the quarter.
LIQUIDITY AND CAPITAL RESOURCES
_______________________________
The Company maintains a total credit facility of $30,000,000, $1,500,000 (the
outstanding balance as of September 30, 1996 was approximately $964,000) 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. The credit
facility carries a borrowing rate equal to the higher of 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 financial covenants, all
of which the Company believes itself to be in compliance. As of September 30,
1996, the Company had outstanding borrowings of $9.1 million, with additional
borrowing capacity of $20.9 million available under the revolving line of
credit.
Working capital was $37.5 million as of September 30, 1996, as compared to $37.0
million as of June 30, 1996 an increase of $.5 million or approximately 1%. The
increase was primarily attributable to a net increase in current assets.
For the first quarter of fiscal 1997, the Company's net cash provided by
operating activities was approximately $1,725,000 as compared to net cash used
in operating activities of approximately $4,111,000 for the first quarter of
fiscal 1996 an increase of $5,386,000 or 142%. The increase is primarily
attributable to the reduction of accounts receivable in the first quarter of
fiscal 1997 as compared to increases in accounts receivable and inventory levels
in the first quarter of fiscal 1996. Net cash used in investing activities
increased to $1,588,000 for the first quarter of fiscal
<PAGE> 12
FORM 10-Q
Page 12
1997 as compared to $211,000 for the first quarter of fiscal 1996, an increase
of $1,377,000. The acquisition of the assets of QPS accounted for approximately
$1,240,000 of the increase. Net cash provided by financing activities decreased
$4,199,000 or 97% to $152,000 for the three months ended September 30, 1996
when compared to $4,351,000 for the three months ended September 30, 1995. The
decrease is attributable to a net reduction in borrowings under the Company's
line of credit of $3,492,000 and the purchase of treasury stock at a cost of
$700,000. The Company's cash expenditures may vary significantly from current
levels, based on a number of factors, including but not limited to, future
acquisitions, if any.
In April 1996, the Company's Board of Directors authorized the purchase of up
to 250,000 shares of its common stock under a stock repurchase program. As of
November 7, 1996, the Company has repurchased 87,500 shares at an average
market price of $8.00 per share.
INFLATION
_________
Inflation has not had a significant impact on the Company's operations during
the last three fiscal years.
<PAGE> 13
FORM 10-Q
Page 13
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:
27: Financial Data Schedule
b) Reports on Form 8-K: None
<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)
DATED: November 14, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 30,1996 AND THE
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF EARNINGS FOR THE THREE MONTHS
ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> SEP-30-1996
<CASH> 452,658
<SECURITIES> 512,592
<RECEIVABLES> 22,965,508
<ALLOWANCES> 874,979
<INVENTORY> 30,790,480
<CURRENT-ASSETS> 55,272,561
<PP&E> 7,591,672
<DEPRECIATION> 3,326,915
<TOTAL-ASSETS> 62,569,273
<CURRENT-LIABILITIES> 17,758,060
<BONDS> 10,251,206
0
0
<COMMON> 397,572
<OTHER-SE> 34,162,435
<TOTAL-LIABILITY-AND-EQUITY> 62,569,273
<SALES> 38,321,790
<TOTAL-REVENUES> 38,321,790
<CGS> 30,206,288
<TOTAL-COSTS> 30,206,288
<OTHER-EXPENSES> 6,592,245
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 199,616
<INCOME-PRETAX> 1,323,641
<INCOME-TAX> 536,000
<INCOME-CONTINUING> 787,641
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 787,641
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.20
</TABLE>
