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, 1997
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, 1997
- - 3,888,221 (Excluding 87,500 Shares of Treasury Stock).
<PAGE>
FORM 10-Q September 30, 1997
Page 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, June 30,
1997 1997
-------------- ------
ASSETS
Current Assets:
Cash $401,696 $463,352
Marketable securities 677,351 627,179
Accounts receivable - net 22,233,277 22,008,210
Inventories 34,357,124 33,311,201
Prepaid expenses and other 996,520 1,359,617
Prepaid income taxes 233,408 528,243
Deferred income taxes 776,000 750,000
------- -------
Total current assets 59,675,376 59,047,802
Property, plant and equipment - net 5,027,153 5,009,045
Deferred income taxes 253,000 244,000
Excess of cost over net assets acquired 4,097,252 4,151,574
Other assets 1,516,054 1,543,257
--------- ---------
$70,568,835 $69,995,678
=========== ===========
See accompanying notes to condensed consolidated financial statements.
<PAGE>
FORM 10-Q September 30, 1997
Page 3
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, June 30,
1997 1997
______________ __________
LIABILITIES & SHAREHOLDERS' EQUITY:
Current Liabilities:
Accounts payable and accrued expenses $17,620,132 $17,302,127
Current maturities of long term debt and
capitalized lease obligations 616,447 599,239
___________ __________
Total current liabilities 18,236,579 17,901,366
Long term debt and capitalized lease obligations 15,349,791 15,552,549
Deferred compensation 662,500 650,000
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
3,888,221 outstanding 397,572 397,572
Additional paid-in capital 22,180,295 22,180,295
Unrealized gain on marketable securities 150,372 120,200
Retained earnings 14,291,726 13,893,696
Treasury stock (700,000) (700,000)
-------- --------
Total shareholders' equity 36,319,965 35,891,763
---------- ----------
$70,568,835 $69,995,678
============ ==========
See accompanying notes to condensed consolidated financial statements.
<PAGE>
FORM 10-Q September 30, 1997
Page 4
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
1997 1996
---- ----
NET SALES $36,878,534 $38,321,790
----------- -----------
COST AND EXPENSES:
Cost of goods sold 29,061,380 30,206,288
---------- ----------
Gross profit 7,817,154 8,115,502
Selling, general and administrative expenses 6,877,115 6,592,245
---------- ---------
Operating profit 940,039 1,523,257
Interest expense 272,009 199,616
------- -------
Earnings before income taxes 668,030 1,323,641
Income tax provision 270,000 536,000
------- -------
NET EARNINGS $398,030 $787,641
======== ========
Net earnings per common share $ .10 $ .20
============ ============
Weighted average common shares and common
equivalent shares outstanding 3,943,192 3,982,259
See accompanying notes to condensed consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
FORM 10-Q September 30,1997
Page 5
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1997
(UNAUDITED)
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> <C>
Balance at July 1, 1997 3,975,721 $397,572 $22,180,295 $120,200 $13,893,696 $(700,000) $35,891,763
Unrealized gain on marketable
securities 30,172 30,172
Net earnings 398,030 398,030
-------- ---------- ---------- ------ -------- -------- --------
Balance at September 30,1997 3,975,721 $397,572 $22,180,295 $150,372 $14,291,726 $(700,000) $36,319,965
========= ======== ========== ======== =========== ========== ==============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
FORM 10-Q September 30, 1997
Page 6
<TABLE>
<CAPTION>
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
1997 1996
_______ _______
Cash flows from operating activities
<S> <C> <C>
Net earnings $ 398,030 $ 787,641
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities
Depreciation and amortization 242,428 207,082
Deferred compensation 12,500 12,500
Deferred income tax provision (55,000) (66,000)
Amortization of intangible assets 87,655 16,584
Gain on sale of equipment (11,094)
Provision for doubtful accounts 89,375 117,125
Changes in operating assets and
liabilities, net of effect of acquisitions:
(Increase) decrease in operating assets - net (702,433) 630,430
Increase in operating liabilities - net 318,005 30,311
------- -------
Net cash provided by operating activities 390,560 1,724,579
-------- ----------
Cash flows from investing activities
Capital expenditures (260,536) (243,083)
Proceeds from sale of equipment 34,000
Acquisition of operating assets - net (1,240,327)
Increase in other assets (6,130) (138,953)
--------- ---------
Net cash used in investing activities (266,666) (1,588,363)
---------- -----------
Cash flows from financing activities
Borrowings under line of credit 35,455,080 41,420,780
Payments under line of credit (35,489,278) (40,449,000)
Principal payments under equipment financing
and term loans (151,352) (119,499)
Purchase of treasury stock (700,000)
------------ ------------
Net cash (used in) provided by financing activities (185,550) 152,281
------------ -----------
NET (DECREASE) INCREASE IN CASH (61,656) 288,497
------------ ------------
Cash at beginning of period 463,352 164,161
------------ ------------
Cash at end of period $ 401,696 $ 452,658
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
FORM 10-Q September 30, 1997
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, 1997 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) For interim financial reporting purposes, the Company uses the gross profit
method for computing inventories, which consists of goods held for resale.
3) The Company has a $30,000,000 term loan and revolving line of credit facility
with its banks, which are based principally on eligible accounts receivables
and inventories as defined in the agreement. The agreement was amended to (i)
extend the maturity date to September 13, 2000, (ii) change the interest rate
to a rate based on the average 30 day LIBOR rate plus 3/4 % to 1 1/4%
depending on the Company's performance measured by a financial ratio,
effective January 1, 1998 and (iii) changed the requirements of certain
financial covenants. The applicable interest rate may be adjusted quarterly
and borrowings under this facility are collateralized by substantially all of
the assets of the Company.
4) In April 1996, the Company announced that its Board of Directors 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 on the open market at the Company's discretion. During fiscal 1997,
the Company purchased 87,500 shares of its common stock for aggregate
consideration of $700,000.
5) Earnings per share has been computed based on weighted average number of
shares outstanding, including approximately 55,000 and 51,000 common stock
equivalents for the three months ending September 30, 1997 and 1996,
respectively. In February 1997, the Financial Accounting Standards Board has
issued Statement of Financial Accounting Standards No. 128, "Earnings Per
Share," which is effective for financial statements for both interim and
annual periods ending after December 15, 1997. Early adoption of the new
standard is not permitted. The new standard eliminates primary and fully
diluted earnings per share and requires presentation of basic and diluted
earnings per share together with disclosure of how the per share amounts were
computed. The adoption of this standard is not expected to have a material
impact on the disclosure of earnings per share in the financial statements.
6) During August 1996, and January 1997, the Company purchased QPS Electronics,
Inc. and Corona Electronics, Inc., respectively, both of which are electronic
component distributors. Aggregate consideration paid for the acquisitions
approximated $4,700,000 of which $157,500 was paid through the issuance of
20,000 shares of the Company's common stock. These acquisitions have been
accounted for by the purchase method and, as such, the fair value of the
assets and liabilities acquired have been recorded on the date of the
respective acquisitions. The respective results of their operations are
included with those of the Company from the date of acquisition. The excess
of the purchase price, over the fair value of the assets acquired,
approximately $3,053,000, is being amortized using the straight-line method
over a period of twenty years. Pro forma historical results of operations are
not presented, as such results would not be materially different from the
historical results of the Company.
<PAGE>
FORM 10-Q September 30, 1997
Page 8
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's
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, electromechanical devices and flat panel
displays (FPDs) 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), and contract manufacturing services through the Company's wholly-owned
subsidiary, Nexus Custom Electronics, Inc.
<PAGE>
Form 10-Q September 30, 1997
Page 9
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 1997 AND SEPTEMBER 30, 1996
Net sales for the first quarter of fiscal 1998 decreased approximately 4% to
$36.9 million as compared to $38.3 million for the first quarter of fiscal 1997.
The Company was affected by the continued industry wide competitive pressures
resulting in reduction of the unit prices of certain electronic components. The
Company believes that to increase sales in future periods it needed to expand
its semiconductor management group, flat panel display division and increase the
field application engineer program.
Gross profit margins, as a percentage of the net sales remained constant at
21.2% for the quarter ended September 30, 1997 as compared to the quarter ended
September 30, 1996. The Company was able to maintain its margins despite the
reductions in component pricing during the quarter.
Selling, general and administrative (SG&A) expenses increased to $6.9 million
for the first quarter of fiscal 1998, an increase of $.3 million, or
approximately 4.3% compared to the $6.6 million for the first quarter of fiscal
1997. The increase was a result of the expanded programs previously stated and
the additional costs associated with the acquisitions of Q.P.S. Electronics,
Inc. and Corona Electronics, Inc. These increases were partially offset during
the current quarter by reducing certain administrative costs and non-core
personnel.
Interest expense increased to $272,000 for the three months ended September 30,
1997 as compared to $200,000 for the three months ended September 30, 1996. The
increase was primarily attributable to the increased borrowings of approximately
$4.5 million attributed to the fiscal 1997 acquisitions of Q.P.S. Electronics,
Inc. and Corona Electronics, Inc. (see note A-6 of the notes to condensed
consolidated financial statements).
Net earnings for the three months ended September 30, 1997 were $398,000, or
$.10 per share as compared to $788,000, or $.20 per share for the three months
ended September 30, 1996. The decrease in net earnings was attributable to the
decrease in sales and the increase in SG&A expenses incurred in pursuit of the
initiatives to expand the semiconductor management group, flat panel display
division, field application engineer program and the acquisition of Corona
Electronics, Inc. and Q.P.S. Electronics, Inc.
LIQUIDITY AND CAPITAL RESOURCES
The Company's agreement with its banks, as amended, provides the Company with a
$30,000,000 term loan and revolving line of credit facility based principally on
eligible accounts receivable and inventories of the Company as defined in the
agreements expiring September 13, 2000. Effective June 1, 1997, borrowings under
the credit facility bear interest at the average 30-day LIBOR rate plus 1%. As
of January 1, 1998, interest is based on the average daily 30-day LIBOR rate
plus 3/4% to 1 1/4% depending on the Company's performance measured by a
financial ratio. The applicable interest rate may be adjusted quarterly. The
outstanding balance on the revolving line of credit facility was $13,988,944 at
September 30, 1997.
<PAGE>
Form 10-Q September 30, 1997
Page 10
The term loan, with a remaining balance of $750,000 at September 30, 1997,
requires monthly principal payments of $17,857, together with interest through
September 13, 1998, with a final payment of $533,600 on September 13, 1998.
Borrowings under this facility are collateralized by substantially all of the
assets of the Company. The agreement contains provisions for maintenance of
certain financial ratios, all of which the Company is in compliance with at
September 30, 1997, and prohibits the payment of cash dividends. The agreement
also provides for the issuance of letters of credit by the banks on the
Company's behalf. At September 30, 1997, $500,000 of such letters of credit were
outstanding.
For the three months ended September 30, 1997, the Company's net cash provided
by operating activities was $391,000 as compared to net cash provided by
operating activities of $1,725,000 for the three months ended September 30,
1996. The decrease is primarily attributable to the increase in inventory of
$1,046,000 compared to a reduction in accounts receivable and inventory (net of
assets acquired from business acquisitions) during the first quarter of fiscal
1997. Net cash used in investing activities decreased to $267,000 for the first
quarter of fiscal 1998, as compared to $1,588,000 for the first quarter of
fiscal 1997. The acquisition during fiscal 1997 required $1,240,000, which was
financed substantially through additional borrowings under the Company's line of
credit. 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.
For the first quarter of fiscal 1998 and 1997 inventory turnover was 3.4x and
4.0x, respectively. The average of the Company's accounts receivable at
September 30,1997 was 55 days, as compared to 53 days at September 30,1996. The
Company did not experience any significant trade collection difficulties during
the first quarter of fiscal 1998.
On April 15, 1996, the Company's Board of Directors authorized the purchase of
up to 250,000 shares of its common stock or approximately 6.3% of the then
outstanding shares, under a stock repurchase program. During fiscal 1997, the
Company repurchased 87,500 shares at an average market price of $8.00 per share.
The Company believes that cash flow from operations and funds available under
its credit facility will be sufficient to fund the Company's capital needs for
at least the next twelve months.
INFLATION
Inflation has not had a significant impact on the Company's operations during
the last three fiscal years.
<PAGE>
FORM 10-Q September 30, 1997
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:
27. Financial Data Schedule
99.8.2 Amendment to Loan and Security
Agreement
b) Reports on Form 8-K: None
<PAGE>
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 12, 1997
August 1, 1997
JACO ELECTRONICS, INC.
145 Oser Avenue
Hauppauge, NY 11778
NEXUS CUSTOM ELECTRONICS, INC.
Prospect Street
Brandon, VT 05733
Gentlemen:
Reference is made to the Second Restated and Amended Loan and Security
Agreement between Jaco Electronics, Inc. and Nexus Custom Electronics, Inc., as
Debtor, and our predecessor-in-interest, The Bank of New York Commercial
Corporation, as Lender, and each other Lender a party thereto, dated September
13, 1995, as amended and supplemented (the "Loan Agreement"). Initially
capitalized terms not otherwise defined herein shall have the meanings ascribed
to them in the Loan Agreement.
It is hereby agreed that effective as of August 1, 1997, the Loan
Agreement shall be amended as follows:
1. The definition of "Agent ABR Loan" set forth in Paragraph 1 is
deleted in its entirety and replaced by the following definition of "Agent
LIBO Rate Loan":
" "Agent LIBO Rate Loan" shall have the meaning set forth in Paragraph
4( c ) of this Agreement."
2. The definition of "Contract Rate" set forth in Paragraph 1 is
amended to read in its entirety as follows:
" "Contract Rate" means an interest rate per annum equal to (i) the
applicable LIBO Rate plus one percent (1%) in the case of LIBO Rate
Loans first arising, or first continued or converted thereto prior to
January 1, 1998, and (ii) in the case of LIBO Rate Loans first arising,
or first continued or converted thereto on or after January 1, 1998,
the applicable LIBO Rate plus ( a ) one and one-quarter percent (1
1/4%) if the ratio of total Loans to net earnings before interest,
taxes, depreciation, amortization, extraordinary gains and losses, and
all other non-cash charges on a consolidated basis ("EBITDA") during
the immediately preceding four (4) fiscal quarters is greater than 2 to
1, ( b ) one percent (1%) if the ratio of total Loans to EBITDA during
the immediately preceding four (4) fiscal quarters is 1.5-2 to 1, or (
c ) three-quarters of one percent (3/4%) if the ratio of total Loans to
EBITDA during the immediately preceding four (4) fiscal quarters is
less than 1.5 to 1. The Contract Rate applicable to LIBO Rate Loans
under clause (ii) hereof shall be adjusted quarterly."
3. The definitions of "Interest Period", "LIBO Rate (Reserve
Adjusted)", "LIBOR Office" and "LIBOR Reserve Percentage" set forth in Paragraph
1 are deleted in their entirety.
4. The definition of "LIBO Rate" set forth in Paragraph 1 is amended
to read in its entirety as follows:
" "LIBO Rate" means the rate per annum for the one month LIBOR as
published in The Wall Street Journal, averaged monthly on a calendar
month basis."
5. The definition of "LIBO Rate Loan" set forth in Paragraph 1 is amended
to read in its entirety as follows:
" "LIBO Rate Loan" means a Loan or any portion thereof that bears
interest based on the LIBO Rate."
6. The fourth through the seventh lines of the definition of "Term Loan
Notes" set forth in Paragraph 1 are deleted in their entirety and replaced by
the following:
"restate in their entirety, upon terms and conditions therein more
fully described, that certain promissory note initially issued by
Debtor to the order of BNYCC dated as of March 11, 1994 in the original
principal amount of $1,500,000."
7. The second full paragraph of Paragraph 2 is amended by deleting the
following language:
"provided that any application of the proceeds of Accounts which (i) is
made prior to the occurrence of an Event of Default and (ii) is not
made at the direction of Borrower, and which application results in the
payment of a LIBO Rate Loan prior to the last day of an Interest Period
with respect thereto shall not result in the required payment by Debtor
to Lender of any penalty or premium or loss or expense pursuant to
Paragraph 5(g) hereof,"
8. Paragraph 4( c )( i ) is deleted in its entirety and replaced by the
following:
"[INTENTIONALLY OMITTED]".
9. Paragraph 4( c )( ii ) is amended to read in its entirety as follows:
"( ii ) The Debtor may by telephonic notice received by an officer of
the Agent, request a borrowing prior to 1:00 P.M. New York time in the
form of a LIBO Rate Loan on the date on which it requests to incur such
a Loan, such request to specify the amount of the Loan requested. In
any such instance, the Agent may: (a) notify each of the Lenders, not
later than 2:00 P.M. New York time, of the LIBO Rate Loan to be funded
on such date, as well as the amount of such Lender's Pro Rata Share of
the requested LIBO Rate Loan, and each such Lender shall make such
amount available to the Agent on such date in same day funds, to such
account of the Agent as the Agent may designate, by not later than 5:00
P.M. New York time; or (b) if the Agent shall elect to do so in its
sole and absolute discretion, subject to the terms and conditions
hereof and in its capacity as a Lender, make such LIBO Rate Loan
available to the Debtor (each an "Agent LIBO Rate Loan") on the date so
requested, by transferring same day funds to the operating account(s)
of the Debtor maintained with the Agent. Each such Agent LIBO Rate Loan
shall constitute a Loan hereunder and shall be subject to all of the
terms and conditions applicable to other Loans, except that all
payments thereon shall be payable to the Agent in its capacity as
Lender, solely for its own account, until such time as each of the
Lenders shall Settle with the Agent as to such Agent LIBO Rate Loan on
the Settlement Date next occurring. Until such Settlement shall occur,
the Agent shall correspondingly increase its Pro Rata Share of the
Aggregate Maximum Loan Amount and the Pro Rata Share of each such other
Lender shall be correspondingly decreased and upon such Settlement
occurring, appropriate adjustments shall be made to such Pro Rata
Shares in order to restore such Pro Rata Shares to their respective
levels prior to the relevant Agent LIBO Rate Loan."
10. Paragraph 4( c )( v ) is deleted in its entirety and replaced by the
following:
"[INTENTIONALLY OMITTED]".
11. Paragraph 5(a)(i) is amended by deleting the words "except that
interest with respect to LIBO Rate Loans shall be payable on the last day of the
Interest Period with respect thereto" and inserting at the end of said paragraph
the following sentence:
"Whenever the LIBO Rate is increased or decreased, the applicable
Contract Rate shall be similarly changed without notice or demand by an
amount equal to the amount of such change in the LIBO Rate."
12. Paragraph 4(e)is amended by deleting the following language:
"(except as set forth in subsection (b) of the definition of "Interest
Period" appearing herein)".
13. Paragraph 5(a) is amended by deleting the following language:
"except that interest with respect to LIBO Rate Loans shall be payable
on the last day of the Interest Period with respect thereto".
14. Paragraph 5(e) is amended by deleting the following language:
"at the end of the then current Interest Periods with respect thereto
or sooner".
15. Paragraph 5(g) is deleted in its entirety and replaced by the
following:
"[INTENTIONALLY OMITTED]".
16. The first sentence of Paragraph 17(d) is amended to read in its
entirety as follows:
"Maintain at all times a ratio of consolidated current assets of Debtor
and its Subsidiaries to consolidated current liabilities of Debtor and
its Subsidiaries of not less than 1.6 to 1.0."
17. Paragraphs 17(e), (f) and (g) are amended to read in their entirety
as follows:
"(e) Maintain at all times consolidated net worth (all amounts which
would be included under shareholders' equity on a consolidated balance
sheet of the Debtor determined in accordance with generally accepted
accounting principles) in an amount not less than $34,000,000, which
amount shall be increased at the end of each quarter on a cumulative
basis by an amount equal to fifty percent (50%) of the consolidated net
profit after taxes, if any, for such quarter."
"(f) Maintain at all times a ratio of the sum of (1) cash and cash
equivalents plus (2) accounts receivable to current liabilities (as
defined in Paragraph 17(d)) of not less than 0.65 to 1.0 on a
consolidated basis."
"(g) Maintain at all times an excess of current assets over current
liabilities (both as defined in Paragraph 17(d) and each on a
consolidated basis) of not less than $23,000,000."
18. The first sentence of Paragraph 18(e) is amended to read in its
entirety as follows:
"Permit at any time the ratio of Indebtedness to Tangible Net Worth to
be greater than 1.30 to 1.0; "Indebtedness" shall mean consolidated
total liabilities of Debtor and its Subsidiaries determined in
accordance with generally accepted accounting principles consistently
applied."
19. The first sentence of Paragraph 21 is amended to read in its
entirety as follows:
"This (Second Restated and Amended Loan and Security) Agreement shall
(subject to compliance with the Conditions Precedent) become effective
on the Closing Date hereof, without any interruption or break in
continuity (as more fully described in the second paragraph hereof) and
shall continue until the fifth anniversary of the Closing Date."
20. The fifth sentence of Paragraph 21 is amended by deleting the
following language:
"provided that any such payment which results in a payment of a LIBO
Rate Loan before the last date of the Interest Period with respect
thereto shall be subject to the provisions of Paragraph 5(g) hereof".
Except as hereinabove specifically set forth, the Loan Agreement shall
remain unmodified and in full force and effect in accordance with its terms.
If you are in agreement with the foregoing, please so indicate by
signing and returning to us the enclosed copy of this letter.
Very truly yours,
BNY FINANCIAL CORPORATION f/k/a THE
BANK OF NEW YORK COMMERCIAL CORPORATION,
as Agent and Lender
By:/s/ Frank Imperato
_______________________
Title: Vice President
FLEET BANK, N.A. f/k/a/
NATWEST BANK N.A., as Lender
By:/s/ Alice Adelberg
_______________________
Title: Vice President
AGREED:
JACO ELECTRONICS, INC.
By: /s/ Jeffrey D. Gash
_______________________
Title: Vice President
NEXUS CUSTOM ELECTRONICS, INC.
By: /s/ Jeffrey D. Gash
_______________________
Title: Vice President
DATED: November 12, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted form the
unaudited condensed consolidated balance sheet as of September 30, 1997
and the unaudited condensed consolidated statement of earnings fo the
three months ended September 30, 1997 and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 401,696
<SECURITIES> 677,351
<RECEIVABLES> 23,164,672
<ALLOWANCES> 931,395
<INVENTORY> 34,357,124
<CURRENT-ASSETS> 59,675,376
<PP&E> 7,596,980
<DEPRECIATION> 2,569,827
<TOTAL-ASSETS> 70,568,835
<CURRENT-LIABILITIES> 18,236,579
<BONDS> 16,012,291
0
0
<COMMON> 397,572
<OTHER-SE> 35,922,393
<TOTAL-LIABILITY-AND-EQUITY> 70,568,835
<SALES> 36,878,534
<TOTAL-REVENUES> 36,878,534
<CGS> 29,061,380
<TOTAL-COSTS> 29,061,380
<OTHER-EXPENSES> 6,877,115
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 272,009
<INCOME-PRETAX> 668,030
<INCOME-TAX> 270,000
<INCOME-CONTINUING> 398,030
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 398,030
<EPS-PRIMARY> 0.10
<EPS-DILUTED> 0.10
</TABLE>
