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, 2000
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: (631) 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 12, 2000-
3,683,271 (Excluding 412,200 Shares of Treasury Stock).
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FORM 10-Q March 31, 2000
Page 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, June 30,
2000 1999
----------- ---------
ASSETS
Current Assets
<S> <C> <C>
Cash $ 427,287 $ 922,247
Marketable securities 903,868 881,622
Accounts receivable - net 29,799,762 23,408,900
Inventories 43,210,928 33,224,719
Prepaid expenses and other 653,926 660,782
Prepaid and refundable income taxes 990,855
Deferred income taxes 1,008,000 336,000
----------- -----------
Total current assets 76,003,771 60,425,125
Property, plant and equipment - net 6,426,398 6,983,761
Deferred income taxes 394,000 390,000
Excess of cost over net assets acquired - net 3,655,418 3,588,449
Other assets 1,722,155 1,543,328
----------- -----------
$88,201,742 $72,930,663
=========== ===========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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FORM 10-Q March 31, 2000
Page 3
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, June 30,
2000 1999
---------------- --------------
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities
<S> <C> <C>
Accounts payable and accrued expenses $ 25,159,115 $ 17,635,319
Current maturities of long term debt and
capitalized lease obligations 859,324 791,814
Income taxes payable 1,130,136
------------- -----------
Total current liabilities 27,148,575 18,427,133
Long term debt and capitalized lease obligations 22,373,398 18,885,664
Deferred compensation 787,500 750,000
SHAREHOLDERS' EQUITY
Preferred stock - authorized, 100,000 shares,
$10 par value; none issued
Common stock - authorized 10,000,000 shares,
$.10 par value; issued 4,065,721 and 4,080,721 shares,
respectively, and 3,653,521 and 3,668,521 shares
outstanding, respectively 408,072 406,572
Additional paid-in capital - net 22,721,645 22,531,295
Retained earnings 16,784,584 13,920,807
Accumulated other comprehensive income 182,483 213,707
Treasury stock (2,204,515) (2,204,515)
------------ ------------
Total shareholders' equity 37,892,269 34,867,866
---------- ----------
$88,201,742 $72,930,663
=========== ==========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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FORM 10-Q March 31, 2000
Page 4
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
2000 1999
----------- --------
<S> <C> <C>
NET SALES $51,693,699 $36,187,676
COST AND EXPENSES
Cost of goods sold 39,680,844 29,193,984
---------- ----------
Gross profit 12,012,855 6,993,692
Selling, general and administrative expenses 8,691,425 6,538,685
------------ ------------
Operating profit 3,321,430 455,007
Interest expense 334,202 335,630
------------ ------------
Earnings before income taxes 2,987,228 119,377
Income tax provision 1,221,000 48,000
------------ ------------
NET EARNINGS $ 1,766,228 $ 71,377
============ ============
Net earnings per common share
Basic $ 0.48 $ 0.02
============ ============
Diluted $ 0.45 $ 0.02
============ ============
Weighted average common shares outstanding
Basic 3,657,642 3,653,521
============ ============
Diluted 3,924,887 3,663,882
============ ============
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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FORM 10-Q March 31, 2000
Page 5
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE NINE MONTHS ENDED MARCH 31,
(UNAUDITED)
2000 1999
-------------- -----------
<S> <C> <C>
NET SALES $138,811,321 $104,410,230
COST AND EXPENSES
Cost of goods sold 108,994,750 84,019,054
----------- ----------
Gross profit 29,816,571 20,391,176
Selling, general and administrative expenses 23,918,836 19,801,603
------------ ------------
Operating profit 5,897,735 589,573
Interest expense 1,002,958 990,094
------------ ------------
Earnings (Loss) before income taxes 4,894,777 (400,521)
Income tax provision (benefit) 2,031,000 (162,000)
------------ ------------
NET EARNINGS (LOSS) $ 2,863,777 $ (238,521)
============ ============
Net earnings (loss) per common share
Basic $ 0.78 $ (0.06)
============ ============
Diluted $ 0.76 $ (0.06)
============ ============
Weighted average common shares outstanding
Basic 3,654,885 3,713,132
============ ============
Diluted 3,768,395 3,713,132
============ ============
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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FORM 10-Q March 31, 2000
Page 6
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED MARCH 31, 2000
(UNAUDITED)
Accumulated
Additional other
paid-in Retained comprehensive
Shares Amount capital earnings income
--------------- -------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Balance at July 1, 1999 4,065,721 $406,572 $ 22,801,295 $ 13,920,807 $ 213,707
Net earnings 2,863,777
Unrealized loss on marketable
securities - net (31,224)
Comprehensive income
Exercise of Stock Options 15,000 1,500 89,100
Deferred compensation
--------------- -------------- ---------------- ---------------- ----------------
Balance at March 31, 2000 4,080,721 $408,072 $ 22,890,395 $ 16,784,584 $ 182,483
=============== ============== ================ ================ ================
Total
Treasury Deferred shareholders'
stock compensation equity
------------- -------------- --------------
<S> <C> <C> <C> <C>
Balance at July 1, 1999 $ (2,204,515) $ (270,000) $34,867,866
-----------
Net earnings 2,863,777
Unrealized loss on marketable
securities - net (31,224)
---------
Comprehensive income 2,832,553
----------
Exercise of Stock Options 90,600
Deferred compensation 101,250 101,250
---------------- --------------- -------------
Balance at March 31, 2000 $ (2,204,515) $ (168,750) $37,892,269
================ =============== ==============
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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FORM 10-Q March 31, 2000
Page 7
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED MARCH 31,
(UNAUDITED)
2000 1999
------------------ -----------------
Cash flows from operating activities
<S> <C> <C>
Net earnings (loss) $ 2,863,777 $ (238,521)
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities
Depreciation and amortization 1,323,241 1,192,647
Deferred compensation 138,750 138,750
Deferred income tax (benefit) expense (658,000) 1,000
Provision for doubtful accounts 455,125 347,255
Gain on sale of equipment (1,655)
Changes in operating assets and liabilities,
Increase in operating assets - net (14,863,982) (2,959,292)
Increase in operating liabilities - net 8,653,932 618,076
------------------ -----------------
Net cash used in operating activities (2,087,157) (901,740)
------------------ -----------------
Cash flows from investing activities
Capital expenditures (453,582) (1,461,827)
Increase in marketable securities (71,470) (35,298)
Proceeds from sale of equipment 9,689
Acquisition of operating assets (1,212,428)
Increase in other assets (189,938) (147,634)
------------------ -----------------
Net cash used in investing activities (1,927,418) (1,635,070)
------------------ -----------------
Cash flows from financing activities
Borrowings under line of credit 45,247,667 40,346,052
Payments under line of credit (41,208,947) (36,954,685)
Principal payments under equipment financing
and term loans (609,705) (602,583)
Borrowings under term loan 575,000
Proceeds from exercise of stock options 90,600
Purchase of treasury stock (784,553)
------------------ -----------------
Net cash provided by financing activities 3,519,615 2,579,231
------------------ -----------------
NET (DECREASE) INCREASE IN CASH (494,960) 42,421
------------------ -----------------
Cash at beginning of period 922,247 562,556
------------------ -----------------
Cash at end of period $ 427,287 $ 604,977
================== =================
Supplemental schedule of non-cash financing and
investing activities
Equipment under capital leases $ 126,229 $ 552,544
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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FORM 10-Q March 31, 2000
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, 1999 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) 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 twice during
the first six months of fiscal 2000. Effective September 1, 1999, the agreement
was amended to extend the maturity date to September 13, 2001 and effective
December 31, 1999, the requirements of certain financial covenants were amended.
The interest rate is based on the average 30 day LIBOR rate plus 3/4 % to 1 1/4%
depending on the Company's performance for the immediately preceding four fiscal
quarters measured by a certain financial ratio. The applicable interest rate may
be adjusted quarterly and borrowings under this facility are collateralized by
substantially all of the assets of the Company.
3) The Board of Directors of the Company has authorized the purchase of up to
650,000 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.
The Company has made purchases of 412,200 shares of its common stock from July
31, 1996 through October 16, 1998 for aggregate consideration of $2,204,515.
Since October 17, 1998 the Company has made no additional purchases of treasury
stock.
4) For interim financial reporting purposes, the Company uses the gross profit
method for computing inventories, which consists of goods held for resale.
5) On February 25, 2000, the Company purchased the operating assets of PGI
Industries, Inc., an exporter of electronic components, located in Ronkokoma,
New York. The purchase price of approximately $1.2 million was paid exclusively
by cash. In addition, $100,000 is payable over the next two years based on
certain events defined in the purchase agreement. This acquisition has been
accounted for by the purchase method and, as such, the fair value of the assets
acquired has been recorded on the date of the purchase. The results of
operations are included with those of the Company's from the date of
acquisition. The excess of the purchase price, as adjusted will be amortized
using the straight line method over a period not to exceed 20 years. Proforma
results of operations not expected to be material, presently, they are not
materially different from those of the Company.
6) The Company has entered into a definitive agreement to acquire privately held
Interface Electronics Corporation (IEC), a distributor of electronic components
primarily serving the Northeast and Southeast. Under the terms of the agreement,
Jaco will acquire IEC for approximately $15.4 million in cash plus an earn out
based on IEC's performance. Jaco will also assume approximately $3.5 million of
IEC's debt. The transaction is expected to be consummated in the second calendar
quarter of 2000 and is subject to the expiration of the applicable
Hart-Scott-Rodino waiting period and other customary closing conditions. To
finance the consideration for the transaction, the Company received a commitment
from its commercial banks to increase its credit facility from $30,000,000 to
$50,000,000, based on eligible accounts receivable and inventories of the
Company.
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FORM 10-Q March 31, 2000
Page 9
7) The number of shares used in the Company's basic and diluted earnings per share computations are as follows:
Three Months Ended Nine Months Ended
March 31, March 31,
--------------------------------- --------------------------------
2000 1999 2000 1999
-------------- -------------- ------------- -------------
Weighted average common shares
outstanding net of treasury shares,
<S> <C> <C> <C> <C>
for basic earnings per share 3,657,642 3,653,521 3,654,885 3,713,132
Common stock equivalents for
stock options 267,245 10,361 113,510
-------------- -------------- ------------- -------------
Weighted average common shares
outstanding for diluted earnings per share 3,924,887 3,663,882 3,768,395 3,713,132
============== ============== ============= =============
</TABLE>
As of March 31, 2000 options to purchase 584,430 shares of common stock
at a price range of $2.69 to $12.75 were outstanding compared to 573,229 shares
as of March 31, 1999. The stock options with exercise prices greater than the
average quoted market prices, have been excluded from the computation of diluted
earnings per share as there affect is antidilutive. Stock options to purchase
52,000 shares of the Company's common stock have been excluded from the
computation of diluted earnings per share for the three and nine months ended
March 31, 2000 as compared to 319,230 and 573,229 shares for the three and nine
months ended March 31, 1999, respectively.
8) The Company has two reportable segments: electronics parts distribution and
contract manufacturing. The Company's primary business activity is conducted
with small and medium size manufacturers, located in North America, that produce
electronic equipment used in a variety of industries. Information pertaining to
the Company's operations in different geographic areas for the three months and
nine months ended March 31, 2000 and 1999 is not considered material to the
financial statements.
The Company's chief operating decision maker utilizes net sales and
net earnings (loss) information in assessing performance and making overall
operating decisions and resource allocations. The accounting policies of the
operating segments are the same as those described in the summary of significant
accounting policies included in the Company's annual report to shareholders.
Information about the Company's segments is as follows:
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FORM 10-Q March 31, 2000
Page 10
Three Months Ended Nine Months Ended
March 31, March 31,
--------- ---------
2000 1999 2000 1999
--------- --------- --------- -------
(in thousands) (in thousands)
Net sales from external customers
<S> <C> <C> <C> <C>
Electronics components distribution $47,510 $32,833 $128,948 $94,190
Contract manufacturing 4,184 3,355 9,863 10,220
------- ------- ------- --------
$51,694 $36,188 $138,811 $104,410
====== ====== ======= =======
Intersegment net sales
Electronics components distribution $ 86 $ 93 $ 217 $ 255
Contract manufacturing 111
------- --------- -------- -------
$ 86 $ 93 $ 217 $ 366
======== ====== ======= =======
Operating profit
Electronics components distribution $ 3,118 $ 325 $ 5,404 $ 209
Contract manufacturing 203 130 494 381
------- ------- ------- -------
$ 3,321 $ 455 $ 5,898 $ 590
===== ======= ====== =======
Interest expense
Electronics components distribution $ 215 $ 198 $ 627 $ 588
Contract manufacturing 119 138 376 402
-------- -------- ------- -------
$ 334 $ 336 $ 1,003 $ 990
======= ======= ========= ======
Income tax provision (benefit)
Electronics components distribution $ 1,186 $ 51 $ 1,982 $ (154)
Contract manufacturing 35 (3) 49 (8)
-------- --------- -------- ----------
$ 1,221 $ 48 $ 2,031 $ (162)
========= ======= ========= =========
Identifiable assets
Electronics components distribution $77,262 $66,265 $77,262 $66,265
Contract manufacturing 10,940 10,819 10,940 10,819
------- ------- -------- -------
$88,202 $77,084 $88,202 $77,084
====== ====== ====== ======
Capital expenditures
Electronics components distribution $ 120 $ 194 $ 249 $ 818
Contract manufacturing 113 68 205 644
-------- ------- ------- -------
$ 233 $ 262 $ 454 $ 1,462
======= ======= ======= ======
Depreciation and amortization
Electronics components distribution $ 279 $ 275 $ 850 $ 796
Contract manufacturing 167 136 473 397
-------- -------- ------- -------
$ 446 $ 411 $ 1,323 $ 1,193
======= ======= ========= ========
</TABLE>
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FORM 10-Q March 31, 2000
Page 11
JACO ELECTRONICS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995:
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
downturns in the electronics distribution industry which may have an adverse
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, flat panel
displays and monitors, and power supplies 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 automated inventory management services, 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 through Nexus Custom Electronics, Inc., a wholly owned subsidiary
of the Company. The Company is also expanding in the flat panel display
value-added market which includes full system integration, kitting and the
implementation of touch technologies.
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FORM 10-Q March 31, 2000
Page 12
Results of Operations
- ---------------------
The following table sets forth certain items in the Company's statements of
operations as a percentage of net sales for the periods shown:
Three Months Ended Nine Months Ended
March 31, March 31,
------------------------------ ---------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 76.8 80.7 78.6 80.5
---------- ---------- ---------- ----------
Gross Profit 23.2 19.3 21.4 19.5
Selling, general and
administrative expenses 16.8 18.1 17.2 18.9
---------- ---------- ---------- ----------
Operating profit 6.4 1.2 4.2 0.6
Interest expense 0.6 0.9 0.7 1.0
---------- ---------- ---------- ----------
Earnings (Loss) before income taxes 5.8 0.3 3.5 (0.4)
Income tax provision (benefit) 2.4 0.1 1.4 (0.2)
---------- ---------- ---------- ----------
NET EARNINGS (LOSS) 3.4% 0.2% 2.1% (0.2)%
========== ========= ========= =========
</TABLE>
COMPARIS0N OF THE THREE AND NINE MONTHS ENDED MARCH 31, 2000 AND MARCH 31, 1999
- -------------------------------------------------------------------------------
Net sales for the three and nine months ended March 31, 2000 were $51.7
million and $138.8 million, respectively, compared to $36.2 million and $104.4
million for the three and nine months ended March 31, 1999, respectively,
representing increases in net sales of 42.8% and 32.9%. The Company's net sales
continue to be positively impacted by strong industry-wide demand for many
components. There is an extremely strong demand for passive components, which
represents approximately fifty percent of the Company's net sales. Additionally,
the Company continues to experience strong results from the sales of flat panels
and monitors as well as growth in providing value-added services to the
Company's key customers. Most of these value-added services relate to assisting
the customer in all aspects of inventory management.
Gross profit margins as a percentage of net sales were 23.2% and 21.4%
for the three and nine months ended March 31, 2000, respectively, compared to
19.3% and 19.5% for the three and nine months ended March 31, 1999,
respectively. The increases are primarily attributable to the strong demand for
components that continues to exist throughout the electronics industry.
Selling, general and administrative expenses ("SG&A") for the three and
nine months ended March 31, 2000 were $8.7 million and $23.9 million,
respectively, increases of $2.2 million and $4.1 million when compared to the
three and nine months ended March 31, 1999, respectively. As a percentage of net
sales, SG&A for the three and nine months ended March 31, 2000 were 16.8% and
17.2%,
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FORM 10-Q March 31, 2000
Page 13
respectively, compared to 18.1% and 18.9% for the three and nine months ended
March 31, 1999, respectively. These trends reflect operating efficiencies
achieved by the Company with higher revenue levels. The Company has continued to
invest in sales and marketing personnel, which it believes is required for
continued growth.
Interest expense for the three and nine months ended March 31, 2000
were $334,000 and $1,003,000, respectively, compared to $336,000 and $990,000
for the three and nine months ended March 31, 1999, respectively. The Company
has been able to maintain borrowings at comparable levels to last year.
The net earnings for the three and nine months ended March 31, 2000 were
$1,766,000 and $2,864,000 or $0.45 and $0.76 per share diluted, respectively,
compared to net earnings of $71,000 or $0.02 per share diluted for the three
months ended March 31, 1999 and a net loss of $239,000 or $0.06 per share
diluted for the nine months ended March 31, 1999. The increase in earnings was
attributable to the increase in net sales, the increase in gross profit margins,
and the operating efficiencies achieved in SG&A. The Company is cautiously
optimistic that it is positioned to see continued strong performance based on
the demand for electronic components, the Company's flat panel product group and
the value-added service programs in place to assist customers in the management
of their inventory and procurement programs.
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 agreement expiring September 13, 2001. The interest rate of the
credit facility is based on the average 30 day LIBOR rate plus 3/4% to 1-1/4%
depending on the Company's performance for the immediately preceding four fiscal
quarters measured by a certain financial ratio, and may be adjusted quarterly.
The outstanding balance on the revolving line of credit facility was $21,002,295
at March 31, 2000. The term loan, with a remaining balance of $214,285 at March
31, 2000, requires monthly principal payments of $17,857, together with interest
through March 1, 2001. 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 March 31, 2000, and prohibits the payment of cash
dividends.
For the nine months ended March 31, 2000, the Company's net cash used
in operating activities was approximately $2.1 million, as compared to net cash
used in operating activities of $0.9 million for the nine months ended March 31,
1999. The increase is primarily attributable to an increase in inventory and
accounts receivable which was partially offset by an increase in accounts
payable and accrued expenses and net earnings for the nine months ended March
31, 2000. Net cash used in investing activities increased to $1.9 million for
the nine months ended March 31, 2000 as compared to $1.6 million for the nine
months ended March 31, 1999. The increase of $0.3 million is primarily
attributable to the acquisition of the operating assets of PGI Industries, Inc.
for $1,212,000 which was partially offset by a decrease in capital expenditures
of approximately $1.0 million.
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 nine months of Fiscal 2000 and Fiscal 1999, inventory
turnover was 3.8x and 3.2x, respectively. The average days outstanding of the
Company's accounts receivable at March 31, 2000 was 52 days, as compared to 61
days at March 31, 1999.
The Board of Directors of the Company had authorized the purchase of up
to 250,000 shares of its common stock under a stock repurchase program. During
Fiscal 1999, the Board of Directors authorized the repurchase of up to an
additional 400,000 shares of the Company's common stock. The purchases may
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FORM 10-Q March 31, 2000
Page 14
be made by the Company from time to time on the open market at the Company's
discretion and will be dependent on market conditions. Through May 12, 2000, the
Company has purchased 412,200 shares of its common stock for aggregate
consideration of $2,204,515 under this program. Since October 17, 1998, the
Company has made no additional purchases of treasury stock.
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.
Year 2000 Compliance
- --------------------
The year 2000 ("Y2K") issue was the result of computer programs using a
two-digit format, as opposed to four digits, to indicate the year. Such computer
systems would have been unable to interpret dates beyond the year 1999, which
would cause a system failure or other computer errors, leading to disruptions in
operations. In April 1996, the Company developed a three-phase program for Y2K
information systems compliance. Phase I was to identify those systems with which
the Company had exposure to Y2K issues. Phase II was the development and
implementation of action plans to be Y2K compliant in all areas by late 1998.
Phase III, which was fully completed by late 1999, was the final major area of
exposure to ensure compliance. The Company had identified three major areas
determined to be critical for successful Y2K compliance: (1) financial and
informational system applications, (2) manufacturing applications and (3) third
party relationships.
As of September 1, 1998, Jaco completed the redesign and development of
an entirely new distribution software system. All of the dates in this new
database are 8 characters, including the century. The system has been tested and
has been in production as of September 1, 1998. The systems include customer
order entry, purchase order entry to the Company's manufacturers, warehousing
and inventory control.
The financial systems, Accounts Payable and General Ledger have been
Y2K compliant since April 1997. The Accounts Receivable system has been Y2K
compliant since September 1, 1998.
Jaco's distribution facilities: warehouse, shipping and other physical
handling have been tested and are Y2K compliant. At this time, the Company has
tested substantially all of its programs and has experienced no system problems
as it relates to Y2k issues. There were only minor corrections that needed to be
made to certain non-essential applications. In general, the Y2K compliance
efforts continue to be part of the Company's ongoing software development
process. The Company has spent to date approximately $1.8 million to replace the
core financial and reporting software systems for its distribution business. The
Company has utilized outside consultants to undertake a portion of the work.
Inflation
Inflation has not had a significant impact on the Company's operations
during the last three fiscal years.
Quantitative and Qualitative Disclosure about Market Risk.
- ----------------------------------------------------------
The Company is exposed to interest rate change market risk with respect
to its credit facility with a financial institution which is priced based on the
average 30 day LIBOR rate plus 3/4% to 1 1/4% depending on the Company's
performance for the immediately preceding four fiscal quarters measured by a
certain financial ratio, and may be adjusted quarterly. At April 30, 2000,
$17,948,267 was outstanding under the credit facility. Changes in the LIBOR
interest rate during the fiscal year ending June 30, 2000 will have a positive
or negative effect on the Company's interest expense. Each 1% fluctuation in the
LIBOR interest rate will increase or decrease interest expense for the Company
by approximately $179,000.
<PAGE>
FORM 10-Q March 31, 2000
Page 15
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Nothing to Report
Item 2. Changes in Securities and Use of Proceeds
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
27.1 Financial Data Schedule
b) Reports on Form 8-K
The Company filed one report on Form 8-K on May 15,
2000, to report under Item 5 the issuance of the May 9, 2000
press release announcing that it has entered into a definitive
agreement to acquire Interface Electronics Corporation.
<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: May 15, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from the unaudited condensed consolidated
balance sheet as of March 31, 2000 and the unaudited
condensed consolidated statement of operations for the
nine months ended March 31, 2000 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 427,287
<SECURITIES> 903,868
<RECEIVABLES> 30,717,367
<ALLOWANCES> 917,605
<INVENTORY> 43,210,928
<CURRENT-ASSETS> 76,003,771
<PP&E> 12,004,038
<DEPRECIATION> 5,577,640
<TOTAL-ASSETS> 88,201,742
<CURRENT-LIABILITIES> 27,148,575
<BONDS> 23,160,898
0
0
<COMMON> 408,072
<OTHER-SE> 37,484,197
<TOTAL-LIABILITY-AND-EQUITY> 88,201,742
<SALES> 138,811,321
<TOTAL-REVENUES> 138,811,321
<CGS> 108,994,750
<TOTAL-COSTS> 108,994,750
<OTHER-EXPENSES> 23,918,836
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,002,958
<INCOME-PRETAX> 4,894,777
<INCOME-TAX> 2,031,000
<INCOME-CONTINUING> 2,863,777
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,863,777
<EPS-BASIC> 0.78
<EPS-DILUTED> 0.76
</TABLE>
