FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period ended December 31, 1999
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 February 7, 2000
- - 3,653,521 (Excluding 412,200 Shares of Treasury Stock).
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FORM 10-Q December 31, 1999
Page 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
December 31, June 30,
1999 1999
-------------- ------------
ASSETS
Current Assets
<S> <C> <C>
Cash $ 479,127 $ 922,247
Marketable securities 896,729 881,622
Accounts receivable - net 29,239,832 23,408,900
Inventories 35,179,108 33,224,719
Prepaid expenses and other 692,200 660,782
Prepaid and refundable income taxes 990,855
Deferred income taxes 738,000 336,000
----------- -----------
Total current assets 67,224,996 60,425,125
Property, plant and equipment - net 6,559,097 6,983,761
Deferred income taxes 397,000 390,000
Excess of cost over net assets acquired - net 3,494,217 3,588,449
Other assets 1,456,542 1,543,328
----------- -----------
$79,131,852 $72,930,663
=========== ===========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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FORM 10-Q December 31, 1999
Page 3
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
December 31, June 30,
1999 1999
--------------- -------------
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities
<S> <C> <C>
Accounts payable and accrued expenses $ 20,803,690 $ 17,635,319
Current maturities of long term debt and
capitalized lease obligations 843,936 791,814
Income taxes payable 183,758
------------- ------------
Total current liabilities 21,831,384 18,427,133
Long term debt and capitalized lease obligations 20,526,364 18,885,664
Deferred compensation 775,000 750,000
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 shares
and 3,653,521 shares outstanding 406,572 406,572
Additional paid-in capital - net 22,598,795 22,531,295
Retained earnings 15,018,356 13,920,807
Accumulated other comprehensive income 179,896 213,707
Treasury stock (2,204,515) (2,204,515)
------------ ------------
Total shareholders' equity 35,999,104 34,867,866
---------- ----------
$79,131,852 $72,930,663
========== ==========
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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FORM 10-Q December 31, 1999
Page 4
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31,
(UNAUDITED)
1999 1998
-------------- -------------
<S> <C> <C>
NET SALES $45,100,259 $34,966,098
COST AND EXPENSES
Cost of goods sold 35,232,148 28,271,002
---------- ----------
Gross profit 9,868,111 6,695,096
Selling, general and administrative expenses 7,978,814 6,467,866
------------ ------------
Operating profit 1,889,297 227,230
Interest expense 345,823 341,022
------------ ------------
Earnings (Loss) before income taxes 1,543,474 (113,792)
Income tax provision (benefit) 660,000 (46,000)
------------ ------------
NET EARNINGS (LOSS) $ 883,474 $ (67,792)
============ ============
Net earnings (loss) per common share
Basic and diluted $ 0.24 $ (0.02)
============ ============
Weighted average common shares outstanding
Basic 3,653,521 3,654,182
Diluted 3,705,505 3,654,182
============ ============
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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FORM 10-Q December 31, 1999
Page 5
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31,
(UNAUDITED)
1999 1998
-------------- -------------
<S> <C> <C>
NET SALES $87,117,622 $68,222,554
COST AND EXPENSES
Cost of goods sold 69,313,906 54,825,070
---------- ----------
Gross profit 17,803,716 13,397,484
Selling, general and administrative expenses 15,227,411 13,262,918
------------ ------------
Operating profit 2,576,305 134,566
Interest expense 668,756 654,464
------------ ------------
Earnings (Loss) before income taxes 1,907,549 (519,898)
Income tax provision (benefit) 810,000 (210,000)
------------ ------------
NET EARNINGS (LOSS) $ 1,097,549 $ (309,898)
============ ============
Net earnings (loss) per common share
Basic and diluted $ 0.30 $ (0.08)
============ ============
Weighted average common shares outstanding
Basic 3,653,521 3,725,441
Diluted 3,707,424 3,725,441
============ ============
See accompanying notes to condensed consolidated financial statements.
</TABLE>
5
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FORM 10-Q December 31, 1999
Page 6
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 31, 1999
(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 1,097,549
Unrealized loss on marketable
securities - net (33,811)
Comprehensive income
Deferred compensation
--------------- -------------- ---------------- ---------------- ----------------
Balance at December 31, 1999 4,065,721 $406,572 $ 22,801,295 $ 15,018,356 $ 179,896
=============== ============== ================ ================ ================
Total
Treasury Deferred shareholders'
stock compensation equity
--------------- -------------- ----------------
<S> <C> <C> <C>
Balance at July 1, 1999 $ (2,204,515) $ (270,000) $34,867,866
----------
Net earnings 1,097,549
Unrealized loss on marketable
securities - net (33,811)
----------
Comprehensive income 1,063,738
----------
Deferred compensation 67,500 67,500
--------------- -------------- ----------------
Balance at December 31, 1999 $ (2,204,515) $ (202,500) $35,999,104
=============== ============== ================
See accompanying notes to condensed consolidated financial statements.
</TABLE>
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FORM 10-Q December 31, 1999
Page 7
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31,
(UNAUDITED)
1999 1998
------------------ -----------------
Cash flows from operating activities
<S> <C> <C>
Net earnings (loss) $ 1,097,549 $ (309,898)
Adjustments to reconcile net earnings (loss) to net
cash provided by (used in) operating activities
Depreciation and amortization 877,159 781,948
Deferred compensation 92,500 92,500
Deferred income tax benefit (389,000) (70,000)
Provision for doubtful accounts 259,075 253,687
Gain on sale of equipment (1,655)
Changes in operating assets and liabilities,
(Increase) decrease in operating assets - net (7,084,959) 575,494
Increase (decrease) in operating liabilities - net 3,352,129 (2,618,043)
------------------ -----------------
Net cash used in operating activities (1,795,547) (1,295,967)
------------------ -----------------
Cash flows from investing activities
Capital expenditures (220,923) (1,200,316)
Increase in marketable securities (68,918) (35,298)
Proceeds from sale of equipment 9,689
Decrease (increase) in other assets 75,675 (84,507)
------------------ -----------------
Net cash used in investing activities (214,166) (1,310,432)
------------------ -----------------
Cash flows from financing activities
Borrowings under line of credit 29,094,235 28,698,555
Payments under line of credit (27,119,478) (25,089,672)
Principal payments under equipment financing
and term loans (408,164) (390,463)
Purchase of treasury stock (784,553)
------------------ -----------------
Net cash provided by financing activities 1,566,593 2,433,867
------------------ -----------------
NET DECREASE IN CASH (443,120) (172,532)
------------------ -----------------
Cash at beginning of period 922,247 562,556
------------------ -----------------
Cash at end of period $ 479,127 $ 390,024
================== =================
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 December 31, 1999
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.
8
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FORM 10-Q December 31, 1999
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5) The number of shares used in the Company's basic and diluted earnings per share computations are as follows:
Three Months Ended Six Months Ended
December 31, December 31,
--------------------------------- --------------------------------
1999 1998 1999 1998
-------------- -------------- ------------- -------------
Weighted average common shares
outstanding net of treasury shares,
<S> <C> <C> <C> <C>
for basic earnings per share 3,653,521 3,654,182 3,653,521 3,725,441
Common stock equivalents for
stock options 51,984 53,903
-------------- -------------- ------------- -------------
Weighted average common shares
outstanding for diluted earnings per share 3,705,505 3,654,182 3,707,424 3,725,441
============== ============== ============= =============
</TABLE>
For the three and six months ended December 31, 1999 options to
purchase 614,796 shares of common stock at a price range of $2.69 to $12.75 were
outstanding during the period. 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 anti-dillutive.
6) 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
six months ended December 31, 1999 and 1998 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 December 31, 1999
Page 10
Three Months Ended Six Months Ended
December 31, December 31,
------------ ------------
1999 1998 1999 1998
--------- --------- --------- -------
(in thousands) (in thousands)
Net sales from external customers
<S> <C> <C> <C> <C>
Electronics components distribution $42,215 $31,315 $81,439 $61,358
Contract manufacturing 2,885 3,651 5,679 6,865
------- ------- ------- -------
$45,100 $34,966 $87,118 $68,223
====== ====== ====== ======
Intersegment net sales
Electronics components distribution $ 63 $ 91 $ 131 $ 162
Contract manufacturing _____ 51 _____ 111
------- -------
$ 63 $ 142 $ 131 $ 273
======== ======= ======= =======
Operating profit (loss)
Electronics components distribution $ 1,704 $ 110 $ 2,286 $ (116)
Contract manufacturing 185 117 290 251
------- ------- ------- -------
$ 1,889 $ 227 $ 2,576 $ 135
===== ======= ====== =======
Interest expense
Electronics components distribution $ 220 $ 205 $ 412 $ 390
Contract manufacturing 126 136 257 264
-------- -------- ------- -------
$ 346 $ 341 $ 669 $ 654
======= ======= ======= ======
Income tax provision (benefit)
Electronics components distribution $ 635 $ (39) $ 796 $ (205)
Contract manufacturing 25 (7) 14 (5)
-------- --------- -------- ----------
$ 660 $ (46) $ 810 $ (210)
======= ========= ======= =========
Identifiable assets
Electronics components distribution $69,329 $61,530 $69,329 $61,530
Contract manufacturing 9,803 12,048 9,803 12,048
------- ------- ------- -------
$79,132 $73,578 $79,132 $73,578
====== ====== ====== ======
Capital expenditures
Electronics components distribution $ 63 $ 404 $ 129 $ 624
Contract manufacturing 46 53 92 576
------- ------- ------- -------
$ 109 $ 457 $ 221 $ 1,200
======= ======= ======= ======
Depreciation and amortization
Electronics components distribution $ 283 $ 274 $ 571 $ 521
Contract manufacturing 155 133 306 261
-------- -------- ------- -------
$ 438 $ 407 $ 877 $ 782
======= ======= ======= ======
</TABLE>
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FORM 10-Q December 31, 1999
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.
11
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FORM 10-Q December 31, 1999
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 Six Months Ended
December 31, December 31,
------------------------------ ---------------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 78.1 80.9 79.6 80.4
---------- ---------- ---------- ----------
Gross Profit 21.9 19.1 20.4 19.6
Selling, general and
administrative expenses 17.7 18.5 17.4 19.4
---------- ---------- ---------- ----------
Operating profit 4.2 0.6 3.0 0.2
Interest expense 0.8 0.9 0.8 1.0
---------- ---------- ---------- ----------
Earnings (Loss) before income taxes 3.4 (0.3) 2.2 (0.8)
Income tax provision (benefit) 1.4 (0.1) 0.9 (0.3)
---------- ---------- ---------- ----------
NET EARNINGS (LOSS) 2.0% (0.2)% 1.3% (0.5)%
========= ========= ========== ==========
</TABLE>
COMPARIS0N OF THE THREE AND SIX MONTHS ENDED DECEMBER 31,1999 AND DECEMBER
31,1998
Net sales for the three and six months ended December 31,1999 were
$45.1 million and $87.1 million, respectively, compared to $35.0 million and
$68.2 million for the three and six months ended December 31,1998, respectively
representing increases in net sales of 29.0% and 27.7%, respectively. The
Company's net sales were impacted by strong demand for both active and passive
components including record quarterly sales of flat panel displays and monitors.
The Company has continued to invest in increasing the number of sales, marketing
and engineering personnel, which in conjunction with, the electronic automated
inventory management systems, provides a value-added service to enable the
Company to increase net sales, in addition, there has been increases resulting
from the strong demand for product.
Gross profit margins as a percentage of net sales were 21.9% and 20.4%
for the three and six months ended December 31,1999, respectively, compared to
19.1% and 19.6% for the three and six months ended December 31,1998,
respectively. The increases are attributable to the strong demand for components
that currently exist throughout the electronics industry. During the second
quarter, there has been a world-wide shortage in capacitors which has
historically represented a significant portion of the Company's sales.
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FORM 10-Q December 31, 1999
Page 13
Selling, general and administrative expenses ("S,G&A") for the three
and six months ended December 31, 1999 were $8.0 million and $15.2 million,
respectively, increases of $1.5 million and $2.0 million when compared to the
three and six months ended December 31, 1998, respectively. As a percentage of
net sales, S,G&A for the three and six months ended December 31, 1999 were 17.7%
and 17.4%, respectively, compared to 18.5% and 19.4% for the three and six
months ended December 31, 1998, respectively. These trends reflect operating
efficiencies achieved with higher revenue levels.
Interest expense for the three and six months ended December 31, 1999
were $346,000 and $669,000, respectively, compared to $341,000 and $654,000 for
the three and six months ended December 31, 1998, respectively. The Company has
been able to maintain its borrowings at comparable levels to the prior year.
Additionally, the rates have remained relatively constant.
The net earnings for the three and six months ended December 31, 1999
were $883,000 and $1,098,000 or $.24 and $.30 per share diluted, respectively,
compared to net losses of $68,000 and $310,000 or $.02 and $.08 per share
diluted, respectively, during the same periods in the last fiscal year. The
increase in earnings was attributable to the increase in net sales, the increase
in gross profit margins and the operating efficiencies achieved in S,G&A. The
Company continues to be cautiously optimistic that it is positioned to see
increased performance based on the strong demand for electronic components,
continuing growth in the Company's flat panel division, and the automated
inventory management 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 $18,938,332
at December 31, 1999. The term loan, with a remaining balance of $267,857 at
December 31, 1999, 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 December 31, 1999, and prohibits the
payment of cash dividends.
For the six months ended December 31, 1999, the Company's net cash used
in operating activities was approximately $1.8 million, as compared to net cash
used in operating activities of $1.3 million for the six months ended December
31, 1998. 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 six months ended December
31, 1999. Net cash used in investing activities decreased to $0.2 million for
the six months ended December 31, 1999, as compared to $1.3 million for the six
months ended December 31, 1998. The decrease is primarily attributable to a
reduction in capital expenditures. Net borrowings under the Company's line of
credit was approximately $2.0 million for the six months ended December 31,
1999, as compared to net borrowings of $3.6 million for the six months ended
December 31, 1998. The change of $1.6 million is primarily attributable to a
reduction in capital expenditures and no additional purchases of treasury stock
during the six months ended December 31, 1999. 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 six months of Fiscal 2000 and Fiscal 1999, inventory
turnover was 4.1x and 3.2x, respectively. The average days outstanding of the
Company's accounts receivable at December 31, 1999 was 55 days, as compared to
58 days at December 31, 1998.
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 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 October 16, 1998,
the Company has purchased 412,200 shares
13
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FORM 10-Q December 31, 1999
Page 14
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 is Y2K compliant
as of 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 January 31, 2000,
$15,701,266 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 $157,000.
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FORM 10-Q December 31, 1999
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
99.8.6 Amendment to Second Restated
and Amended Loan and Security Agreement
dated December 31, 1999
b) Reports on Form 8-K None
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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: February 11, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information
extracted from the unaudited condensed consolidated
balance sheet as of December 31, 1999 and the unaudited
condensed consolidated statement of operations for the
six months ended December 31, 1999 and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 479,127
<SECURITIES> 896,729
<RECEIVABLES> 29,942,673
<ALLOWANCES> 702,841
<INVENTORY> 35,179,108
<CURRENT-ASSETS> 67,224,996
<PP&E> 11,739,521
<DEPRECIATION> 5,180,424
<TOTAL-ASSETS> 79,131,852
<CURRENT-LIABILITIES> 21,831,384
<BONDS> 21,301,364
0
0
<COMMON> 406,572
<OTHER-SE> 35,592,532
<TOTAL-LIABILITY-AND-EQUITY> 79,131,852
<SALES> 87,117,622
<TOTAL-REVENUES> 87,117,622
<CGS> 69,313,906
<TOTAL-COSTS> 69,313,906
<OTHER-EXPENSES> 15,227,411
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 668,756
<INCOME-PRETAX> 1,907,549
<INCOME-TAX> 810,000
<INCOME-CONTINUING> 1,097,549
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,097,549
<EPS-BASIC> 0.30
<EPS-DILUTED> 0.30
</TABLE>
December 31, 1999
JACO ELECTRONICS, INC.
145 Oser Avenue
Hauppauge, NY 11788
NEXUS CUSTOM ELECTRONICS, INC.
Prospect Street
Brandon, VT 05733
Gentlemen:
Reference is made to the Second Restated and Amended Loan and Security
Agreement between us bearing an effective date of September 13, 1995, as amended
and supplemented (the "Agreement"). All initially capitalized terms not
otherwise defined herein shall have such meaning as are ascribed to them under
the Agreement.
It is hereby agreed by and between us that the Agreement is hereby
amended effective December 31, 1999, as follows:
1. 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 1.5 to 1.0."
2. 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 1.60 to 1.0;
"Indebtedness" shall mean consolidated total
liabilities of Debtor and its Subsidiaries determined
in accordance with generally accepted accounting
principles consistently applied."
Except as herein specifically amended, the Agreement shall remain in
full force and effect in accordance with its original terms, except as
previously amended.
<PAGE>
If the foregoing accurately reflects our understanding, kindly
sign the enclosed copy of this letter and return it to our office as soon as
practicable.
Very truly yours,
GMAC COMMERCIAL CREDIT LLC,successor
by merger to BNY FINANCIAL CORPORATION,
successor in interest to THE BANK OF
NEW YORK COMMERCIAL CORPORATION,
as Agent and Lender
By: /s/ Daniel Murray_
Title: Senior Vice President
FLEET BANK, N.A. f/k/a
NATWEST BANK N.A., as Lender
By: /s/ Alice Aliceberg
Title: Vice President
ACCEPTED & AGREED TO:
JACO ELECTRONICS, INC.
By:/s/ Jeffrey D. Gash
Title: Vice President
NEXUS CUSTOM ELECTRONICS, INC.
By:/s/ Jeffrey D. Gash
Title: Vice President
