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, 2001
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 November 9, 2001
- - 5,707,459 (Excluding 618,300 Shares of Treasury Stock).
FORM 10-Q September 30, 2001
Page 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, June 30,
2001 2001
--------------- -----------
ASSETS
Current Assets
Cash $ 517,940 $ 89,523
Marketable securities 664,360 771,406
Accounts receivable - net 30,409,274 37,820,946
Inventories 55,462,996 62,212,121
Prepaid expenses and other 1,668,973 824,121
Prepaid and refundable income taxes 1,429,839 486,325
Deferred income taxes 2,171,000 2,190,000
--------- ---------
Total current assets 92,324,382 104,394,442
Property, plant and equipment - net 8,268,463 8,389,651
Deferred income taxes 453,000 436,000
Excess of cost over net assets acquired - net 20,095,844 20,095,844
Other assets 3,294,194 2,998,902
----------- -----------
$124,435,883 $136,314,839
============ ============
See accompanying notes to condensed consolidated financial statements.
2
FORM 10-Q September 30, 2001
Page 3
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
September 30, June 30,
2001 2001
---- ----
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 17,976,291 $ 25,004,058
Current maturities of long term debt and
capitalized lease obligations 1,027,823 1,081,905
------------- ------------
Total current liabilities 19,004,114 26,085,963
Long term debt and capitalized lease obligations 52,866,185 56,128,243
Deferred compensation 862,500 850,000
SHAREHOLDERS' EQUITY
Preferred stock - authorized, 100,000 shares,
$10 par value; none issued
Common stock - authorized, 20,000,000,
$.10 par value; issued 6,325,759 and
6,315,759 shares, respectively, and 5,707,459
and 5,697,459 shares outstanding, respectively 632,576 631,576
Additional paid-in capital 24,639,866 24,615,866
Retained earnings 28,644,051 30,146,599
Accumulated other comprehensive (loss) income (8,894) 61,107
Treasury stock (2,204,515) (2,204,515)
------------ ------------
Total shareholders' equity 51,703,084 53,250,633
---------- ----------
$124,435,883 $136,314,839
============ ============
See accompanying notes to condensed consolidated financial statements.
3
FORM 10-Q September 30, 2001
Page 4
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
2001 2000
-------------- -------------
NET SALES $49,430,523 $94,158,828
COST AND EXPENSES
Cost of goods sold 41,415,022 73,541,170
---------- ----------
Gross profit 8,015,501 20,617,658
Selling, general and administrative expenses 9,392,345 11,834,056
------------ ------------
Operating (loss) profit (1,376,844) 8,783,602
Interest expense 769,704 888,735
------------ ------------
(Loss) earnings before income taxes (2,146,548) 7,894,867
Income tax (benefit) provision (644,000) 3,237,000
------------ ------------
NET (LOSS) EARNINGS $(1,502,548) $ 4,657,867
============ ============
Net (loss) earnings per common share:
Basic $ (0.26) $ 0.83
============ ============
Diluted $ (0.26) $ 0.75
============ ============
Weighted average common shares outstanding:
Basic 5,700,937 5,633,959
============ ============
Diluted 5,700,937 6,234,768
============ ============
See accompanying notes to condensed consolidated financial statements.
4
FORM 10-Q September 30, 2001
Page 5
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2001
(UNAUDITED)
Additional
paid-in Retained
Shares Amount capital earnings
--------------- -------------- ---------------- -------------------
Balance at July 1, 2001 6,315,759 $ 631,576 $ 24,615,866 $ 30,146,599
Net loss (1,502,548)
Unrealized loss on marketable
securities, net of deferred taxes
Exercise of stock options 10,000 1,000 24,000
--------------- -------------- ---------------- --------------------
Balance at September 30, 2001 6,325,759 $ 632,576 $ 24,639,866 $ 28,644,051
=============== ============== ================ ====================
Accumulated
other Total
comprehensive Treasury shareholders'
income (loss) stock equity
--------------- ---------------- -----------------
Balance at July 1, 2001
$ 61,107 $ (2,204,515) $ 53,250,633
Net loss
(1,502,548)
Unrealized loss on marketable
securities, net of deferred taxes (70,001) (70,001)
Exercise of stock options
25,000
--------------- ---------------- -----------------
Balance at September 30, 2001 $ (8,894) $ (2,204,515) $ 51,703,084
=============== ================ =================
See accompanying notes to condensed consolidated financial statements.
5
FORM 10-Q
Page 6 September 30, 2001
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
2001 2000
------------------ -----------------
Cash flows from operating activities
Net (loss) earnings $ (1,502,548) $ 4,657,867
Adjustments to reconcile net (loss) earnings to net
cash provided by (used in) operating activities
Depreciation and amortization 592,139 735,220
Deferred compensation 12,500 46,250
Deferred income tax expense (benefit) 41,032 (113,600)
Provision for doubtful accounts 176,900 360,703
Changes in operating assets and liabilities,
Decrease (increase) in operating assets - net 12,225,238 (25,517,995)
(Decrease) increase in operating liabilities - net (7,027,767) 7,588,449
------------------ -----------------
Net cash provided by (used in) operating activities 4,517,494 (12,243,106)
------------------ -----------------
Cash flows from investing activities
Capital expenditures (69,723) (1,133,573)
Increase in marketable securities (1,987) (1,969)
Increase in other assets (329,542) (21,362)
------------------ -----------------
Net cash used in investing activities (401,252) (1,156,904)
------------------ -----------------
Cash flows from financing activities
Borrowings under line of credit 44,782,170 87,922,848
Payments under line of credit (48,241,778) (73,943,121)
Principal payments under equipment financing
and term loans (253,217) (211,427)
Payment of fractional shares (559)
Proceeds from exercise of stock options 25,000
------------------ -----------------
Net cash (used in) provided by financing activities (3,687,825) 13,767,741
------------------ -----------------
NET INCREASE IN CASH 428,417 367,731
------------------ -----------------
Cash at beginning of period 89,523 617,603
------------------ -----------------
Cash at end of period $ 517,940 $ 985,334
================== =================
Supplemental schedule of non-cash financing and
investing activities:
Equipment acquired under capital lease obligations $ 396,685
See accompanying notes to condensed consolidated financial statements.
6
FORM 10-Q September 30, 2001
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, 2001 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 $70,000,000 term loan and revolving line of credit facility
with its banks, which is based principally on eligible accounts receivables and
inventories as defined in the loan agreement. The agreement was amended
effective September 30, 2001 to (i) extend the maturity date to September 14,
2003, and (ii) change the requirements of certain financial covenants. The
interest rate is based on the average 30-day LIBOR plus 1% to 2-1/4% 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) For interim financial reporting purposes, the Company uses the gross profit
method for computing inventories, which consists of goods held for resale.
4) On September 18, 2001, the Company announced that its Board of Directors
authorized the repurchase of up to 250,000 shares of its outstanding common
stock. Purchases may be made from time to time in market or private transactions
at prevailing market prices.
5) On July 20, 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141 ("SFAS No. 141"), "Business
Combinations," and Statement of Financial Accounting Standards No. 142 ("SFAS
No. 142"), "Goodwill and Other Intangible Assets." SFAS No. 141 is effective for
all business combinations completed after June 30, 2001. SFAS No. 142 is
effective for fiscal years beginning after December 15, 2001. However, certain
provisions of this statement apply to goodwill and other intangible assets
acquired between July 1, 2001 and the effective date of SFAS No. 142. The new
standards require that all business combinations initiated after June 30, 2001
be accounted for under the purchase method. In addition, all intangible assets
acquired that are obtained through contractual or legal right, or are capable of
being separately sold, transferred, licensed, rented or exchanged shall be
recognized as an asset apart from goodwill. Goodwill and intangibles with
indefinite lives will no longer be subject to amortization, but will be subject
to at least an annual assessment for impairment by applying a fair value-based
test.
The Company has adopted, as of July 1, 2001, the provisions of SFAS
Nos. 141 and 142. Accordingly, the results for the three months ended September
30, 2001 excludes approximately $279,000 of such amortization, as compared to
approximately $222,000, which was included in the comparable period last year.
By December 31, 2001, the Company will have completed a transitional fair
value-based impairment test of goodwill to determine if the fair value is less
than the recorded value at July 1, 2001. Impairment losses, if any, resulting
from the transitional testing will be recognized in the quarter ended December
31, 2001 as a cumulative effect of a change in accounting principle.
7
FORM 10-Q September 30, 2001
Page 8
The following table presents a reconciliation of net (loss) earnings
and net (loss) earnings per common share amounts, as reported in the Company's
statement of operations, to those amounts adjusted for goodwill and intangible
asset amortization determined in accordance with the provisions of SFAS No. 142.
Three Months Ended September 30,
2001 2000
----- -----
(Unaudited) (Unaudited)
Dollars in thousands except
per share data
Reported net (loss) earnings $ (1,503) $ 4,658
Add back: goodwill amortization 213
Add back: franchise agreement amortization 9
-------- -------
Adjusted net (loss) earnings $ (1,503) $ 4,880
========= =======
BASIC (LOSS) EARNINGS PER SHARE:
Reported net (loss) earnings $ (0.26) $ 0.83
Goodwill amortization 0.04
Franchise agreement amortization 0.00
-------- -------
Adjusted net (loss) earnings $ (0.26) $ 0.87
======== ======
DILUTED (LOSS) EARNINGS PER SHARE:
Reported net (loss) earnings $ (0.26) $ 0.75
Goodwill amortization 0.03
Franchise agreement amortization 0.00
-------- -------
Adjusted net (loss) earnings $ (0.26) $ 0.78
======== ======
6) In August 2001, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard ("SFAS") No. 144 "Accounting for the Impairment or
Disposal of Long-Lived Assets." This statement is effective for fiscal years
beginning after December 15, 2001. This supercedes SFAS 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of,"
while retaining many of the requirements of such statement. The Company is
currently evaluating the impact of the statement.
7) On June 6, 2000, the Company acquired all of the issued and outstanding
shares of common stock, no par value, of Interface Electronics Corp.
("Interface"), a distributor of electronic parts, components and equipment,
located in Massachusetts. The purchase price was $15,400,000 payable in cash at
the closing, plus a deferred payment of $3,960,000 provided that certain
conditions, as defined in the purchase agreement, were met. As of September 30,
2001, $3,760,000 of the deferred payment has been paid. The remaining $200,000
has been provided for in the accompanying balance sheet. An additional $25,000
has been provided for in the accompanying balance sheet due to a purchase price
adjustment. On the second anniversary of the closing date a deferred payment of
up to $2,640,000 shall be paid if certain conditions, as defined in the purchase
agreement, are met. When the remaining contingency is resolved, the Company
shall record the current fair value of the consideration paid as additional
goodwill.
8
FORM 10-Q September 30, 2001
Page 9
The acquisition has been accounted for as a purchase and the operations of
Interface have been included in the Company's Statement of Operations since the
date of acquisition, June 6, 2000. Included in other assets are the costs of the
identifiable intangible assets acquired, principally an employment agreement
which is being amortized on a straight-line basis over five years, and a
franchise agreement which was being amortized on a straight-line basis over
fifteen years until the Company's adoption of SFAS No. 142. The excess of the
purchase price and related expenses over the net tangible and identifiable
intangible assets acquired amounted to approximately $17,486,000 and was being
amortized on a straight-line basis over twenty years until the Company's
adoption of SFAS No. 142.
8) On February 25, 2000, the Company purchased the operating assets of PGI,
Industries, Inc., ("PGI") an exporter of electronic components, located in
Ronkonkoma, New York. The purchase price was $1,200,000 paid in cash, plus a
deferred payment of $100,000 payable over the next two years based on certain
conditions, as defined in the purchase agreement. As of September 30, 2001,
$50,000 of the deferred payment has been paid. When the remaining contingency is
resolved, the Company shall record the current fair value of the consideration
issued as additional costs of the acquired enterprise. The acquisition has been
accounted for as a purchase and the operations of PGI have been included in the
Company's Statement of Operations since the date of acquisition, February 25,
2000. The excess of the purchase price over the fair value of the assets
acquired, approximately $260,000, was being amortized on a straight-line basis
over twenty years until the Company's adoption of SFAS No. 142.
9) Total comprehensive income and its components for the three months ended
September 30, 2001 and 2000 are as follows:
Three Months Ended
September 30,
--------------------------------
2001 2000
-------------- -------------
Net (loss) income (1,502,548) 4,657,867
Unrealized loss
on marketable securities (109,033) (3,897)
Deferred tax benefit 39,032 1,400
-------------- -------------
Comprehensive (loss) income (1,572,549) 4,655,370
============== =============
Accumulated other comprehensive income is comprised of unrealized gains
and losses on marketable securities, net of the related tax effect.
9
FORM 10-Q September 30, 2001
Page 10
10) The number of shares used in the Company's basic and diluted earnings per
share computations are as follows:
Three Months Ended
September 30,
--------------------------------
2001 2000
-------------- -------------
Weighted average common shares
outstanding net of treasury shares,
for basic earnings per share 5,700,937 5,633,959
Common stock equivalents for
stock options 600,809
-------------- -------------
Weighted average common shares
outstanding for diluted earnings per share 5,700,937 6,234,768
============== =============
The diluted loss per common share for the three months ended September
30, 2001 is based only on the weighted average number of common shares
outstanding during the period, as the inclusion of 311,753 common share
equivalents would have been antidilutive.
11) 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
ended September 30, 2001 and 2000 is not considered material to the financial
statements.
The Company's chief operating decision maker utilizes net sales and
net earnings 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:
10
FORM 10-Q September 30, 2001
Page 11
Three Months Ended
September 30,
2001 2000
--------- -------
(in thousands)
Net sales from external customers
Electronics components distribution $42,438 $87,767
Contract manufacturing 6,993 6,392
------- -------
$49,431 $94,159
====== ======
Intersegment net sales
Electronics components distribution $ 114 $ 128
Contract manufacturing _____ _____
$ 114 $ 128
========= =========
Operating (loss) profit
Electronics components distribution $ (1,574) $ 8,259
Contract manufacturing 197 525
------- -------
$ (1,377) $ 8,784
======= =====
Interest expense
Electronics components distribution $ 604 $ 752
Contract manufacturing 166 137
-------- --------
$ 770 $ 889
====== =======
Income tax (benefit) provision
Electronics components distribution $ (654) $ 3,078
Contract manufacturing 10 159
-------- ---------
$ (644) $ 3,237
========= =========
Identifiable assets
Electronics components distribution $107,552 $138,719
Contract manufacturing 16,884 13,655
-------- --------
$124,436 $152,374
======= =======
Capital expenditures
Electronics components distribution $ 70 $ 333
Contract manufacturing 801
------ --------
$ 70 $ 1,134
====== =========
Depreciation and amortization
Electronics components distribution $ 369 $ 536
Contract manufacturing 223 199
-------- --------
$ 592 $ 735
======= =======
11
FORM 10-Q September 30, 2001
Page 12
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:
Except for the historical information, this filing includes
forward-looking statements that involve risks and uncertainties, including, but
not limited to, general industry and economic conditions, the impact of
competitive products, product demand and market acceptance risks, fluctuations
in operating results, delays in development of highly-complex products, the
ability of the Company to continue to expand its operations, the level of costs
incurred in connection with the Company's expansion efforts and the financial
strength of the Company's customers and suppliers and other risks detailed from
time to time in the Company's Securities and Exchange Commission filings. The
forward-looking statements in this filing involve risks and uncertainties which
could cause actual results, performance or trends, including margins, SG&A
expenses as a percentage of revenues and earnings per diluted share, to differ
materially from those expressed in the forward-looking statements. The Company
believes that all forward-looking statements made by it have a reasonable basis,
but there can be no assurance that management's expectations, beliefs or
projections as expressed in the forward-looking statements will actually occur
or prove to be correct. Actual results may differ materially from such
information set forth herein.
GENERAL
Jaco is a distributor of electronic components, 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.
12
FORM 10-Q September 30, 2001
Page 13
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
September 30,
----------------------------------
2001 2000
--------------- ------------
Net sales 100.0% 100.0%
Cost of goods sold 83.8 78.1
--------------- ---------------
Gross profit 16.2 21.9
Selling, general and
administrative expenses 19.0 12.6
--------------- ---------------
Operating (loss) profit (2.8) 9.3
Interest expense 1.5 0.9
--------------- ---------------
Loss (earnings) before income taxes (4.3) 8.4
Income tax (benefit) provision (1.3) 3.5
--------------- ---------------
NET (LOSS) EARNINGS (3.0)% 4.9%
============== ===============
COMPARISON OF THE THREE MONTHS ENDED SEPTEMBER 30, 2001 AND SEPTEMBER 30, 2000
- -------------------------------------------------------------------------------
Net sales for the three months ended September 30, 2001 were $49.4 million
compared to $94.2 million for the three months ended September 30, 2000, a
decrease of approximately $44.8 million or 48%. The decrease in net sales is
primarily attributable to the continuing weak demand for electronic components
throughout the electronics industry. Additionally, many of our customers have
excess inventory based on current usage.
Gross profit was $8.0 million for the three months ended September 30,
2001, a decrease of $12.6 million, or 61%, compared to $20.6 million for the
three months ended September 30, 2000. Gross profit margins were 16.2% compared
to 21.9%, respectively. During the three months ended September 30, 2001, demand
for components continued to weaken, thereby resulting in a decrease in our
margins. We do not foresee any material increase in margins until such time as
the industry rebounds.
Selling, general and administrative ("SG&A") expenses were $9.4 million for
the three months ended September 30, 2001, a decrease of $2.4 million, or 20.6%,
compared to $11.8 million for the three months ended September 30, 2000. As a
percentage of net sales, SG&A expenses increased to 19.0% during the current
quarter, compared to 12.6% during the same quarter last year. The decrease in
spending is attributable to lower staffing levels required as a result of the
decrease in demand for product and a decrease in variable costs, such as
commissions paid to sales personnel, as a result of the reduction in sales.
Management is continuing to review all SG&A expenses, and will continue to
reduce costs that are deemed discretionary.
13
FORM 10-Q September 30, 2001
Page 14
Interest expense decreased to $0.8 million for the three months ended
September 30, 2001, as compared to $0.9 million for the three months ended
September 30, 2000, or approximately 13%. The reduction in interest expense was
primarily the result of a decrease in interest rates. Additionally, due to the
decrease in sales, there has been a reduction in Accounts Receivable and
management has implemented inventory reduction programs. These factors have
resulted in a reduction in bank borrowings.
Net loss for the three months ended September 30, 2001 was $1.5 million,
$0.26 per share diluted, compared to net earnings for the three months ended
September 30, 2000 of $4.7 million, or $0.75 per share diluted. The loss for the
current quarter is primarily the result of the decrease in sales and reduction
in gross profit margin.
LIQUIDITY AND CAPITAL RESOURCES
Our agreement with our banks, as amended effective September 30, 2001,
expires on September 14, 2003. The agreement provides us with a $70 million term
loan and revolving line of credit facility based principally on eligible
accounts receivable and inventories as defined in the agreement. The interest
rate of the credit facility is based on the average 30-day LIBOR rate plus
1.0%-2.25% depending on our 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
$51.1 million at September 30, 2001. Borrowings under this facility are
collateralized by substantially all of our assets. The agreement contains
provisions for maintenance of certain financial ratios, all of which we were in
compliance with at September 30, 2001, and prohibits the payment of cash
dividends.
For the three months ended September 30, 2001, our cash provided by
operating activities was approximately $4.5 million, as compared to net cash
used in operating activities of $12.2 million for the same period last fiscal
year. The increase in net cash provided is primarily attributable to a decrease
in accounts receivable and inventory. This was partially offset by a decrease in
accounts payable and accrued expenses for the three months ended September 30,
2001. The decrease in accounts receivable and inventory was the result of the
decrease in net sales for the three months ended September 30, 2001, as compared
to the same period last year. Net cash used in investing activities decreased to
$0.4 million for the three months ended September 30, 2001, as compared to $1.2
million for the three months ended September 30, 2000. The decrease is primarily
attributable to a reduction in capital expenditures. Net cash used in financing
activities was $3.7 million for the three months ended September 30, 2001 as
compared to net cash provided by financing activities of $13.8 million for the
comparable period last fiscal year. The increase in net cash used is primarily
attributable to the decrease in net borrowings under the line of credit of
approximately $17.4 million.
Our 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 three months ended September 30, 2001 and September 30, 2000, our
inventory turnover was 2.8x and 5.1x, respectively. The average days outstanding
of our accounts receivable at September 30, 2001 were 63 days, as compared to 46
days at September 30, 2000. We believe that cash flow from operations and funds
available under our credit facility will be sufficient to fund our 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.
14
FORM 10-Q September 30, 2001
Page 15
Quantitative and Qualitative Disclosure about Market Risk.
We are exposed to interest rate changes with respect to our credit
facility which bears interest at the higher of the prime rate or the federal
funds rate plus 0.5%, or at our option, at a rate equal to the average 30-day
LIBOR rate plus 1.0% to 2.25% depending on our performance for the immediately
preceding four fiscal quarters measured by a certain financial ratio, and may be
adjusted quarterly. At October 31, 2001 $46.3 million was outstanding under the
credit facility. Changes in the LIBOR interest rate during the fiscal year will
have a positive or negative effect on our interest expense. Each 1.0%
fluctuation in the LIBOR interest rate will increase or decrease interest
expense for us by approximately $0.5 million based on outstanding borrowings at
October 31, 2001.
The impact of interest rate fluctuations on other floating rate
debt is not material.
15
FORM 10-Q September 30, 2001
Page 16
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:
99.8.12 Amendment to Second Restated
and Amended Loan and Security Agreement
dated November 14, 2001
b) Reports on Form 8-K: None
16
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, Chief Financial Officer
(Principal Financial Officer)
DATED: November 14, 2001