1
FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period ended December 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 February 9,
2001 - 5,697,459 (Excluding 618,300 Shares of Treasury Stock).
2
FORM 10-Q December 31, 2000
Page 2
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
December 31, June 30,
2000 2000
------------ ------------
ASSETS
Current Assets
Cash $ 259,165 $ 617,603
Marketable securities 820,692 880,954
Accounts receivable - net 59,153,069 42,179,468
Inventories 72,196,403 53,415,793
Prepaid expenses and other 1,208,367 887,804
Deferred income taxes 2,360,000 1,975,000
------------ ------------
Total current assets 135,997,696 99,956,622
Property, plant and equipment - net 7,368,996 6,926,734
Excess of cost over net assets acquired - net 20,134,743 16,600,432
Other assets 2,981,938 2,845,305
------------ ------------
$166,483,373 $126,329,093
============ ============
See accompanying notes to condensed consolidated financial statements.
3
FORM 10-Q December 31, 2000
Page 3
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
December 31, June 30,
2000 2000
------------- -------------
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 47,934,078 $ 39,190,011
Accrued acquisition costs 3,960,000
Current maturities of long term debt and
capitalized lease obligations 720,828 807,444
Income taxes payable 1,363,654 1,575,319
------------- -------------
Total current liabilities 53,978,560 41,572,774
Long term debt and capitalized lease obligations 59,679,736 40,940,877
Deferred income taxes 206,000 225,000
Deferred compensation 825,000 800,000
SHAREHOLDERS' EQUITY
Preferred stock - authorized, 100,000 shares,
$10 par value; none issued
Common stock - authorized, 20,000,000 and 10,000,000
shares, respectively, $.10 par value; issued 6,288,259
and 6,252,259 shares, respectively, and 5,669,959
and 5,633,959 shares outstanding, respectively 628,826 625,226
Additional paid-in capital - net 24,276,201 23,906,301
Retained earnings 28,998,731 20,296,761
Accumulated other comprehensive income 94,834 166,669
Treasury stock (2,204,515) (2,204,515)
------------- -------------
Total shareholders' equity 51,794,077 42,790,442
------------- -------------
$ 166,483,373 $ 126,329,093
============= =============
See accompanying notes to condensed consolidated financial statements.
4
FORM 10-Q December 31, 2000
Page 4
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED DECEMBER 31,
(UNAUDITED)
2000 1999
------------ ------------
NET SALES $100,235,652 $ 45,100,259
COST AND EXPENSES
Cost of goods sold 80,158,461 35,232,148
------------ ------------
Gross profit 20,077,191 9,868,111
Selling, general and administrative expenses 12,052,203 7,978,814
------------ ------------
Operating profit 8,024,988 1,889,297
Interest expense 1,169,326 345,823
------------ ------------
Earnings before income taxes 6,855,662 1,543,474
Income tax provision 2,811,000 660,000
------------ ------------
NET EARNINGS $ 4,044,662 $ 883,474
============ ============
Net earnings per common share:
Basic $ 0.72 $ 0.16
============ ============
Diluted $ 0.65 $ 0.16
============ ============
Weighted average common shares outstanding:
Basic 5,655,089 5,480,282
============ ============
Diluted 6,230,451 5,558,258
============ ============
See accompanying notes to condensed consolidated financial statements.
5
FORM 10-Q December 31, 2000
Page 5
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE SIX MONTHS ENDED DECEMBER 31,
(UNAUDITED)
2000 1999
------------ ------------
NET SALES $194,394,480 $ 87,117,622
COST AND EXPENSES
Cost of goods sold 153,699,631 69,313,906
------------ ------------
Gross profit 40,694,849 17,803,716
Selling, general and administrative expenses 23,886,259 15,227,411
------------ ------------
Operating profit 16,808,590 2,576,305
Interest expense 2,058,061 668,756
------------ ------------
Earnings before income taxes 14,750,529 1,907,549
Income tax provision 6,048,000 810,000
------------ ------------
NET EARNINGS $ 8,702,529 $ 1,097,549
============ ============
Net earnings per common share:
Basic $ 1.54 $ 0.20
============ ============
Diluted $ 1.40 $ 0.20
============ ============
Weighted average common shares outstanding:
Basic 5,644,524 5,480,282
============ ============
Diluted 6,232,609 5,561,136
============ ============
See accompanying notes to condensed consolidated financial statements.
6
FORM 10-Q December 31, 2000
Page 6
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 31, 2000
(UNAUDITED)
Additional
paid-in Retained
Shares Amount capital earnings
----------- ----------- ----------- -----------
Balance at July 1, 2000 6,252,259 $ 625,226 $24,041,301 $20,296,761
Net earnings 8,702,529
Unrealized loss on marketable
securities - net
Comprehensive income
Payment of fractional shares (559)
Exercise of stock options 36,000 3,600 302,400
Deferred compensation
----------- ----------- ----------- -----------
Balance at December 31, 2000 6,288,259 $ 628,826 $24,343,701 $28,998,731
=========== =========== =========== ===========
Accumulated
other Total
comprehensive Treasury Deferred shareholders'
income stock compensation equity
------------- ----------- ------------ -------------
Balance at July 1, 2000 $ 166,669 $(2,204,515) $ (135,000) $42,790,442
-----------
Net earnings 8,702,529
Unrealized loss on marketable
securities - net (71,835) (71,835)
-----------
Comprehensive income 8,630,694
-----------
Payment of fractional shares (559)
Exercise of stock options 306,000
Deferred compensation 67,500 67,500
----------- ----------- ----------- -----------
Balance at December 31, 2000 $ 94,834 $(2,204,515) $ (67,500) $51,794,077
=========== =========== =========== ===========
See accompanying notes to condensed consolidated financial statements.
7
FORM 10-Q December 31, 2000
Page 7
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31,
(UNAUDITED)
2000 1999
------------- -------------
Cash flows from operating activities
Net earnings $ 8,702,529 $ 1,097,549
Adjustments to reconcile net earnings to net
cash provided by (used in) operating activities
Depreciation and amortization 1,486,162 877,159
Deferred compensation 92,500 92,500
Deferred income tax benefit (363,000) (389,000)
Provision for doubtful accounts 746,201 259,075
Changes in operating assets and liabilities,
Increase in operating assets - net (36,820,975) (7,084,959)
Increase in operating liabilities - net 8,532,402 3,352,129
------------- -------------
Net cash used in operating activities (17,624,181) (1,795,547)
------------- -------------
Cash flows from investing activities
Capital expenditures (1,415,902) (220,923)
Increase in marketable securities (52,573) (68,918)
(Increase) decrease in other assets (223,466) 75,675
------------- -------------
Net cash used in investing activities (1,691,941) (214,166)
------------- -------------
Cash flows from financing activities
Borrowings under line of credit 176,491,113 29,094,235
Payments under line of credit (157,413,488) (27,119,478)
Principal payments under equipment financing
and term loans (425,382) (408,164)
Payment of fractional shares (559)
Proceeds from exercise of stock options 306,000
------------- -------------
Net cash provided by financing activities 18,957,684 1,566,593
------------- -------------
NET DECREASE IN CASH (358,438) (443,120)
------------- -------------
Cash at beginning of period 617,603 922,247
------------- -------------
Cash at end of period $ 259,165 $ 479,127
============= =============
Supplemental schedule of non-cash financing and
investing activities:
Accrued acquisition costs $ 3,960,000
Equipment under capital leases $ 126,229
See accompanying notes to condensed consolidated financial statements.
8
FORM 10-Q December 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, 2000 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 to (i) increase the amount available under the revolving line of credit
to $70,000,000 (ii) extend the maturity date to September 14, 2002, (iii) change
the interest rate to a rate based on the average 30-day LIBOR plus 1-3/4%
through the quarter ended September 30, 2000, at such time the rate converted to
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, and (iv) change the requirements of certain financial
covenants. The applicable interest rate may be adjusted quarterly and borrowings
under this facility are collateralized by substantially all of the assets of the
Company.
3) The Board of Directors of the Company had authorized the purchase of up
to 975,000 shares of its outstanding common stock under a stock repurchase
program. The purchases were made by the Company from time to time on the open
market. The Company had made purchases of 618,300 shares of its common stock
from July 31, 1996 through September 13, 2000 for aggregate consideration of
$2,204,515. On September 14, 2000, the Board of Directors passed a resolution to
terminate the stock repurchase program.
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 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, (June 6, 2000) plus a deferred payment of $3,960,000 provided that
certain conditions, as defined in the purchase agreement, are met. As of
December 31, 2000, these conditions have been met. On the second anniversary of
the closing date a deferred payment of up to $2,640,000 shall be paid provided
that 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 which will be amortized
over the remaining life of the asset.
9
FORM 10-Q December 31, 2000
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 Earnings 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 and
a franchise agreement which are being amortized on a straight-line basis over
five and fifteen years, respectively. The excess of the purchase price and
related expenses over the net tangible and identifiable intangible assets
acquired amounted to approximately $17,008,000 and is being amortized on a
straight-line basis over twenty years.
Summarized below are the unaudited pro forma results of operations of
the Company as if Interface has been acquired at the beginning of the fiscal
periods presented:
Three months ended Six months ended
December 31, December 31,
1999 1999
-------------- ------------
Net sales $ 56,042,529 $106,217,723
Net loss (345,836) (910,584)
Net loss per common share
Basic $ (0.06) $ (0.17)
Diluted $ (0.06) $ (0.17)
The pro forma financial information presented above for the three and
six months ended December 31, 1999 is not necessarily indicative of either the
results of operations that would have occurred had the acquisition taken place
at the beginning of the periods presented or of future operating results of the
combined companies.
6) 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. When this contingency is
resolved, the Company shall record the current fair value of the consideration
issued as additional costs of the acquired enterprise. These additional costs
shall be amortized over the remaining life of the asset. The acquisition has
been accounted for as a purchase and the operations of PGI have been included in
the Company's Statement of Earnings since the date of acquisition, February 25,
2000. The excess of the purchase price over the fair value of the assets
acquired, approximately $210,000, is being amortized on a straight-line basis
over twenty years. Pro forma results of operations are not material.
7) On June 26, 2000, the Company announced a 3-for-2 stock split which was
in the form of a 50% common stock dividend payable on July 24, 2000 to
shareholders of record on July 10, 2000. All references to the number of
weighted average common shares outstanding and earnings per share have been
restated to reflect the 3-for-2 stock split.
10
FORM 10-Q December 31, 2000
Page 10
8) 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,
------------------------ ------------------------
2000 1999 2000 1999
--------- --------- --------- ---------
Weighted average common shares
outstanding net of treasury shares,
for basic earnings per share 5,655,089 5,480,282 5,644,524 5,480,282
Common stock equivalents for
stock options 575,362 77,976 588,085 80,854
--------- --------- --------- ---------
Weighted average common shares
outstanding for diluted earnings per share 6,230,451 5,558,258 6,232,609 5,561,136
========= ========= ========= =========
Excluded from the calculation of earnings per share are options and
warrants to purchase 45,000 shares of the Company's common stock for the three
and six months ended December 31, 2000 as compared to 495,444 shares for the
three and six months ended December 31, 1999, as their inclusion would have been
antidilutive.
9) 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, 2000 and 1999 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:
11
FORM 10-Q December 31, 2000
Page 11
Three Months Ended Six Months Ended
December 31, December 31,
---------------------- ----------------------
2000 1999 2000 1999
-------- -------- -------- --------
(in thousands) (in thousands)
Net sales from external customers
Electronics components distribution $ 93,656 $ 42,215 $181,423 $ 81,439
Contract manufacturing 6,580 2,885 12,971 5,679
-------- -------- -------- --------
$100,236 $ 45,100 $194,394 $ 87,118
======== ======== ======== ========
Intersegment net sales
Electronics components distribution $ 254 $ 63 $ 382 $ 131
Contract manufacturing
-------- -------- -------- --------
$ 254 $ 63 $ 382 $ 131
======== ======== ======== ========
Operating profit
Electronics components distribution $ 7,712 $ 1,704 $ 15,971 $ 2,286
Contract manufacturing 313 185 838 290
-------- -------- -------- --------
$ 8,025 $ 1,889 $ 16,809 $ 2,576
======== ======== ======== ========
Interest expense
Electronics components distribution $ 1,015 $ 220 $ 1,767 $ 412
Contract manufacturing 154 126 291 257
-------- -------- -------- --------
$ 1,169 $ 346 $ 2,058 $ 669
======== ======== ======== ========
Income tax provision
Electronics components distribution $ 2,746 $ 635 $ 5,824 $ 796
Contract manufacturing 65 25 224 14
-------- -------- -------- --------
$ 2,811 $ 660 $ 6,048 $ 810
======== ======== ======== ========
Identifiable assets
Electronics components distribution $150,593 $ 69,329 $150,593 $ 69,329
Contract manufacturing 15,890 9,803 15,890 9,803
-------- -------- -------- --------
$166,483 $ 79,132 $166,483 $ 79,132
======== ======== ======== ========
Capital expenditures
Electronics components distribution $ 196 $ 63 $ 529 $ 129
Contract manufacturing 86 46 887 92
-------- -------- -------- --------
$ 282 $ 109 $ 1,416 $ 221
======== ======== ======== ========
Depreciation and amortization
Electronics components distribution $ 540 $ 283 $ 1,076 $ 571
Contract manufacturing 211 155 410 306
-------- -------- -------- --------
$ 751 $ 438 $ 1,486 $ 877
======== ======== ======== ========
12
FORM 10-Q December 31, 2000
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:
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, 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.
13
FORM 10-Q December 31, 2000
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 Six Months Ended
December 31, December 31,
------------------ ------------------
2000 1999 2000 1999
----- ----- ----- -----
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 80.0 78.1 79.1 79.6
----- ----- ----- -----
Gross Profit 20.0 21.9 20.9 20.4
Selling, general and
administrative expenses 12.0 17.7 12.3 17.4
----- ----- ----- -----
Operating profit 8.0 4.2 8.6 3.0
Interest expense 1.2 0.8 1.0 0.8
----- ----- ----- -----
Earnings before income taxes 6.8 3.4 7.6 2.2
Income tax provision 2.8 1.4 3.1 0.9
----- ----- ----- -----
NET EARNINGS 4.0% 2.0% 4.5% 1.3%
===== ===== ===== =====
COMPARISON OF THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2000 AND
DECEMBER 31, 1999
Net sales for the three and six months ended December 31, 2000 were
$100.2 million and $194.4 million, respectively, compared to $45.1 million and
$87.1 million for the three and six months ended December 31, 1999,
respectively, representing increases in net sales of 122.3% and 123.1%,
respectively. During the first six months of Fiscal 2001, the Company benefited
from strong demand for components. Net sales increased in flat panel displays,
contract manufacturing, and additional sales from the acquisition of Interface
Electronics Corp. ("Interface"), which was completed during June 2000. In
addition to providing value-added services to assist customers in procurement
and inventory management, the Company has targeted emerging and middle market
accounts as well as large global contract manufacturers.
Gross profit increased $10.2 million, or 103.5%, for the three months
ended December 31, 2000 and $22.9 million, or 128.6%, for the six months ended
December 31, 2000 compared to the same periods last fiscal year, primarily due
to the increase in net sales. Gross profit margins, as a percentage of net
sales, were 20.0% and 20.9% for the three and six months ended December 31,
2000, respectively, compared to 21.9% and 20.4% for the three and six months
ended December 31, 1999, respectively. The decrease in gross profit margins for
the three months compared to last year was primarily the result of a change in
product mix toward active components which historically realize slightly lower
margins.
14
FORM 10-Q December 31, 2000
Page 14
Selling, general and administrative ("SG&A") expenses were $12.1
million and $23.9 million for the three and six months ended December 31, 2000,
respectively, compared to $8.0 million and $15.2 million for the three and six
months ended December 31, 1999, respectively. This represented an increase of
$4.1 million, or 51.1%, and $8.7 million, or 56.9% for the three and six months
ended December 31, 2000, respectively, compared to the same periods during
Fiscal 2000. The increase in spending is primarily attributable to expenses
necessary to support the growth in sales. These expenses include additional
sales and marketing personnel, investments in the Company's infrastructure,
variable costs associated with the increase in net sales and the additional
costs associated with the acquisition of Interface. As a percentage of net sales
SG&A decreased to 12.0% and 12.3% for the three and six months ended December
31, 2000, respectively, compared to 17.7% and 17.5% for the comparable periods
during Fiscal 2000. The decreases reflect operating efficiencies associated with
the higher revenue levels.
Operating profit for the three and six months ended December 31, 2000
were $8.0 million and $16.8 million, respectively compared to $1.9 million and
$2.6 million for the three and six months ended December 31, 1999, respectively.
This represents an increase of $6.1 million, or 324.8% and $14.2 million, or
552.4%, when comparing Fiscal 2001 to Fiscal 2000. The increase was the result
of the increase in net sales and the Company's ability to achieve operating
efficiencies reflected in lower SG&A as a percentage of net sales.
Interest expense increased to $1.2 million and $2.1 million for the
three and six months ended December 31, 2000, respectively, compared to $.3
million and $.7 million respectively, for the same periods during Fiscal 2000.
The increases were primarily due to the additional borrowings of approximately
$15 million to acquire Interface, and the additional borrowings required, to
support the increases in accounts receivable and inventory necessary as a result
of the growth in net sales.
Net earnings for the three and six months ended December 31, 2000 were
$4.0 million, or 4%, and $8.7 million, or 4.5%, respectively, compared to $.9
million, or 2.0%, and $1.1 million, or 1.3%, respectively, for the comparable
periods during Fiscal 2000. The increase in net earnings was attributable to the
increase in net sales and the increase in gross profit. The Company also
benefited from the acquisition of Interface.
LIQUIDITY AND CAPITAL RESOURCES
Our agreement with our banks, as amended on September 28, 2000 and
January 29, 2001, expires on September 14, 2002.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 was based on the average 30-day LIBOR rate
plus 1.75% through the quarter ended September 30, 2000. At such time, the rate
converted to 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 $58.8 million at December 31, 2000.
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 December 31, 2000, and
prohibits the payment of cash dividends.
For the six months ended December 31, 2000, our cash used in operating
activities was approximately $17.6 million, as compared to net cash used in
operating activities of $1.8 million for the same period last fiscal year. The
increase in net cash used is primarily attributable to an increase in accounts
receivable and inventory. This was partially offset by an increase in accounts
payable and accrued expenses and net earnings for the six months ending December
31, 2000. The increase in accounts receivable was the result of the increase in
net sales during the quarter. The Company increased its inventory levels to
support its sales growth. Net cash used in investing activities increased to
$1.7 million for the six months ending December 31, 2000, as compared to $0.2
million for the six months ending December 31, 1999. The increase is primarily
attributable to capital expenditures. Net cash provided by financing activities
was $19.0 million for the six months ended December 31, 2000 as compared to net
cash provided by financing activities of $1.6 million for the comparable period
last fiscal year. The increase is primarily attributable to the increase in net
borrowings under the line of credit of approximately $19.1 million required to
fund the increases in inventory and accounts receivable.
15
FORM 10-Q December 31, 2000
Page 15
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 six months ended December 31, 2000 and December 31, 1999, our
inventory turnover was 4.9x and 4.1x, respectively. The average days outstanding
of our accounts receivable at December 31, 2000 was 48 days, as compared to 55
days at December 31, 1999.
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.
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 January 31, 2001, $60.6 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 $0.6 million based on outstanding borrowings at
January 31, 2001.
The impact of interest rate fluctuations on other floating rate debt is
not material.
16
FORM 10-Q December 31, 2000
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
Our Annual Meeting of Shareholders was held on December 12, 2000. The
Shareholders approved the following:
(i) The election of each of the nominees to the Board of
Directors:
Stephen A. Cohen For: 4,724,945 Withheld: 630,575
Edward M. Frankel For: 4,725,342 Withheld: 630,178
Charles B. Girsky For: 4,724,945 Withheld: 630,575
Joel H. Girsky For: 4,724,945 Withheld: 630,575
Joseph F. Hickey, Jr. For: 4,725,342 Withheld: 630,178
Joseph F. Oliveri For: 4,725,342 Withheld: 630,178
(ii) An amendment to our Certificate of Incorporation to increase
the aggregate number of shares of common stock, $0.10 par
value per share, which we have the authority to issue from
10,000,000 shares to 20,000,000 shares.
For: 5,166,801 Against: 181,997 Abstention: 6,722
(iii) The adoption and approval of our 2000 Stock Option Plan.
For: 1,816,145 Against: 1,542,987 Abstention: 46,509
Item 5. Other Information
Nothing to Report
17
FORM 10-Q December 31, 2000
Page 17
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits
27.1 Financial Data Schedule
99.8.9 Amendment to Second Restated and Amended Loan and
Security Agreement dated January 29, 2001
b) Reports on Form 8-K
1. On October 20, 2000, a Current Report on Form 8-K,
Amendment No. 2, was filed to include revised audited
financial statements of Interface Electronics Corp. as of and
for the year ended December 31, 1999, unaudited statements of
Interface Electronics Corp. for the nine months ended March
31, 2000 and related proforma information.
2. On November 13, 2000, a Current Report on Form 8-K was
filed to include under Item 5 the declaration of a 3-for-2
stock split in the form of a 50% stock dividend with respect
to the common stock of the Company.
18
SIGNATURE
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 13, 2001