UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-Q
{X} QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2004
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 offices) (Zip Code)
Registrant's telephone number, including area code: (631) 273-5500
Indicate 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 reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
------ -----
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes No X
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Shares Outstanding at February 11, 2005
----- ---------------------------------------
Common Stock, $0.10 Par Value 6,262,832 (excluding 659,900
shares held as treasury stock)
FORM 10-Q December 31, 2004
Page 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
December 31, June 30,
2004 2004
--------------- -----------
ASSETS
Current Assets
Cash $ 66,601 $ 552,655
Marketable securities 833,948 770,283
Accounts receivable - net 32,097,812 35,926,553
Inventories 44,795,379 37,017,390
Prepaid expenses and other 2,157,334 1,513,657
Deferred income taxes 2,943,000 2,725,000
Current assets of discontinued operations --- 12,910,801
----------- ----------
Total current assets 82,894,074 91,416,339
Property, plant and equipment - net 2,079,984 2,003,137
Deferred income taxes 891,000 416,000
Excess of cost over net assets acquired - net 25,416,087 25,416,087
Note receivable 2,750,000 ---
Other assets 2,408,720 2,530,269
----------- -----------
Total assets $116,439,865 $121,781,832
============ ============
See accompanying notes to condensed consolidated financial statements.
FORM 10-Q December 31, 2004
Page 3
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
December 31, June 30,
2004 2004
---------------- ---------------
LIABILITIES & SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses $ 31,992,378 $ 34,068,132
Current maturities of long-term debt and
capitalized lease obligations 38,147,499 37,088,743
Income taxes payable 60,150 ---
Current liabilities of discontinued operations --- 2,800,664
------------- ------------
Total current liabilities 70,200,027 73,957,539
Long-term debt and capitalized lease obligations 88,998 118,525
Deferred compensation 1,025,000 1,000,000
SHAREHOLDERS' EQUITY
Preferred stock - authorized, 100,000 shares,
$10 par value; none issued
Common stock - authorized, 20,000,000 shares,
$.10 par value; issued 6,922,732 and
6,855,232 shares, respectively,
and 6,262,832 and 6,195,332 shares
outstanding, respectively 692,273 685,523
Additional paid-in capital 26,897,295 26,735,295
Retained earnings 19,779,523 21,562,396
Accumulated other comprehensive income 71,315 37,120
Treasury stock - 659,900 shares at cost (2,314,566) (2,314,566)
---------- -----------
Total shareholders' equity 45,125,840 46,705,768
---------- ----------
Total liabilities and shareholders' equity $116,439,865 $121,781,832
============ ============
See accompanying notes to condensed consolidated financial statements.
FORM 10-Q December 31, 2004
Page 4
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED DECEMBER 31,
(UNAUDITED)
2004 2003
-------------- -------------
Net sales $51,967,477 $61,488,811
Cost of goods sold 45,386,465 53,194,320
---------- ----------
Gross profit 6,581,012 8,294,491
Selling, general and administrative expenses 8,298,209 8,697,010
------------ ------------
Operating loss (1,717,197) (402,519)
Interest expense 476,369 509,063
------------ ------------
Loss from continuing operations
before income taxes (2,193,566) (911,582)
Income tax benefit (658,100) (319,369)
------------ ------------
Loss from continuing operations (1,535,466) (592,213)
Discontinued operations:
Earnings from discontinued operations,
net of income tax provision of $84,369 --- 154,976
------------ ------------
NET LOSS $(1,535,466) $ (437,237)
============ ============
PER SHARE INFORMATION
Basic and diluted (loss) earnings per common share:
Loss from continuing operations $(0.25) $(0.10)
Earnings from discontinued operations --- $ 0.03
------ -------
Net loss $(0.25) $(0.07)
======= =======
Weighted-average common shares and common
equivalent shares outstanding:
Basic and Diluted 6,262,832 5,928,169
============ ============
See accompanying notes to condensed consolidated financial statements.
FORM 10-Q December 31, 2004
Page 5
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31,
(UNAUDITED)
2004 2003
-------------- -------------
Net sales $112,204,114 $128,914,118
Cost of goods sold 98,021,730 111,941,631
---------- -----------
Gross profit 14,182,384 16,972,487
Selling, general and administrative expenses 16,986,706 17,831,188
------------ ------------
Operating loss (2,804,322) (858,701)
Interest expense 838,274 860,482
------------ ------------
Loss from continuing operations
before income taxes (3,642,596) (1,719,183)
Income tax benefit (1,092,800) (602,370)
------------ ------------
Loss from continuing operations (2,549,796) (1,116,813)
Discontinued operations:
(Loss) earnings from discontinued operations,
net of income tax (benefit)provision of $(39,800) and
$139,370 in 2004 and 2003, respectively (63,652) 256,005
Gain on sale of net assets of subsidiary, net of income
tax provision of $518,500 830,575 ---
------- --------
Earnings from discontinued operations 766,923 256,005
------- -------
NET LOSS $(1,782,873) $ (860,808)
============ ============
PER SHARE INFORMATION
Basic and diluted (loss) earnings per common share:
Loss from continuing operations $(0.41) $(0.19)
Earnings from discontinued operations $0.12 $ 0.04
----- -------
Net loss $(0.29) $(0.15)
======= =======
Weighted-average common shares and common
equivalent shares outstanding:
Basic and Diluted 6,233,117 5,860,146
============ ============
See accompanying notes to condensed consolidated financial statements.
FORM 10-Q December 31, 2004
Page 6
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES
IN SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED DECEMBER 31, 2004
(UNAUDITED)
Additional
Common stock paid-in Retained
Shares Amount capital earnings
--------------- -------------- ---------------- -------------------
Balance at July 1, 2004 6,855,232 $ 685,523 $ 26,735,295 $ 21,562,396
Net loss (1,782,873)
Unrealized gain on marketable
securities, net of deferred tax
expense of $21,000
Exercise of stock options 67,500 6,750 162,000
--------------- -------------- ---------------- -------------------
Balance at December 31, 2004 6,922,732 $ 692,273 $ 26,897,295 $ 19,779,523
=============== ============== ================ ===================
Accumulated
other Total
comprehensive Treasury shareholders'
income stock equity
--------------- ---------------- -----------------
Balance at July 1, 2004 $ 37,120 $ (2,314,566) $ 46,705,768
Net loss (1,782,873)
Unrealized gain on marketable
securities, net of deferred tax
expense of $21,000 34,195 34,195
Exercise of stock options 168,750
--------------- ---------------- -----------------
Balance at December 31, 2004 $ 71,315 $ (2,314,566) $ 45,125,840
=============== ================ =================
See accompanying notes to condensed consolidated financial statements.
FORM 10-Q December 31, 2004
Page 7
JACO ELECTRONICS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED DECEMBER 31,
(UNAUDITED)
2004 2003
-------------- --------------
Cash flows from operating activities
Net loss $ (1,782,873) $ (860,808)
Loss (earnings) from discontinued operations 63,652 (256,005)
Gain on sale of subsidiary (830,575) -
-------------- --------------
Loss from continuing operations (2,549,796) (1,116,813)
Adjustments to reconcile net loss to net
cash (used in) provided by operating activities
Depreciation and amortization 578,649 657,869
Deferred compensation 25,000 25,000
Deferred income tax benefit (714,000) (191,000)
Gain on sale of equipment - (2,100)
Provision for doubtful accounts 250,750 426,250
Changes in operating assets and liabilities
Increase in operating assets - net (4,376,141) (8,531,247)
(Decrease) increase in operating liabilities - net (2,850,079) 7,434,420
-------------- --------------
Net cash used in continuing operations (9,635,617) (1,297,621)
Net cash (used in) provided by discontinuing operations (447,716) 115,165
-------------- --------------
Net cash used in operating activities (10,083,333) (1,182,456)
-------------- --------------
Cash flows from investing activities
Purchase of marketable securities (8,470) (5,145)
Capital expenditures (501,482) (217,673)
Proceeds from sale of equipment - 2,100
Proceeds from sale of assets of a subsidiary,
net of transaction costs 9,070,000 -
-------------- --------------
Net cash provided by (used in) continuing operations 8,560,048 (220,718)
Net cash used in discontinuing operations (57,855) (59,549)
-------------- --------------
Net cash provided by (used in) investing activities 8,502,193 (280,267)
-------------- --------------
Cash flows from financing activities
Borrowings under line of credit 130,236,649 135,158,492
Repayments under line of credit (129,177,493) (134,252,155)
Release of compensating balance - 800,000
Principal payments under equipment financing
and term loans (29,927) (142,762)
Proceeds from exercise of stock options 168,750 455,188
-------------- --------------
Net cash provided by continuing operations 1,197,979 2,018,763
Net cash used in discontinuing operations (102,893) (226,252)
-------------- --------------
Net cash provided by financing activities 1,095,086 1,792,511
-------------- --------------
NET (DECREASE) INCREASE IN CASH (486,054) 329,788
-------------- --------------
Cash at beginning of period 552,655 157,467
-------------- --------------
Cash at end of period $ 66,601 $ 487,255
============== ==============
Supplemental schedule of non-cash financing and
investing activities:
Note receivable, received in conjunction with the $ 2,750,000
sale of assets of a subsidiary
See accompanying notes to condensed consolidated financial statements.
FORM 10-Q December 31, 2004
Page 8
JACO ELECTRONICS, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 of Jaco
Electronics, Inc. and its subsidiaries ("Jaco" or the "Company") at the end of
and for all 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 fiscal year ended June 30, 2004 and the notes thereto
included in the Company's Annual Report on Form 10-K for the fiscal year ended
June 30, 2004. The results of operations for the interim periods are not
necessarily indicative of the results for the entire year.
2) At December 31, 2004, the Company had cash of approximately $67,000 and
working capital of approximately $12,694,000 as compared to cash of $553,000 and
working capital of $17,549,000 at June 30, 2004. The Company incurred a loss of
approximately $1,783,000 during the six months ended December 31, 2004. The
Company utilized approximately $10,083,000 of cash in operations during the six
months ended December 31, 2004. Included in cash used in operating activities
was $10,721,000 of inventory purchases that will be utilized to fulfill existing
sales orders with a customer through June 30, 2005.
As discussed further in Note 4, the Company maintains a secured
revolving line of credit, which provides the Company with bank financing based
upon eligible accounts receivable and inventory, as defined. At December 31,
2004, the Company was in violation of certain financial covenants contained in
the credit agreement. On February 11, 2005, the Company entered into an
amendment to its credit agreement that retroactively established new covenants
with which the Company is currently in compliance.
Management believes that cost containment, improved operating controls,
paring back of unprofitable product lines, and a focused sales and marketing
effort should improve results from operations and cash flows in the near term.
Achievement of these goals, however, will be dependent upon the Company's
ability to generate sufficient revenues, improved operating costs and trade
support levels consistent with management's plans. Such operating performance
will be subject to financial, economic and other factors beyond the Company's
control, and there can be no assurance that the Company will be able to achieve
these goals. If these goals are not achieved it could have a material adverse
effect upon the Company.
3) On September 20, 2004, the Company completed the sale of substantially all of
the assets of its contract manufacturing subsidiary, Nexus Custom Electronics,
Inc. ("Nexus"), to Sagamore Holdings, Inc. for consideration of $13,000,000,
subject to closing adjustments, and the assumption of certain liabilities. The
divestiture of Nexus allows the Company to focus its resources on its core
electronics distribution business. Under the terms of the purchase agreement
relating to this transaction, the Company received $9,250,000 of the purchase
consideration in cash on the closing date. Such cash consideration was used to
repay a portion of the outstanding borrowings under the Company's line of credit
(See Note 4). The balance of the fixed portion of the purchase consideration was
satisfied through the delivery of a $2,750,000 subordinated note issued by the
purchaser. This note has a maturity date of September 1, 2009 and bears interest
at the lower of the prime rate or 7%. The note is payable by the purchaser in
quarterly cash installments ranging from $156,250 to $500,000 commencing
September 2006 and continuing for each quarter thereafter until maturity.
Prepayment of the principal of and accrued interest on the note is permitted.
Additionally, the Company is entitled to receive additional consideration in the
form of a six-year earn-out based on 5% of the annual net sales of Nexus after
the closing date, up to $1,000,000 in the aggregate.
Pursuant to the purchase agreement, the purchaser has also entered into
a contract that designates the Company as a key supplier of electronic
components to Nexus for a period of five years following the
FORM 10-Q December 31, 2004
Page 9
closing date. The gain on the sale of net assets of Nexus, net of transaction
costs and applicable taxes was approximately $831,000.
As a result of the sale of Nexus, the Company will no longer engage in
contract manufacturing. In accordance with the provisions of SFAS No, 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets" ("SFAS No.
144"), the Company has accounted for the results of operations of Nexus as
discontinued in the accompanying consolidated statements of operations. The
Company has also classified the assets sold and liabilities assumed of Nexus
(the disposal group) as part of assets and liabilities of discontinued
operations in the June 30, 2004 balance sheet. A summary of the assets and
liabilities included in the disposal group as of June 30, 2004 is as follows:
Accounts receivable, net $ 2,407,527
Inventories 7,923,578
Prepaid expenses and other 75,429
Property, plant and equipment, net 2,504,267
---------
Total assets 12,910,801
----------
Accounts payable 2,240,314
Accrued compensation 218,209
Accrued expenses 27,942
Long-term debt and capitalized lease obligations 314,199
-------
Total liabilities 2,800,664
---------
Net assets $10,110,137
===========
A summary of operating results of Nexus for the three and six months ended
December 31, 2004 and 2003 were as follows:
Three Months Ended Six Months Ended
December 31, December 31,
--------------------------------- ---------------------------------
2004 2003 2004 2003
-------------- -------------- ------------- ---------------
Net sales --- $5,330,370 $5,208,184 $10,170,799
Earnings (loss) before income taxes --- $ 239,345 $(103,452) $ 395,375
4) To provide additional liquidity and flexibility in funding its operations,
the Company borrows amounts under credit facilities and other external sources
of financing. On December 22, 2003, the Company entered into a Third Restated
and Amended Loan and Security Agreement with GMAC Commercial Finance LLC and PNC
Bank, National Association providing for a $50,000,000 revolving secured line of
credit. This credit facility has a maturity date of December 31, 2006.
Borrowings under the credit facility are based principally on eligible accounts
receivable and inventories of the Company, as defined in the credit agreement,
and are collateralized by substantially all of the assets of the Company.
FORM 10-Q December 31, 2004
Page 10
At December 31, 2004, the outstanding balance on this revolving line of credit
facility was $38.1 million, with approximately $2.5 million available based on
the amendment dated February 11, 2005, described later in this footnote. The
interest rate on the outstanding borrowings at December 31, 2004 was
approximately 5.5%. The credit agreement contains certain financial covenants,
including, among others, provisions for maintenance of specified levels of
EBITDA and Minimum Net Worth.
At December 31, 2004, we were out of compliance with certain bank
covenants, including Minimum EDITDA and Maximum capital expenditures. On
February 11, 2005, our credit facility was amended, which retroactively restated
the covenants and added additional covenants. Our credit facility was amended to
(i) modify the Availability Formula, (ii) require Undrawn Availability of not
less than $1,500,000 at all times; (iii) define and reset existing covenants for
Minimum EBITDA, Fixed Charge Coverage, Capital Expenditure and Net Worth
Covenants, (iv) add a new covenant regarding minimum sales, (v) establish
additional reporting requirements for Jaco; (vi) modify interest provisions;
(vii) permit certain domestic and foreign receivables to qualify as eligible for
a period of time. Failure to remain in compliance with these covenants could
trigger an acceleration of our obligation to repay all outstanding borrowings
under our credit facility, limit our ability to borrow additional amounts under
the line of credit. The credit agreement includes a subjective acceleration
clause and requires the deposit of customer receipts to be directed to a blocked
account and applied directly to the repayment of indebtedness outstanding under
the revolving credit facility. Accordingly, the debt is classified as a current
liability.
On November 23, 2004, our credit facility was amended to
exclude, effective as of October 1, 2004, any extraordinary gains, including any
gains derived from the sale of assets of Nexus, from the calculation of EBITDA
and Fixed Charge Coverage Ratio covenants. On September 20, 2004, our credit
facility was amended to provide the lenders' consent to our sale of our contract
manufacturing subsidiary, Nexus, and to (i) change our EBITDA, Fixed Charge
Coverage Ratio and Minimum Net Worth covenants, (ii) eliminate the remaining
portion of the additional $732,000 of the additional available amount under the
facility to zero, (iii) require the cash proceeds from the sale of Nexus to be
used to repay indebtedness outstanding under the facility, and (iv) and add a
requirement that we maintain an aggregate undrawn availability of $1.5 million
until certain financial requirements are achieved, which would reduce the
undrawn availability requirement to $500,000.
5) On September 18, 2001, the Company's 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. The Company made purchases of 41,600 shares of its common stock
from November 5, 2002 through December 31, 2004 for aggregate consideration of
$110,051. However, no such repurchases of common stock were made during the
three months ended December 31, 2004.
FORM 10-Q December 31, 2004
Page 11
6) Total comprehensive loss and its components for the three and six months ended December 31, 2004 and 2003 are as follows:
Three Months Ended Six Months Ended
December 31, December 31,
--------------------------------- ----------------------------------
2004 2003 2004 2003
-------------- -------------- ------------- ---------------
Net loss $(1,535,466) $(437,237) $(1,782,873) $(860,808)
Unrealized gain on
marketable securities 66,342 73,111 55,195 89,883
Deferred tax expense (25,000) (28,000) (21,000) (34,000)
-------------- -------------- ------------- ---------------
Comprehensive loss $(1,494,124) $(392,126) $(1,748,678) $(804,925)
============== ============== ============= ===============
Accumulated other comprehensive income is comprised of unrealized gains
and losses on marketable securities, net of the related tax effect.
7) The Company accounts for stock-based compensation using the intrinsic value
method in accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related Interpretations ("APB
No. 25"), and has adopted the disclosure provisions of Statement of Financial
Accounting Standards No. 148, "Accounting for Stock-Based Compensation -
Transition and Disclosure, an Amendment of FASB Statement No. 123" ("SFAS No.
148"). Under APB No. 25, compensation expense is only recognized when the market
value of the underlying stock at the date of grant exceeds the amount an
employee must pay to acquire the stock. Accordingly, no compensation expense has
been recognized in the Company's condensed consolidated financial statements in
connection with employee stock option grants.
During the three months ended December 31, 2004, there were no stock
options granted to employees or directors of the Company.
The following table illustrates the effect on net loss and loss per
share for the three and six months ended December 31, 2004 and 2003 had the
Company applied the fair value recognition provisions of Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation," to
stock-based employee compensation.
FORM 10-Q December 31, 2004
Page 12
Three Months Ended Six Months Ended
December 31, December 31,
--------------------------------- ---------------------------------
2004 2003 2004 2003
-------------- -------------- -------------- ---------------
Net loss, as reported $(1,535,466) $(437,237) $(1,782,873) $(860,808)
Deduct: Total stock-based employee
compensation expense determined under the
fair value based method for all awards, net
of related tax effects (62,931) (17,490) (134,842) (90,534)
-------------- -------------- -------------- -------------
Pro forma net loss $(1,598,397) $(454,727) $(1,917,715) $(951,342)
============== ============== ============== ==============
Net loss per common share:
Basic - as reported $(0.25) $(0.07) $(0.29) $(0.15)
============== ============== ============== =============
Basic - pro forma $(0.26) $(0.08) $(0.31) $(0.16)
============== ============== ============== =============
Diluted - as reported $(0.25) $(0.07) $(0.29) $(0.15)
============== ============== ============== =============
Diluted - pro forma $(0.26) $(0.08) $(0.31) $(0.16)
============== ============== ============== =============
8) The weighted average common shares outstanding, net of treasury shares, used
in the Company's basic and diluted loss per share computations on its condensed
consolidated statements of operations were 6,262,832 and 6,233,117 for the three
and six months ended December 31, 2004, respectively, compared to 5,928,169 and
5,860,146 for the three and six months ended December 31, 2003, respectively.
Excluded from the calculation of loss per share are outstanding options to
purchase 662,500 and 993,000 shares of the Company's common stock, representing
all outstanding options, for the three and six months ended December 31, 2004
and 2003, respectively, as their inclusion would have been antidilutive. Common
stock equivalents for stock options are calculated using the treasury stock
method.
9) The Company is a party to legal matters arising in the general conduct of
business. The ultimate outcome of such matters is not expected to have a
material adverse effect on the Company's business, results of operations or
financial position.
10) Certain reclassifications have been made to prior year amounts to conform to
the current year's presentation.
11) During the three and six months ended December 31, 2004, the Company
recorded sales of $17,500 and $1,057,627, respectively, compared to $1,490,813
and $2,679,033 for the three and six months ended December 31, 2003,
respectively, from a customer, Frequency Electronics, Inc. ("Frequency"). The
Company's Chairman of the Board of Directors and President serves on the Board
of Directors of Frequency. Amounts included in accounts receivable from
Frequency at December 31, 2004 and June 30, 2004 aggregate $235 and $188,720,
respectively.
FORM 10-Q December 31, 2004
Page 13
12) In November 2004, the FASB issued FASB Statement No. 151, "Inventory
Costs--an amendment of ARB No. 43" ("FAS 151"), which is the result of its
efforts to converge U.S. accounting standards for inventories with International
Accounting Standards. FAS No. 151 requires idle facility expenses, freight,
handling costs, and wasted material (spoilage) costs to be recognized as
current-period charges. It also requires that allocation of fixed production
overheads to the costs of conversion be based on the normal capacity of the
production facilities. FAS No. 151 will be effective for inventory costs
incurred during fiscal years beginning after June 15, 2005. The Company is
currently evaluating the impact of this standard on the consolidated financial
statements.
13) In December 2004, the FASB issued SFAS No. 123 (Revised 2004) "Share-Based
Payment" (SFAS No. 123R"). SFAS No. 123R addresses all forms of share-based
payment ("SBP") awards, including shares issued under employee stock purchase
plans, stock options, restricted stock and stock appreciation rights. SFAS No.
123R will require the Company to expense SBP awards with compensation cost for
SBP transactions measured at fair value. The FASB originally stated a preference
for a lattice model because it believed that a lattice model more fully captures
the unique characteristics of employee stock options in the estimate of fair
value, as compared to the Black-Scholes model which the Company currently uses
for its footnote disclosure. The FASB decided to remove its explicit preference
for a lattice model and not require a single valuation methodology. SFAS No.
123R requires the Company to adopt the new accounting provisions beginning in
the first quarter of fiscal 2006. The Company has not yet determined the impact
of applying the various provisions of SFAS No. 123R.
FORM 10-Q December 31, 2004
Page 14
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The following discussion contains various forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933, as amended, or
the Securities Act, and Section 21E of the Securities Act of 1934, as amended,
or the Exchange Act, which represent our management's beliefs and assumptions
concerning future events. When used in this report and in other written or oral
statements made by us from time to time, forward-looking statements include,
without limitation, statements regarding our financial forecasts or projections,
our expectations, beliefs, intentions or future strategies that are signified by
the words "expects", "anticipates", "estimates", "intends", "plans" or similar
language. Although we believe that the expectations in these forward-looking
statements are reasonable, we cannot assure that such expectations will prove to
be correct. These forward-looking statements are subject to numerous
assumptions, risks and uncertainties, which are subject to change and/or beyond
our control, that could cause our actual results and the timing of certain
events to differ materially from those expressed in the forward-looking
statements. Consequently, the inclusion of the forward-looking statements should
not be regarded as a representation by us of results that actually will be
achieved. For a discussion of certain potential factors that could cause our
actual results to differ materially from those contemplated by the
forward-looking statements, see "Forward-Looking Statements" in our Annual
Report on Form 10-K for the fiscal year ended June 30, 2004 and our other
periodic reports and documents filed with the Securities and Exchange
Commission.
GENERAL
Jaco is a distributor of electronic components and provider of related
value-added services. Products distributed by us include semiconductors,
capacitors, resistors, electromechanical devices, flat panel displays, and power
supplies used in the assembly and manufacturing of electronic equipment.
Value-added services currently provided by us consist of automated inventory
management services and kitting (e.g., supplying sets of specified quantities of
products to a customer that are prepackaged in kits for ease of feeding the
customer's production lines). We are also expanding in the flat panel display
value-added market, which includes full system integration, kitting and the
implementation of touch technologies.
Our customers are primarily small and medium sized manufacturers. The
trend for these customers has been to shift certain manufacturing functions to
third parties (i.e., outsourcing). We intend to seek to capitalize on this trend
by increasing sales of outsourced electronic products enhanced by our customized
value-added services.
Critical Accounting Policies and Estimates
We have disclosed in Note A to our consolidated financial statements
and in Management's Discussion and Analysis of Financial Condition and Results
of Operations included in our Annual Report on Form 10-K for the fiscal year
ended June 30, 2004, as amended, those accounting policies that we consider to
be significant in determining our results of operations and financial position.
There have been no material changes to the critical accounting policies
previously identified and described in our 2004 Form 10-K. The accounting
principles we utilized in preparing our consolidated financial statements
conform in all material respects to generally accepted accounting principles in
the United States of America.
The preparation of these consolidated financial statements requires our
management to make estimates and assumptions that affect the reported amounts of
assets, liabilities, revenues and expenses, as well as the disclosure of
contingent assets and liabilities at the date of our financial statements. We
base our estimates on historical experience, actuarial valuations and various
other factors that we believe to be reasonable under the circumstances, the
results of which form the basis for making judgments about the carrying value of
assets and liabilities that are not readily apparent from other sources. Some of
those judgments can be subjective and complex and, consequently, actual results
may differ from these estimates under different assumptions or conditions. While
for any given estimate or assumption made by our management there may be other
estimates or assumptions that are reasonable, we believe that, given the current
facts and circumstances, it is unlikely that applying any such other reasonable
estimate or assumption would materially impact the financial statements. The
accounting principles we utilized in
FORM 10-Q December 31, 2004
Page 15
preparing our consolidated financial statements conform in all material respects
to generally accepted accounting principles in the United States of America.
New Accounting Standards
In November 2004, the Financial Accounting Standards Board, or the
FASB, issued FASB Statement No. 151, "Inventory Costs--an amendment of ARB No.
43" ("FAS 151"), which is the result of its efforts to converge U.S. accounting
standards for inventories with International Accounting Standards. FAS No. 151
requires idle facility expenses, freight, handling costs, and wasted material
(spoilage) costs to be recognized as current-period charges. It also requires
that allocation of fixed production overheads to the costs of conversion be
based on the normal capacity of the production facilities. FAS No. 151 will be
effective for inventory costs incurred during fiscal years beginning after June
15, 2005. The Company is currently evaluating the impact of this standard on its
consolidated financial statements.
In December 2004, the FASB issued SFAS No. 123 (Revised 2004)
"Share-Based Payment" (SFAS No. 123R"). SFAS No. 123R addresses all forms of
share-based payment ("SBP") awards, including shares issued under employee stock
purchase plans, stock options, restricted stock and stock appreciation rights.
SFAS No. 123R will require the Company to expense SBP awards with compensation
cost for SBP transactions measured at fair value. The FASB originally stated a
preference for a lattice model because it believed that a lattice model more
fully captures the unique characteristics of employee stock options in the
estimate of fair value, as compared to the Black-Scholes model, which the
Company currently uses for its footnote disclosure. The FASB decided to remove
its explicit preference for a lattice model and not require a single valuation
methodology. SFAS No. 123R requires the Company to adopt the new accounting
provisions beginning in the first quarter of fiscal 2006. The Company has not
yet determined the impact of applying the various provisions of SFAS No. 123R on
its consolidated financial statements.
FORM 10-Q December 31, 2004
Page 16
Results of Operations
The following table sets forth certain items in our statements of operations as
a percentage of net sales for the periods shown:
Three Months Ended Six Months Ended
December 31, December 31,
------------------------------ ---------------------------
2004 2003 2004 2003
---------- ---------- ---------- ----------
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 87.3 86.5 87.4 86.8
---------- ---------- ---------- ----------
Gross Profit 12.7 13.5 12.6 13.2
Selling, general and
administrative expenses 16.0 14.2 15.1 13.8
---------- ---------- ---------- ----------
Operating loss (3.3) (0.7) (2.5) (0.6)
Interest expense 0.9 0.8 0.7 0.7
---------- ---------- ---------- ----------
Loss from continuing operations
before income taxes (4.2) (1.5) (3.2) (1.3)
Income tax benefit (1.2) (0.5) (1.0) (0.4)
---------- ---------- ---------- ----------
Loss from continuing operations (3.0) (1.0) (2.2) (0.9)
Earnings (loss) from discontinued
Operations, net of taxes 0.3 (0.1) 0.2
Gain on sale of subsidiary, net of taxes 0.7
---------- ---------- ---------- ----------
NET LOSS (3.0)% (0.7)% (1.6)% (0.7)%
============ ============ ============ ============
COMPARISON OF THE THREE AND SIX MONTHS ENDED DECEMBER 31, 2004 AND DECEMBER 31,
2003
Results from Continuing Operations:
Net sales for the three and six months ended December 31, 2004 were
$52.0 million and $112.2 million, respectively, compared to $61.5 million and
$128.9 million for the three and six months ended December 31, 2003,
representing decreases of 15.5% and 13.0%, respectively. We experienced a
decrease in overall demand for electronic components during this period, which
adversely affected our sales. In addition, our customer base continues to be
predominantly in the United States, while manufacturing continues to shift
off-shore to the Far East. We continue to believe that our future growth will be
partially dependent on our marketing and sale of our flat panel display (FPD)
product. We have identified this product as continuing to be utilized as part of
the manufacturing process domestically. We anticipate completing the
construction of an in-house integration center to enhance our value-added
integration capabilities by the end of February 2005. We believe it is important
for distributors of electronic components to identify value-added solutions that
are required by customers. We have increased our
FORM 10-Q December 31, 2004
Page 17
marketing focus on creating demand with our Field Application Engineer (FAE)
capabilities. This program enables us to work with our customers to design into
their products our suppliers' components. Our FPD product represented
approximately 21% of our net sales for the three and six months ended December
31, 2004, respectively, compared to 19% and 21% for the comparable periods last
year. Our electromechanical product, which is also a key focus of our marketing
efforts, includes power supplies and printer heads. This product represented 10%
and 9% of our net sales for the three and six months ended December 31, 2004,
respectively, compared to approximately 7% for the same periods last year.
Passive components, which have become more of a commodity item, are very
competitive and represented only 19% and 18% of our net sales for the three and
six months ended December 31, 2004, respectively, while semiconductors
represented 51% and 52% of our net sales for the three and six months ended
December 31, 2004, respectively. Our future growth will be partially dependent
on our ability to grow globally. In response to this challenge, we currently
have a sales office in Beijing, China, are utilizing a third party warehouse to
support certain non-U.S. customers, and are searching for a suitable strategic
alliance or partner in the Far East. Primarily by successfully transitioning
business that we had done domestically to the Far East and by expanding our
exporting group that supports Europe, non-U.S. sales represented approximately
26% of our total net sales for both the three and six months ended December 31,
2004.
Gross profit was $6.6 million, or 12.7% of net sales, and $14.2
million, or 12.6% of net sales, for the three and six months ended December 31,
2004, respectively, compared to $8.3 million, or 13.5% of net sales, and $17.0
million, or 13.2% of net sales for the comparable periods in the last fiscal
year. Management considers gross profit to be a key performance indicator in
managing our business. Gross profit margins are usually a factor of product mix
and demand for product. We continue to see competitive pressure on our product
offerings which has adversely impacted our gross profit margin. We do not
anticipate any material change in our margin for the foreseeable future unless
we experience a shift in the product mix we sell or an increase in demand.
Selling, general and administrative ("SG&A") expenses were $8.3 million
and $17.0 million for the three and six months ended December 31, 2004,
respectively, compared to $8.7 million and $17.8 million for the comparable
periods last year, representing a reduction of approximately 5%. For the three
and six months ended December 31, 2004, SG&A as a percentage of net sales was
16.0% and 15.1%, respectively. Management considers SG&A as a percentage of net
sales to be a key performance indicator in managing our business and we are
focused on further reducing these expenses. However, we have been careful not to
reduce our infrastructure to a level that would not be adequate to support
ongoing customer requirements. We are in the process of reviewing all our
spending and will continue to reduce costs where feasible.
Interest expense was $0.5 million and $0.8 million for the three and
six months ended December 31, 2004, respectively. We support our growth in part
through bank borrowings. Therefore, an increase in net sales could result in an
increase in borrowings. Any significant increase in our borrowing rates could
significantly increase our interest expense, which would have a negative impact
on our results of operations.
Net loss from continuing operations for the three and six months ended
December 31, 2004 was $1.5 million, or $0.25 per diluted share, and $2.5
million, or $0.41 per diluted share, respectively, compared to $0.6 million, or
$0.10 per diluted share, and $1.1 million, or $0.19 per diluted share, for the
comparable periods of last year. The increase in our net loss from continuing
operations compared to last year is primarily attributable to the reduction in
our net sales, which, as described above, is attributable to the decrease in
overall demand for electronic components. The impact of this reduction in net
sales was partially offset by our decrease in SG&A expenses.
FORM 10-Q December 31, 2004
Page 18
Discontinued Operations:
On September 20, 2004, the Company completed the sale of substantially
all of the assets of its contract manufacturing subsidiary, Nexus Custom
Electronics, Inc. ("Nexus"), to Sagamore Holdings, Inc. for consideration of
$13,000,000, subject to closing adjustments, and the assumption of certain
liabilities. The divestiture of Nexus allows the Company to focus its resources
on its core electronics distribution business. Under the terms of the purchase
agreement relating to this transaction, the Company received $9,250,000 of the
purchase consideration in cash on the closing date. Such cash consideration was
used to repay a portion of the outstanding borrowings under the Company's line
of credit (See Note 4). The balance of the fixed portion of the purchase
consideration was satisfied through the delivery of a $2,750,000 subordinated
note issued by the purchaser. This note has a maturity date of September 1, 2009
and bears interest at the lower of the prime rate or 7%. The note is payable by
the purchaser in quarterly cash installments ranging from $156,250 to $500,000
commencing September 2006 and continuing for each quarter thereafter until
maturity. Prepayment of the principal of and accrued interest on the note is
permitted. Additionally, the Company is entitled to receive additional
consideration in the form of a six-year earn-out based on 5% of the annual net
sales of Nexus after the closing date, up to $1,000,000 in the aggregate.
Net earnings from these discontinued operations for the six months
ended December 31, 2004 was $0.8 million, or $0.12 per diluted share, compared
to $0.2 million, or $0.03 per diluted share, and $0.3 million, or $0.04 per
diluted share, for the three and six months ended December 31, 2003,
respectively. The increase in our net earnings from discontinued operations
compared to last year was primarily attributable to the gain on the sale of
Nexus.
Combined Net Loss:
The combined net loss from both the continuing and discontinued
operations for the three and six months ended December 31, 2004 was $1.5
million, or $0.25 per diluted share, and $1.8 million, or $0.29 per diluted
share, respectively, compared to $0.4 million, or $0.07 per diluted share, and
$0.9 million, or $0.15 per diluted share, for the comparable periods last year.
The increase in our combined net loss compared to last year is primarily
attributable to the reduction in our net sales as described above.
LIQUIDITY AND CAPITAL RESOURCES
To provide additional liquidity and flexibility in funding its
operations, the Company borrows amounts under credit facilities and other
external sources of financing. On December 22, 2003, the Company entered into a
Third Restated and Amended Loan and Security Agreement with GMAC Commercial
Finance LLC and PNC Bank, National Association providing for a $50,000,000
revolving secured line of credit. This credit facility has a maturity date of
December 31, 2006. Borrowings under the credit facility are based principally on
eligible accounts receivable and inventories of the Company, as defined in the
credit agreement, and are collateralized by substantially all of the assets of
the Company. At December 31, 2004, the outstanding balance on this revolving
line of credit facility was $38.1 million, with approximately $2.5 million
available based on the amendment dated February 11, 2005. The interest rate on
the outstanding borrowings at December 31, 2004 was approximately 5.5%. The
credit agreement contains certain financial covenants, including, among others,
provisions for maintenance of specified levels of EBITDA and Minimum Net Worth.
At December 31, 2004, we were out of compliance with certain bank
covenants, including Minimum EDITDA and Maximum capital expenditures. On
February 11, 2005, our credit facility was amended, which retroactively restated
the covenants and added additional covenants. Our credit facility was amended to
(i) modify the Availability Formula, (ii) require Undrawn Availability of not
less than $1,500,000 at all times; (iii) define and reset existing covenants for
Minimum EBITDA, Fixed Charge Coverage, Capital Expenditure and Net Worth
Covenants, (iv) add a new covenant regarding minimum sales, (v) establish
additional reporting requirements for Jaco; (vi) modify interest provisions;
(vii) permit certain domestic and foreign receivables to qualify as eligible for
a period of time. Failure to remain in compliance with these covenants could
trigger an acceleration of our obligation to repay all outstanding borrowings
under our credit facility, limit our ability to borrow additional amounts under
the line of credit. The credit agreement includes a subjective acceleration
clause and requires the deposit of customer receipts
FORM 10-Q December 31, 2004
Page 19
to be directed to a blocked account and applied directly to the repayment of
indebtedness outstanding under the revolving credit facility. Accordingly, the
debt is classified as a current liability.
At December 31, 2004, the Company had cash of approximately $67,000 and
working capital of approximately $12,694,000 as compared to cash of $553,000 and
working capital of $17,549,000 at June 30, 2004. The Company incurred a loss of
approximately $1,783,000 during the six months ended December 31, 2004. The
Company utilized approximately $10,083,000 of cash in operations during the six
months ended December 31, 2004. Included in cash used in operating activities
was $10,721,000 of inventory purchases that will be utilized to fulfill existing
sales orders with a customer through June 30, 2005.
On November 23, 2004, our credit facility was amended to
exclude, effective as of October 1, 2004, any extraordinary gains, including any
gains derived from the sale of assets of Nexus, from the calculation of EBITDA
and Fixed Charge Ratio covenants.
On September 20, 2004, our credit facility was amended to provide the
lenders' consent to our sale of our contract manufacturing subsidiary, Nexus,
and to (1) change our EBITDA, Fixed Charge Ratio and Minimum Net Worth
covenants, (2) eliminate the remaining portion of the additional $732,000 of the
additional available amount under the facility to zero, (3) require the cash
proceeds from the sale of Nexus to be used to repay indebtedness outstanding
under the facility, and (4) and add a requirement that we maintain an aggregate
undrawn availability of $1.5 million until certain financial requirements are
achieved, which would reduce the undrawn availability requirement to $500,000.
For the six months ended December 31, 2004, our net cash used in
operating activities was approximately $10.1 million, as compared to $1.2
million for the six months ended December 31, 2003. The increase in net cash
used is primarily attributable to a larger increase in our inventory for the six
months ended December 31, 2004, as compared to the same period in our last
fiscal year. This increase is also attributable to a decrease in accounts
payable and accrued expenses for the six months ended December 31, 2004, as
compared to an increase in accounts payable and accrued expenses for the six
months ended December 31, 2003.The decrease in accounts payable and accrued
expenses was partially offset by a decrease in our accounts receivable for the
six months ended December 31, 2004 compared to the same period in our last
fiscal year. Net cash provided by investing activities was approximately $8.5
million for the six months ended December 31, 2004 as compared to net cash used
in investing activities of $0.3 million for the six months ended December 31,
2003. The increase in net cash provided by is primarily attributable to $9.1
million in proceeds we received from our sale of substantially all of the assets
of Nexus in September 2004. Net cash provided by financing activities was
approximately $1.1 million for the six months ended December 31, 2004 as
compared to $1.8 million for the six months ended December 31, 2003. The
decrease in net cash provided by is primarily attributable to the release of an
$0.8 million compensating balance under our credit facility in the six months
ended December 31, 2003.
For the six months ended December 31, 2004 and 2003, our inventory
turnover was 5.0 times and 6.2 times, respectively. The average days outstanding
of our accounts receivable at December 31, 2004 was 58 days, as compared to 49
days at December 31, 2003. Inventory turnover and average days outstanding are
key ratios that management relies on to monitor our business.
In February 2005, we plan to complete certain leasehold improvements to
construct an FPD facility that will allow us to vertically integrate our entire
FPD operation. When the facility is completed, we will offer customers a
one-stop source for their FPD supply and integration needs. The cost of this
project is not expected to be material.
Based upon our present plans, including no anticipated material
capital expenditures, we believe that cash flow from operations and funds
available under our credit facility will be sufficient to fund our capital needs
for the next twelve months and for the foreseeable future. However, our ability
to maintain sufficient liquidity depends partially on our ability to achieve
anticipated levels of revenue while continuing to control costs. Our planned
expansion to the Far East and construction of an integration center for our FPD
operation will require capital expenditures that have been planned for by the
sale of our contract manufacturing subsidiary, Nexus. The $9.25 million in cash
we received from the sale of Nexus was used to repay indebtedness outstanding
under our credit facility, which provided us with increased availability
thereunder (subject to the restrictions described above in this section that
were established in the amendment approving the sale), that we plan to draw down
on to help fund these initiatives. However, our cash expenditures may vary
significantly from current levels based on a number of factors, including, but
not limited to, future acquisitions and capital expenditures, if any.
Historically, we have, when necessary, been able to obtain amendments to our
credit facilities to satisfy instances of non-compliance
FORM 10-Q December 31,2004
Page 20
with financial covenants. While we cannot assure that any such future
amendments, if needed, will be available, management believes we will be able to
continue to obtain financing on acceptable terms under our existing credit
facility or through other external sources. Failure to maintain financing
arrangements on acceptable terms would have a material adverse effect on our
business, results of operations and financial condition.
Contractual Obligations
This table summarizes our known contractual obligations and commercial
commitments at December 31, 2004.
Total < 1 Year 1 to 3 Years 3 to 5 Years >5 Years
--------------- --------------- --------------- ---------------- --------------
Bank Debt 38,090,338 38,090,338
Capital Lease 170,843 73,218 97,625
Operating Lease 8,860,599 1,666,982 2,089,162 1,638,866 3,465,589
--------------- --------------- --------------- ---------------- --------------
Total 47,121,780 39,830,538 2,186,787 1,638,866 3,465,589
=============== =============== =============== ================ ==============
Inflation
Inflation has not had a significant impact on our operations during the
last three fiscal years.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
We are exposed to interest rate changes with respect to borrowings
under our credit facility, which bears interest at the higher of the prime rate
plus 0.75% or the federal funds rate plus 1.25%. At January 31, 2005, $32.9
million was outstanding under the credit facility. Changes in the prime interest
rate or the federal funds rate during the current fiscal year will have a
positive or negative effect on our interest expense. Each 1.0% fluctuation in
the prime interest rate or the federal funds rate will increase or decrease our
interest expense under the credit facility by approximately $0.3 million based
on the amount of outstanding borrowings at January 31, 2005. The impact of
interest rate fluctuations on our other floating rate debt is not material.
Item 4. Controls and Procedures.
An evaluation was performed, under the supervision and with the
participation of the Company's management, including the Company's Principal
Executive Officer and Principal Financial Officer, of the effectiveness of the
design and operation of the Company's disclosure controls and procedures (as
defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of
1934) as of December 31, 2004. Based upon that evaluation, the Company's
management, including its Principal Executive Officer and Principal Financial
Officer, has concluded that the Company's disclosure controls and procedures are
effective to ensure that information required to be disclosed in the reports
that the Company files or submits under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission's rules and forms. There have been no
changes in the Company's internal control over financial reporting or in other
factors identified in connection with this evaluation that occurred during the
three months ended December 31, 2004 that have materially affected, or are
reasonably likely to materially affect, the Company's internal control over
financial reporting.
FORM 10-Q December 31, 2004
Page 21
PART II - OTHER INFORMATION
Item 1. Submission of Matters to a Vote of Security Holders
Our Annual Meeting of Shareholders was held on December 16,
2004. At the Annual Meeting, our shareholders approved the
following matters:
(i) The election of each of the nominees to the Board of
Directors to hold office until the Company's next annual
meeting of shareholders or until their successors are duly
elected and qualified:
Stephen A. Cohen For: 5,464,025 Withheld: 494,769
Edward M. Frankel For: 5,501,785 Withheld: 457,009
Charles B. Girsky For: 5,462,575 Withheld: 496,219
Joel H. Girsky For: 5,462,575 Withheld: 496,219
Joseph F. Hickey, Jr. For: 5,505,785 Withheld: 453,009
Joseph F. Oliveri For: 5,491,233 Withheld: 467,561
Neil Rappaport For: 5,528,843 Withheld: 429,951
Robert A. Waldman For: 5,525,643 Withheld: 433,151
(ii) An amendment to the Company's 2000 Stock Option Plan to
increase the number of shares of the Company's common stock
available for awards under the plan from 600,000 to
1,200,000.
For: 5,214,330 Against: 718,759 Abstention: 25,705
FORM 10-Q December 31, 2004
Page 22
Item 2. Exhibits and Reports on Form 8-K
a) Exhibit 10.23.2 - Amendment to Third Restated and
Amended Loan and Security Agreement dated November 23,
2004, by and among GMAC Commercial Finance LLC, as
Lender and as Agent, PNC Bank, National Association, as
Lender and Co-Agent, Jaco Electronics, Inc., Nexus
Custom Electronics, Inc. and Interface Electronics
Corp.
Exhibit 10.23.3 - Amendment to Third Restated and
Amended Loan and Security Agreement dated February
11, 2005, by and among GMAC Commercial Finance LLC,
as Lender and as Agent, PNC Bank, National
Association, as Lender and Co-Agent, Jaco
Electronics, Inc., Nexus Custom Electronics, Inc.
and Interface Electronics Corp.
Exhibit 31.1 - Rule 13a-14 (a) / 15d-14 (a)
Certification of Principal Executive Officer.
Exhibit 31.2 - Rule 13a-14 (a) / 15d-14 (a)
Certification of Principal Financial Officer.
Exhibit 32.1 - Section 1350 Certification of
Principal Executive Officer.
Exhibit 32.2 - Section 1350 Certification of
Principal Financial Officer.
b) Reports on Form 8-K
(1) On October 5, 2004, a Current Report on Form
8-K was filed under Item 9.01. "Financial
Statements and Exhibits" to file pro forma
financial statements in connection with the sale
of substantially all of the assets of Nexus.
(2) On November 12, 2004, a Current Report on
Form 8-K was filed under Item 2.02. "Results of
Operations and Financial Condition" to report
the Company's results for its first quarter of
the fiscal year ending June 30, 2005.
(3) On February 14, 2005, a Current Report on
Form 8-K was filed under Item 2.02. "Results of
Operations and Financial Condition" to report
the Company's results for its second quarter of
the fiscal year ending June 30, 2005.
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.
February 14, 2005
JACO ELECTRONICS, INC.
(Registrant)
BY: /s/ Jeffrey D. Gash
---------------------------------------
Jeffrey D. Gash, Executive Vice President,
Finance and Secretary
(Principal Financial Officer)