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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from _____________ to _______________________________.
Commission File No. 1-5863
JACLYN, INC.
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(Exact name of registrant as specified in its charter)
Delaware 22-1432053
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
635 59th Street, West New York, New Jersey 07093
- ------------------------------------------ -----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (201) 868-9400
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of Class on which registered
-------------- ----------------------
Common Stock, $1 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock (based on the closing price of
such stock on the American Stock Exchange) held by non-affiliates of the
Registrant at September 5, 1996 was approximately $11,438,000.
There were 2,691,405 shares of Common Stock outstanding at September 7, 1996.
[Cover Page: 1 of 2 Pages]
DOCUMENTS INCORPORATED BY REFERENCE
PART III Certain Portions of the Registrant's Proxy Statement for the
Registrant's Annual Meeting of Stockholders scheduled to be held on
December 3, 1996.
[Cover Page: 2 of 2 Pages]
TABLE OF CONTENTS
Item Page
---- ----
PART I 1. Business.............................................. 1
2. Properties............................................ 4
3. Legal Proceedings..................................... 5
4. Submission of Matters to a
Vote of Security Holders.............................. 5
PART II 5. Market for the Registrant's Common Equity
and Related Stockholder Matters....................... 5
6. Selected Financial Data............................... 7
7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................................ 8
8. Financial Statements and Supplementary
Data.................................................. 11
9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure............................................ 11
PART III 10. Directors and Executive Officers
of the Registrant..................................... 11
11. Executive Compensation................................ 11
12. Security Ownership of Certain
Beneficial Owners and Management...................... 12
13. Certain Relationships and Related
Transactions.......................................... 12
PART IV 14. Exhibits, Financial Statement
Schedules and Reports on Form 8-K..................... 12
SIGNATURES.................................................................. 16
PART I
Item 1. Business.
Jaclyn, Inc. (incorporated in the State of Delaware in 1968) ("Jaclyn") and
its subsidiaries (collectively the "Registrant") are primarily engaged in the
design, manufacture, distribution and sale of vinyl, leather and fabric
handbags and related products (collectively, "handbag products"), and apparel
items. The Registrant markets its handbag products in a variety of popularly
priced fashions and designs, with an emphasis on casual, travel and sport
styles. The Registrant's apparel lines are wide ranging and include vests,
loungewear, sleepwear, dresses, sportswear, slippers and footwear, as well as
lingerie.
General. Styling is an important factor in the merchandising of all of the
Registrant's products. The Registrant's staff of full-time designers studies
fashion trends in order to anticipate consumer demand. The design staff works
closely with the purchasing department to determine the styling and materials
components for its handbag products, and concepts and fabrics for its apparel
products, that may be available and also works with the production and
engineering staffs to determine the costs of production and the technical
problems involved in producing a new style. The Registrant changes many of its
designs from season to season.
Finished merchandise is received at the Registrant's warehouses located in
Ferris, Texas and West New York, New Jersey and in several independently owned
warehouses in New Jersey, Florida, California and Texas, and from these
locations is shipped under different selling names to customers all over the
country. The Registrant's handbag products are intended to retail at between $6
and $275. The Registrant's better price and designer lines of handbag products,
which are sold under the "Susan Gail" name, are marketed through better
department stores and specialty shops. The Registrant's other handbag products
are marketed primarily through general merchandise, chain and department stores.
In addition, the Registrant markets its apparel lines to existing customers of
its handbag products as premium and/or special order items, as well as to major
mail order catalog chains and other retailers.
The Registrant markets its handbag products under trademarks and tradenames
which it owns, including "Saddle River," "Shane," "Empress," "Aetna," "Susan
Gail," "Robyn Lyn" and "Marilyn USA." In addition, the Registrant is licensed to
manufacture and market handbag products under the names "Looney Tunes(TM)" under
an agreement which expires December 31, 1998, "Riders(TM)" under an agreement
which expires December 31, 1998, "Crayola(TM)" under an agreement which expires
December 31, 1996, and "Winnie The Pooh(TM)" under an agreement which expires
June 30, 1997. The Registrant's apparel lines are marketed under the names
"Robyn Lyn," "Saddle River," and "111 Main." The Registrant also manufactures
apparel items for sale as private-label merchandise. The Registrant considers
all of its trademarks, tradenames and other intellectual property rights to be
of significant value in the marketing of its products.
The Registrant sells throughout the United States through its own salesmen
and through independent sales representatives. Sales of domestically
manufactured merchandise, including those assembled in Mexico from domestically
produced components, accounted for approximately 35% of the Registrant's
consolidated net sales for the fiscal year ended June 30, 1996. During fiscal
1995, sales of such merchandise, including those assembled in Mexico from
domestically manufactured components, accounted for approximately 40% of
consolidated net sales.
In fiscal 1996, the Registrant's imports of merchandise manufactured in the
Far East accounted for approximately 65% of consolidated net sales, compared to
approximately 60% of consolidated net sales in fiscal 1995. Such imports offer
the Registrant the benefit of a greater diversification of styling resulting
from volume purchases and the benefit of cost savings related to such purchases.
In addition, the market's increased acceptance of leather handbags and related
products has resulted in an emphasis on Far East manufacturing and supply
sources. While the Registrant's operations are subject to the usual risks
associated with purchases from foreign countries, the Registrant's other foreign
manufacturing sources and its domestic manufacturing operations provide it with
alternative sources and facilities.
Approximately 73% of the Registrant's consolidated net sales for fiscal
1996 were to general merchandise, chain and department stores, with the balance
consisting of sales to specialty shops, smaller retail stores and cosmetic
firms. During the fiscal year ended June 30, 1996, four customers of the
Registrant accounted for 51% of the Registrant's consolidated net sales, of
which the Registrant's three largest customers (Wal-Mart Stores, Inc., Estee
Lauder and Target Stores) accounted for 20%, 12% and 11% of such sales,
respectively. Three major customers of the Registrant accounted for
approximately 36% of the Registrant's consolidated net sales for the fiscal year
ended June 30, 1995, of which the Registrant's two largest customers (Avon
Products, Inc. and Wal-Mart Stores, Inc.) accounted for 15% and 13% of such
sales, respectively. Sales of apparel items during each of the fiscal years
ended June 30, 1996, 1995 and 1994 represented 30%, 30% and 13%, respectively,
of consolidated net sales. Sales of handbag products represented the remainder
of the Registrant's consolidated net sales. The Registrant's sales are
customarily offered on credit terms. The Registrant does not have long-term
contracts with any of its customers.
The Registrant purchases its handbag and apparel raw materials, primarily
fabrics, vinyl and urethane plastics, leather, frames, ornaments, trim and other
materials, and certain of its finished products, from a variety of sources. In
most cases, the Registrant assists its suppliers and contractors in the design
and style of the materials it purchases. The Registrant's largest expenditures
for raw materials are for fabrics, leather, vinyl and urethane plastics, which
the Registrant purchases from several suppliers, one of which provided about 9%
of its raw material needs in fiscal 1996. While the Registrant has no long-term
supply contracts, the raw materials it uses are available from various sources
and it anticipates no difficulty in the future in obtaining the necessary raw
materials for its operations. With respect to its domestic manufacturing and
imported purchases from the Far East and Europe of finished handbags and related
products, the Registrant deals with a number of sources, both domestically and
in the Far East and Europe, no one of which accounted for more than 14% of the
Registrant's total cost of goods sold. The Registrant has no
-2-
long-term supply contracts with its Far East or European sources of finished
handbags and related products or apparel items and is subject to the usual risks
associated therewith.
The Registrant generally offers Fall/Winter, Holiday and Spring/Summer
product lines and in most instances manufactures product to meet the specific
requirements of its customers. The Registrant's business is somewhat seasonal in
nature, with shipments historically being greater in the first and third
quarters of its fiscal years and lower in the second and fourth quarters.
Reference is made to Note O, "Unaudited Quarterly Financial Data," of the Notes
to Consolidated Financial Statements on page F-16 of this Form 10-K for
additional information about quarterly results.
At September 15, 1996, the Registrant had unfilled order of approximately
$24,471,000, compared to approximately $18,200,000 at September 15, 1995. The
increase in backlog is attributable, among other things, to anticipated
increased sales volume and due to timing differences in the receipt of orders
from certain customers in 1996 compared to 1995. In the ordinary course of
business, the amount of unfilled orders at a particular point in time is
affected by several factors, including scheduling of the manufacture and
shipping of goods (which, in turn, may be dependent on the requirements of
customers). Accordingly, a comparison of backlog from period to period is not
necessarily meaningful and may not be indicative of future sales patterns or
shipments.
The Registrant employed approximately 285 persons as of June 30, 1996, of
whom 80 were on a salaried basis and the balance on an hourly basis. At June 30,
1996, 31 of the Registrant's employees were members of the Four Joint Boards of
New York, New Jersey, Pennsylvania and New England, affiliated with the
International Leather Goods, Plastics and Novelty Workers Union, AFL-CIO. The
Registrant considers its relations with its employees to be satisfactory.
The Registrant competes with hundreds of domestic and foreign manufacturers
of popular priced handbags and apparel, very few of which are believed to
account for as much as 1% of industry sales. In addition, the Registrant
competes with numerous manufacturers of apparel items. The Registrant believes
its sales of apparel items are not significant in light of total apparel
industry sales. The Registrant's business is dependent, among other things, on
its ability to anticipate and respond to changing consumer preferences, to
remain competitive in price, style and quality and to meet its customers'
production and delivery requirements. While some of the Registrant's competitors
may be larger or may have greater resources than the Registrant, the Registrant
believes that its size and financial position will allow it to continue to
respond to changes in consumer demand and meet its competition.
Certain Developments. In January 1996, the Registrant entered into a sales
agreement to manufacture and distribute an existing line of women's robes and
sleepwear. The Registrant did not incur any significant expenditures as a result
of this agreement.
-3-
On June 18, 1996, the Registrant acquired certain trademarks and other
assets from McCrackin Industries, Inc. ("McCrackin") and its affiliates for a
purchase price of $1,500,000. The trademarks included "Saddle River," under
which the Registrant has been manufacturing and distributing ladies' handbags
for more than 9 years. The Registrant also acquired certain office equipment,
furnishings and fixtures located at McCrackin's New York City showroom, which
will now be operated by the Registrant. In addition, two of the principals of
McCrackin have entered into a consulting agreement to make available to the
Registrant marketing and consulting services. The Registrant has also granted to
those principals an option to repurchase the trademarks on or prior to December
31, 1997.
During the fiscal year ended June 30, 1995, the Registrant announced that
due to the decline in sales of the Registrant's Barney(R) the dinosaur line of
products and the increased direct importation of products by its customers, it
was restructuring certain of its operations. The restructuring included
personnel reductions, the closing of the Registrant's warehouse in North Bergen,
New Jersey and the consolidation of its New York City showrooms. The Registrant
also discontinued the payment of quarterly cash dividends after the second
quarter of the fiscal year. During fiscal 1995, the Registrant recorded a
pre-tax restructuring charge of approximately $995,000, representing employee
severance and other exit costs in connection with the closure of the warehouse
and showroom. In addition, the Registrant incurred costs of $1,761,000,
primarily the write-down to market value of inventory of certain of its
divisions and costs incurred during the wind-down of operations in its closed
facilities. Reference is made to "Item 7 - Management's Discussion and Analysis
of Financial Condition and Results of Operations" on pages 8 through 11 of this
Form 10-K and Note N, "Corporate Restructuring" of the Notes to Consolidated
Financial Statements on page F-15 of this Form 10-K for additional information
related to the restructuring.
Item 2. Properties.
The Registrant's executive offices and one of its warehouse facilities,
containing 140,000 square feet, are located in West New York, New Jersey. The
Registrant occupied these facilities under long-term leases from 1968 to 1981,
when these facilities were purchased by the Registrant. The Registrant currently
leases to outside parties approximately 40,000 square feet of the West New York
facilities. The Registrant also leases (i) showroom, warehouse and distribution
facilities in New York City containing approximately 12,000 square feet and (ii)
two additional showroom and office facilities in New York City totaling
approximately 7,000 square feet (one of which is subject to a lease that expires
in January 1997 and, as part of the Registrant's restructuring, will not be
renewed). The executive offices, and manufacturing, distribution and warehouse
facilities, of JLN, Inc., containing approximately 93,250 square feet, are
located in Ferris, Texas. All of the Registrant's facilities are well maintained
structures, in good physical condition and are adequate to meet its current and
reasonably foreseeable needs.
Reference is made to Note E, "Commitments," of the Notes to Consolidated
Financial Statements on page F-10 of this Form 10-K for additional information
about the Registrant's commitments under the terms of non-cancelable leases.
-4-
Item 3. Legal Proceedings.
(a) The Registrant is not a party to, nor is any of its property the
subject of, any material pending legal proceeding.
(b) No material pending legal proceeding was terminated during the
three-months ended June 30, 1996.
Item 4. Submission of Matters to a Vote of Security Holders.
The Registrant did not submit any matters to a vote of its security
holders, through the solicitation of proxies or otherwise, during the
three-months ended June 30, 1996.
PART II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters.
The Registrant's Common Stock, $1.00 par value per share, is traded on the
American Stock Exchange (Symbol: "JLN"). The following table sets forth the high
and low closing sales prices for the Registrant's Common Stock, as reported by
the American Stock Exchange, for each quarterly period during the Registrant's
fiscal years ended June 30, 1996 and June 30, 1995:
Fiscal Year Ended June 30, 1996 High Low
------------------------------- ----- ---
First Quarter 5 1/2 4 5/8
Second Quarter 5 3 7/8
Third Quarter 4 5/8 4
Fourth Quarter 4 1/2 3 3/4
-5-
Fiscal Year Ended June 30, 1995 High Low
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First Quarter 13 1/4 10 1/8
Second Quarter 10 1/8 4 3/8
Third Quarter 6 3 1/2
Fourth Quarter 6 3 7/8
The Registrant did not pay cash dividends during fiscal 1996. During the
quarterly periods in fiscal 1995 ending September 30, 1994 and December 31,
1994, the Registrant paid quarterly cash dividends of $.125 per share of its
Common Stock. In connection with the restructuring of the Registrant's
operations, described above under the caption "Item 1. Business--Certain
Developments," the Registrant discontinued the payment of quarterly cash
dividends during the third quarter ended March 31, 1995. As previously
announced, the Registrant does not anticipate a resumption of payment of cash
dividends in the foreseeable future.
At June 30, 1996, there were approximately 800 holders of record of the
Registrant's Common Stock.
-6-
Item 6. Selected Financial Data.
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Years ended June 30, 1996 1995 1994 1993 1992
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REVENUES:
Net Sales $72,312,000 $ 73,577,000 $82,393,000 $63,520,000 $65,285,000
Other Income, net 328,000 317,000 422,000 454,000 623,000
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72,640,000 73,894,000 82,815,000 63,974,000 65,908,000
- ---------------------------------------------------------------------------------------------------------------
Cost of goods sold 53,836,000 58,639,000 58,298,000 48,044,000 49,411,000
Shipping, selling and administrative
expenses 17,543,000 17,834,000 21,741,000 15,786,000 14,652,000
Interest expense 119,000 309,000 224,000 59,000 26,000
Restructuring costs - 995,000 - - -
Cost of product recall - - - 2,000,000 -
Provision (benefit) for income taxes 457,000 (1,563,000) 965,000 (786,000) 436,000
Cumulative effect for change in
accounting for income taxes - - - (750,000) -
- ---------------------------------------------------------------------------------------------------------------
NET EARNINGS (LOSS) $ 685,000 $ (2,320,000) $ 1,587,000 $ (379,000) $ 1,383,000
===============================================================================================================
Average common shares outstanding 2,691,405 2,691,352 2,688,555 2,675,815 2,660,537
- ---------------------------------------------------------------------------------------------------------------
Earnings (loss) per common share
before cumulative effect of change
in accounting for income taxes $ 0.25 $ (0.86) $ 0.59 $ (0.42) $ 0.52
Cumulative effect of change in
accounting for income taxes - - - $ 0.28 -
- ---------------------------------------------------------------------------------------------------------------
Earnings (loss) per common share $ 0.25 $ (0.86) $ 0.59 $ (0.14) $ 0.52
===============================================================================================================
Cash dividends paid - $ 0.25 $ 0.50 $ 0.50 $ 0.50
- ---------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $31,981,000 $ 28,409,000 $34,886,000 $32,288,000 $29,515,000
===============================================================================================================
Long term debt:
Guaranteed bank loan - ESOP $ 704,000 $ 888,000 $ 1,150,000 - -
Other non-current liabilities $ 32,000 $ 33,000 $ 31,000 $ 25,000 $ 44,000
Obligation under capital leases - - - - $ 217,000
Stockholders' equity $16,838,000 $ 15,942,000 $18,703,000 $19,600,000 $21,343,000
===============================================================================================================
Stockholders' equity per share $ 6.26 $ 5.92 $ 6.95 $ 7.30 $ 7.97
===============================================================================================================
-7-
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
Liquidity and Capital Resources
The net increase in cash and cash equivalents in the fiscal years ended
June 30, 1996 and 1995 was $422,000 and $58,000, respectively, compared to a
decrease in the fiscal year ended June 30, 1994 of $518,000. The increase in
fiscal 1996 was the result of an excess of funds provided by operating
activities of $3,176,000 over funds used in investing activities of $315,000 and
financing activities of $2,439,000. Funds provided by operating activities
increased mainly due to an increase in accounts payable of $5,010,000 mostly
financing the increase in inventory and net earnings from operations totaling
$685,000. These funds were principally offset by an increase in inventories of
$3,330,000 due to increased orders for goods planned to be shipped in the first
quarter of fiscal 1997. Cash used in investing activities was primarily for the
purchase of bonds (securities available for sale) of $3,673,000 and for the
purchase of certain trademarks and other assets from McCrackin Industries, Inc.
for $1,500,000. Reference is made to Note M "Purchase of Trademarks" of the
Notes to Consolidated Financial Statements on page F-15 of this Form 10-K. These
items were offset, in part, by sales of securities available for sale totaling
$5,034,000. Funds used in financing activities of $2,439,000 were entirely
related to the pay down of outstanding notes payable to the Company's bank under
an existing bank line of credit.
Through a $15,000,000 credit line with its bank, the Company has short-term
borrowing capabilities, and can issue letters of credit for purchase commitments
and issue bankers acceptances. Within this line of credit, the Company has
available to it up to $7,500,000 of short-term loans and bankers acceptances at
either prime or LIBOR rates. All borrowings, with the exception of bankers
acceptances, are unsecured. Amounts outstanding under the unsecured short-term
line of credit at June 30, 1996 was $1,100,000. Reference is made to Note F
"Credit Facilities," of the Notes to Consolidated Financial Statements on page
F-10 of this Form 10-K for additional information about the Company's credit
lines.
There were no material commitments for capital expenditures at June 30,
1996.
The net increase in cash and cash equivalents in the fiscal year ended June
30, 1995 was $58,000. The increase in fiscal 1995 was the result of an excess of
funds provided by operating activities of $2,967,000 over funds used in
investing activities of $192,000 and financing activities of $2,717,000. Funds
provided by operating activities were mainly the result of a decrease in
accounts receivable of $4,445,000 as a result of lower sales in the final months
of this fiscal period, a decrease in inventories of $2,277,000 due to increased
emphasis on purchasing inventory for certain divisions by specific order rather
than for stock, as well as anticipated lower demand for goods, and from the sale
of marketable trading securities of $1,662,000. These funds were principally
offset by the net loss of $2,320,000, an increase in both deferred and prepaid
and refundable income taxes of $2,032,000, the purchase of trading securities
totaling $620,000 and a decrease in accounts payable and other current
liabilities of $1,012,000, which resulted from lower inventory levels. Cash used
in investing activities was primarily for the purchase of bonds
-8-
(securities available for sale) plus additions to property and equipment. Funds
used in financing activities were principally for the repayment of bank loans of
$2,000,000 and dividends paid for the first and second quarters of the 1995
fiscal year totaling $715,000.
The net decrease in cash and cash equivalents in the fiscal year ended June
30, 1994 was $518,000. The decrease in fiscal 1994 was the result of funds used
in operating activities of $3,063,000 in excess of funds provided by investing
activities of $1,441,000 and financing activities of $1,104,000. Funds used in
operating activities were mainly the result of increases in accounts receivable
of $2,992,000, due to heavy shipments in the last month of the fiscal year, and
increases in inventories of $2,748,000, primarily a buildup for shipments in the
first quarter of the subsequent year. These were principally offset by net
earnings of $1,587,000, depreciation and amortization of $360,000 and a decrease
in deferred and refundable income taxes. Cash provided by investing activities
consisted primarily of a decrease in marketable securities due mainly to
maturing bonds of $1,910,000 offset by the purchase of property and equipment of
$573,000. Funds provided by financing activities, mainly bank loans of
$2,438,000, were offset by dividends paid of $1,350,000.
The Company has an Employee Stock Ownership Plan ("ESOP"). During fiscal
1994, the Company guaranteed a bank loan to the ESOP in the amount of
$1,150,000, the proceeds of which were also used to purchase shares of the
Company's Common Stock. At June 30, 1996, the loan balance was $704,000.
Reference is made to Note L, "Employee Stock Ownership Plan and Trust," of the
Notes to Consolidated Financial Statements on page F-14 of this Form 10-K.
As of June 30, 1996 1995 and 1994 working capital was $15,993,000,
$16,223,000 and $19,128,000, respectively. The ratio of current assets to
current liabilities for those same periods was 2.3 to 1, 2.6 to 1 and 2.5 to 1,
respectively. The change in the current ratio in 1996 was primarily due to the
increases in accounts payable and other current liabilities which rose (mostly
attributable to the purchase of trademarks referred to above) at a
proportionately higher rate than the offsetting increase in inventory. The
change in current ratio in 1995 was primarily due to the level of bank
borrowing, which was $3,538,000 at June 30, 1995 and $5,538,000 at June 30,
1994. The Company's cash, cash equivalents and marketable securities totaled
$4,279,000, $5,191,000 and $5,860,000 at June 30, 1996, 1995 and 1994,
respectively. The Company believes that funds provided by operations, existing
working capital and the Company's current bank lines will be sufficient to meet
its anticipated short-term and long-term working capital needs.
Results of Operations
1996 Compared to 1995
Net sales were $72,312,000 which was slightly lower than net sales of
$73,577,000 in fiscal 1995. This reduction was part of lower anticipated sales
based on the Company's 1995 restructuring which included emphasis on improving
the gross profit margin and of buying inventory for certain divisions by
specific order rather than for stock.
-9-
Cost of goods sold, as a percentage of sales, decreased, due to relatively
fewer markdowns taken after the Company's fiscal 1995 restructuring. Shipping,
selling and administrative expense decreased due to a reduction in certain fixed
expenses following the Company's fiscal 1995 restructuring. Interest expense
decreased due to lower aggregate average borrowing in fiscal 1996 compared to
fiscal 1995.
Other income, almost exclusively from investments, was slightly higher than
the same 1995 period due to a small increase in the overall average investment
interest rate.
The earnings increase for the fiscal year ended June 30, 1996 compared to
the prior year was due mainly to better gross profit margins, lower shipping,
selling and administrative expense as well as lower interest expense.
1995 Compared to 1994
During fiscal 1995, the Company decided to institute a restructuring
program as a result of the decline in sales and margins and the increased direct
importation by accessory and apparel retailers. This program resulted in a
pre-tax restructuring charge of $995,000, representing employee severance and
other exit costs in connection with the closure of a warehouse and showroom. In
addition, there were costs of $1,761,000, primarily for the write-down to market
value of inventory of certain divisions of the Company, as well as costs
incurred during the wind-down of operations in those closed facilities.
Net sales were $73,577,000 in the year ended June 30, 1995 compared to
$82,393,000 in the year ended June 30, 1994. The decrease in sales was due
primarily to the steep decline in the Company's children's line and its ladies
moderately priced handbag lines, offset partially by an increase in apparel
sales.
Cost of goods sold, as a percentage of sales, increased, in part, due to
the markdowns taken by the Company relative to the restructuring and from lower
markups achieved in certain divisions. Shipping, selling and administrative
expenses decreased due to the decrease in expenses related to the decline in
sales volume and measures taken in the restructuring. Interest expense increased
during fiscal 1995 compared to fiscal 1994 due to an increase in interest rates.
Other income, almost exclusively from investments, declined due to a lower
level of funds available for investment.
The loss for the fiscal year ended June 30, 1995 was due mainly from
decreased sales volume and lower margins, offset by decreased shipping, selling,
administrative expenses as well as costs associated with the restructuring.
The increase in net earnings for the fiscal year ended June 30, 1994 was
due mainly to the increase in sales volume and somewhat higher markups, offset
by increased shipping, selling, administrative and interest expenses.
-10-
Impact of Recently Issued Accounting Standards
SFAS No. 121 requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may no longer be
recoverable. Adoption of SFAS No. 121, which is in effect for years beginning
after December 31, 1995, is not expected to have an material impact on the
Company. In October 1995, the Financial Accounting Standards Board issued SFAS
No. 123, "Accounting for Stock-Based Compensation." The Standard is effective
for fiscal years beginning after December 15, 1995. The Company has not yet
determined if it will adopt the accounting provisions of SFAS No. 123 or only
elect, as allowed, the disclosure provision, each of which deals with
recognition of compensation expense of grants for stock, stock options and other
equity instruments to employees based of fair value accounting rules. However,
the Company does not believe that the adoption of SFAS No. 123 will have a
significant effect on its results of operations.
Item 8. Financial Statements and Supplementary Data.
(a) Financial Statements
The report dated September 17, 1996 of Deloitte & Touche LLP,
independent auditors, the consolidated balance sheets of Jaclyn, Inc. and
subsidiaries as of June 30, 1996 and 1995 and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended June 30, 1996 and Notes to Consolidated
Financial Statements appear on pages F-2 through F-15 of this Form 10-K.
(b) Supplementary Data
Selected unaudited quarterly financial data for the fiscal years ended
June 30, 1996 and June 30, 1995 is set forth at Note O, "Unaudited Quarterly
Financial Data" on page F-16 of this Form 10-K.
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure.
Not Applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information required by this item is incorporated herein by
reference to the Registrant's definitive Proxy Statement relating to the
Registrant's 1996 Annual Meeting of Stockholders to be filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended.
Item 11. Executive Compensation.
The information required by this item is incorporated herein by
reference to the Registrant's definitive Proxy Statement relating to the
Registrant's 1996 Annual Meeting of Stockholders to be filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended.
-11-
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by this item is incorporated herein by
reference to the Registrant's definitive Proxy Statement relating to the
Registrant's 1996 Annual Meeting of Stockholders to be filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended.
Item 13. Certain Relationships and Related Transactions.
The information required by this item is incorporated herein by
reference to the Registrant's definitive Proxy Statement relating to the
Registrant's 1996 Annual Meeting of Stockholders to be filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) The following financial statements and financial statement schedules
are filed as part of this report:
1. Financial Statements:
Independent Auditors' Report
Consolidated Balance Sheets -- June 30, 1996 and 1995
Consolidated Statements of Operations -- years ended June 30,
1996, 1995 and 1994
Consolidated Statements of Stockholders' Equity -- years ended
June 30, 1996, 1995 and 1994
Consolidated Statements of Cash Flows -- years ended June 30,
1996, 1995 and 1994
Notes to Consolidated Financial Statements
2. Financial Statement Schedules:
Schedule II -- Valuation and Qualifying Accounts
All other schedules are omitted because they are either
inapplicable, not required, or because the required information is included in
the consolidated financial statements or notes thereto.
3. Exhibits:
Exhibit No. Description
- ----------- -----------
3(a) Certificate of Incorporation of the Registrant (incorporated
herein by reference to Exhibit 3(a) to the Registrant's Annual
Report on Form 10-K, File No. 1-5863, for the fiscal year
ended June 30, 1994).
-12-
3(b) By-Laws of the Registrant (incorporated herein by reference to
Exhibit 3(b) to the Registrant's Annual Report on Form 10-K,
File No. 1-5863, for the fiscal year ended June 30, 1991).
l0(a) Lease dated September 1, 1968 relating to former warehouse
facilities of the Registrant located in North Bergen, New
Jersey (incorporated herein by reference to Exhibit 13(c) of
Amendment No. 1 to the Registrant's Registration Statement on
Form S-1, Registration No. 2-29970, filed October 1, 1968).
10(b) Renewal dated March 19, 1986 of Lease dated September 1, 1968
relating to former warehouse facilities of the Registrant
located in North Bergen, New Jersey (incorporated herein by
reference to Exhibit 10(c) to the Registrant's Annual Report
on Form 10-K, File No. 1-5863, for the fiscal year ended June
30, 1987).
10(c) Lease dated January 29, 1987 relating to former warehouse
facilities of the Registrant located in North Bergen, New
Jersey (incorporated herein by reference to Exhibit 10(e) to
the Registrant's Annual Report on Form 10-K, File No. 1-5863,
for the fiscal year ended June 30, 1987).
10(d) Lease dated as of February 11, 1993 with 33 East 33rd Street
Realty Associates relating to showroom, warehouse and
distribution facilities of the Registrant located in New York,
New York (incorporated herein by reference to Exhibit 10(d) to
the Registrant's Annual Report on Form 10-K, File No. 1-5863,
for the fiscal year ended June 30, 1993).
10(e) Lease dated January 28, 1994 with 330 Realty Company relating
to office and showroom facilities located in New York, New
York (incorporated herein by reference to Exhibit 10(e) to the
Registrant's Annual Report on Form 10-K, File No. 1-5863, for
the fiscal year ended June 30, 1994).
10(f) Lease dated January 28, 1994 between E.H. Handbag Co. and 330
Realty Company relating to office and showroom facilities
located in New York, New York (incorporated herein by
reference to Exhibit 10(f) to the Registrant's Annual Report
on Form 10-K, File No. 1-5863, for the fiscal year ended June
30, 1993)
10(g) Incentive Stock Option Plan of the Registrant (incorporated
herein by reference to Exhibit 10(f) to the Registrant's
Annual Report on Form 10-K, File No. 1-5863, for the fiscal
year ended June 30, 1988).*
10(h) 1984 Employee Stock Option Plan of the Registrant
(incorporated herein by reference to Exhibit 10(f) to the
Registrant's Annual Report on Form 10-K, File No. 1-5863, for
the fiscal year ended June 30, 1989).*
10(i) 1990 Stock Option Plan of the Registrant, as amended
(incorporated herein by reference to Exhibit 10(g) to the
Registrant's Annual Report
-13-
on Form 10-K, File No. 1-5863, for the fiscal year ended June
30, 1991).*
10(j) Amended and Restated Stockholders' Agreement dated July 30,
1996 among the Registrant and the persons listed on Schedule A
thereto.
10(k) Key Executive Disability Plan of the Registrant (incorporated
herein by reference to Exhibit 10(m) to the Registrant's
Annual Report on Form 10-K, File No. 1-5863, for the fiscal
year ended June 30, 1988).*
10(l) Loan and Security Agreement dated February 15, 1994 between
the Jaclyn, Inc. Employee Stock Ownership Plan and Trust and
National Westminster Bank, New Jersey (incorporated herein by
reference to Exhibit 10(l) to the Registrant's Annual Report
on Form 10-K, File No. 1-5863, for the fiscal year ended June
30, 1994).
10(m) Guaranty dated February 15, 1994 of Empress Handbag Co., Inc.,
The Bag Factory Shops, Inc., JLN, Inc. and the Registrant in
favor of National Westminster Bank, New Jersey (incorporated
herein by reference to Exhibit 10(m) to the Registrant's
Annual Report on Form 10-K, File No. 1-5863, for the fiscal
year ended June 30, 1994).
10(n) Amendment to Loan and Security Agreement dated August 2, 1994
between the Jaclyn, Inc. Employee Stock Ownership Plan and
Trust and National Westminster Bank, New Jersey (incorporated
herein by reference to Exhibit 10(n) to the Registrant's
Annual Report on Form 10-K, File No. 1-5863, for the fiscal
year ended June 30, 1994).
10(o) Split-Dollar Insurance Agreement dated August 15, 1987 between
the Registrant and Robert Chestnov (incorporated herein by
reference to Exhibit 10(m) to the Registrant's Annual Report
on Form 10-K, File No. 1-5863, for the fiscal year ended June
30, 1990).*
10(p) Split-Dollar Insurance Agreement dated August 15, 1987 between
the Registrant and Howard Ginsburg (incorporated herein by
reference to Exhibit 10(n) to the Registrant's Annual Report
on Form 10-K, File No. 1-5863, for the fiscal year ended June
30, 1990).*
10(q) Split-Dollar Insurance Agreement dated August 15, 1987 between
the Registrant and Allan Ginsburg (incorporated herein by
reference to
-14-
Exhibit 10(o) to the Registrant's Annual Report on Form 10-K,
File No. 1-5863, for the fiscal year ended June 30, 1990).*
21 Subsidiaries of the Registrant (incorporated herein by
reference to Exhibit 21 to the Registrant's Annual Report on
Form 10-K, File No. 1-5863, for the fiscal year ended June 30,
1995).
27 Financial Data Schedule.
- --------------------
*Management contract or compensatory plan or arrangement
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the Registrant during the three
months ended June 30, 1996.
(c) Exhibits.
Exhibits are listed in response to Item 14(a)3.
(d) Financial Statement Schedules.
Financial Statement Schedules are listed in response to Item 14(a)2.
-15-
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
JACLYN, INC.
By: /s/ ALLAN GINSBURG
----------------------------------
September 27, 1996 Allan Ginsburg, Chairman
of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indi cated:
/s/ ALLAN GINSBURG Chairman of the Board September 27, 1996
- -------------------------- and Director
Allan Ginsburg
/s/ ROBERT CHESTNOV President, Principal September 27, 1996
- ------------------------- Executive Officer and
Robert Chestnov Director
/s/ ANTHONY CHRISTON Chief Financial Officer, September 27, 1996
- ------------------------- Principal Financial and
Anthony C. Christon Accounting Officer
/s/ ABE GINSBURG DIRECTOR SEPTEMBER 27, 1996
- -------------------------
Abe Ginsburg
/S/ HOWARD GINSBURG DIRECTOR SEPTEMBER 27, 1996
- -------------------------
Howard Ginsburg
/S/ MARTIN BRODY DIRECTOR SEPTEMBER 27, 1996
- -------------------------
Martin Brody
/S/ NORMAN SEIDEN Director September 27, 1996
- -------------------------
Norman Seiden
-16-
Director September , 1996
- -------------------------
Michael Singer
/s/ RICHARD CHESTNOV Director September 27, 1996
- -------------------------
Richard Chestnov
-17-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------------
EXHIBITS
to
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR
ENDED JUNE 30, 1996
----------------------------------------
JACLYN, INC.
================================================================================
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
3(a) Certificate of Incorporation of the Registrant
(incorporated herein by reference to Exhibit 3(a) to
the Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1994).
3(b) By-Laws of the Registrant (incorporated herein by
reference to Exhibit 3(b) to the Registrant's Annual
Report on Form 10-K, File No. 1-5863, for the fiscal
year ended June 30, 1991).
10(a) Lease dated September 1, 1968 relating to warehouse
facilities of the Registrant located in North Bergen,
New Jersey (incorporated herein by reference to Exhibit
13(c) of Amendment No. 1 to the Registrant's
Registration Statement on Form S-1, Registration No.
2-29970, filed October 1, 1968).
10(b) Renewal dated March 19, 1986 of Lease dated September 1,
1968 relating to warehouse facilities of the Registrant
located in North Bergen, New Jersey (incorporated herein
by reference to Exhibit 10(c) to the Registrant's Annual
Report on Form 10-K, File No. 1-5863, for the fiscal
year ended June 30, 1987).
10(c) Lease dated January 29, 1987 relating to warehouse
facilities of the Registrant located in North Bergen,
New Jersey (incorporated herein by reference to Exhibit
10(e) to the Registrant's Annual Report on Form 10-K,
File No. 1-5863, for the fiscal year ended June
30, 1987).
10(d) Lease dated as of February 11, 1993 with 33 East 33rd
Street Realty Associates relating to showroom, warehouse
and distribution facilities of the Registrant located in
New York, New York (incorporated herein by reference to
Exhibit 10(d) to the Registrant's Annual Report on Form
10-K, File No. 1-5863, for the fiscal year ended June
30, 1993).
Exhibit No. Description Page
- ----------- ----------- ----
10(e) Lease dated January 28, 1994 with 330 Realty Company
relating to office and showroom facilities located in
New York, New York (incorporated herein by reference to
Exhibit 10(e) to the Registrant's Annual Report on Form
10-K, File No. 1-5863, for the fiscal year ended June
30, 1994).
10(f) Lease dated January 28, 1994 between E.H. Handbag Co.
and 330 Realty Company relating to office and showroom
facilities located in New York, New York (incorporated
herein by reference to Exhibit 10(f) to the Registrant's
Annual Report on Form 10-K, File No. 1-5863, for the
fiscal year ended June 30, 1994).
10(g) Incentive Stock Option Plan of the Registrant
(incorporated herein by reference to Exhibit 10(f) to
the Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1988).*
10(h) 1984 Employee Stock Option Plan of the Registrant
(incorporated herein by reference to Exhibit 10(f) to
the Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1989).*
10(i) 1990 Stock Option Plan of the Registrant, as amended
(incorporated herein by reference to Exhibit 10(g) to
the Registrant's Annual Report on Form 10-K, File
No. 1-5863, for the fiscal year ended June 30, 1991).*
10(j) Amended and Restated Stockholders' Agreement dated as of
July 30, 1996 among the Registrant and the persons
listed on Schedule A thereto (incorporated herein by
reference to Exhibit 10(h) to the Registrant's Annual
Report on Form 10-K, File No. 1-5863, for the fiscal
year ended June 30, 1988).
10(k) Key Executive Disability Plan of the Registrant
(incorporated herein by reference to Exhibit 10(m) to
the Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1988).*
10(l) Loan and Security Agreement dated February 15, 1994
between the Jaclyn, Inc. Employee Stock Ownership Plan
Exhibit No. Description Page
- ----------- ----------- ----
and Trust and National Westminster Bank, New Jersey
(incorporated herein by reference to Exhibit 10(l) to
the Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1994).
10(m) Guaranty dated February 15, 1994 of Empress Handbag Co.,
Inc., The Bag Factory Shops, Inc., JLN, Inc. and the
Registrant in favor of National Westminster Bank, New
Jersey (incorporated herein by reference to Exhibit
10(m) to the Registrant's Annual Report on Form 10-K,
File No. 1-5863, for the fiscal year ended June 30,
1994).
10(n) Amendment to Loan and Security Agreement dated August 2,
1994 between the Jaclyn, Inc. Employee Stock Ownership
Plan and Trust and National Westminster Bank, New Jersey
(incorporated herein by reference to Exhibit 10(n) to
the Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1994).
10(o) Split-Dollar Insurance Agreement dated August 15, 1987
between the Registrant and Robert Chestnov (incorporated
herein by reference to Exhibit 10(m) to the Registrant's
Annual Report on Form 10-K, File No. 1-5863, for the
fiscal year ended June 30, 1990).*
10(p) Split-Dollar Insurance Agreement dated August 15, 1987
between the Registrant and Howard Ginsburg (incorporated
herein by reference to Exhibit 10(n) to the Registrant's
Annual Report on Form 10-K, File No. 1-5863, for the
fiscal year ended June 30, 1990).*
10(q) Split-Dollar Insurance Agreement dated August 15, 1987
between the Registrant and Allan Ginsburg (incorporated
herein by reference to Exhibit 10(o) to the Registrant's
Annual Report on Form 10-K, File No. 1-5863, for the
fiscal year ended June 30, 1990).*
21 Subsidiaries of the Registrant (incorporated herein by
reference to Exhibit 21 to the Registrant's Annual
Report on Form 10-K, File No. 1-5863, for the fiscal
year ended June 30, 1995).
27 Fiancial Data Schedule
- ----------
* Management contract or compensatory plan or arrangement.
JACLYN, INC. AND SUBSIDIARIES
Consolidated Financial Statements and
Additional Information for the Years Ended
June 30, 1996, 1995 and 1994 and
Independent Auditors' Report
Report to Independent Accountants
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
Jaclyn, Inc.
West New York, New Jersey
We have audited the accompanying consolidated balance sheets of Jaclyn, Inc. and
Subsidiaries as of June 30, 1996 and 1995, and the related consolidated
statements of operations, stockholders equity and cash flows for each of the
three years in the period ended June 30, 1996. Our audits also included the
consolidated financial statement schedule of Jaclyn Inc. and Subsidiaries listed
in item 14(a)2. These financial statements and schedule are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Jaclyn, Inc. and Subsidiaries as of
June 30, 1996 and 1995, and the results of their operations and their cash flows
for each of the three years in the period ended June 30, 1996 in conformity with
generally accepted accounting principles. Also, in our opinion, such financial
statement schedule, when considered in relation to the basic consolidated
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.
DELOITTE & TOUCHE LLP
September 17, 1996
New York, New York
F-1
JACLYN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND 1995
================================================================================
ASSETS 1996 1995
CURRENT ASSETS:
Cash and cash equivalents $ 665,000 $ 243,000
Securities available for sale 3,614,000 4,948,000
Accounts receivable, less allowance for
doubtful accounts: 1996, $760,000, 1995, $301,000 10,305,000 10,550,000
Inventories 11,072,000 7,742,000
Prepaid expenses and other current assets 421,000 583,000
Deferred income taxes 2,395,000 1,739,000
Prepaid and refundable income taxes 271,000 596,000
----------- -----------
Total current assets 28,743,000 26,401,000
----------- -----------
PROPERTY, PLANT AND EQUIPMENT, NET 1,481,000 1,614,000
----------- -----------
OTHER ASSETS 1,757,000 394,000
----------- -----------
$31,981,000 $28,409,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable - bank $ 1,100,000 $ 3,538,000
Accounts payable 6,279,000 3,022,000
Commissions payable 573,000 375,000
Accrued payroll and related expenses 1,406,000 989,000
Other current liabilities 3,392,000 2,254,000
----------- -----------
Total current liabilities 12,750,000 10,178,000
----------- -----------
GUARANTEED BANK LOAN - ESOP 704,000 888,000
OTHER NON-CURRENT LIABILITIES 32,000 33,000
DEFERRED INCOME TAXES 1,657,000 1,368,000
COMMITMENTS
STOCKHOLDERS' EQUITY:
Preferred stock, par value $1: authorized,
1,000,000 shares, issued, none -- --
Common stock, par value $1: authorized,
5,000,000 shares 3,369,000 3,369,000
Additional paid-in capital 12,117,000 12,117,000
Retained earnings 9,026,000 8,341,000
----------- -----------
24,512,000 23,827,000
Less: Treasury stock at cost 7,011,000 7,011,000
Guaranteed bank loan - ESOP 704,000 888,000
Add: Unrealized gain on securities available
for sale 41,000 14,000
----------- -----------
Total stockholders' equity 16,838,000 15,942,000
----------- -----------
$31,981,000 $28,409,000
=========== ===========
The accompanying notes are an integral part of these financial statements.
F-2
JACLYN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
================================================================================
1996 1995 1994
REVENUES:
Net Sales $ 72,312,000 $ 73,577,000 $ 82,393,000
Other income, net 328,000 317,000 422,000
------------ ------------ ------------
72,640,000 73,894,000 82,815,000
------------ ------------ ------------
COSTS AND EXPENSES:
Cost of goods sold 53,836,000 58,639,000 58,298,000
Shipping, selling and
administrative expenses 17,543,000 17,834,000 21,741,000
Interest expense 119,000 309,000 224,000
Restructuring costs -- 995,000 --
------------ ------------ ------------
71,498,000 77,777,000 80,263,000
------------ ------------ ------------
EARNINGS (LOSS) BEFORE
INCOME TAXES 1,142,000 (3,883,000) 2,552,000
PROVISION (BENEFIT) FOR
INCOME TAXES 457,000 (1,563,000) 965,000
------------ ------------ ------------
NET EARNINGS (LOSS) $ 685,000 $ (2,320,000) $ 1,587,000
------------ ------------ ------------
EARNINGS (LOSS) PER
COMMON SHARE $ 0.25 $ (0.86) $ 0.59
------------ ------------ ------------
Weighted average number
of shares outstanding 2,691,405 2,691,352 2,688,555
------------ ------------ ------------
The accompanying notes are an integral part of these financial statements.
F-3
JACLYN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
===================================================================================
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss) $ 685,000 $(2,320,000) $ 1,587,000
Adjustments to reconcile net earnings
(loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 419,000 430,000 360,000
Deferred income taxes (367,000) (1,436,000) 122,000
Gain on sale of equipment (2,000) (30,000) (19,000)
Changes in assets and liabilities:
Sales of trading securities -- 1,662,000 --
Purchase of trading securities -- (620,000) --
Decrease (increase) in accounts
receivable 245,000 4,445,000 (2,992,000)
(Increase) decrease in inventories (3,330,000) 2,277,000 (2,748,000)
Decrease in prepaid expenses and
other current assets 162,000 114,000 23,000
Decrease (increase) in prepaid and
refundable income taxes 325,000 (596,000) --
Decrease in deferred income taxes -- -- 538,000
Decrease in security deposits and
other assets 29,000 53,000 154,000
Increase (decrease) in accounts
payable and other current liabilities 5,010,000 (1,012,000) (88,000)
----------- ----------- -----------
Net cash provided by (used in) operating
activities 3,176,000 2,967,000 (3,063,000)
----------- ----------- -----------
F-4
JACLYN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED JUNE 30, 1996, 1995 AND 1994
====================================================================================
1996 1995 1994
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (202,000) (288,000) (573,000)
Proceeds from sale of property 26,000 388,000 104,000
Sales of marketable securities -- -- 1,910,000
Purchase of trademarks (1,500,000) -- --
Purchases of securities available for
sale (3,673,000) (1,247,000) --
Sales of securities available for sale 5,034,000 955,000 --
----------- ----------- -----------
Net cash (used in) provided by investing
activities (315,000) (192,000) 1,441,000
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Dividends paid -- (715,000) (1,350,000)
Exercise of stock options -- 26,000 65,000
Acquisition of treasury stock -- (28,000) (49,000)
(Decrease) increase in notes payable
- bank (2,439,000) (2,000,000) 2,438,000
----------- ----------- -----------
Net cash (used in) provided by financing
activities (2,439,000) (2,717,000) 1,104,000
----------- ----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ 422,000 $ 58,000 $ (518,000)
----------- ----------- -----------
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 243,000 185,000 703,000
----------- ----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 665,000 $ 243,000 $ 185,000
=========== =========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the year for:
Interest $ 120,000 $ 309,000 $ 224,000
----------- ----------- -----------
Income taxes $ 203,000 $ 543,000 $ 885,000
----------- ----------- -----------
NON-CASH ITEMS:
Unrealized gain on securities available
for sale $ 41,000 $ 14,000 --
----------- ----------- -----------
The accompanying notes are an integral part of these financial statements
F-5
JACLYN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1996, 1995, AND 1994
- -----------------------------------------------------------------------------------------------------------
Unrealized
COMMON STOCK Gain (Loss)
-------------------------- Additional Securities
Shares Amount Paid-in Available Retained
Capital for Sale Earnings
------------ ------------ ------------ ------------ ------------
BALANCE, JUNE 30, 1993 3,357,656 $ 3,358,000 $ 12,037,000 -- $ 11,139,000
Net earnings, year ended
June 30, 1994 -- -- -- -- 1,587,000
Exercise of stock options 7,862 8,000 57,000 -- --
Dividends:
Cash, $.50 per share -- -- -- -- (1,350,000)
Acquisition of treasury stock -- -- -- -- --
Guaranteed bank loan - ESOP -- -- -- -- --
------------ ------------ ------------ ------------ ------------
BALANCE, JUNE 30, 1994 3,365,518 3,366,000 12,094,000 -- 11,376,000
Unrealized gain on securities
available for sale at July 1, 1994 -- -- -- 33,000 --
Unrealized loss on securities
available for sale -- -- -- (19,000) --
Net loss, year ended June 30, 1995 -- -- -- -- (2,320,000)
Exercise of stock options 3,215 3,000 23,000 -- --
Dividends:
Cash, $.25 per share -- -- -- -- (715,000)
Acquisition of treasury stock -- -- -- -- --
ESOP loan repayment -- -- -- -- --
------------ ------------ ------------ ------------ ------------
BALANCE, JUNE 30, 1995 3,368,733 3,369,000 12,117,000 14,000 8,341,000
Unrealized gain on securities
available for sale at July 1, 1995 -- -- -- 27,000 --
Net earnings, year ended
June 30, 1996 -- -- -- 685,000 --
ESOP loan repayment -- -- -- -- --
------------ ------------ ------------ ------------ ------------
BALANCE, JUNE 30, 1996 3,368,733 $ 3,369,000 $ 12,117,000 $ 41,000 $ 9,026,000
============ ============ ============ ============ ============
- -----------------------------------------------------------------------------
Treasury Stock Guaranteed
--------------------------- Bank Loan -
Shares Amount ESOP
------------ ------------ ------------
BALANCE, JUNE 30, 1993 670,943 $ 6,934,000 --
Net earnings, year ended
June 30, 1994 -- -- --
Exercise of stock options -- -- --
Dividends:
Cash, $.50 per share -- -- --
Acquisition of treasury stock 4,230 49,000 --
Guaranteed bank loan - ESOP -- -- 1,150,000
------------ ------------ ------------
BALANCE, JUNE 30, 1994 675,173 6,983,000 1,150,000
Unrealized gain on securities
available for sale at July 1, 1994 -- -- --
Unrealized loss on securities
available for sale -- -- --
Net loss, year ended June 30, 1995 -- -- --
Exercise of stock options -- -- --
Dividends:
Cash, $.25 per share -- -- --
Acquisition of treasury stock 2,155 28,000 --
ESOP loan repayment -- -- (262,000)
------------ ------------ ------------
BALANCE, JUNE 30, 1995 677,328 7,011,000 888,000
Unrealized gain on securities
available for sale at July 1, 1995 -- -- --
Net earnings, year ended
June 30, 1996 -- -- --
ESOP loan repayment -- -- (184,000)
------------ ------------ ------------
BALANCE, JUNE 30, 1996 677,328 $ 7,011,000 $ 704,000
============ ============ ============
The accompanying notes are an integral part of these financial statements.
F-6
JACLYN, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE A - SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
Jaclyn, Inc. and its subsidiaries (the "Company") are engaged in the design,
manufacture, marketing and sale of handbags, accessories, apparel and related
products. The Company sells its products to retailers, including department and
specialty stores, national chains, major discounters and mass volume retailers,
throughout the United States.
The consolidated financial statements include the accounts of the Company and
all of its majority-owned subsidiaries. All significant intercompany
transactions and balances have been eliminated. Certain reclassifications have
been made to the 1994 financial statements to conform to the presentation used
in 1995 and 1996.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expense during the reporting period. Actual
results could differ from those estimates.
Accounting Changes
Effective July 1, 1994 the Company adopted Statement of Financial Accounting
Standards No. 115,"Accounting for Investments in Debt and Equity Securities,"
(SFAS 115), the effect of which was not material. All securities classified as
available for sale are recorded at fair market value and the resulting
unrealized gain (loss) is recorded as a component of Stockholder's Equity.
Inventories
Inventories are stated at the lower of cost (first-in, first-out method) or
market.
Property, plant and equipment
Property, plant and equipment are stated at cost. The Company provides for
depreciation and amortization on the straight-line method based on the shorter
of the estimated useful lives or lease period of the respective depreciable or
amortizable assets.
Intangible Assets
Goodwill and trademarks arising from acquisitions are being amortized on a
straight-line basis over periods not exceeding 20 years. The Company regularly
reviews the individual components of the balances by evaluating the future cash
flows of the businesses to determine the recoverability of the assets and
recognizes, on a current basis, any diminution in value.
F-7
Revenue Recognition
Revenue is recognized at the time merchandise is shipped. Retail factory outlet
store revenues are recognized at the time of sale.
New Accounting Pronouncements
SFAS No. 121 requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may no longer be
recoverable. Adoption of SFAS No. 121, which is effective for years beginning
after December 15, 1995, is not expected to have a material impact on the
Company.
In October 1995, the Financial Accounting Standards Board issued SFAS No. 123,
"Accounting for Stock-Based Compensation." The standard encourages, but does not
require, companies to recognize compensation expense of grants for stock, stock
options and other equity instruments to employees based on fair value accounting
rules. SFAS No. 123 requires companies that choose not to adopt the new fair
value accounting rules to disclose pro forma net income and earnings per share
under the new method. The Standard is effective for fiscal years beginning after
December 15, 1995. The Company has not yet determined if it will adopt the
accounting provisions of SFAS No. 123 or only the disclosure provision. However,
the Company does not believe that the adoption of SFAS No. 123 will have a
significant effect on its results of operations.
Cash and Cash Equivalents
Cash in excess of daily requirements is invested in certificates of deposits and
money market funds with maturities of three months or less. Such investments are
deemed to be cash equivalents.
Fair Value of Financial Instruments
The carrying amount of cash, accounts receivable, accounts and notes payable and
accrued expenses are assumed to approximate fair value due to their short
maturities. The carrying value of the long-term bank loan, which bears interest
at a variable rate, approximates fair value. Securities are recorded at fair
value, which is based principally on quoted market prices.
Earnings (loss) per share
Earnings (loss) per share of common stock is computed by dividing net earnings
(loss) by the weighted average number of common shares outstanding during each
year. The assumed exercise of stock options has not been included in the
calculation as the effect is not material.
NOTE B - SECURITIES
Securities available for sale at June 30, 1996 and June 30, 1995 follow:
1996 1995
Cost: $3,546,000 at June 30,
1996 and $4,925,000 at
June 30, 1995 $3,614,000 $4,948,000
F-8
At June 30, 1996 and 1995, securities had unrealized gains of $69,000 and
$23,000 and unrealized loses of $1,000 and $ -0-, respectively.
The net realized gain on the sale of securities, which is included in other
income, net in the Consolidated Statement of Operations, is $13,000 for the
fiscal year ended June 30, 1995.
NOTE C- INVENTORIES
Inventories consist of:
1996 1995
----------- -----------
Raw material $ 4,379,000 $ 1,829,000
Work in process 1,797,000 1,065,000
Finished goods 4,896,000 4,848,000
----------- -----------
$11,072,000 $ 7,742,000
=========== ===========
NOTE D - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is summarized as follows:
1996 1995
Land $ 182,000 $ 182,000
Buildings 1,311,000 1,311,000
Machinery and equipment 1,291,000 1,227,000
Furniture and fixtures 359,000 357,000
Leasehold improvements 708,000 633,000
Automobiles and trucks 46,000 82,000
---------- ----------
3,897,000 3,792,000
Less accumulated depreciation
and amortization 2,416,000 2,178,000
---------- ----------
$1,481,000 $1,614,000
========== ==========
F-9
NOTE E - COMMITMENTS
The Company leases office, warehouse and retail sales facilities under
non-cancelable leases that expire in various years through the year 2000. One
leased warehouse, which lease expired on June 30, 1996, is owned by an entity
controlled by certain officers and stockholders of the Company. The Company paid
$250,300 for each of the years ended June 30, 1996, 1995 and 1994. This lease
agreement was not renewed.
Future minimum payments under non-cancelable operating leases with initial or
remaining terms of one year or more are as follows:
Year Ended Showroom Assembling
June 30, and Distribution Facilities
1997 $351,000
1998 142,000
1999 24,000
2000 14,000
2001 --
Rental expense, including real estate taxes, for all operating leases, totaled
$938,000, $1,062,000 and $1,046,000 for 1996, 1995 and 1994, respectively.
NOTE F - CREDIT FACILITIES
The Company has a line of credit with a bank to issue short-term loans, letters
of credit and bankers acceptances amounting to $15,000,000. At June 30, 1996 and
1995, the Company was contingently obligated on open letters of credit for
approximately $8,584,000 and $7,567,000, respectively. Within the $15,000,000
credit line, the Company can borrow up to $7,500,000 on an unsecured short-term
line of credit and a banker's acceptance line. Borrowings on the unsecured
short-term line of credit were $1,100,000 and $2,500,000 as of June 30, 1996 and
1995, respectively. Borrowings on the bankers acceptance line were $-0- and
$1,038,000 as of June 30, 1996 and 1995, respectively. These loans were at the
bank's prime rate or below (LIBOR) at the option of the Company. The bank's
prime rate at June 30, 1996 was 8.25%. During fiscal 1996, the average amount
outstanding under the short-term line was $2,895,000 with a weighted average
interest rate of 8.0%. During 1995, the average amount outstanding under the
short-term line was $4,541,000 with a weighted average interest rate of 7.2%.
The maximum amount outstanding during fiscal 1996 and fiscal 1995 was $4,000,000
and $6,931,000, respectively.
F-10
NOTE G - STOCK OPTIONS
The Company has an Incentive Stock Option Plan permitting the granting of
options to purchase up to 500,000 shares of common stock. Under the Plan, the
option price cannot be less than the fair market value of the stock as of the
date of the granting of the option and 110% of the fair market value for certain
management employees. Options, which may be granted to December 2000, are
exercisable as determined by the Board of Directors.
At June 30, 1996, 287,583 shares of common stock were available for grant in
connection with the above plan. Changes under the plan for each of the three
years in the period ended June 30, 1996, are as follows:
1996 1995 1994
Shares under option, beginning of year 154,585 152,021 52,338
Granted -- 25,000 107,545
Canceled (21,417) (19,221) --
Exercised -- (3,215) (7,862)
----------- ----------- -----------
Shares under option, end of year 133,168 154,585 152,021
=========== =========== ===========
Shares exercisable, end of year 120,668 129,585 152,021
=========== =========== ===========
Option prices of shares exercisable $4.13-13.61 $4.13-13.61 $6.38-13.61
=========== =========== ===========
NOTE H- PREFERRED STOCK
The Board of Directors of the Company has authority (without action by the
stockholders) to issue the authorized and unissued preferred stock in one or
more series and, within certain limitations to determine the voting rights,
preference as to dividends and in liquidation, conversion and other rights of
each such series. No shares of preferred stock have been issued.
NOTE I - INCOME TAXES
The components of the Company's tax provision (benefit) for each of the three
years ended June 30, 1996 follow:
1996 1995 1994
Current:
Federal $ 148,000 ($ 308,000) $ 625,000
State and Local 31,000 33,000 133,000
Foreign 645,000 148,000 85,000
----------- ----------- -----------
824,000 (127,000) 843,000
Deferred:
Federal and State (367,000) (1,436,000) 122,000
=========== =========== ===========
Provision (benefit) $ 457,000 ($1,563,000) $ 965,000
=========== =========== ===========
F-11
A reconciliation between the provision for income taxes computed by applying the
federal statutory rate to income (loss) before income taxes and the actual
provision (benefit) for income taxes is as follows:
1996 1995 1994
Provision (benefit) for income
taxes at statutory rate 34.0% (34.0)% 34.0%
State and local income taxes net
of federal tax benefit 7.4 (6.3) 3.4
Tax exempt interest (1.7) (2.3) (4.5)
Other 0.3 2.3 4.9
---- ----- ----
Effective tax rate 40.0% (40.3)% 37.8%
==== ===== ====
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The income tax effects of
significant items comprising the Company's net deferred tax assets as of June
30, 1996 and 1995 are as follows:
June 30,
==================================================
1996 1995
======================== ========================
Assets Liabilities Assets Liabilities
Depreciation
and amortization -- $ 726,000 -- $ 437,000
Leases -- 251,000 -- 309,000
Foreign taxes -- 645,000 -- 255,000
Inventory $ 638,000 -- $ 237,000 --
Bad debt and
other reserves 295,000 -- 508,000 --
Reserve for
sales allowances 1,030,000 -- 354,000 --
Reserve for
restructuring costs 37,000 -- 212,000 --
Reserve for royalties -- -- 136,000 --
Other 395,000 35,000 292,000 367,000
---------- ---------- ---------- ----------
$2,395,000 $1,657,000 $1,739,000 $1,368,000
========== ========== ========== ==========
F-12
NOTE J - EMPLOYEE'S PENSION TRUST
The Company and its subsidiaries have a trusteed defined benefit pension plan
for certain of their salaried and hourly personnel. The plan provides pension
benefits that are based on a fixed amount of compensation per year of service,
career average pay or on the employee's compensation during a specified number
of years before retirement. The Company's funding policy is to make annual
contributions required by the Employee Retirement Security Act of 1974.
The net pension expense for 1996, 1995, and 1994 included the following
components:
1996 1995 1994
Service cost - benefits
earned during the period $ 184,000 $ 144,000 $ 137,000
Interest cost on projected
benefit obligations 175,000 137,000 145,000
Actual return on assets (155,000) (2,000) (75,000)
Net amortization and deferral 12,000 (204,000) (146,000)
--------- --------- ---------
Net pension expense $ 216,000 $ 75,000 $ 61,000
========= ========= =========
Assumptions used in determining the net pension charges were:
1996 1995 1994
Discount rates 7.25% 7.25% 7.25%
Rates of increase in compensation levels 3.00% 2.50% 2.50%
Expected long-term rate of return on assets 6.50% 6.75% 7.25%
F-13
The following table sets forth the plan's funded status and amount recognized in
the Company's balance sheets at June 30, 1996, and 1995.
1996 1995
Actuarial present value of benefit obligations:
Vested benefit obligation $ 1,920,000 $ 1,541,000
=========== ===========
Accumulated benefit obligation $ 2,118,000 $ 1,612,000
=========== ===========
Plan assets at fair value $ 2,142,000 $ 2,258,000
Less projected benefit obligation 2,556,000 1,911,000
----------- -----------
Plan assets (less than) in excess of projected
benefit obligation (414,000) 347,000
Unrecognized prior service cost 5,000 6,000
Unrecognized net loss 691,000 28,000
Unrecognized net asset (321,000) (360,000)
----------- -----------
(Accrued) prepaid pension costs ($ 39,000) $ 21,000
=========== ===========
Plan assets at June 30, 1996 and June 30, 1995, consisted primarily of U.S.
Government securities and high-grade corporate notes. Also included in plan
assets at those dates were 22,654 shares of the common stock of the Company with
a market value of $93,000 and $$125,000, respectively.
NOTE K - SALES TO MAJOR CUSTOMERS
During the year ended June 30, 1996, 1995 and 1994, revenues derived from sales
to one customer were 20%, 15% and 18%, respectively. Sales to a second customer
were 12%, 13% and 6%, respectively, and to a third customer were 11%, 8% and 5%,
respectively.
NOTE L - EMPLOYEE STOCK OWNERSHIP PLAN AND TRUST
The Company established a non-contributory Employee Stock Ownership Plan (the
"ESOP") and Trust, for its employees who are not covered by a collective
bargaining agreement.
On February 15, 1994, the ESOP authorized the Trust to borrow $1,150,000 from a
bank, which loan is guaranteed by the Company. The debt bears interest at the
prime rate and is payable in a minimum of ten annual installments. The proceeds,
together with the Company's contribution of $100,000 for the fiscal year ended
June 30, 1994, representing interest and other costs, were used to purchase
90,000 shares of common stock at $13.125 (the market price on February 14, 1994)
from members of the control group representing officers and shareholders of the
Company. As of June 30, 1996, the guaranteed ESOP bank loan was $704,000.
Contributions to the ESOP are at the discretion of the Company's Board of
Directors. During fiscal 1996 and 1995, the Company contributed approximately
$250,000 and $315,000 to the ESOP, respectively. ESOP expense was approximately
$250,000 for each year ended June 30,1996 and June 30, 1995, which includes
$184,000 and $182,000 of compensation expense and 77,000 and 68,000 of interest
expense, respectively. Compensation expense related to the plan is based upon
the number of shares allocated to participants in the current year.
F-14
Vesting occurs after five years of service. However, if the ESOP is deemed
"top-heavy", vesting will occur at the rate of 20% per year after the completion
of the second year of service.
NOTE M - PURCHASE OF TRADEMARKS
During June 1996, the Company acquired certain trademarks and other assets from
McCrackin Industries, Inc. and its affiliates, for a purchase price of
$1,500,000. The trademarks include "Saddle River," under which the Company has
been manufacturing and distributing women's handbags for the past 9 years. In
connection with the acquisition, two of the principals of McCrackin Industries
have entered into a separate consulting agreement with the Company for a period
of 18 months for marketing and consulting services. During this period, those
principals have an option to buy back the trademarks for pre-determined prices
in excess of the purchase price.
NOTE N - CORPORATE RESTRUCTURING
During fiscal 1995, the Company instituted a corporate-wide restructuring
program as a result of experiencing declines in sales and margins, and due to
increased direct importation by accessory and apparel retailers. This program,
which was completed by June 30, 1995, resulted in a pre-tax restructuring charge
of $995,000 representing employee severance and other exit costs in connection
with the closure of a warehouse and showroom. Additional costs of $1,761,000
were incurred primarily for the write-down of inventory to market value relating
to certain of the Company's divisions, as well as for costs incurred during the
wind-down of operations in those closed facilities.
F-15
NOTE O - UNAUDITED QUARTERLY FINANCIAL DATA
Summarized quarterly financial data, in thousands of dollars except for per
share amounts, for the fiscal years ended June 30, 1996 and 1995, are as
follows:
Three Months Ended
---------------------------------------------------------
June 30, March 31, December 31, September 30,
1996 1996 1995 1995
Revenue:
Net sales $21,270 $18,045 $15,159 $17,838
Other income $ 82 $ 76 $ 88 $ 82
------- ------- ------- -------
$21,352 $18,121 $15,247 $17,920
------- ------- ------- -------
Gross profit $ 5,575 $ 4,544 $ 3,858 $ 4,500
======= ======= ======= =======
Net earnings $ 227 $ 135 $ 87 $ 236
======= ======= ======= =======
Earnings per
common share $ .08 $ .05 $ .03 $ .09
======= ======= ======= =======
Three Months Ended
---------------------------------------------------------
June 30, March 31, December 31, September 30,
1995 1995 1994 1994
Revenue:
Net sales $ 16,935 $ 17,289 $ 15,552 $ 23,801
Other income 80 80 54 103
-------- -------- -------- --------
$ 17,015 $ 17,369 $ 15,606 $ 23,904
======== ======== ======== ========
Gross profit $ 2,691 $ 4,818 $ 2,413 $ 5,016
======== ======== ======== ========
Net (loss) earnings ($ 720)(1) ($ 26)(2) ($ 1,957)(3) $ 383
======== ======== ======== ========
(Loss) earnings per
common share ($ .26) ($ .01) ($ .73) $ .14
======== ======== ======== ========
- --------
(1) Includes the pre-tax costs of $846 related to the restructuring
representing additional costs in connection with the wind-down of
operations of the facilities closed.
(2) Includes the pre-tax costs of $390 related to the restructuring
representing additional costs in connection with the wind-down of
operations of the facilities closed.
(3) Includes a pre-tax restructuring charge of $995 and expenses of $525,
primarily for the write-down of inventory in connection with the
restructuring.
F-16
JACLYN, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
- -------------------------------------------------------------------------------------------------
Column A Column C Column D Column E
Additions
===========================
Description Balance at (Credited) Charged to Deductions Balance at
beginning Charged to accounts (2) end of
of period costs and (1) period
expenses
Year ended
June 30,
1996 $301,000 $527,000 $32,000 $100,000 $760,000
======== ======== ======= ======== ========
Year ended
June 30,
1995 $375,000 ($114,000) $79,000 $39,000 $301,000
======== ======== ======= ======== ========
Year ended
June 30,
1994 $298,000 $202,000 $56,000 $181,000 $375,000
======== ======== ======= ======== ========
(1) Collection accounts previously written off.
(2) Doubtful accounts written off.
F-17