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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
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 No. 1-5863
JACLYN, INC.
- -------------------------------------------------------------------------------
(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
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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. [ ]
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 15, 1999 was approximately $ 6,948,000.
There were 2,711,405 shares of Common Stock outstanding at September 15, 1999.
[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
November 30, 1999.
[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..........................................6
6. Selected Financial Data..................................................7
7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations...............................................................8
7A. Quantitative and Qualitative disclosures about
Market & Risk............................................................12
8. Financial Statements and Supplementary
Data.....................................................................12
9. Changes in and Disagreements with
Accountants on Accounting and Financial
Disclosure...............................................................12
PART III 10. Directors and Executive Officers
of the Registrant........................................................12
11. Executive Compensation...................................................12
12. Security Ownership of Certain
Beneficial Owners and Management.........................................13
13. Certain Relationships and Related
Transactions.............................................................13
PART IV 14. Exhibits, Financial Statement
Schedules and Reports on Form 8-K........................................13
SIGNATURES........................................................................................................17
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, sport bags 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 women's loungewear, sleepwear, dresses, sportswear, vests, 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 material components for its handbag products, and concepts and
fabrics for its apparel products. The design staff 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
most of its designs from season to season.
Finished merchandise, other than merchandise for the
Registrant's newly acquired women's apparel catalogue business (the "Catalogue
Business") discussed below, is received at independently owned outside
warehouses located in New Jersey, Florida, California and Indiana. From these
locations product is shipped under different selling names to customers all over
the country. Product for the Catalogue Business is shipped directly from outside
contractor locations to the customer. 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 "ANNE KLEIN(TM)",
"A LINE(TM)"and "Susan Gail" names, 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 trade names which it owns, including "Shane"and "Aetna," "Susan Gail," and
"Robyn Lyn". In addition, the Registrant is licensed to manufacture and market
handbag products under the names "Looney Tunes(TM)" under three agreements which
expire December 31, 1999 and one other expiring March 30, 2003, "South Park(TM)"
under an agreement which expires December 31, 2000,"Crayola(TM)" under an
agreement which expires December 31, 1999, "Dr. Seuss(TM)" under two agreements
which expire December 31, 1999 and June 30, 2000, and "ANNE KLEIN(TM)" and "A
LINE(TM)" under an agreement which expires December 31, 2001. The Registrant's
apparel lines are marketed under the names "Robyn Lyn," "Saddle River," "Susan
Gail," "Emerson Road," Dawson Road," and "Banner New York." The Registrant also
manufactures apparel items for sale as private-label merchandise. The Registrant
considers all of its licensed trademarks, trade names 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 Central
America and in Mexico from domestically produced components, accounted for
approximately 29% of the Registrant's consolidated net sales for the fiscal year
ended June 30, 1999. During fiscal 1998, sales of such merchandise, including
those assembled in Central America and in Mexico from domestically manufactured
components, accounted for approximately 33% of consolidated net sales.
In fiscal 1999, the Registrant's imports of merchandise
manufactured in the Far East accounted for approximately 71% of consolidated net
sales, compared to approximately 67% of consolidated net sales in fiscal 1998.
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. While the Registrant's operations are subject to the usual risks
associated with purchases from foreign countries, the Registrant's other foreign
and domestic manufacturing sources provide it with alternative sources and
facilities.
Approximately 75% of the Registrant's consolidated net sales
for fiscal 1999 were to general merchandise, chain, department stores and
catalogue retailers, with the balance consisting of sales to smaller specialty
shops, smaller retail stores and cosmetic firms. During the fiscal year ended
June 30, 1999, four customers of the Registrant accounted for 37% of the
Registrant's consolidated net sales, of which the Registrant's two largest
customers ( Estee Lauder and Wal-Mart Stores, Inc.) accounted for 16% and 11% of
such sales, respectively. Four major customers of the Registrant accounted for
approximately 44% of the Registrant's consolidated net sales for the fiscal year
ended June 30, 1998, of which the Registrant's three largest customers ( Estee
Lauder, Wal-Mart Stores, Inc.and Target Stores) accounted for 15% , 12% and 10%
of such sales, respectively. Sales of apparel items during each of the fiscal
years ended June 30, 1999, 1998 and 1997 represented 34%, 35% and 32%,
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 4% of its raw material needs in fiscal
1999. 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 27% of the Registrant's total cost of goods sold.
The Registrant has no 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.
-2-
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 has been
somewhat seasonal in nature, with shipments generally being greater in the first
two quarters of its fiscal years and lower in the third and fourth quarters
although due to scheduling and customer requirements and, in part, to the
Catalogue Business, sales in the first and fourth quarters were greater in
fiscal 1999. Reference is made to Note L, "Unaudited Quarterly Financial Data,"
of the Notes to Consolidated Financial Statements on page F-17 of this Form 10-K
for additional information about quarterly results.
At September 15, 1999, the Registrant had unfilled orders of
approximately $24,149,000 compared to approximately $18,834,000 at September 15,
1998. The increase in backlog is primarily attributable to an increases in the
volume of the women's sleepwear business coupled with backlog related to the
acquisition of the Catalogue Business. 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 138 persons as of June 30, 1999, of
whom 85 were on a salaried basis and the balance on an hourly basis. At June 30,
1999, 18 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.
On January 11,1999, the Registrant acquired the business and
certain assets of the catalogue division of Banner Industries of New York, Inc.
("Banner"), a manufacturer and distributor of sportswear and dresses. Assets
acquired included, among other things, work-in-process, piece goods, raw
materials, customer orders, trademarks and trade names, office equipment,
furniture and fixtures. The Registrant also operates a New York City showroom
formerly operated by Banner. The acquired business manufactures and sells
apparel lines to major mail order catalogues. The aggregate purchase price
(after giving effect to certain post-closing adjustments) was approximately
$2,861,000, of which $2,411,671.21 was paid at the closing of the transaction
and the remainder of which, approximately $450,000 (subject to adjustment), is
payable during the one-year period after closing. The Registrant used funds
generated from
-3-
operations to pay the purchase price, which was determined through arm's length
negotiations with the Seller. One of the principals of Banner was retained by
the Registrant as a consultant, primarily to provide advice and other assistance
in connection with the transfer of the acquired assets and operations to the
Registrant, for a period of one year from closing (ending January 2000) at a
consulting fee of $50,000.
As previously announced, during fiscal 1999 the Registrant
commenced the process of evaluation its operations with a view to eliminating
unprofitable businesses. During the year ended June 30, 1999, the Registrant
closed three unprofitable divisions, including the operations of its
wholly-owned subsidiary, JLN, Inc., located in Ferris Texas. As a result of the
closure of one of its handbag divisions (discussed below in this Item 1), the
Registrant recorded a pre-tax charge for the write-off of goodwill in the amount
of approximately $1,100,000. In connection with the closure of the Texas
operations of JLN, JLN's real property and certain related fixed assets were
sold and a pretax gain of $324,000 from the sale was recorded by the Registrant.
Reference is made to Item 7, Management's Discussion and Analysis of Financial
Condition and Results of Operations for further information concerning the
closing of such divisions.
In January 1996, the Registrant entered into a sales
agreement to manufacture and distribute an existing line of women's robes and
sleepwear. In addition, in April 1998, the Registrant entered into a sales
agreement to manufacture and distribute an existing line of junior intimates and
daywear. The Registrant did not incur any significant expenditures as a result
of either of these agreements.
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. In March 1999, the Registrant concluded
that this line of moderately priced handbags, which were primarily sold to
department stores, was not profitable and consequently closed operations. This
resulted in a goodwill pretax writeoff of approximately $1.1 million during
fiscal 1999.
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 59,000 square feet
of the West New York facilities. The Registrant also leases three showroom and
office facilities in New York City totaling approximately 20,000 square feet.
The executive offices, and manufacturing, distribution and warehouse facilities,
of the Registrant's wholly-owned subsidiary, JLN, Inc., containing 93,250 square
feet, located in Ferris, Texas were sold during fiscal 1999. The Registrant
realized a pretax gain of $324,000 on the sale of land, buildings and equipment
at this location.
Reference is made to Note D, "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, 1999.
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, 1999.
-5-
PART II
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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, 1999 and June 30, 1998.
Fiscal Year Ended June 30, 1999 High Low
------------------------------- ---- ---
First Quarter 5 1/4 3 5/8
Second Quarter 4 3 1/8
Third Quarter 4 2 3/8
Fourth Quarter 3 3/16 2 3/16
Fiscal Year Ended June 30, 1998 High Low
------------------------------- ---- ---
First Quarter 5 1/8 3 7/8
Second Quarter 4 15/16 4 3/16
Third Quarter 5 5/16 4
Fourth Quarter 5 13/16 4 3/4
The Registrant did not pay cash dividends during fiscal 1999
or 1998 and does not anticipate the payment of cash dividends in the foreseeable
future.
At June 30, 1999, there were approximately 699 holders of
record of the Registrant's Common Stock.
-6-
Item 6. Selected Financial Data.
- ------ -----------------------
===================================================================================================================================
Years ended June 30, 1999 1998 1997 1996 1995
===================================================================================================================================
Net Sales $ 58,766,000 $ 68,263,000 $ 77,156,000 $ 72,312,000 $ 73,577,000
Cost of Goods Sold 44,873,000 51,401,000 56,825,000 53,836,000 58,639,000
- -----------------------------------------------------------------------------------------------------------------------------------
Gross Profit 13,893,000 16,862,000 20,331,000 18,476,000 14,938,000
- -----------------------------------------------------------------------------------------------------------------------------------
Shipping, selling and administrative
expenses 16,073,000 16,870,000 19,206,000 17,553,000 17,834,000
Writeoff of goodwill - See note below 1,124,000 - - - -
Restructuring costs - - - - 995,000
Interest expense 4,000 182,000 181,000 119,000 309,000
Interest income 207,000 294,000 277,000 338,000 313,000
Other income, net 324,000 - 10,000 - 4,000
(Benefit) provision for income taxes (998,000) 37,000 468,000 457,000 (1,563,000)
- -----------------------------------------------------------------------------------------------------------------------------------
NET (LOSS) EARNINGS $ (1,779,000) $ 67,000 $ 763,000 $ 685,000 $ (2,320,000)
===================================================================================================================================
Weighted average shares outstanding 2,711,000 2,707,000 2,705,000 2,692,000 2,691,000
===================================================================================================================================
Net Earnings per common share-
Basic and Diluted $ (.66) $ .02 $ .28 $ .25 $ (.86)
Cash dividends paid $ - $ - $ $ $ .25
===================================================================================================================================
TOTAL ASSETS $ 25,595,000 $ 24,572,000 $ 34,063,000 $ 31,981,000 $ 28,409,000
===================================================================================================================================
Long term debt:
Guaranteed bank loan - ESOP - $ 56,000 $ 509,000 $ 704,000 $ 888,000
Other non-current liabilities - - $ 28,000 $ 32,000 $ 33,000
Stockholders' equity $ 16,659,000 $ 18,394,000 $ 17,785,000 $ 16,838,000 $ 15,942,000
===================================================================================================================================
Stockholders' equity per share $ 6.15 $ 6.80 $ 6.57 $ 6.26 $ 5.92
===================================================================================================================================
Note: Goodwill writeoff totaling $1,124,000 resulted from closing one of three
- ----
unprofitable divisions during fiscal 1999.
-7-
Item 7. Management's Discussion and Analysis of
- ------ Financial Condition and Results of Operations.
---------------------------------------------
Liquidity and Capital Resources
The net decrease in cash and cash equivalents in the fiscal year ended
June 30, 1999 was $1,125,000, resulting from an excess of funds used in
operating activities $1,425,000 and an excess of funds used in investing
activities $1,475,000, offset, in part, by cash provided by financing activities
of $1,775,000. Funds used in operating activities in fiscal 1999 principally was
the result of an increase in accounts receivable (attributable to a higher level
of shipping in the fourth quarter of fiscal 1999 compared to the comparable
quarter in fiscal 1998) offset, for the most part, by a decrease in inventory
(attributable to closing three unprofitable businesses and acquiring a new
women's apparel business, which manufactures and distributes women's apparel to
catalogue retailers, with faster inventory turnover). In addition, the increase
in the Company's net loss offset by a write-off of approximately $1.1 million of
goodwill associated with one of the three unprofitable closed operations during
fiscal 1999 and an increase in prepaid and refundable income taxes, were other
factors which contributed to the net cash used in operating activities. Funds
used in investing activities resulted mainly from the acquisition of the women's
apparel business in January 1999 (described above), offset by proceeds from
sales of securities available for sale. Funds provided by financing activities
were the result of bank borrowing of $1,775,000 at June 30, 1999 under Company's
existing credit facility.
During fiscal 1999, the Company completed the renewal of a $23,000,000
bank line of credit which extends through June 30, 2000. Changes from the
previous bank line of credit include, among other things, an increase in loan
availability from $10,000,000 to $13,000,000 with the Company's inventory and
accounts receivable pledged to the bank as collateral, a minimum quick ratio
requirement of 1 to 1, and the maintenance of a minimum tangible net worth of
$14,000,000. The Company believes that funds provided by operations, existing
working capital and the Company's bank line of credit will be sufficient to meet
foreseeable working capital needs. Reference is made to Note E "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, 1999.
The net increase in cash and cash equivalents in fiscal 1998 of
$596,000 was the result of an excess of funds provided from operating activities
totaling $4,042,000 and investing activities of $633,000, over funds used in
financing activities of $4,079,000. Funds provided by operating activities were
principally from a $1,985,000 decrease in inventory (resulting from lower first
quarter fiscal 1999 shipping) and a $5,648,000 decrease in accounts receivable
(attributable to a lower level of shipping in the fourth quarter of fiscal 1998
compared to the comparable quarter in fiscal 1997). The resulting cash flows
were mostly used to decrease accounts payable and other current liabilities by
$5,056,000. Cash provided by investing activities resulted mainly from an excess
of proceeds from securities available for sale over purchases of such securities
and the purchases of property and equipment. Funds used in financing activities
were mostly to pay down all outstanding notes payable to the Company's bank
under the existing credit facility.
The net increase in cash and cash equivalents in fiscal 1997 totaling
$915,000 was the result of an excess of funds from financing activities (bank
borrowing under the Company's credit line) of $3,063,000 over funds used in
investing activities of $467,000 and funds used in operating activities of
$1,681,000. Funds from operating activities were used mainly to reduce accounts
payable and other
-8-
current liabilities totaling $1,677,000 and to finance the $1,179,000 increase
in accounts receivable. These funds were principally offset by a decrease in
inventories of $1,010,000 which resulted from higher shipping in June 1997
compared to June 1996 and net earnings from operations of $763,000. Cash used in
investing activities was primarily for property and equipment additions.
As of June 30, 1999, 1998 and 1997, working capital was $15,069,000,
$16,695,000 and $16,697,000, respectively. The ratio of current assets to
current liabilities for those same periods was 2.9 to 1, 4.4 to 1 and 2.2 to 1,
respectively. The decrease in the current ratio in fiscal 1999 is the result of
using a greater portion of the proceeds from the securities available for sale
to fund part of the Company's working capital needs and from using cash to
purchase the women's apparel catalogue business (including approximately $1.3
million of goodwill for this business) and from a higher level of both notes
payable to the Company's bank and accounts payable. The Company's cash, cash
equivalents and marketable securities totaled $2,725,000, $4,911,000 and
$5,187,000, at June 30, 1999, 1998 and 1997, respectively.
Results of Operations
1999 Compared to 1998
Net sales of $58,766,000 were $9,497,000 below fiscal 1998. This was
due primarily to the closing of three unprofitable operations, as well as lower
volume in the Company's medium priced handbag business due, in general, to
reduced retail demand for non-branded handbag and accessories merchandise,
offset partly by improved premium handbag and women's apparel sales and by sales
from the newly acquired women's apparel business selling to catalogue retailers.
The gross profit margin for fiscal 1999 was 23.6 %, or a decline of
1.1% from the prior year, which resulted from a higher level of inventory
markdowns due to closing three unprofitable operations and also from off-price
sales in the children's and medium priced handbag business. Margins improved
somewhat, however, in the premium and the women's apparel business. Shipping,
selling and administrative expenses decreased by $797,000 related to lower
shipping, royalty and administrative expense offset, in part, by higher
product development costs. Also included in fiscal 1999 are business integration
costs of approximately $230,000 associated with the acquisition of the new
women's apparel business. As a percentage of net sales, the current fiscal year
was 27.4% compared to 24.7% in the prior fiscal year, attributable to the
relatively higher level of fixed costs.
Interest expense was much lower in fiscal 1999 compared to the prior
year because the Company utilized its available investment funds in lieu of
borrowing in the current fiscal year compared to the prior year.
Interest income, decreased $87,000 from the prior fiscal year
generally due to a lower level of interest rates on the investment portfolio and
from the greater utilization of investment funds for working capital needs in
fiscal 1999 compared to the prior fiscal year.
Other income (net) is comprised of a pretax gain on the sale of fixed
assets totaling $324,000 from one of the unprofitable businesses closed during
fiscal 1999.
-9-
The decrease in earnings before income taxes for the fiscal year ended
June 30, 1999 compared to the prior year was primarily due to the decrease in
sales, a 1.1% decrease in the gross profit margin discussed above, the goodwill
write-off of approximately $1.1 million associated with one of three
unprofitable businesses closed during fiscal 1999 and business integration costs
associated with the acquisition of the women's apparel catalogue business. The
foregoing was offset, in part, by lower shipping, selling and administrative
expenses, as well as the pre-tax gain on the sale of fixed assets as discussed
above.
1998 Compared to 1997
Net sales of $68,263,000 were $8,893,000 below fiscal 1997. This
decrease was due primarily to significantly lower sales volume in the Company's
children's division resulting mostly from the non-renewal of the Company's
"Winnie The Pooh(TM)" license and lower volume in the Company's medium priced
handbag business, due to lower retail demand for non-brand handbag and
accessories merchandise, offset partly by improved premium and women's apparel
sales.
The gross profit margin for fiscal 1998 was 24.7%, or a decline of
1.7% from the prior year, which resulted from a higher level of inventory
markdowns and off-price sales in the children's and medium priced handbag
business. Margins improved somewhat, however, in the premium and the women's
apparel business. Shipping, selling and administrative expenses decreased by
$2,336,000. As a percentage of net sales, the current fiscal year was 24.7%
compared to 24.9% in the prior fiscal year, attributable to lower fiscal 1998
shipping, royalty and product development costs.
Other income, comprised almost exclusively from interest income,
declined slightly from the prior fiscal year generally due to a lower level of
interest rates on the investment portfolio.
The decrease in earnings before income taxes for the fiscal year ended
June 30, 1998 compared to the prior year was primarily due to the decrease in
sales and the 1.7% decrease in the gross profit margin discussed above.
1997 Compared to 1996
Net sales were $77,156,000, or $4,844,000 greater than fiscal 1996.
This increase was primarily due to increased apparel sales, an increase in the
premium business and an increase in the children's licensing business offset
somewhat by a decrease in moderately priced handbag line.
Gross profit margins totaling 26.4% improved slightly due to stronger
margins from licensed products and from improved apparel business margins.
Other income, almost exclusively from investments, declined due to a
lower level of investments in fiscal 1997 compared to fiscal 1996.
The earnings increase for the fiscal year ended June 30, 1997 compared
to the prior year was due to slightly higher gross profit margins on increased
sales and a slightly lower effective tax rate compared to the prior fiscal year
offset by higher shipping, selling and administrative expenses.
-10-
Recently Issued Accounting Standards
In June 1998 the Financial Accounting Standards Board issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities." This
statement, which is effective for the Company for the year ending June 30, 2001,
establishes accounting and reporting standards for derivative instruments and
hedging activities. The Company has not yet determined whether the application
of SFAS No. 133 will have a material impact on its financial position or results
of operations.
Year 2000 Compliance
The Company has completed its assessment of the changes that are
needed to make its critical and other data processing systems Year 2000
compliant. The changes, which include a combination of software modifications,
upgrades, hardware changes and significant customer testing have substantially
been completed. The Company's internal target date to be fully compliant is
October 1999 with continued testing to take place during the balance of 1999 in
order to minimize the risks associated with Year 2000 systems changes.
Existing data processing personnel are being utilized to implement
Year 2000 changes. To date, total costs incurred have been approximately
$20,000, with total aggregate costs to become Year 2000 compliant not expected
to exceed $25,000.
Most of the Company's major customers have already indicated that they
are or will be Year 2000 compliant before the end of 1999. The Company is not
computer interdependent with its significant suppliers and, accordingly, does
not believe that the failure of suppliers to be Year 2000 compliant will pose
any significant risk to the Company's business operation. In any event, the
Company presently has and expects it will have alternative sources of supply if
existing vendors are unable to supply the Company in the event they may not be
Year 2000 compliant and is taking measures to have certain raw materials on
hand, in certain instances, to assure continuity in the first month or two of
the year 2000.
The foregoing constitute forward looking statements based upon
management's best estimates concerning future events. Actual results could
differ as a result of a number of factors, including future costs of Year 2000
compliance, success of testing, successful completion by third parties with
their respective Year 2000 compliance programs, and similar uncertainties.
-11-
Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
- --------- -----------------------------------------------------------
The Registrant, in the normal course of doing business, is
theoretically exposed to interest rate change market risk with respect to its
Securities Available for Sale and its line of credit. As borrowing patterns are
seasonal, the Registrant is not dependent on borrowing throughout the year.
Therefore, a sudden increase in interest rates (which under the line of credit
is at the prime rate or lower) may, during peak borrowing, have a negative
impact on short-term results, but would unlikely impact longer-term results
since a cost pass-through would offset such higher interest expense.
All of the Registrant's Securities Available for Sale are state
government or municipal bonds. As of June 30, 1999, the cost and market value of
such bonds was $1,651,000 and $1,674,000, respectively. A significant increase
in interest rates would result in a decrease in the market value of the bond
prices. However, to minimize risk, the Registrant has a policy of investing only
in high rated instruments (substantially all have Aa or better Moody's bond
ratings) and generally uses short-term maturities (currently the average life is
about three years). In addition, the proceeds from such securities are not
essential to the working capital needs of the business and therefore could be
held to maturity for full face value.
Item 8. Financial Statements and Supplementary Data.
- ------- --------------------------------------------
(a) Financial Statements
--------------------
The report dated September 22, 1999 of Deloitte & Touche LLP,
independent auditors, the consolidated balance sheets of Jaclyn, Inc. and
subsidiaries as of June 30, 1999 and 1998 and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended June 30, 1999 and Notes to Consolidated
Financial Statements appear on pages F-2 through F-17 of this Form 10-K.
(b) Supplementary Data
------------------
Selected unaudited quarterly financial data for the fiscal years ended
June 30, 1999 and June 30, 1998 is set forth at Note L, "Unaudited Quarterly
Financial Data" on page F-17 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 1999 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 1999 Annual Meeting of Stockholders to be filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended.
-12-
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 1999 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 1999 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, 1999 and 1998
Consolidated Statements of Operations -- years ended June 30,
1999, 1998 and 1997
Consolidated Statements of Stockholders' Equity -- years ended
June 30, 1999, 1998 and 1997
Consolidated Statements of Cash Flows -- years ended June 30,
1999, 1998 and 1997
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).
-13-
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 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(b) Lease dated January 27, 1999 with Ruth R. Abrams LLC,
Rosalie Abrams Katz, First Half Realty Co., Inc. and
Second Half Realty Co., Inc. relating to office and
showroom facilities located in New York, New York.
10(c) Lease dated October 14, 1998 with Statecourt
Enterprises, Inc. relating to office and showroom
facilities located in New York, New York.
10(d) 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(e) 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(f) 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(g) Amended and Restated Stockholders' Agreement dated
July 30, 1996 among the Registrant and the persons
listed on Schedule A thereto (incorporated herein by
reference to Exhibit 10(j) to the Registrant's Annual
Report on Form 10K, file number 1-5863, for the
fiscal year ended June 30, 1996).
10(h) 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(i) Non-Qualified Stock Option Contract dated December 2,
1998 between the Registrant and Martin Brody.
10(j) Non-Qualified Stock Option Contract dated December 2,
1998 between the Registrant and Richard Chestnov
-14-
10(k) Non-Qualified Stock Option Contract dated December 2,
1998 between the Registrant and Albert Safer.
10(l) 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(m) 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(n) 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).*
10(o) 1996 Non-Employee Director Stock Option Plan
(incorporated 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, 1998).*
10(p) Non-Qualified Stock Option Contract dated December
3,1996 between the Registrant and Martin Brody
(incorporated by reference to Exhibit 10(p) to the
Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1997).
10(q) Non-Qualified Stock Option Contract dated December 3,
1996 between the Registrant and Richard Chestnov
(incorporated by reference to Exhibit 10(q) to the
Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1997).
10(r) Non-Qualified Stock Option Contract dated August 19,
1997 between the Registrant and Al Safer
(incorporated by reference to Exhibit 10(r) to the
Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1997).
10(s) Non-Qualified Stock Option Contract dated December 3,
1997 between the Registrant and Martin
Brody. (incorporated by reference to Exhibit 10(s) to
the Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1998).
-15-
10(t) Non-Qualified Stock Option Contract dated December 3,
1997 between the Registrant and Richard Chestnov.
(incorporated by reference to Exhibit 10(t) to the
Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1998).
10(u) Non-Qualified Stock Option Contract dated December 3,
1997 between the Registrant and Albert Safer.
(incorporated by reference to Exhibit 10(u) to the
Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1998).
10(v) Letter Agreement dated as of December 29, 1997
between the Registrant and Robert Chestnov
(incorporated herein by reference to Exhibit 2.1 to
the Registrant's Current Report on Form 8-K, file No.
1-5863, for the fiscal year ended June 30, 1998).*
10(w) Purchase and Sale Agreement dated January 11, 1999
between Banner Industries of New York, Inc. and
Jaclyn, Inc. (incorporated herein by reference to
Exhibit 2.1 to the Registrant's Current Report on
Form 8-K, file No. 1-5863, dated January 26, 1999).
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, 1999.
(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.
-16-
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 22, 1999 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 indicated:
/s/ Allan Ginsburg Chairman of the Board September 22, 1999
- ---------------------------------- and Director
ALLAN GINSBURG
/s/ Robert Chestnov President, Principal September 22, 1999
- -------------------------------- Executive Officer and
ROBERT CHESTNOV Director
/s/ Anthony Christon Chief Financial Officer, September 22, 1999
- -------------------------------- Principal Financial and
ANTHONY CHRISTON Accounting Officer
/s/ Abe Ginsburg Director September 22, 1999
- --------------------------------
ABE GINSBURG
/s/ Howard Ginsburg Director September 22, 1999
- --------------------------------
HOWARD GINSBURG
/s/ Martin Brody Director September 22, 1999
- --------------------------------
MARTIN BRODY
/s/ Richard Chestnov Director September 22, 1999
- --------------------------------
RICHARD CHESTNOV
/s/ Al Safer Director September 22, 1999
- --------------------------------
AL SAFER
-17-
JACLYN, INC. AND SUBSIDIARIES
Consolidated Financial Statements and
Financial Statement Schedule for the Years Ended
June 30, 1999, 1998 and 1997 and
Independent Auditors' Report
JACLYN, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Page
INDEPENDENT AUDITORS' REPORT F-1
FINANCIAL STATEMENTS:
Consolidated Balance Sheets - As of June 30, 1999 and 1998 F-2
Consolidated Statements of Operations - For the years ended June 30,
1999, 1998 and 1997 F-3
Consolidated Statements of Cash Flows - For the years ended June 30,
1999, 1998 and 1997 F-4 to 5
Consolidated Statements of Changes in Stockholders' Equity - For the
years ended June 30, 1999, 1998 and 1997 F-6
Notes to Consolidated Financial Statements F-7 to 17
FINANCIAL STATEMENT SCHEDULE:
Valuation and Qualifying Accounts F-18
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, 1999 and 1998, and the related consolidated
statements of operations, stockholders' equity and cash flows for each of the
three years in the period ended June 30, 1999. Our audits also included the
consolidated financial statement schedule of Jaclyn Inc. and subsidiaries listed
in item 14(a)2. These financial statements and financial statement 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, 1999 and 1998, and the results of their operations and their cash flows
for each of the three years in the period ended June 30, 1999 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 22, 1999
New York, New York
F-1
JACLYN, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND 1998
==============================================================================================================================
ASSETS 1999 1998
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS $ 1,051,000 $ 2,176,000
SECURITIES AVAILABLE FOR SALE (COST: 1999, $1,651,000,
1998, $2,676,000) 1,674,000 2,735,000
ACCOUNTS RECEIVABLE, LESS ALLOWANCE FOR DOUBTFUL
ACCOUNTS: 1999, $415,000, 1998, $483,000 9,675,000 5,979,000
INVENTORIES 6,341,000 8,077,000
PREPAID EXPENSES AND OTHER CURRENT ASSETS 925,000 533,000
DEFERRED INCOME TAXES 3,212,000 2,050,000
PREPAID AND REFUNDABLE INCOME TAXES 4,000 82,000
------------------- -----------------
TOTAL CURRENT ASSETS 22,882,000 21,632,000
PROPERTY, PLANT AND EQUIPMENT - NET 1,193,000 1,516,000
OTHER ASSETS 1,520,000 1,424,000
------------------- -----------------
$ 25,595,000 $ 24,572,000
=================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
NOTES PAYABLE - BANK $ 1,775,000 $ -
ACCOUNTS PAYABLE 4,009,000 2,676,000
COMMISSIONS PAYABLE 160,000 144,000
ACCRUED PAYROLL AND RELATED EXPENSES 368,000 829,000
OTHER CURRENT LIABILITIES 1,501,000 1,288,000
------------------- -----------------
TOTAL CURRENT LIABILITIES 7,813,000 4,937,000
------------------- -----------------
GUARANTEED BANK LOAN - ESOP - 56,000
------------------- -----------------
DEFERRED INCOME TAXES 1,123,000 1,185,000
------------------- -----------------
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; ISSUED 3,368,733 SHARES 3,369,000 3,369,000
ADDITIONAL PAID-IN CAPITAL 12,117,000 12,117,000
RETAINED EARNINGS 7,954,000 9,733,000
ACCUMULATED OTHER COMPREHENSIVE INCOME 23,000 35,000
------------------- -----------------
23,463,000 25,254,000
LESS: TREASURY STOCK AT COST (657,328 SHARES) 6,804,000 6,804,000
GUARANTEED BANK LOAN - ESOP - 56,000
------------------- -----------------
TOTAL STOCKHOLDERS' EQUITY 16,659,000 18,394,000
------------------- -----------------
$ 25,595,000 $ 24,572,000
=================== =================
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, 1999, 1998 AND 1997
============================================================================================================================
1999 1998 1997
Net sales $ 58,766,000 $ 68,263,000 $ 77,156,000
Cost of goods sold 44,873,000 51,401,000 56,825,000
------------ ------------ ------------
Gross profit 13,893,000 16,862,000 20,331,000
------------ ------------ ------------
Shipping, selling and administrative
expenses 16,073,000 16,870,000 19,206,000
Write off of goodwill 1,124,000 -- --
Interest expense 4,000 182,000 181,000
Interest income 207,000 294,000 277,000
Other income, net 324,000 -- 10,000
------------ ------------ ------------
(LOSS) EARNINGS BEFORE INCOME
TAXES (2,777,000) 104,000 1,231,000
(BENEFIT) PROVISION FOR INCOME
TAXES (998,000) 37,000 468,000
------------ ------------ ------------
NET (LOSS) EARNINGS $ (1,779,000) $ 67,000 $ 763,000
Other comprehensive income, net of tax:
Unrealized holding gain (loss) on securities
arising during period 12,000 5,000 (11,000)
------------ ------------ ------------
Net comprehensive (loss) earnings $ (1,767,000) $ 72,000 $ 752,000
============ ============ ============
NET (LOSS) EARNINGS PER
COMMON SHARE - BASIC AND
DILUTED $ (0.66) $ .02 $ .28
============ ============ ============
Weighted average number of shares
outstanding - diluted 2,711,000 2,707,000 2,705,000
============ ============ ============
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, 1999, 1998 AND 1997
============================================================================================================================
1999 1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) earnings $(1,779,000) $ 67,000 $ 763,000
Adjustments to reconcile net earnings to net
cash provided by (used in)
operating activities:
Depreciation and amortization 322,000 362,000 316,000
Deferred income taxes (1,224,000) (141,000) 14,000
Provision for doubtful accounts (78,000) (143,000) (38,000)
Loss (gain) on sale of fixed assets (324,000) 4,000 (10,000)
Writeoff of goodwill 1,124,000 -- --
Amortization of goodwill 118,000 155,000 155,000
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (3,628,000) 5,648,000 (1,141,000)
Decrease in inventories 3,260,000 1,985,000 1,010,000
(Increase) decrease in prepaid expenses and
other current assets (392,000) 725,000 (837,000)
(Increase) decrease in prepaid and refundable
income taxes 78,000 431,000 (242,000)
(Increase) decrease in security deposits, other assets
and non current liabilities (3,000) 5,000 6,000
Increase (decrease) in accounts payable and
other current liabilities 1,101,000 (5,056,000) (1,677,000)
----------- ----------- -----------
Net cash provided by (used in) operating activities (1,425,000) 4,042,000 (1,681,000)
----------- ----------- -----------
F-4
JACLYN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1999, 1998 AND 1997
===================================================================================================================================
1999 1998 1997
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (196,000) (304,000) (515,000)
Proceeds from sale of property 521,000 60,000 52,000
Purchases of securities available for sale -- (1,103,000) (184,000)
Proceeds from sales of securities available for sale 1,061,000 1,980,000 180,000
Acquisition of certain assets of Banner Industries of
New York, Inc. (2,861,000) -- --
----------- ----------- -----------
Net cash provided by (used in) investing activities (1,475,000) 633,000 (467,000)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in notes payable - bank 1,775,000 (4,163,000) 3,063,000
Proceeds from issuance of treasury stock -- 84,000 --
----------- ----------- -----------
Net cash provided by (used in) financing activities 1,775,000 (4,079,000) 3,063,000
----------- ----------- -----------
NET (DECREASE) INCREASE IN CASH AND CASH
EQUIVALENTS (1,125,000) 596,000 915,000
----------- ----------- -----------
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 2,176,000 1,580,000 665,000
----------- ----------- -----------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 1,051,000 $ 2,176,000 $ 1,580,000
----------- ----------- -----------
SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:
Cash paid during the year for:
Interest $ 4,000 $ 182,000 $ 181,000
----------- ----------- -----------
Income taxes $ 202,000 $ 872,000 $ 863,000
----------- ----------- -----------
NON-CASH ITEMS:
Unrealized gain on securities available for sale $ 23,000 $ 35,000 $ 30,000
----------- ----------- -----------
The accompanying notes are an integral part of these financial statements
(Concluded)
F-5
JACLYN, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1999, 1998, AND 1997
- --------------------------------------------------------------------------------
COMMON STOCK Additional Accumulated
------------------------- Paid-in Comprehensive Retained
Shares Amount Capital Income Earnings
----------- ----------- ----------- ----------- -----------
BALANCE, JUNE 30, 1996 3,368,733 $ 3,369,000 $12,117,000 $ 41,000 $ 9,026,000
Unrealized gain on securities available
for sale at July 1, 1996 -- -- -- (11,000) --
Net earnings, year ended June 30, 1997 -- -- -- -- 763,000
ESOP loan repayment -- -- -- -- --
----------- ----------- ----------- ----------- -----------
BALANCE, JUNE 30, 1997 3,368,733 3,369,000 12,117,000 30,000 9,789,000
Unrealized loss on securities available
for sale at July 1, 1997 -- -- -- 5,000 --
Net earnings, year ended June 30, 1998 -- -- -- -- 67,000
Issuance of treasury shares -- -- -- -- (123,000)
ESOP loan repayment -- -- -- -- --
----------- ----------- ----------- ----------- -----------
BALANCE, JUNE 30, 1998 3,368,733 3,369,000 12,117,000 35,000 9,733,000
Unrealized loss on securities available
for sale at July 1, 1998 -- -- -- (12,000) --
Net loss, year ended June 30, 1999 -- -- -- -- (1,779,000)
ESOP loan repayment -- -- -- -- --
----------- ----------- ----------- ----------- -----------
BALANCE, JUNE 30, 1999 3,368,733 $3,369,000 $12,117,000 $ 23,000 $ 7,954,000
=========== =========== =========== =========== ===========
TREASURY STOCK Guaranteed
-------------------------- Bank Loan -
Shares Amount ESOP
----------- ----------- -----------
BALANCE, JUNE 30, 1996 677,328 $ 7,011,000 $ 704,000
Unrealized gain on securities available
for sale at July 1, 1996 -- -- --
Net earnings, year ended June 30, 1997 -- -- --
ESOP loan repayment -- -- (195,000)
----------- ----------- -----------
BALANCE, JUNE 30, 1997 677,328 7,011,000 509,000
Unrealized loss on securities available
for sale at July 1, 1997 -- -- --
Net earnings, year ended June 30,1998 -- -- --
1997 1996
Issuance of treasury shares (20,000 (207,000) --
ESOP loan repayment -- -- (453,000)
----------- ----------- -----------
BALANCE, JUNE 30, 1998 657,328 6,804,000 56,000
Unrealized loss on securities available
for sale at July 1, 1998 -- -- --
Net loss, year ended June 30,1999 -- -- --
ESOP loan repayment -- -- (56,000)
----------- ----------- -----------
BALANCE, JUNE 30, 1999 657,328 $ 6,804,000 $ --
=========== =========== ===========
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 wholly-owned subsidiaries. All significant intercompany transactions
and balances have been eliminated.
Use of Estimates
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.
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 over the following
estimated useful lives:
Buildings 25 to 40 years
Machinery and equipment 5 years
Furniture and fixtures 5 years
Leasehold improvements Lesser of life of the asset or life of the lease
Automobiles and trucks 3 to 5 years
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
In January 1999 the Company closed one its unprofitable divisions. An impairment
charge of approximately $1.1 million was recognized when future cash flows of
the goodwill was determined to be insufficient to recover its carrying value.
Revenue Recognition
Revenue is recognized at the time merchandise is shipped. Sales returns,
discounts and allowances are recorded as components of net sales in the period
in which the related revenue is recorded.
Recently Issued Accounting Standards
Segment Reporting - In June 1999, the Company adopted the provisions of SFAS No.
131, "Disclosures about Segments of an Enterprise and Related Information." SFAS
No. 131 is effective for fiscal years beginning after December 15, 1997, and
establishes standards for reporting information about a company's operating
segments. It also establishes standards for related disclosures about products
and services, geographic areas and major customers. The Company operates in a
single operating segment -- the manufacture of women's handbag, apparel and
related accessories. Revenues from customers are derived from merchandise sales.
The Company's merchandise sales mix by product category for the last three years
was as follows:
Year ended June 30,
Product Category 1999 1998 1997
- ---------------- ---- ---- ----
Handbags 66% 65% 68%
Women's apparel 34% 35% 32%
--- --- ---
Total 100% 100% 100%
---- ---- ----
During the year ended June 30, 1999, 1998 and 1997, revenues derived from sales
to one customer were 16%, 15% and 13%, respectively. Sales to a second customer
were 11%, 12% and 12%, respectively, and to a third customer were 5%, 10% and 9%
respectively.
The Company relies on suppliers to purchase a variety of raw materials. The
Company had one supplier who in the aggregate constituted 4% of the Company's
purchases for the year ended June 30, 1999.
Comprehensive Income - Effective July 1, 1998, the Company adopted SFAS No. 130
"Reporting Comprehensive Income." This statement established standards for
reporting types of income and its components in financial statements.
In June 1998 the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." This statement,
which is effective for the Company for the year ending June 30, 2001,
establishes accounting and reporting standards for derivative instruments and
hedging activities. The Company has not yet determined whether the application
of SFAS No. 133 will have a material impact on its financial position or results
of operations.
F-8
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.
Net Earnings per Common Share
The Company records Net Earnings per Common Share in accordance with Statement
of Financial Accounting Standards No. 128, "Earnings per Share."
Reclassifications
Certain items in prior years have been reclassified for comparative purposes.
NOTE B - INVENTORIES
Inventories consist of the following:
June 30,
1999 1998
Raw material $ 3,466,000 $ 2,937,000
Work in process 1,057,000 835,000
Finished goods 1,818,000 4,305,000
------------------- ------------------
$ 6,341,000 $ 8,077,000
=================== ==================
NOTE C - PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is summarized as follows:
June 30,
1999 1998
Land $162,000 $182,000
Buildings 1,181,000 1,311,000
Machinery and equipment 1,572,000 1,697,000
Furniture and fixtures 395,000 394,000
Leasehold improvements 784,000 722,000
Automobiles and trucks 95,000 99,000
------------------- ------------------
4,189,000 4,405,000
Less accumulated
depreciation and amortization 2,996,000 2,889,000
------------------- ------------------
$1,193,000 $1,516,000
=================== ==================
F-9
F-10
NOTE D - COMMITMENTS
The Company leases office facilities under non-cancelable leases that expire in
various years through the year 2006.
Future minimum payments under non-cancelable operating leases with initial or
remaining terms of one year or more are as follows:
Year Ended Office and Showroom
June 30, Facilities
2000 $ 373,500
2001 359,500
2002 322,600
2003 214,900
2004 127,200
After 2004 174,400
Rental expense, including real estate taxes, for all operating leases, totaled
$481,000, $634,000, and $683,000 for 1999, 1998 and 1997, respectively.
NOTE E - CREDIT FACILITIES
The Company has a line of credit with a bank for short-term loans, letters of
credit and bankers acceptances amounting to $23,000,000. At June 30, 1999 and
1998, the Company was contingently obligated on open letters of credit for
approximately $ 7,483,000 and $ 3,257,000 respectively. The Company can borrow
up to $13,000,000 with the Company's inventory and accounts receivable pledged
to the bank as collateral, provided it maintains a minimum quick ratio
requirement of 1 to 1, and a minimum tangible net worth of $14,000,000.
Borrowing on the short-term line of credit was $ 1,775,000 and $ -0- as of June
30, 1999 and 1998, respectively. There was no borrowing on the bankers
acceptance line as of June 30, 1999 and 1998. Borrowing during the year were at
the bank's prime rate or below (LIBOR) at the option of the Company. The bank's
prime rate at June 30, 1999 was 7.75%. During fiscal 1999, the average amount
outstanding under the short-term line was $115,000 with a weighted average
interest rate of 8.0%. During 1998, the average amount outstanding under the
short-term line was $2,569,000 with a weighted average interest rate of 7.3%.
The maximum amount outstanding during fiscal 1999 and fiscal 1998 was $2,270,000
and $9,130,000, respectively.
F-11
NOTE F - 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.
Statement of Financial Accounting Standards No. 123, "Accounting Stock-Based
Compensation" (SFAS 123) was effective for the Company for fiscal 1998. SFAS No.
123 encourages (but does not require) compensation expense to be measured based
on the fair value of the equity instrument awarded. In accordance with APB No.
25, no compensation cost has been recognized in the Consolidated Statements of
Operations for the Company's stock option plans. If compensation cost for the
Company's stock option plans had been determined in accordance with the fair
value method prescribed by SFAS No. 123, the Company's net (loss) earnings would
have been ($1,819,000), $43,000 and $739,000 for 1999 and 1998, and 1997, or
($.67) and $.02 and $.26 per share, respectively. This pro forma information may
not be representative of the amounts to be expected in future years as the fair
value method of accounting prescribed by SFAS No. 123 has not been applied to
options granted prior to 1997.
Stock option transactions are summarized below:
1999 1998 1997
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
Outstanding -
beginning of year 267,045 $ 9.35 270,817 $ 9.33 133,168 $ 11.85
Granted 150,000 2.35 - - 159,000 4.29
Exercised - - - - (6,739) 9.18
Forfeited (77,384) 10.61 (3,772) 8.58 (14,612) 10.62
-------------- --------------- ------------- --------------- -------------- ---------------
Outstanding - end of
year 339,661 $ 5.86 267,045 $ 9.35 270,817 $ 9.33
============== =============== ============== =============== ============== ===============
Exercisable - end of
year 339,661 $ 5.86 267,045 $ 9.35 117,817 $ 11.96
Weighted-average
fair value of options
granted during the
year $ 1.66 $ - $ 2.41
F-12
The following table summarizes information about stock options outstanding at
June 30, 1999:
Options Outstanding Option Exercisable
- ------------------------------------------------------------------------------ -----------------------------------------
Weighted-
Number Average Number
Range of Outstanding Remaining Weighted Exercisable Weighted
Exercise at June 30, Contractual Average at June 30, Average
Prices 1999 Life (Yrs) Exercise Price 1999 Exercise Price
- ------------------------------------------------------------------------------ -----------------------------------------
$2 1/4-$5 1/4 339,661 5.60 $4.13 339,661 $4.13
- ------------------------------------------------------------------------------ -----------------------------------------
The fair value of each option grant is estimated on the date of each grant using
the Black-Scholes option-pricing model. The following weighted average
assumptions were used for grants in 1999 and 1997: risk-free interest rate of
5.5% and 6.43%, expected life of 5 to 10 years; expected volatility of 55.10%
and 36.37%; dividend yield of 0%. The fair values generated by the Black-Scholes
model may not be indicative of the future benefit, if any, that may be received
by the option holder.
NOTE G - 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 H - INCOME TAXES
The components of the Company's tax (benefit) provision for each of the three
years ended June 30, follow:
June 30,
1999 1998 1997
Current:
Federal $ - ($9,000) ($6,000)
State and Local 7,000 17,000 90,000
Foreign 219,000 170,000 370,000
------------------- ----------------- ----------------
226,000 178,000 454,000
Deferred:
Federal and State (1,224,000) (141,000) 14,000
------------------- ----------------- ----------------
Provision (benefit) ($998,000) $37,000 $468,000
=================== ================= ================
F-13
A reconciliation between the provision for income taxes computed by applying the
federal statutory rate to income before income taxes and the actual provision
for income taxes is as follows:
================================================================= ================ =============== =================
June 30, 1999 1998 1997
================================================================= ================ =============== =================
(Benefit) provision for income taxes at statutory rate (34.0)% 34.0% 34.0%
State and local income taxes net of federal tax benefit (5.2) 5.0 7.4
Tax exempt interest 2.2 (2.0) (1.4)
Other 1.0 1.4 (2.0)
--------------- --------------- -----------------
Effective tax rate % (36.0)% 35.6% 38.0%
=============== =============== =================
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 and
liabilities as of June 30, 1999 and 1998 are as follows:
============================= ========================================== ==========================================
June 30, 1999 1998
============================= ========================================== ==========================================
Assets Liabilities Assets Liabilities
Depreciation
and amortization - $818,000 - $852,000
Leases - 155,000 - 169,000
Foreign taxes 73,000 - - 140,000
Inventory 549,000 - 628,000 -
Bad debt, sales
allowances and
other reserves 407,000 - 566,000 -
NOL and tax credit
carryforwards
1,407,000 - 518,000 -
Other 776,000 150,000 338,000 24,000
------------------ ----------------- ------------------ -----------------
$3,212,000 $1,123,000 $2,050,000 $1,185,000
================== ================= ================== =================
F-14
NOTE I - EMPLOYEE'S BENEFIT PLANS
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.
Fiscal Year Ended June 30, 1999 1998 1997
CHANGE IN BENEFIT OBLIGATION:
Net benefit obligation at beginning of year $ 2,872,000 $ 2,640,000 $ 2,556,000
Service cost 166,000 194,000 214,000
Interest cost 195,000 176,000 164,000
Plan participants' contributions - - -
Actuarial (gain) loss 194,000 65,000 (132,000)
Gross benefits paid (335,000) (203,000) (162,000)
------------------- ------------------ ------------------
Net benefit obligation at end of year $ 3,092,000 $ 2,872,000 $ 2,640,000
=================== ================== ==================
CHANGE IN PLAN ASSETS:
Fair value of plan assets at beginning of year $ 2,383,000 $ 2,423,000 $ 2,142,000
Employer contributions 761,000 - 300,000
Plan participants' contributions - - -
Gross benefits paid (335,000) (203,000) (162,000)
Actual return on plan assets 59,000 163,000 143,000
------------------- ------------------ ------------------
Fair value of plan assets at end of year 2,868,000 2,383,000 2,423,000
=================== ================== ==================
Funded status at end of year (224,000) (489,000) (217,000)
Unrecognized net actuarial loss 826,000 555,000 530,000
Unrecognized transition amount (204,000) (243,000) (282,000)
Unrecognized prior service cost 3,000 4,000 5,000
------------------- ------------------ ------------------
Prepaid (accrued) benefit costs $ 401,000 $ (173,000) $ 36,000
=================== ================== ==================
F-15
Pension expenses includes the following components:
Fiscal Year Ended June 30, 1999 1998 1997
COMPONENTS OF NET PERIODIC BENEFIT COST:
Service cost $ 166,000 $ 194,000 $ 214,000
Interest cost 195,000 176,000 164,000
Expected return on assets (169,000) (145,000) (138,000)
Amortization of prior service cost 1,000 1,000 1,000
Amortization of transition (assets) (39,000) (39,000) (39,000)
Amortization of actuarial loss 32,000 23,000 22,000
---------------- --------------- ---------------
Net periodic benefit cost $ 186,000 $ 210,000 $ 224,000
================ =============== ===============
Assumptions used in determining the net pension charges were:
June 30, 1999 1998 1997
------------ --------------- ---------------
Discount rates 6.75% 6.75% 7.00%
Rates of increase in compensation levels 3.00% 3.00% 4.00%
Expected long-term rate of return on assets 6.50% 6.25% 6.25%
The Company maintains 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. As of June
30, 1999, the guaranteed ESOP bank loan had been completely paid.
Contributions to the ESOP are at the discretion of the Company's Board of
Directors. ESOP expense was approximately $56,000 and $250,000 for the years
ended June 30,1999 and June 30, 1998, which includes $ 54,000 and $211,000 of
compensation expense and $2,000 and $39,000 of interest expense, respectively.
Compensation expense related to the plan is based upon the number of shares
allocated to participants in the current year.
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 J - RECENT ACQUISITION
On January 11, 1999, the Company completed the acquisition of certain assets of
Banner Industries of New York, Inc., which manufactures and distributes its
women's apparel to catalog companies. The Company paid approximately $2.9
million for certain inventory, fixed assets and goodwill. The Company recorded
$1,300,000 of goodwill which is being amortized over 15 years.
F-16
NOTE K - NET EARNINGS PER SHARE
The Company's calculation of Basic and Diluted Net (Loss) Earnings Per Share are
as follows (in thousands, except per share amounts) :
Year Ended June 30,
1999 1998 1997
Basic Net Earnings Per Share:
- ----------------------------
Net (Loss) Earnings $ (1,779) $ 67 $ 763
----------------- --------------- ------------------
Basic Weighted Average Shares Outstanding 2,711 2,701 2,691
----------------- --------------- ------------------
Basic Net (Loss) Earnings Per Common Share ($.66) $.02 $.28
----------------- --------------- ------------------
Diluted Net Earnings Per Share:
- ------------------------------
Net (Loss) Earnings $ (1,779) $ 67 $ 763
----------------- --------------- -- ------------------
Basic Weighted Average Shares Outstanding 2,711 2,701 2,691
Add: Dilutive Options (a) 6 14
----------------- --------------- ------------------
Diluted Weighted Average Shares Outstanding 2,711 2,707 2,705
----------------- --------------- ------------------
Diluted Net (Loss) Earnings Per Common Share ($.66) $.02 $.28
----------------- --------------- ------------------
Options to purchase 180, 89, and 92 common shares were outstanding as of June
30, 1999, 1998, and 1997, respectively, but were not included in the computation
of diluted earnings per share because the exercise price of the options exceeds
the average market price and would have been anti-dilutive.
(a) Options are not considered part of the diluted weighted average share
calculation where there is a loss for the period, since they would be
anti-dilutive.
F-17
NOTE L - UNAUDITED QUARTERLY FINANCIAL DATA
Summarized quarterly financial data, in thousands of dollars except for per
share amounts, for the fiscal years ended June 30, 1999 and 1998, are as
follows:
Three Months Ended
-------------------------------------------------------------------------------------------
June 30, March 31, December 31, September 30,
1999 1999 1998 1998
Net sales $17,732 $12,255 $13,134 $15,645
Gross profit $4,017 $2,660 $2,944 $4,272
Net earnings (loss) $30 ($1,458) ($434) $83
Net earnings (loss) per
common share - basic
and diluted $.01 ($.54) ($.16) $.03
Three Months Ended
-------------------------------------------------------------------------------------------
June 30, March 31, December 31, September 30,
1998 1998 1997 1997
Net sales $13,565 $13,999 $21,369 $19,330
Gross profit $3,474 $3,060 $5,472 $4,856
Net (loss) earnings ($394) $25 $147 $289
Net (loss) earnings per
common share - basic
and diluted ($.15) $.01 $.06 $.10
F-18
JACLYN, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
- ---------------------------------------------------------------------------
Column A Column C Column D Column E
Additions
----------------------------------------
(Credited) Charged
Balance at Charged to to Balance at
beginning costs and accounts Deductions end of
Description of period expenses (1) (2) period
Year ended June
30, 1999 $483,000 ($78,000) $10,000 - 0- $415,000
---------------- -------------------- ---------------- ------------------ ----------------
Year ended June
30, 1998 $724,000 ($143,000) $1,000 $99,000 $483,000
---------------- -------------------- ---------------- ------------------ ----------------
Year ended June $760,000 ($38,000) $8,000 $6,000 $724,000
30, 1997
---------------- -------------------- ---------------- ------------------ ----------------
(1) Collection of amounts previously written off.
(2) Doubtful accounts written off.
F-19
====================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------------------------
EXHIBITS
to
ANNUAL REPORT ON FORM 10-K
FOR THE FISCAL YEAR
ENDED JUNE 30, 1999
----------------------------------------
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 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(b) Lease dated January 27, 1999 with Ruth R. Abrams LLC,
Rosalie Abrams Katz, First Half Realty Co., Inc. and
Second Half Realty Co., Inc. relating to office and
showroom facilities located in New York, New York.
10(c) Lease dated October 14, 1998 with Statecourt
Enterprises, Inc. relating to office and showroom
facilities located in New York, New York.
10(d) 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(e) 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(f) 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(g) Amended and Restated Stockholders' Agreement dated
July 30, 1996 among the Registrant and the persons
listed on Schedule A thereto (incorporated herein by
reference to Exhibit 10(j) to the
Registrant's Annual Report on Form 10K, file number
1-5863, for the fiscal year ended June 30, 1996).
10(h) 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(i) Non-Qualified Stock Option Contract dated December 2,
1998 between the Registrant and Martin Brody.
10(j) Non-Qualified Stock Option Contract dated December 2,
1998 between the Registrant and Richard Chestnov
10(k) Non-Qualified Stock Option Contract dated December 2,
1998 between the Registrant and Albert Safer.
10(l) 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(m) 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(n) 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).*
10(o) 1996 Non-Employee Director Stock Option Plan
(incorporated 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, 1998).*
10(p) Non-Qualified Stock Option Contract dated December
3,1996 between the Registrant and Martin Brody
(incorporated by reference to Exhibit 10(p) to the
Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1997).
10(q) Non-Qualified Stock Option Contract dated December 3,
1996 between the Registrant and Richard Chestnov
(incorporated by reference to Exhibit 10(q) to the
Registrant's Annual Report on
Form 10-K, File No. 1-5863, for the fiscal year ended
June 30, 1997).
10(r) Non-Qualified Stock Option Contract dated August 19,
1997 between the Registrant and Al Safer (incorporated
by reference to Exhibit 10(r) to the Registrant's
Annual Report on Form 10-K, File No. 1-5863, for the
fiscal year ended June 30, 1997).
10(s) Non-Qualified Stock Option Contract dated December 3,
1997 between the Registrant and Martin Brody.
(incorporated by reference to Exhibit 10(s) to the
Registrant's Annual Report on Form 10-K, File No. 1-
5863, for the fiscal year ended June 30, 1998).
10(t) Non-Qualified Stock Option Contract dated December 3,
1997 between the Registrant and Richard Chestnov.
(incorporated by reference to Exhibit 10(t) to the
Registrant's Annual Report on Form 10-K, File No. 1-
5863, for the fiscal year ended June 30, 1998).
10(u) Non-Qualified Stock Option Contract dated December 3,
1997 between the Registrant and Albert Safer.
(incorporated by reference to Exhibit 10(u) to the
Registrant's Annual Report on Form 10-K, File No.
1-5863, for the fiscal year ended June 30, 1998).
10(v) Letter Agreement dated as of December 29, 1997 between
the Registrant and Robert Chestnov (incorporated herein
by reference to Exhibit 2.1 to the Registrant's Current
Report on Form 8-K, file No. 1-5863, for the fiscal
year ended June 30, 1998).*
10(w) Purchase and Sale Agreement dated January 11, 1999
between Banner Industries of New York, Inc. and Jaclyn,
Inc. (incorporated herein by reference to Exhibit 2.1
to the Registrant's Current Report on Form 8-K, file
No. 1-5863, dated January 26, 1999).
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