<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended April 30, 1998
Commission File Number 1-4124
JETRONIC INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-1364981
------------------------------- ----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4200 Mitchell Street, Philadelphia, PA 19128
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (215) 482-7660
--------------
Indicate by checkmark 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
requirements for the past 90 days. Yes __X__ No _____
At April 30, 1998, 3,664,499 shares of common stock were outstanding.
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PART I
ITEM 1
CONSOLIDATED FINANCIAL STATEMENTS OF THE REGISTRANT AND ITS SUBSIDIARIES
The following Consolidated Balance Sheets, Consolidated Statements of
Operations, Consolidated Statements of Changes in Shareholders, Equity and
Consolidated Statements of Cash Flows are unaudited. In the opinion of
management, all adjustments, consisting only of normal recurring adjustments,
necessary for a fair statement of results for the interim periods have been
included. Results of operations for interim periods are not necessarily
indicative of a full year's operations. The aforementioned statements should be
read in conjunction with the annual report on Form 10-K for the fiscal year
ended January 31, 1998.
CAUTIONARY STATEMENT REGARDING FORWARD LOOKING STATEMENTS
Certain forward looking statements contained herein are based on current
expectations. Actual results may differ materially from the results described in
such forward looking statements due to, but not limited to, the following
factors: the effect of general business conditions, the impact of competitive
products and pricing, product development and technological difficulties.
<PAGE>
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of operations:
In the following commentary, "operating profit" is total revenue less operating
expenses. In computing operating profit, none of the following items has been
added or deducted: general corporate expenses, corporate interest expense,
corporate interest income and income taxes.
The Company reported revenues of $6,144,000 and an operating profit of $831,000
for the three months ended April 30, 1998 (1999) compared to revenues of
$5,707,000 and an operating profit of $750,000 for the three months ended April
30, 1997 (1998).
The increase in revenues from year to year was experienced across the board for
all elements of the energy conversion products group. The increase in
profitability was primarily attributable to better mix of product at the
switchgear operations and the overall increase in revenues. The Company recently
received additional orders against an existing U.S. Govenment Contract which is
expected to ship in the second and third quarters of this fiscal year.
Net corporate expenses, comprised of interest expense and general corporate
items, were $570,000 for the three months ended April 30, 1998 compared to
$533,000 for the three months ended April 30, 1997.
Liquidity and Capital Resources:
During FY 1999 and FY 1998 the operations of the Company and its subsidiary were
financed by a lending institution under various formulae which provide operating
funds as required. Such borrowings are primarily in the form of short-term
loans, secured by assignment of accounts receivable and inventories. Under the
various formulae, borrowings are limited to varying percentages and maximum
dollar amounts of accounts receivable and inventories with a maximum limitation
of $5,000,000. As of April 30, 1998, such borrowings amounted to $3,839,000 with
an additional availability based on the various formulae of $644,000. In May
1998, the Company replaced its existing short-term revolving credit arrangement
and term loans with another financing institution which provides for a revolving
line of credit of $6,500,000 and term loans totaling $2,930,000 and expires in
May 2001.
At this time, there are no material commitments for capital expenditures
although the Company is pursuing several acquisitions which, if successful, will
require the outlay of additional cash. Cash requirements for the current fiscal
year should increase by ten percent due to the anticipated increase in business
activity. Based upon the availability of funds under its existing financing
arrangements, the Company deems its liquidity to be adequate.
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JETRONIC INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(000's Omitted)
April 30, 1998 January 31, 1998
-------------- ----------------
ASSETS
Current assets:
Cash $ 369 $ 513
Accounts receivable 4,107 3,956
Inventories 6,755 6,700
Prepaid and other assets 983 932
-------- --------
Total current assets 12,214 12,101
Property, plant and equipment, net 404 418
Goodwill 288 291
Other assets 756 676
-------- --------
Total assets $ 13,662 $ 13,486
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to lenders $ 3,839 $ 3,323
Current portion of long-term debt 335 335
Accounts payable 1,669 2,328
Other accrued liabilities 949 883
Deferred interest 1,405 1,379
-------- --------
Total current liabilities 8,197 8,248
Long-term debt 4,198 4,282
-------- --------
Total liabilities 12,395 12,530
-------- --------
Shareholders' equity:
Common stock 367 361
Capital in excess of par value 12,623 12,569
Retained earnings (deficit) (11,723) (11,974)
-------- --------
Total shareholders'
equity 1,267 956
-------- --------
$ 13,662 $ 13,486
======== ========
See notes to consolidated financial statements.
<PAGE>
JETRONIC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(000's omitted)
Three months Ended April 30,
----------------------------
1998 1997
------ ------
Net sales $6,144 $5,707
Cost and expenses:
Cost of goods sold 4,967 4,697
Selling and administrative expenses 663 564
Interest and debt expenses 254 229
------ ------
Total costs and expenses 5,884 5,490
------ ------
Income before income taxes 260 217
Income tax provision 9 1
------ ------
Net income $ 251 $ 216
====== ======
Net income per share (A):
Basic $ .07 $ .06
====== ======
Diluted $ .06 $ .06
====== ======
Notes:
(A) Weighted average number of shares for the three months ended April 30, 1998
and 1997 was 3,604,000 and 3,604,000, respectively for basic and 4,000,000
and 3,723,000, respectively for diluted.
See notes to consolidated financial statements.
<PAGE>
JETRONIC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(Unaudited)
(000's omitted)
<TABLE>
<CAPTION>
Common Stock Capital in Retained
---------------------------- excess of earnings
Shares Amount par value (deficit) Total
------ ------ --------- --------- -----
<S> <C> <C> <C> <C> <C>
Balance, January 31, 1997 3,604,499 $ 361 $ 12,569 ($ 13,247) ($ 317)
Net income, year ended
January 31, 1998 1,273 1,273
--------- --------- --------- --------- ---------
Balance, January 31, 1998 3,604,499 361 12,569 ( 11,974) 956
Exercise of warrants 60,000 6 54 60
Net income, three months
ended April 30, 1998 251 251
--------- --------- --------- --------- ---------
Balance, April 30, 1998 3,664,499 $ 367 $ 12,623 ($ 11,723) $ 1,267
========= ========= ========= ========= =========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
JETRONIC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(000's Omitted)
Three Months Ended April 30,
----------------------------
1998 1997
---- ----
Cash flows from operating activities:
Net income $251 $216
Adjustments to reconcile net income
to net cash provided (used)
by operating activities:
Depreciation and amortization 28 25
Reduction, of goodwill 3 3
Changes in assets and liabilities:
Accounts receivable ( 151) ( 238)
Inventories ( 55) 23
Prepaid and other assets ( 51) ( 104)
Other assets ( 80) 4
Accounts payable ( 659) ( 487)
other liabilities 92 ( 132)
---- ----
Total adjustments ( 873) ( 906)
---- ----
Net cash provided (used) by
operating activities ( 622) ( 690)
---- ----
Cash flows from investing activities:
Capital expenditures ( 14) ( 35)
---- ----
Cash flows from financing activities:
Proceeds from long-term debt 515
Net borrowings from lenders 516 223
Principal payments on long-term debt ( 84) ( 21)
Proceeds from exercise of warrants 60
---- ----
Net cash provided (used) by
financing activities 492 717
---- ----
Net increase (decrease) in cash ( 144) ( 8)
Cash beginning of period 513 498
---- ----
Cash end of period $369 $490
==== ====
Supplemental disclosures of cash flow information:
Interest paid during the period $184 $171
==== ====
Income taxes paid during the period $-0- $-0-
==== ====
See notes to consolidated financial statements.
<PAGE>
JETRONIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(000's omitted)
Note 1 - INVENTORIES
Inventories, which are stated at the lower of last-in first-out (LIFO) cost
or market for electronic communication equipment and a portion of energy
conversion products (16% of inventory) and at the lower of first-in
first-out (FIFO) cost or market for the remaining portion of energy
conversion products, are summarized as follows:
April 30, 1998 January 31, 1998
-------------- ----------------
Raw materials $ 4,077 $ 4,224
Work in process 2,678 2,476
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Total $ 6,755 $ 6,700
========= ========
Note 2 - STATEMENT OF OPERATIONS
Effective February 1, 1993, the Company changed its method of accounting
for income taxes by adopting Statement of Financial Accounting Standards
No. 109 (SFAS No. 109). Under SFAS No. 109 the deferred tax provision is
determined under the liability method. Deferred tax assets of $2,715,
arising principally from net operating loss carryforwards, were partially
offset by deferred tax liabilities and valuation allowance of $2,543 in
accordance with guidelines established under SFAS No. 109. The Company will
periodically review and adjust the valuation allowance as needed.
Differences between the statutory federal income tax rate and the effective
tax rate are accounted for as follows:
Three months Ended April 30,
----------------------------
1998 1997
---- ----
Federal income tax rate 34.0% 34.0%
State income taxes, net of
federal tax benefit .3
Tax effect of non-deductible
expenses 1.2 1.4
NOL utilization under SFAS No. 109 (31.8) (35.2)
----- ----
Effective income tax rate 3.4% 0.5%
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<PAGE>
PART II
Items 1 thru 6(a) are not applicable.
Item 6(b) - There were no reports on Form 8-K filed for the quarter ended April
30, 1998.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
JETRONIC INDUSTRIES, INC.
-------------------------
Registrant
_______________________________________
Leonard W. Pietrzak
Vice President - Finance
June 30, 1998
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<NAME> JETRONIC INDUSTRIES, INC.
<S> <C>
<PERIOD-TYPE> 3-MOS
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