<PAGE>
SECURITIES & EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended April 30, 1999
Commission File Number 1-4124
JETRONIC INDUSTRIES, INC.
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(Exact name of registrant as specified in its charter)
Pennsylvania 23-1364981
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(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
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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
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At April 30, 1999, 3,701,999 shares of common stock were outstanding.
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PART I
ITEM 1
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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, 1999.
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.
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ITEM 2
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Results of operations:
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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 $5,035,000 and an operating profit of $711,000
for the three months ended April 30, 1999 (2000) compared to revenues of
$6,144,000 and an operating profit of $831,000 for the three months ended April
30, 1998 (1999). The decrease in revenues from year to year was attributable to
a softness in the solid state power supply business and a decline in revenues in
the switchgear business as a result of decreased orders from a major customer
and a reduction in orders for custom switchgear. Although the specialized
computer subsystem enclosure business increased by 20%, it was not sufficient to
offset the aforementioned revenue decreases and, therefore, operating profits
were negatively impacted. The Company recently received additional orders
against an existing U.S. Government contract which is expected to ship in the
third and fourth quarters of this fiscal year.
Net corporate expenses, comprised of interest expense and general corporate
items, were $704,000 for the three months ended April 30, 1999 compared to
$571,000 for the three months ended April 30, 1998. The increase in corporate
expenses is primarily attributable to the increase in interest and financing
costs associated with the Company's refinancing in May 1998.
Liquidity and Capital Resources:
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During FY 2000 and FY 1999 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 $6,500,000. As of April 30, 1999, such borrowings amounted to $2,275,000 with
an additional availability based on the various formulae of $743,000. The
Company's line of credit agreement with its current lender expires in May 2001.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS - (continued):
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)
<TABLE>
<CAPTION>
April 30, 1999 January 31, 1999
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<S> <C> <C>
ASSETS
Current assets:
Cash $ 309 $ 495
Accounts receivable 3,125 2,775
Inventories 7,919 7,569
Prepaid and other assets 1,914 1,951
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Total current assets 13,267 12,790
Property, plant and equipment, net 371 377
Goodwill 278 280
Other assets 1,651 1,764
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Total assets $ 15,567 $ 15,211
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to lenders $ 2,275 $ 1,781
Current portion of long-term debt 1,030 976
Accounts payable 1,455 1,482
Other accrued liabilities 828 825
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Total current liabilities 5,588 5,064
Deferred interest 1,405 1,405
Long-term debt 5,598 5,773
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Total liabilities 12,591 12,242
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Shareholders' equity:
Preferred stock 33 33
Common stock 370 370
Capital in excess of par value 13,822 13,822
Retained earnings (deficit) (11,249) (11,256)
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Total shareholders' equity 2,976 2,969
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$ 15,567 $ 15,211
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</TABLE>
See notes to consolidated financial statements.
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JETRONIC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(000's Omitted)
<TABLE>
<CAPTION>
Three Months Ended April 30,
1999 1998
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<S> <C> <C>
Net sales $5,035 $6,144
Cost and expenses:
Cost of goods sold 4,051 4,967
Selling and administrative expenses 583 663
Interest and debt expenses 394 254
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Total costs and expenses 5,028 5,884
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Income before income taxes 7 260
Income tax provision 9
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Net income $ 7 $ 251
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Basic $ .00 $ .07
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Diluted $ .00 $ .06
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</TABLE>
Notes:
A) Weighted average number of shares for the three months ended April 30, 1999
and 1998 was 3,702,000 and 3,604,000, respectively for basic and 4,293,000
and 4,000,000, 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>
Capital in Retained
Preferred Common Stock excess of earnings
Stock Shares Amount par value (deficit) Total
----- ------ ------ --------- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Balance, January 31, 1998 3,604,499 $ 361 $ 12,569 ($ 11,974) $ 956
Issuance of common stock 97,500 9 104 113
Issuance of warrants 1,149 1,149
Issuance of preferred stock $ 33 33
Net income, year ended
January 31, 1999 718 718
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Balance, January 31, 1999 33 3,701,999 370 13,822 ( 11,256) 2,969
Net income three months
ended April 30, 1999 7 7
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Balance, April 30, 1999 $ 33 3,701,999 $ 370 $ 13,822 ($ 11,249) $ 2,976
========== ========== ========== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
JETRONIC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(000's Omitted)
<TABLE>
<CAPTION>
Three Months Ended April 30,
----------------------------
1999 1998
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 7 $251
Adjustments to reconcile net income
to net cash provided (used) by
operating activities:
Depreciation and amortization 30 28
Reduction of goodwill 2 3
Changes in assets and liabilities:
Accounts receivable ( 350) ( 151)
Inventories ( 350) ( 55)
Prepaid and other assets 37 ( 51)
Other assets 113 ( 80)
Accounts payable ( 27) ( 659)
Other liabilities 3 92
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Total adjustments ( 542) ( 873)
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Net cash provided (used) by
operating activities ( 535) ( 622)
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Cash flows from investing activities:
Capital expenditures ( 24) ( 14)
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Cash flows from financing activities:
Net borrowings from lenders 494 516
Principal payments on long-term debt ( 121) ( 84)
Proceeds from exercise of warrants 60
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Net cash provided (used) by
financing activities 373 492
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Net increase (decrease) in cash ( 186) ( 144)
Cash beginning of period 495 513
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Cash end of period $309 $369
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Supplemental disclosures of cash flow
information:
Interest paid during the period $240 $184
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Income taxes paid during the period $ -0- $ -0-
==== ====
</TABLE>
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 cost or market, are summarized
as follows:
April 30, 1999 January 31, 1999
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Raw materials $ 4,347 $ 4,309
Work in process 3,572 3,260
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Total $ 7,919 $ 7,569
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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 $2,618, arising
principally from net operating loss carryforwards, were partially offset by
deferred tax liabilities and valuation allowance of $2,059 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,
----------------------------
1999 1998
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Federal income tax rate 34.0% 34.0%
Tax effect of non-deductible expenses 73.8 1.2
NOL utilization under SFAS No. 109 ( 103.5) ( 31.8)
Other ( 4.3)
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Effective income tax rate 0.0% 3.4%
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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, 1999.
SIGNATURES
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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.
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Registrant
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Leonard W. Pietrzak
Vice President - Finance
June 14, 1999
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