<PAGE>
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
------------------
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission File Number
January 31, 1999 1-4124
JETRONIC INDUSTRIES, INC.
Pennsylvania 23-1364981
- ------------------------ -------------------
(State of Incorporation) (I.R.S. Employer
Identification No.)
4200 Mitchell Street, Philadelphia, Pennsylvania 19128
------------------------------------------------------
(Address of Principal Executive Offices)
215-482-7660
------------
(Telephone Number)
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $.10 Par Value American Stock Exchange
- ---------------------------- -----------------------
(Title of Class) (Name of Exchange)
Securities registered pursuant to Section 12(g) of the Act:
None
----
(Title of Class)
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 twelve 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 ninety days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( X )
-----
On April 13, 1999, the aggregate market value of the Registrant's common stock,
$.10 par value (its only voting stock), held by nonaffiliates of the Registrant
was $3,702,000.
On April 13, 1999, there were 3,701,999 shares of the Registrant's common stock,
$.10 par value, outstanding.
Documents incorporated by reference are hereunder listed.
Part of 10-K into which the
Document Document is Incorporated
- ----------------------------------------- -------------------------
Definitive Proxy Statement in connection Part III, Items 10, 11, 12
with annual meeting of shareholders to and 13
be held in September 1999
<PAGE>
PART I
ITEM 1 - BUSINESS:
- ------------------
The Registrant, Jetronic Industries, Inc., together with its subsidiary, is
referred to as "the Company" unless the context clearly indicates otherwise. In
May 1998, holders of the 10% Subordinated Debentures extended the due date of
the Debentures, along with the related Deferred Interest, until January 2003. In
March 1997, the Company acquired the assets, subject to certain liabilities, of
certain subsidiaries of Woven Electronic Corporation. During 1996, the Company
discontinued its marine electronic and communication business (Ray Jefferson)
because of competitive pricing pressures and a general softness in the marine
market and abandoned a portion of its switchgear product line. In 1999, 1998 and
1997, Caterpillar, Inc. accounted for a significant portion of the Company's
revenues. There have been no other significant developments related to the
Company's business.
Business segment and geographic information:
--------------------------------------------
Summarized business segment information for 1999-1997 (in thousands) is as
follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
Net revenues
<S> <C> <C> <C>
Electronic communication equipment $ 678 $ 719 $ 688
Energy conversion products group 21,810 25,154 22,983
------- ------- -------
Consolidated $22,488 $25,873 $23,671
======= ======= =======
Operating profit (loss):
Electronic communication equipment $ 207 $ 271 $ 146
Energy conversion products group 3,108 3,399 2,835
Net corporate expenses ( 2,967) ( 2,393) ( 2,405)
------- ------- -------
Consolidated $ 348 $ 1,277 $ 576
======= ======= =======
Identifiable assets:
Electronic communication equipment $ 525 $ 343 $ 296
Energy conversion products group 11,720 11,872 9,803
------- ------- -------
Total 12,245 12,215 10,099
Other corporate assets 2,966 1,271 1,282
------- ------- -------
Consolidated $15,211 $13,486 $11,381
======= ======= =======
Depreciation expense:
Electronic communication equipment $ 29 $ 30 $ 32
Energy conversion products group 87 80 71
------- ------- -------
Consolidated $ 116 $ 110 $ 103
======= ======= =======
Capital expenditures:
Energy conversion products group $ 75 $ 90 $ 64
======= ======= =======
Consolidated $ 75 $ 90 $ 64
======= ======= =======
</TABLE>
1
<PAGE>
Operating profit is total revenue less operating expenses. In computing
operating profit by segment, none of the following items have been added or
deducted: general corporate expenses, corporate interest expense, corporate
interest income and income taxes.
Identifiable assets by segment are those assets that are used in the Company's
operations in each segment. Corporate assets are principally prepaid and other
assets.
During 1999-1997, respectively contracts with United States Government agencies
accounted for approximately $1,059,000, $863,000 and $930,000 of total sales in
the electronic communication equipment and energy conversion products group
segments.
Description of the business:
----------------------------
Jetronic was incorporated in the Commonwealth of Pennsylvania on January 12,
1951.
Jetronic is engaged in the design, development, manufacture, distribution and
sale of energy conversion equipment, specialized computer subsystem enclosures
and electronic communication devices for commercial and government use through
its "Electronics" and "Transchem" divisions, the Redco subsidiary and Redco's
Power Systems Group division.
The Electronics Division designs and manufactures, to customer specification,
digital data control terminals.
The Transchem Division (energy conversion products group) manufactures and
markets paralleling and nonparalleling electrical switchgear and control
systems, along with the metal enclosures in which the equipment is housed.
Redco, Inc. supplies standardized control panels on a regular basis to major
domestic engine manufacturers (principally Caterpillar, Inc.) and designs,
builds and installs complex cogeneration control systems.
Power Systems Group, a division of Redco, Inc., designs and manufactures custom
ruggedized enclosures for the aircraft and aerospace markets and sells
ruggedized laptop computers into these same markets.
Government business is obtained both through competitive bidding and by
negotiated contract. Commercial products are marketed by Jetronic's officers,
sales managers and a network of manufacturers' representatives. All phases of
Jetronic's business are highly competitive. Each of Jetronic's operating
entities competes with other concerns, some of which have substantially greater
sales and resources than Jetronic. Each of the operating entities accounts for
only a small portion of sales in its area of competition. The five largest
commercial customers of the energy conversion products group accounted for 71%
of that group's sales, one of which accounted for 59%. Prime contract sales to
the U.S. Government accounted for 5% of Jetronic sales. At January 31, 1999, the
total backlog of orders amounted to $5,988,000. At January 31, 1998, the total
backlog was $5,658,000. Of the backlog at January 31, 1999, all is expected to
be filled within the current year.
Jetronic purchases components, raw materials and finished products from numerous
sources and has generally experienced no significant difficulty in meeting its
requirements. The business is not materially dependent on patents, licenses or
concessions; Jetronic's position is more dependent on experience and its
marketing and production techniques. During 1999, 1998 and 1997, Jetronic
expended $8,000, $49,000 and $33,000, respectively, on research activities for
the development of new products or the significant improvement of existing
products, all of which were Company sponsored. Future expenditures are not
expected to be significant. Environmental controls have not had a material
effect on operations. At January 31, 1999, Jetronic employed 155 people.
2
<PAGE>
ITEM 2 - PROPERTIES:
- --------------------
The Company presently has the following leaseholds:
<TABLE>
<CAPTION>
Square Lease
Operating entity Location Use feet expires
---------------- -------- --- ---- -------
<S> <C> <C> <C> <C>
Jetronic Philadelphia, PA Manufacturing 3,000 6/03
and offices
Transchem Division Corona, CA Manufacturing 21,000 1/04
and offices
Redco Peoria, IL Manufacturing 36,000 12/05
and offices
Redco Peoria, IL Manufacturing 10,000 3/00
Power Systems
Group Division Irvine, CA Offices 4,000 4/99
</TABLE>
Leased properties are considered suitable for the purposes intended and adequate
for present levels of utilization. The Company has no significant idle
facilities.
ITEM - 3 LEGAL PROCEEDINGS:
- ---------------------------
In February 1999 certain wholly owned subsidiaries of Woven Electronics
Corporation (Woven) commenced an action against Jetronic's wholly owned
subsidiary, Redco, Inc., for $327,246 and accrued interest alleged to be due
under and pursuant to a promissory note dated March 30, 1997. By way of defense
and counterclaim, Redco has asserted claims in the amount of $328,169 to which
it is entitled under and pursuant to the terms of the agreement under which said
promissory note was issued. Accordingly, it is Redco's position that there are
no amounts due and payable to Woven. Redco intends to contest this matter
vigorously and it is anticipated that a favorable outcome will result.
The Department of Defense is conducting an inquiry with which the Company is
cooperating to ascertain whether one of the Company's divisions has violated
Federal Statutes by failing to perform certain quality control tests and test
procedures in connection with product delivered under government contracts.
While certain irregularities have occurred, they are, in the opinion of
management, of a nature that would have no material effect on the quality or
reliability of such product. Management anticipates that resolution of this
matter will not have a material adverse effect on the financial condition or
operations of the Company.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
- -------------------------------------------------------------
None.
PART II
ITEM 5 - MARKET FOR THE REGISTRANT'S COMMON
- -------------------------------------------
STOCK AND RELATED SECURITY HOLDER MATTERS:
- ------------------------------------------
The Company's common stock is traded on the American Stock Exchange. The high
and low sales prices for each quarterly period in the past two years ended
January 31 are:
<TABLE>
<CAPTION>
1999 1998
---- ----
Quarter High Low High Low
------- ---- --- ---- ---
<S> <C> <C> <C> <C>
First $2 15/16 $2 3/16 $1 1/2 $1
Second 2 13/16 1 1/4 1 7/16 1
Third 1 9/16 15/16 1 7/16 7/8
Fourth 1 7/16 1 2 5/8 1
</TABLE>
3
<PAGE>
As of April 13, 1999, there were approximately 1,539 holders of the Company's
common stock. The Company has paid no cash dividends for a number of years. See
Notes 5 and 6 to Consolidated Financial Statements for a discussion of dividend
restrictions.
ITEM 6 - SELECTED FINANCIAL DATA:
- ---------------------------------
<TABLE>
<CAPTION>
For the year ended January 31,
------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Revenues $ 22,488 $ 25,873 $ 23,671 $ 22,353 $ 18,824
Income (loss) from continuing
operations $ 718 $ 1,273 $ 585 ($ 1,285) $ 115
Income (loss) from continuing
operations per share-basic $ .20 $ .35 $ .16 ($ .36) $ .03
Total assets $ 15,211 $ 13,486 $ 11,381 $ 9,407 $ 11,384
Long-term debt $ 5,773 $ 4,282 $ 4,102 $ 3,996 $ 4,393
</TABLE>
No cash dividends have been declared in the past five years.
ITEM 7 - 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 or loss, none of the following items
have been added or deducted: general corporate expenses, corporate interest
expense, corporate interest income and income taxes. The following should be
read in conjunction with business segment and geographic information on page 1.
1999 compared with 1998:
------------------------
The Company reported revenues of $22,488,000 and an operating profit of $348,000
for the year ended January 31, 1999 (1999) compared to revenues of $25,873,000
and an operating profit of $1,277,000 for the year ended January 31, 1998
(1998).
The electronic communication equipment operations reported revenues of $678,000
and an operating profit of $207,000 for 1999 compared to revenues of $719,000
and an operating profit of $271,000 for 1998. The Company is currently
negotiating an add-on to its existing contract which, if successful, would
expect to be shipped during the fiscal year ended January 31, 2000.
The energy conversion products group reported revenues of $21,810,000 and an
operating profit of $3,108,000 for 1999 compared to revenues of $25,154,000 and
an operating profit of $3,399,000 for 1998. Although revenues and profitability
for the solid state power supply business and specialized computer subsystem
enclosure businesses increased by approximately 19% year to year, a decline in
revenues in switchgear business as a result of decreased orders from a major
customer and a reduction in orders for custom switchgear negatively impacted the
performance of the energy conversion products group.
Net corporate expenses, comprised of interest expense and general corporate
items, were $2,967,000 in 1999 compared to $2,393,000 in 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.
4
<PAGE>
1998 compared with 1997:
- ------------------------
The Company reported revenues of $25,873,000 and an operating profit of
$1,277,000 for the year ended January 31, 1998 (1998) compared to revenues of
$23,671,000 and an operating profit of $576,000 for the year ended January 31,
1997 (1997).
The electronic communication equipment operations reported revenues of $719,000
and an operating profit of $271,000 for 1998 compared to revenues of $688,000
and an operating profit of $146,000 for 1997. The increase in profitability is a
result of the Company's downsizing and cost reductions in reaction to the
reduction in U.S. Government defense related business opportunities. The Company
is currently negotiating an add-on to its existing contract which, if
successful, would expect to be shipped during the fiscal year ended January 31,
1999.
The energy conversion products group reported revenues of $25,154,000 and an
operating profit of $3,399,000 for 1998 compared to revenues of $22,983,000 and
an operating profit of $2,835,000 for 1997. Revenue increases are primarily
associated with the solid state power supply business which reflects increased
quotation and shipping activity and the contribution of the new Power Systems
Group which was acquired in the first quarter. Overall profitability increased
due to the revenue increases and improved margins in the custom switchgear
business.
Net corporate expenses, comprised of interest expense and general corporate
items, were $2,393,000 in 1998 compared to $2,405,000 in 1997.
Liquidity and capital resources:
--------------------------------
During 1999 and 1998, the operations of the Company and its subsidiary were
financed by lending institutions 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 January 31, 1999, such borrowings amounted to $1,781,000
with an additional availability based on the various formulae of $744,000. The
Company's line of credit agreement with its current lender 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 next 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
arrangement, the Company deems its liquidity to be adequate.
Year 2000 issue:
----------------
The Company is proactive in relation to issues surrounding compliance with the
date change from 1999 to 2000 and its effect on its computer systems and those
of its business associates. The Company does not expect the costs of
implementing a program to address this issue to have a material effect on its
consolidated financial statements.
Adoption of new accounting principles:
--------------------------------------
The Company implemented Statements of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" and No. 131, "Disclosures About Segments of an
Enterprise and Related Information" in 1999. These implementations did not have
a material effect on the consolidated financial statements.
5
<PAGE>
ITEM 7a - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK:
- ---------------------------------------------------------------------
Market Risk Sensitive Instruments:
----------------------------------
The market risk inherent in the Company's market risk sensitive instruments and
positions is the potential loss arising from adverse changes in interest rates.
Interest Rate Risk:
-------------------
The Company's bank loans expose earnings to changes in short-term interest rates
since interest rates on the underlying obligations are variable. The fair values
of the Company's bank loans are not significantly affected by changes in market
interest rates. The change in fair value of the Company's long-term debt bearing
variable rates resulting from a hypothetical 10% increase in interest rates is
not material.
6
<PAGE>
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA:
- -----------------------------------------------------
INDEX
Page(s)
-------
Independent auditors' report 8
Financial statements:
Consolidated balance sheets 9
Consolidated statements of operations 10
Consolidated statements of changes in
shareholders' equity 11
Consolidated statements of cash flows 12
Notes to consolidated financial statements 13 - 19
Financial statement schedule:
Valuation and qualifying accounts (Schedule II) 20
7
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and
Board of Directors
Jetronic Industries, Inc.
Philadelphia, Pennsylvania
We have audited the accompanying consolidated balance sheets of Jetronic
Industries, Inc. and Subsidiary as of January 31, 1999 and 1998 and the related
consolidated statements of operations, changes in Shareholders' equity and cash
flows for each of the three years in the period ended January 31, 1999. Our
audits also include the financial statement schedule listed in the Index at Item
8. These consolidated financial statements and financial statement schedule are
the responsibility of the Company's management. Our responsibility is to express
an opinion on these consolidated 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, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Jetronic Industries, Inc. and Subsidiary as of January 31, 1999 and 1998 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended January 31, 1999 in conformity with generally
accepted accounting principles. Also, in our opinion, the financial statement
schedule referred to above, 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 for each of the three years
in the period ended January 31, 1999.
ASHER & COMPANY, LTD.
Philadelphia, Pennsylvania
April 30, 1999
8
<PAGE>
JETRONIC INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
January 31,
-----------
1999 1998
---- ----
ASSETS
<S> <C> <C>
Current assets:
Cash $ 495,000 $ 513,000
Accounts receivable, net 2,775,000 3,956,000
Inventories 7,569,000 6,700,000
Prepaid expenses and other current assets 1,951,000 932,000
----------- -----------
Total current assets 12,790,000 12,101,000
Property, plant and equipment at cost, less
accumulated depreciation 377,000 418,000
Goodwill 280,000 291,000
Other assets 1,764,000 676,000
----------- -----------
$15,211,000 $13,486,000
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable, bank $ 1,781,000 $ 3,323,000
Current portion of long-term debt 976,000 335,000
Accounts payable 1,482,000 2,328,000
Other accrued liabilities 825,000 883,000
Deferred interest 1,379,000
----------- -----------
Total current liabilities 5,064,000 8,248,000
Deferred interest 1,405,000
Long-term debt 5,773,000 4,282,000
----------- -----------
12,242,000 12,530,000
----------- -----------
Commitments and contingencies
Redeemable preferred stock, $1.85 stated value - shares authorized, 577,400;
issued and outstanding, none
Shareholders' equity:
Series AA preferred stock, no par value - shares
authorized, 440,000; issued and outstanding,
327,032 33,000
Common stock, $.10 par value - shares authorized,
10,000,000; issued and outstanding, 3,701,999
in 1999 and 3,604,499 in 1998 370,000 361,000
Capital in excess of par value 13,822,000 12,569,000
Retained earnings (deficit) (11,256,000) (11,974,000)
----------- -----------
Total shareholders' equity 2,969,000 956,000
----------- -----------
$15,211,000 $13,486,000
=========== ===========
</TABLE>
See notes to consolidated financial statements.
9
<PAGE>
JETRONIC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended January 31,
----------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net sales $22,488,000 $25,873,000 $23,671,000
Costs and expenses:
Cost of goods sold 17,866,000 20,861,000 19,747,000
Selling, general and administrative
expenses 3,004,000 2,712,000 2,371,000
Interest and debt expense 1,270,000 1,023,000 977,000
----------- ----------- -----------
22,140,000 24,596,000 23,095,000
----------- ----------- -----------
Income from operations before income taxes 348,000 1,277,000 576,000
Provision for (benefit from) income taxes ( 370,000) 4,000 ( 9,000)
----------- ----------- -----------
Net income $ 718,000 $ 1,273,000 $ 585,000
=========== =========== ===========
Year ended January 31,
----------------------
1999 1998 1997
---- ---- ----
Net income per share:
Basic $ .20 $ .35 $ .16
======= ======= =======
Diluted $ .16 $ .33 $ .16
======= ======= =======
</TABLE>
See notes to consolidated financial statements.
10
<PAGE>
JETRONIC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
<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, 1996 3,604,499 $361,000 $12,569,000 ($13,832,000) ($ 902,000)
Net income, year ended
January 31, 1997 585,000 585,000
--------- -------- ----------- ------------ -----------
Balance, January 31, 1997 3,604,499 361,000 12,569,000 ( 13,247,000) ( 317,000)
Net income, year ended
January 31, 1998 1,273,000 1,273,000
--------- -------- ----------- ------------ -----------
Balance, January 31, 1998 3,604,499 361,000 12,569,000 ( 11,974,000) 956,000
Issuance of common stock 97,500 9,000 104,000 113,000
Issuance of warrants 1,149,000 1,149,000
Issuance of preferred stock $33,000 33,000
Net income, year ended
January 31, 1999 718,000 718,000
------- --------- -------- ----------- ----------- -----------
Balance, January 31, 1999 $33,000 3,701,999 $370,000 $13,822,000 ($11,256,000) $2,969,000
======= ========= ======== =========== ============ ===========
</TABLE>
See notes to consolidated financial statements.
11
<PAGE>
JETRONIC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended January 31,
----------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 718,000 $1,273,000 $ 585,000
Adjustments to reconcile net income
to net cash from (used by)
operating activities:
Depreciation and amortization 116,000 110,000 103,000
Change in goodwill 11,000 10,000 10,000
Changes in assets and liabilities:
Accounts receivable 1,181,000 50,000 ( 741,000)
Inventories ( 869,000) (1,444,000) (1,016,000)
Prepaid expenses and other ( 568,000) ( 79,000) ( 252,000)
Other assets ( 390,000) ( 140,000) ( 172,000)
Accounts payable ( 846,000) 23,000 711,000
Other accrued liabilities ( 32,000) ( 122,000) 72,000
---------- ---------- ----------
Total adjustments ( 1,397,000) (1,592,000) (1,285,000)
---------- ---------- ----------
Net cash from (used by)
operating activities ( 679,000) ( 319,000) ( 700,000)
---------- ---------- ----------
Cash flows from (used by) investing
activities:
Capital expenditures, net of disposals ( 75,000) ( 69,000) ( 60,000)
---------- ---------- ----------
Net cash from (used by)
investing activities ( 75,000) ( 69,000) ( 60,000)
---------- ---------- ----------
Cash flows from (used by) financing
activities:
Net borrowings from lenders ( 1,542,000) 487,000 505,000
Principal payments on long-term debt ( 798,000) ( 84,000) ( 81,000)
Proceeds from long-term debt 2,930,000 182,000
Proceeds from stock issuance 146,000
---------- ---------- ----------
Net cash from (used by)
financing activities 736,000 403,000 606,000
---------- ---------- ----------
Net increase (decrease) in cash ( 18,000) 15,000 ( 154,000)
Cash, beginning of year 513,000 498,000 652,000
---------- ---------- ----------
Cash, end of year $ 495,000 $ 513,000 $ 498,000
========== ========== ==========
Supplemental disclosures of cash flow
information and non cash transactions:
Issuance of warrants $1,149,000
==========
Interest paid during the year $ 961,000 $ 785,000 $ 742,000
========== ========== ==========
Income taxes paid during the year $ 35,000 $ 8,000 $ 1,000
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
12
<PAGE>
JETRONIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Business:
---------
The Company is engaged in the design, manufacture and marketing of energy
conversion equipment, specialized computer subsystem enclosures and electrical
communication devices.
Principles of consolidation:
----------------------------
The consolidated financial statements include the accounts of Jetronic
Industries, Inc. ("Jetronic") and its wholly-owned subsidiary. Significant
intercompany transactions and balances have been eliminated in consolidation.
Estimates:
----------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosure of contingent assets and
liabilities. Actual results could differ from those estimates.
Concentration of credit risk:
-----------------------------
The Company maintains cash accounts which, at times, may exceed federally
insured limits. The Company has not experienced any losses from maintaining cash
accounts in excess of federally insured limits. Management believes it is not
exposed to any significant credit risks on its cash accounts. Financial
instruments which potentially subject the Company to concentration of credit
risk consist principally of accounts receivable because of a significant amount
due from a single customer. This risk is mitigated due to the financial
stability of the particular customer.
Inventories:
------------
Inventories are stated at the lower of cost or market. Cost is determined on the
first-in, first-out (FIFO) method. Progress billings in advance of delivery
reduce inventory.
Property, plant and equipment:
------------------------------
Property, plant and equipment includes the cost of additions and those
improvements which increase the capacity or lengthen the useful lives of assets.
Expenditures for repairs and maintenance are expensed as incurred. Depreciation
is computed principally on the straight-line method over the anticipated useful
lives of the respective assets.
Goodwill:
---------
Goodwill which arose from the acquisition of Redco, Inc. is being amortized over
forty years on the straight-line method. Such balance is net of accumulated
amortization of $126,000 in 1999 and $115,000 in 1998.
Revenue recognition:
--------------------
Sales of products under long-term contracts involving definable end items are
recognized as shipments are made.
13
<PAGE>
JETRONIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Research and development costs:
-------------------------------
Research and development costs are charged to expense as incurred, except for
certain costs associated with specific long-term programs for which the customer
has contracted. Total expenses amounted to $8,000, $49,000 and $33,000 in 1999 -
1997, respectively.
Income taxes:
-------------
The Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109 (SFAS No. 109). Under SFAS No. 109, the deferred
tax provision is determined under the liability method. Under this method,
deferred tax assets and liabilities are recognized based on differences between
financial statement and tax bases of assets and liabilities using presently
enacted rates.
Per share data:
---------------
Basic per share data is based on the weighted average number of common shares
outstanding during the year. When dilutive, the computation of per share data is
based on the weighted average of common shares outstanding during the year plus
the effect of the exercise of options and warrants outstanding as of the
beginning of the period, using the treasury stock method. The weighted average
number of common shares used to compute basic per share data was 3,648,000 for
1999 and 3,604,000 for 1998 and 1997, respectively. The weighted average number
of common shares to compute diluted per share data was 4,415,000 in 1999,
3,799,000 in 1998 and 3,604,000 in 1997.
Acquisition:
------------
In March 1997, the Company purchased the assets, subject to certain liabilities,
of certain subsidiaries of Woven Electronics Corporation for $714,746, $200,000
which was paid in cash and the balance evidenced by a promissory note with final
maturity in July 2000.
NOTE 2 - ACCOUNTS RECEIVABLE:
January 31,
-----------
1999 1998
---- ----
Trade $2,870,000 $4,022,000
Allowance for doubtful accounts ( 95,000) ( 66,000)
---------- ----------
$2,775,000 $3,956,000
========== ==========
NOTE 3 - INVENTORIES:
January 31,
-----------
1999 1998
---- ----
Raw materials $4,309,000 $4,224,000
Work-in-process 3,260,000 2,476,000
---------- ----------
$7,569,000 $6,700,000
========== ==========
Inventory values are stated net of valuation reserves of $132,000 and $72,000 at
January 31, 1999 and 1998, respectively.
14
<PAGE>
JETRONIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 - PROPERTY, PLANT AND EQUIPMENT:
<TABLE>
<CAPTION>
January 31, Estimated
1999 1998 useful lives
---- ---- ------------
<S> <C> <C> <C>
Land, buildings and improvements $ 602,000 $ 602,000 6-15 years
Machinery, equipment and tooling 2,082,000 2,028,000 4-10 years
Furniture and fixtures 1,248,000 1,227,000 4-10 years
----------- -----------
3,932,000 3,857,000
Accumulated depreciation ( 3,555,000) ( 3,439,000)
----------- -----------
$ 377,000 $ 418,000
=========== ===========
</TABLE>
Depreciation and amortization expense amounted to $116,000, $110,000 and
$103,000 in 1999, 1998 and 1997, respectively.
NOTE 5 - INDEBTEDNESS:
The Company's lender has made available lines of credit aggregating up to
$6,500,000 to the Company and its subsidiary at interest rates 2.0% above prime.
Such borrowings are primarily in the form of short-term loans, secured by
assignment of accounts receivable and inventories. At January 31, 1999,
$1,781,000 of demand loans were outstanding under these credit arrangements.
Total unused lines of credit available at January 31, 1999 approximated
$744,000. The weighted average interest rate applicable to all short-term
borrowings outstanding at the end of the year approximated 9.1% in 1999 and
11.4% in 1998.
Notes payable and term loans are variously secured by substantially all of the
Company's accounts receivable, inventories, property, plant and equipment and
capital stock of the subsidiary. Provisions of these agreements contain certain
restrictive covenants which restrict investments in other companies, forego
dividend payments and payments to subordinated debenture holders other than
normal interest.
Long-term debt consists of:
<TABLE>
<CAPTION>
January 31,
-----------
1999 1998
---- ----
<S> <C> <C>
10% Debentures due January 2003 $2,400,000 $2,400,000
10% Debentures due January 2003 (formerly 14 1/2%) 1,456,000 1,456,000
Term loan at 2.00% above prime payable in monthly
installments of $5,100 through May 2001, with a
final payment of $251,000 in June 2001 389,000
Term loan at 3.25% above prime payable in monthly
installments of $42,000 through May 2001, with a
final payment of $1,042,000 in June 2001 2,167,000
Term loans at 2.25% above prime payable in monthly
installments of $5,700 through July 2001 219,000
Philadelphia Industrial Development Corporation (PIDC)
term loan at 4.5% payable in monthly installments
of $1,500 through September 1999 10,000 27,000
8% Promissory note due July 2000, payable starting April
1998 with quarterly installments of $62,500 for the first
year and $50,000 thereafter 327,000 515,000
---------- ----------
6,749,000 4,617,000
Less amount due within one year ( 976,000) ( 335,000)
---------- ----------
$5,773,000 $4,282,000
========== ==========
</TABLE>
15
<PAGE>
JETRONIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Debentures are subordinated to the prior payment of all senior indebtedness.
In May 1998, the Bondholders agreed to extend the maturity of both issues to
January 2003.
The term loans are secured by various machinery and equipment. The Philadelphia
Industrial Development Company (PIDC) loan is secured by a first lien against
the Company's computer system at its Headquarters location.
Principal repayment obligations on all long-term debt amount to $976,000 in
2000, $867,000 in 2001, $1,800,000 in 2002 and $3,106,000 in 2003.
NOTE 6 - COMMON STOCK AND OTHER SHAREHOLDERS' EQUITY:
In conjunction with the extension of the due date of the Subordinated Debentures
until 2003, the Bondholders were issued warrants to purchase 440,000 shares of
non-voting Series AA Preferred Stock with an exercise price of $.10 per share,
expiring in May 2003. The Series AA Preferred Stock is not entitled to any cash
dividends but is entitled to liquidation preference at $.10 per share prior to
any distributions to common shareholders. Additionally, no cash dividends can be
declared for common shareholders as long as the Series AA Preferred Stock is
outstanding. 327,032 warrants were exercised during 1999. The Series AA
Preferred Shares are convertible into common stock at the option of the holder
thereof on a share for share basis. The terms of the Preferred Stock requires
the Company to establish a six member Board of Directors of which three members
will be elected by the Preferred Shareholders.
The Company may grant up to 565,774 options on shares of common stock under the
1990 Incentive Stock Option Plan. Options are exercisable immediately upon grant
and expire five years after the date of grant. The option price must be at least
equal to the fair market value of the common stock at the time of grant. During
1998, 455,000 options were granted at an exercise price of $1.063, of which
447,000 were exercisable. None of these options have been exercised.
In conjunction with his employment agreement, the President of the Company was
granted 360,000 options to acquire common stock at a price of $.375 exercisable
at the rate of 72,000 options per year, expiring in 2001. No options have been
exercised.
In conjunction with various financing arrangements and acquisitions, warrants to
purchase common stock were issued for 75,000 shares at $1.5625 per share and
125,000 shares at $1.00 per share. During 1998, 111,435 warrants at $1.00 per
share expired. During 1999, 60,000 of the $1.00 warrants were exercised. In
satisfaction of claims against the Company's discontinued Ray Jefferson
Division, the Company issued 37,500 shares of common stock during 1999.
Under Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting
for Stock Based Compensation", the Company is permitted to continue accounting
for the issuance of stock options and warrants in accordance with Accounting
Principles Board (APB) Opinion No. 25, which does not require recognition of
compensation expense for option and warrant grants unless the exercise price is
less than the market price at date of grant. If the Company had recognized
compensation cost for the "fair value" of option and warrant grants under the
provisions of SFAS No. 123, the pro forma financial results for the years ended
January 31, 1999 and 1998, respectively, would have differed from the actual
results as follows:
1999 1998
---- ----
Net income:
As reported $ 718,000 $1,273,000
Pro forma $ 693,000 $ 697,000
16
<PAGE>
JETRONIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Basic income per share:
As reported $.20 $.35
Pro forma $.19 $.19
Diluted income per share:
As reported $.16 $.33
Pro forma $.16 $.18
The per share weighted average fair value of the stock options and warrants
granted during the year was $2.35. The fair value was estimated at the date of
grant using the Modified Black-Scholes Stock Option Pricing Model with the
following average assumptions: risk free interest rate of approximately 6%;
expected volatility factor of 135% and expected lives of five to seven years and
no expected dividends rate.
Under SFAS 123, the fair value of stock options issued in any given year is
expensed as compensation over the vesting period. Substantially all of the
Company's options and warrants were vested immediately when granted. The pro
forma results only include the effect of options and warrants granted in 1999
and 1998 as none were issued in 1997 or 1996; options and warrants granted prior
to 1996 were not considered.
NOTE 7 - INCOME TAXES:
The provision for (benefit from) taxes on income include:
Year ended January 31,
----------------------
1999 1998 1997
---- ---- ----
Current:
Federal $ 17,000 $ 4,000
State ($ 9,000)
Deferred:
Federal ( 387,000)
----------- ------------ ------------
($ 370,000) $ 4,000 ($ 9,000)
=========== ============ ============
The tax effects of temporary differences that gave rise to the significant
portions of the deferred tax liability and the deferred tax assets as of January
31, 1999 and 1998 were as follows:
1999 1998
---- ----
Deferred tax liability:
Depreciation $ 14,000 $ 10,000
Prepaid expenses 3,000
----------- -----------
17,000 10,000
----------- -----------
Deferred tax assets:
Accounts receivable 32,000 22,000
Inventories 71,000 40,000
Prepaid expenses 13,000
Liquidation valuations 115,000
Net operating loss carryforwards 2,387,000 2,496,000
Investment tax credit carryforwards 82,000 82,000
----------- -----------
Deferred tax assets 2,572,000 2,768,000
Less valuation allowance ( 1,996,000) ( 2,586,000)
----------- -----------
Net deferred tax assets 576,000 182,000
----------- -----------
Net deferred tax asset $ 559,000 $ 172,000
=========== ===========
17
<PAGE>
JETRONIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In accordance with SFAS No. 109, the Company has provided a valuation allowance
relative to net operating loss and investment tax credit carryforwards because
full realization is not reasonably assured at this time. The Company will
periodically review the likelihood of realizing these assets and adjust the
valuation allowance as needed. The valuation allowance decreased by $590,000 in
1999. $387,000 represents a partial recognition of net operating loss
carryforwards in anticipation of profitable operations in the ensuing fiscal
year and $203,000 is the result of the utilization of net operating loss
carryforwards against current federal income taxes. The $468,000 decrease in
1998 was a result of the utilization of net operating loss carryforwards against
current federal income taxes.
Differences between the statutory federal income tax rate and the effective tax
rate for 1999 - 1997 are accounted for as follows:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Federal income tax rate 34.0% 34.0% 34.0%
Tax effect of non-deductible expenses 4.0 1.0 2.1
NOL utilization under SFAS No. 109 (137.5) ( 34.7) ( 36.1)
Other ( 7.2) ( 1.5)
------ ------ ------
Effective income tax rate (106.7%) 0.3% ( 1.5%)
====== ====== ======
</TABLE>
For federal income tax purposes, at January 31, 1999 the Company has net
operating loss carryforwards of $7,022,000 which will expire from 2007 to 2011.
The Company also has investment tax credit carryforwards of $82,000 at January
31, 1999 which will expire in 2000.
NOTE 8 - EMPLOYEE BENEFIT PLANS:
The Company has a 401(k) plan for eligible employees to which contributions of
$10,000, $9,000 and $8,000 were made in 1999 - 1997, respectively. The Company's
subsidiary maintains a qualified defined contribution plan for its employees
under a collective bargaining agreement. The Company's obligation is based on a
rate per hour worked. Contributions to such plan were $254,000, $165,000 and
$155,000 in 1999 - 1997, respectively.
NOTE 9 - COMMITMENTS AND CONTINGENCIES:
In February 1999 certain wholly owned subsidiaries of Woven Electronics
Corporation (Woven) commenced an action against Jetronic's wholly owned
subsidiary Redco, Inc. for $327,246 and accrued interest alleged to be due under
and pursuant to a promissory note dated March 30, 1997. By way of defense and
counterclaim, Redco has asserted claims in the amount of $328,169 to which it is
entitled under and pursuant to the terms of the agreement under which said
promissory note was issued. Accordingly, it is Redco's position that there are
no amounts due and payable to Woven. Redco intends to contest this matter
vigorously and it is anticipated that a favorable outcome will result.
The Department of Defense is conducting an inquiry with which the Company is
cooperating to ascertain whether one of the Company's divisions has violated
Federal Statutes by failing to perform certain quality control tests and test
procedures in connection with product delivered under government contracts.
While certain irregularities have occurred, they are, in the opinion of
management, of a nature that would have no material effect on the quality or
reliability of such product. Management anticipates that resolution of this
matter will not have a material adverse effect on the financial condition or
operations of the Company.
18
<PAGE>
JETRONIC INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The Company rents certain of its facilities under noncancelable operating
leases. At January 31, 1999, total rental commitments under these leases, which
expire periodically through 2006, aggregated $1,416,000. Under the terms of
these lease agreements, expenses such as taxes, insurance, maintenance and
repairs are paid by the company. Total rental commitments approximate $292,000,
$261,000, $265,000, $243,000 and $233,000 for the years 2000 through 2004,
respectively, and $122,000 thereafter. Total rental expense under all operating
leases was $394,000, $345,000 and $344,000 for 1999 - 1997, respectively.
In conjunction with the acquisition of certain subsidiary assets from Woven
Electronics Corporation, the Company is committed to paying a royalty of 37.5%
for the five year period ended January 31, 2003 predicated upon pre-tax income,
subject to certain adjustments, of the business of the acquired subsidiaries.
The Company has entered into employment agreements requiring minimum annual
payments of $232,000 until 2001. At January 31, 1999, the Company had a total of
155 employees, of which approximately 36% are represented by a union whose
existing labor agreement expires in May 2000.
Management is of the opinion that no excess profits have been realized on sales
to government agencies or contractors and, accordingly, has made no provision
for renegotiation of profits or profit limitations, if any, to which the Company
may be subject.
NOTE 10 - FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying amounts of all assets and liabilities (other than long-term debt)
considered financial instruments approximate fair value because of the short
term maturity of these items.
The carrying amount of long-term debt approximates fair value because of the
short term maturity of a portion of the liability and because the interest rates
approximate market interest rates.
NOTE 11 - BUSINESS SEGMENT AND GEOGRAPHIC INFORMATION:
Business segment and geographic information for the years ended January 31,
1999, 1998 and 1997 included on pages 1 and 2 of this Annual Report on Form 10-K
is an integral part of these financial statements. In 1999, 1998 and 1997,
respectively, Caterpillar, Inc. accounted for 59%, 56% and 55% of consolidated
revenues.
19
<PAGE>
JETRONIC INDUSTRIES, INC.
VALUATION AND QUALIFYING ACCOUNTS
SCHEDULE II
<TABLE>
<CAPTION>
Additions Deductions
--------- ----------
Balance Charged to Balance
beginning costs and Account end of
Description year expenses write-offs year
----------- ---- -------- ---------- ----
Year ended January 31, 1999:
<S> <C> <C> <C> <C>
Allowance for doubtful accounts $ 66,000 $ 30,000 $ 1,000 $ 95,000
========= ========= ========= =========
Inventory valuation $ 72,000 $ 52,000 ($ 8,000) $ 132,000
========= ========= ========== =========
Reorganization $ 126,000 $ 126,000
========= ==========
Year ended January 31, 1998:
Allowance for doubtful accounts $ 24,000 $ 42,000 $ 66,000
========= ========= =========
Inventory valuation $ 62,000 $ 10,000 $ 72,000
========= ========= =========
Reorganization $ 139,000 $ 13,000 $ 126,000
========= ========= =========
Year ended January 31, 1997:
Allowance for doubtful accounts $ 6,000 $ 30,000 $ 12,000 $ 24,000
========== ========= ========= =========
Inventory valuation $ 37,000 $ 25,000 $ 62,000
========= ========= =========
Reorganization $ 232,000 $ 93,000 $ 139,000
========= ========= =========
</TABLE>
20
<PAGE>
ITEM 9 - DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE:
- --------------------------------------------------------------
None.
PART II
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT:
- -------------------------------------------------------------
Reference is made to the Definitive Proxy Statement to Shareholders which the
Company intends to file not later than 30 days after the filing of its annual
Report on Form 10-K.
ITEM 11 - EXECUTIVE COMPENSATION;
- ---------------------------------
Reference is made to the Definitive Proxy Statement to Shareholders which the
Company intends to file not later than 30 days after the filing of its annual
Report on Form 10-K.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT:
- -------------------------------------------------------------------------
Reference is made to the Definitive Proxy Statement to Shareholders which the
Company intends to file not later than 30 days after the filing of its annual
Report on Form 10-K.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS:
- ---------------------------------------------------------
Reference is made to the Definitive Proxy Statement to Shareholders which the
Company intends to file not later than 30 days after the filing of its annual
Report on Form 10-K.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES, AND REPORTS ON FORM 8-K:
- -----------------------------------------------------------------------------
(a) Exhibits, financial statements and financial statement schedules:
1. The financial statements included in the Index to Part II, Item
8, are filed as part of this report.
2. The financial statement schedule included in the Index to Part
II, Item 8, is filed as part of this report.
3. List of Exhibits:
(3) Articles of incorporation and amendments thereto and
by-laws are incorporated herein by reference to
Exhibit 3 to the Registrant's Annual Report on Form
10-K for the year ended January 31, 1981.
(4)(a) Instruments defining the rights of security holders,
including indentures. See Exhibit (3) above.
21
<PAGE>
(b) Agreements with the holders of Registrant's
Convertible Subordinated Debentures and Preferred
Stock related to conversions thereof effective July
31, 1992, are incorporated herein by reference to
Exhibit 4(b) to the Registrant's Annual Report on
Form 10-K for the year ended January 31, 1992.
(21) Subsidiaries of Registrant
Principal Location of
subsidiaries incorporation Business names
------------ ------------- --------------
Redco, Inc. Illinois Republic Electric &
Development Company
(b) Reports on Form 8-K:
1. There were no reports on Form 8-K filed during the quarter ended
January 31, 1999.
Any person may request a copy of any Exhibit filed with this report upon payment
of a fee of $.25 per page of the requested Exhibit, plus postage. Requests
should be directed to Leonard W. Pietrzak, Vice President - Finance, Jetronic
Industries, Inc., 4200 Mitchell Street, Philadelphia, Pennsylvania 19128.
22
<PAGE>
SIGNATURES
----------
Pursuant to the requirement 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.
JETRONIC INDUSTRIES, INC.
Registrant
Date: April 30, 1999 By: /s/ Peter J. Kursman
----------------------------
President
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.
<TABLE>
<CAPTION>
Signature Capacity Date
--------- -------- ----
<S> <C> <C>
/s/ Peter J. Kursman
- ------------------------------------
Peter J. Kursman Principal Executive Officer April 30, 1999
President and Director
/s/ Daniel R. Kursman
- ------------------------------------
Daniel R. Kursman Director April 30, 1999
Chairman of the Board and Treasurer
/s/ Leonard W. Pietrzak
- ------------------------------------
Leonard W. Pietrzak Principal Financial and April 30, 1999
Vice President - Finance Accounting Officer and Director
/s/ William L. Weiss
- ------------------------------------
William L. Weiss Director April 30, 1999
General Counsel and Secretary
</TABLE>
23
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000053500
<NAME> JETRONIC INDUSTRIES, INC.
<MULTIPLIER> 1
<CURRENCY> 0
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> JAN-31-1999
<EXCHANGE-RATE> 1
<CASH> 495
<SECURITIES> 0
<RECEIVABLES> 2,870
<ALLOWANCES> 95
<INVENTORY> 7569
<CURRENT-ASSETS> 12,790
<PP&E> 3,932
<DEPRECIATION> 3,555
<TOTAL-ASSETS> 15,211
<CURRENT-LIABILITIES> 5,064
<BONDS> 3,856
0
33
<COMMON> 370
<OTHER-SE> 2,566
<TOTAL-LIABILITY-AND-EQUITY> 15,211
<SALES> 22,488
<TOTAL-REVENUES> 22,488
<CGS> 17,866
<TOTAL-COSTS> 20,870
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,270
<INCOME-PRETAX> 348
<INCOME-TAX> (370)
<INCOME-CONTINUING> 718
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 718
<EPS-PRIMARY> .20
<EPS-DILUTED> .16
</TABLE>
