<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 October 31, 1999
Commission File Number 1-4124
JETRONIC INDUSTRIES, INC.
-------------------------
(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 October 31, 1999, 3,701,999 shares of common stock were outstanding.
<PAGE>
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, 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.
<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 $17,852,000 and an operating profit of
$2,634,000 for the nine months ended October 31, 1999 (2000) compared to
revenues of $18,085,000 and an operating profit of $2,979,000 for the nine
months ended October 31, 1998 (1999). Revenues and operating profit for the
quarter ended October 31, 1999 were $7,093,000 and $1,118,000, respectively,
compared to revenues and operating profit for the quarter ended October 31, 1998
of $5,549,000 and $1,211,000, respectively. While revenues and profitability
increased for the switchgear business on a year to year and quarter to quarter
basis, revenues and profitability for the solid state and computer subsystem
businesses were negatively impacted by softness in these sectors. Although there
continues to be softness in these markets in the fourth quarter, the outlook for
the new fiscal year appears to show a return to prior levels of business
activity which should enable these operations to return to their former levels
of revenue and profitability.
The Company received additional orders against the final option quantities under
an existing U.S. Government contract which was completed by the end of the third
quarter of this fiscal year. Although no further option quantities are available
under the existing contract, the Company anticipates that a new contract will be
negotiated for subsequent years for the same type of product and under similar
terms.
Interest and debt expense increased as a result of the amortization of
capitalized fees associated with the Company's refinancing in May 1999 and the
restructuring of Bondholder debt coincident with the refinancing. Additionally,
increased borrowings from lenders increased interest expense.
Liquidity and Capital Resources:
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 October 31, 1999, such borrowings amounted to $3,681,000
with a limitation of borrowing based upon the various formulae of $4,189,000.
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):
The Company has not made certain payments of interest to the holders of its
subordinated debentures which constitutes a technical event of default giving
such holders the right, upon notice, demand and failure to cure, to accelerate
the payment of principal and accrued interest due to such holders and which,
among other things, is a technical event of default under the terms of the
Company's agreements with its senior lender. The Company expects that these
matters will be resolved in discussions with such lenders.
At this time, there are no material commitments for capital expenditures. 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.
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 associated businesses. The Company has completed the process of reviewing
its computer systems for compliance for year 2000 issues. Relationships with
interdependent computer systems are currently being addressed and compliance is
expected by the end of the fourth quarter FY 2000. The Company does not expect
that the costs of implementing compliance with Year 2000 issues to have a
material effect on its consolidated financial statements. In the event that its
interdependent computer relationships are not Year 2000 compliant, the Company
has alternative plans to alleviate such situations based on the close proximity
of facilities.
<PAGE>
JETRONIC INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(000's Omitted)
<TABLE>
<CAPTION>
October 31, 1999 January 31, 1999
---------------- ----------------
<S> <C> <C>
ASSETS
Current assets:
Cash $ 56 $ 495
Accounts receivable 4,570 2,775
Inventories 9,859 7,569
Prepaid and other assets 1,980 1,951
---------- ----------
Total current assets 16,465 12,790
Property, plant and equipment, net 411 377
Goodwill 273 280
Other assets 1,456 1,764
---------- ----------
Total assets $ 18,605 $ 15,211
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable to lender $ 3,681 $ 1,781
Current portion of long-term debt 1,024 976
Accounts payable 2,968 1,482
Other accrued liabilities 963 825
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Total current liabilities 8,636 5,064
Deferred interest 1,405 1,405
Long-term debt 5,387 5,773
---------- ----------
Total liabilities 15,428 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) (11,048) (11,256)
---------- ----------
Total shareholders' equity 3,177 2,969
---------- ----------
$ 18,605 $ 15,211
========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
JETRONIC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(000's Omitted)
<TABLE>
<CAPTION>
Nine Months Ended October 31,
-----------------------------
1999 1998
---- ----
<S> <C> <C>
Net sales $ 17,852 $ 18,085
Cost and expenses:
Cost of goods sold 14,314 14,081
Selling and administrative expenses 2,069 2,099
Interest and debt expenses 1,261 962
--------- ---------
Total costs and expenses 17,644 17,142
--------- ---------
Income before income taxes 208 943
Income tax provision 46
--------- ---------
Net income $ 208 $ 897
========= =========
Net income per share (A):
Basic $ .05 $ .25
========= =========
Diluted $ .05 $ .22
========= =========
</TABLE>
Notes:
A) Weighted average number of shares for the nine months ended October 31, 1999
and 1998 was 3,702,000 and 3,634,000, respectively for basic and 4,198,000
and 3,986,000, respectively for diluted.
See notes to consolidated financial statements.
<PAGE>
JETRONIC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(000's Omitted)
<TABLE>
<CAPTION>
Three Months Ended October 31,
------------------------------
1999 1998
---- ----
<S> <C> <C>
Net sales $ 7,093 $ 5,549
Cost and expenses:
Cost of goods sold 5,636 4,000
Selling and administrative expenses 812 718
Interest and debt expenses 447 369
--------- ---------
Total costs and expenses 6,895 5,087
--------- ---------
Income before income taxes 198 462
Income tax provision 22
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Net income $ 198 $ 440
========= =========
Net income per share (A):
Basic $ .05 $ .12
========= =========
Diluted $ .05 $ .11
========= =========
</TABLE>
Notes:
A) Weighted average number of shares for the three months ended October 31,
1999 and 1998 was 3,702,000 and 3,634,000, respectively for basic and
4,198,000 and 3,986,000, 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
----- ---------- ---- ------- -------- -------
Balance, January 31, 1999 33 3,701,999 370 13,822 (11,256) 2,969
Net income nine months
ended October 31, 1999 208 208
----- ---------- ---- ------- -------- -------
Balance, October 31, 1999 $ 33 3,701,999 $370 $13,822 ($11,048) $ 3,177
===== ========== ==== ======= ======== =======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
JETRONIC INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(000's Omitted)
<TABLE>
<CAPTION>
Nine Months Ended October 31,
-----------------------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 208 $ 897
Adjustments to reconcile net income
to net cash provided (used) by
operating activities:
Depreciation and amortization 82 87
Reduction of goodwill 7 8
Changes in assets and liabilities:
Accounts receivable (1,795) ( 60)
Inventories (2,290) ( 496)
Prepaid and other assets ( 29) ( 37)
Other assets 308 ( 677)
Accounts payable 1,486 (1,265)
Other liabilities 138 ( 100)
-------- --------
Total adjustments (2,093) (2,540)
-------- --------
Net cash provided (used) by
operating activities (1,885) (1,643)
-------- --------
Cash flows from investing activities:
Capital expenditures ( 116) ( 46)
--------- --------
Cash flows from financing activities:
Proceeds from long-term debt 2,930
Net borrowings from lenders 1,900 ( 817)
Principal payments on long-term debt ( 338) ( 580)
Proceeds from exercise of warrants 60
--------
Net cash provided (used) by
financing activities 1,562 1,593
-------- --------
Net increase (decrease) in cash ( 439) ( 96)
Cash beginning of period 495 513
-------- --------
Cash end of period $ 56 $ 417
======== ========
Supplemental disclosures of cash flow
information:
Interest paid during the period $ 547 $ 682
======== ========
Income taxes paid during the period $ -0- $ 30
======== ========
</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:
October 31,1999 January 31, 1999
--------------- ----------------
Raw materials $ 5,124 $ 4,309
Work in process 4,735 3,260
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Total $ 9,859 $ 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 $2,325, arising
principally from net operating loss carryforwards, were partially offset by
deferred tax liabilities and valuation allowance of $1,766 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
Nine Months Ended October 31,
----------------------------
1999 1998
---- ----
Federal income tax rate 34.0% 34.0%
Tax effect of non-deductible expenses 5.0 1.0
NOL utilization under SFAS No. 109 ( 46.2) ( 31.8)
Difference in tax basis of assets 7.2 0.7
Other 0.9
------- -------
Effective income tax rate 0.0% 4.8%
======= =======
<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
October 31, 1999.
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
December 15, 1999
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<NAME> JETRONIC INDUSTRIES, INC.
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<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-31-2000
<PERIOD-START> FEB-01-1999
<PERIOD-END> OCT-31-1999
<EXCHANGE-RATE> 1
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33
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