FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998
or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission File Number 1-9477
Joule Inc.
----------
(Exact name of registrant as specified in its charter)
Delaware 22-2735672
-------- ----------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1245 Route 1 South, Edison, New Jersey 08837
---------------------------------------------
(Address of principal executive officers)
(Zip Code)
(732) 548-5444
( Registrant's telephone number including area code)
Indicate by check mark whether the Registrant (1) has filed all reports to be
filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes __X__ No _____
As of August 4, 1998, 3,670,000 shares of the Registrant's common stock were
outstanding.
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
Joule Inc. and Subsidiaries
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, September 30,
ASSETS 1998 1997
------ ----------- ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 151,000 $ 139,000
Accounts receivable, less allowance
for doubtful accounts of $285,000 and $200,000
for June 30 and September 30, respectively 8,062,000 6,820,000
Prepaid expenses and other current assets 453,000 146,000
----------- -----------
Total Current Assets 8,666,000 7,105,000
PROPERTY AND EQUIPMENT, NET OF
ACCUMULATED DEPRECIATION 3,751,000 3,633,000
GOODWILL AND OTHER ASSETS 87,000 105,000
----------- -----------
$12,504,000 $10,843,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Loans payable to bank $ 2,700,000 $ 1,295,000
Accounts payable and accrued expenses 1,165,000 1,472,000
Accrued payroll and related taxes 1,327,000 1,291,000
Income taxes 31,000 168,000
Current portion of long term debt 25,000 25,000
----------- -----------
Total Current Liabilities 5,248,000 4,251,000
LONG TERM DEBT 388,000 406,000
----------- -----------
Total Liabilities 5,636,000 4,657,000
----------- -----------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value:
Authorized 500,000 shares, none outstanding -- --
Common stock, $.01 par value:
Authorized 10,000,000 shares-issued 3,816,000
shares 38,000 38,000
Additional paid-in capital 3,658,000 3,658,000
Retained earnings 3,561,000 2,879,000
----------- -----------
7,257,000 6,575,000
LESS: Cost of 146,000 shares of common
stock held in treasury 389,000 389,000
----------- -----------
Total Stockholders' Equity 6,868,000 6,186,000
----------- -----------
$12,504,000 $10,843,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
Joule Inc. and Subsidiaries
Consolidated Statements of Income
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
----------------------------- -----------------------------
June 30, June 30, June 30, June 30,
1998 1997 1998 1997
------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES $ 14,392,000 $ 12,762,000 $ 40,342,000 $ 36,176,000
------------ ------------ ------------ ------------
COSTS, EXPENSES AND OTHER:
Cost of services 11,730,000 10,355,000 32,988,000 29,555,000
Selling, general & administrative expenses 2,099,000 1,842,000 6,020,000 5,276,000
Interest expense 69,000 54,000 180,000 168,000
Other 4,000 (14,000) 18,000 (34,000)
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAX PROVISION 490,000 525,000 1,136,000 1,211,000
INCOME TAX PROVISION 196,000 210,000 454,000 484,000
------------ ------------ ------------ ------------
NET INCOME $ 294,000 $ 315,000 $ 682,000 $ 727,000
============ ============ ============ ============
BASIC AND DILUTED EARNINGS PER SHARE $ 0.08 $ 0.09 $ 0.19 $ 0.20
============ ============ ============ ============
AVERAGE COMMON SHARES OUTSTANDING-BASIC 3,670,000 3,661,000 3,670,000 3,661,000
============ ============ ============ ============
AVERAGE COMMON SHARES AND COMMON
EQUIVALENTS OUTSTANDING-DILUTED 3,673,000 3,663,000 3,673,000 3,663,000
============ ============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
Joule Inc. and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Nine Months Ended
----------------------------
June 30, June 30,
1998 1997
----------- -----------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 682,000 $ 727,000
Adjustments to reconcile net income to
net cash flows provided by (used in) operating
activities:
Depreciation and amortization 405,000 344,000
Provision for losses on accounts receivable 84,000 71,000
Changes in operating assets and liabilities:
Accounts receivable (1,326,000) 514,000
Prepaid expenses and other assets (310,000) 190,000
Accounts payable and accrued expenses (307,000) (1,152,000)
Accrued payroll and related taxes 36,000 44,000
Income taxes (137,000) 47,000
----------- -----------
Net cash flows provided by (used in) operating activities (873,000) 785,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment (502,000) (176,000)
----------- -----------
Net cash flows used in investing activities (502,000) (176,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in loans payable to bank 1,405,000 (543,000)
Payment of long term debt (18,000) (19,000)
----------- -----------
Net cash flows provided by (used in) financing activities 1,387,000 (562,000)
----------- -----------
NET CHANGE IN CASH 12,000 47,000
CASH, BEGINNING OF PERIOD 139,000 175,000
----------- -----------
CASH, END OF PERIOD $ 151,000 $ 222,000
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 174,000 $ 172,000
=========== ===========
Income taxes paid $ 638,000 $ 272,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
JOULE INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS
(UNAUDITED)
(1) The consolidated balance sheet at the end of the preceding fiscal year has
been derived from the audited consolidated balance sheet contained in the
Company's Form 10-K and is presented for comparative purposes. All other
financial statements are unaudited. All unaudited amounts are subject to year
end adjustments and audit, but the Company believes all adjustments, consisting
only of normal and recurring adjustments, necessary to present fairly the
financial position, results of operations and changes in cash flows for all
interim periods presented, have been made. The results of operations for interim
periods are not necessarily indicative of the operating results for the full
year.
Footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principals have been omitted in
accordance with the published rules and regulations of the Securities and
Exchange Commission. These consolidated financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Form 10-K and Annual Report to Stockholders for the most recent fiscal
year.
(2) During the first quarter ended December 31, 1997, the Company adopted the
provisions of statement of Financial Accounting Standards No. 128, "Earnings per
share" (SFAS 128). The new standard requires the presentation of basic EPS and
diluted EPS. Basic EPS is calculated by dividing income available to common
shareholders by the weighted average number of shares of common stock
outstanding during the period. Diluted EPS is calculated by dividing income
available to common shareholders by the weighted average number of common shares
outstanding adjusted to reflect potentially dilutive securities. Previously
reported EPS amounts have been restated under the new standard.
5
<PAGE>
JOULE INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
The Company's revenues are derived from providing staffing services to its
customers. Such services include providing commercial (office and light
industrial) workers, technical (engineering, scientific and information
technology) personnel, and industrial (skilled craft industrial plant and
facility maintenance) labor. Over 90% of revenue in each period is billed on a
direct cost plus markup basis. Revenue increased approximately 13% to $14.4
million for the three months ended June 30, 1998 from $12.8 million for the year
earlier period. Revenue for the first nine months of fiscal 1998 amounted to
$40.3 million, an increase of 12% or $4.2 million over the comparable nine month
period of 1997. Commercial staffing revenue for the three month period ended
June 30, 1998 decreased 4% to $5.3 million, compared to the same prior year
period while nine month revenues increased 4% over the prior year, to $14.4
million. This quarterly decline is not expected to recur in upcoming quarters.
Technical staffing revenue was $4.4 million in the current 1998 quarter, a 25%
increase over the 1997 quarterly revenue of $3.5 million, and rose 27% to $11.9
million as compared to the 1997 nine month period. Industrial staffing revenue
rose 25% to $4.7 million and 9% to $14.0 million for the 1998 three and nine
month periods. Cost of services amounted to 81.5% of revenue during the current
three months compared to 81.2% a year earlier due to the continuing but less
significant impact of employee van transportation costs, while for nine months
the cost of services as a percentage of revenue was virtually unchanged at
8l.8%. These expenses consist primarily of compensation to employees on
assignment to clients and related costs, including social security, unemployment
taxes, general liability and workers' compensation insurance, and other costs of
services.
Selling, general and administrative expenses amounted to $2.1 million and
$6.0 million for the three and nine months ended June 30, 1998 compared to $1.8
million and $5.3 million for the year earlier periods, and represented 14.6% and
14.9% of revenue in the 1998 periods, a slight increase over the comparable 1997
periods of 14.4% and 14.6% of revenue. Selling, general and administrative
expenses principally include staff employees' salaries and related costs,
advertising, professional fees, depreciation, provision for the allowance for
doubtful accounts and other costs related to maintaining the Company's branch
offices. These increases are principally due to higher staff employee related
expenses necessitated by current labor market conditions.
6
<PAGE>
JOULE INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
Interest expense amounted to $69,000 and $180,000 for the 1998 three and
nine month periods compared to $54,000 and $168,000 for the respective prior
year periods, reflecting an increase in average borrowings to support increasing
business volume during 1998. The effective tax rate approximated 40% for all
periods presented. As a result of the above, net income for the 1998 nine month
period was $682,000 or $0.19 per share, basic and diluted, compared with net
income of $727,000 or $0.20 per share, basic and diluted, for the 1997 period;
for the 1998 three month period, net income was $294,000 or $0.08 per share,
basic and diluted, compared to $315,000 or $0.09 per share, basic and diluted.
Liquidity and Capital Resources
Current assets at June 30, 1998 were $8,666,000 as compared to $7,105,000
at September 30, 1997 and current liabilities were $5,248,000 at June 30, 1998
compared to $4,251,000 as of September 30, 1997. Employees typically are paid on
a weekly basis. Clients generally are billed on a weekly basis. The Company has
generally utilized bank borrowings to meet its working capital needs. The
Company has a $4,500,000 bank line of credit; loans thereunder are secured
principally by receivables and bear interest at the bank's prime rate, less 25
basis points, with a LIBOR plus one hundred and fifty basis point option;
$2,700,000 was outstanding under this line as of June 30, 1998.
The Company believes that internally generated funds and available
borrowings will provide sufficient cash flow to meet its requirements for the
next 12 months.
7
<PAGE>
JOULE INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits: None
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter
for which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned there unto duly authorized.
JOULE INC.
(Registrant)
August 12, 1998
E.N. Logothetis
---------------------------------------
E. N. Logothetis, Chairman
(Principal Executive Officer)
August 12, 1998
Bernard G. Clarkin
---------------------------------------
Bernard G. Clarkin, Vice President and
Chief Financial Officer
(Principal Financial Officer)
8
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 151
<SECURITIES> 0
<RECEIVABLES> 8347
<ALLOWANCES> 285
<INVENTORY> 0
<CURRENT-ASSETS> 8666
<PP&E> 7405
<DEPRECIATION> 3654
<TOTAL-ASSETS> 12504
<CURRENT-LIABILITIES> 5248
<BONDS> 388
0
0
<COMMON> 38
<OTHER-SE> 6830
<TOTAL-LIABILITY-AND-EQUITY> 12504
<SALES> 0
<TOTAL-REVENUES> 40342
<CGS> 0
<TOTAL-COSTS> 32988
<OTHER-EXPENSES> 5954
<LOSS-PROVISION> 84
<INTEREST-EXPENSE> 180
<INCOME-PRETAX> 1136
<INCOME-TAX> 454
<INCOME-CONTINUING> 682
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 682
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
</TABLE>
