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, 1999
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.
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(Exact name of registrant as specified in its charter)
Delaware 22-2735672
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1245 Route 1 South, Edison, New Jersey 08837
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(Address of principal executive officers)
(Zip Code)
(732) 548-5444
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( Registrants 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 9, 1999, 3,674,000 shares of the Registrant's common stock were
outstanding.
<PAGE>
Part I - Financial Information
Item 1. Financial Statements
<TABLE>
<CAPTION>
Joule Inc. And Subsidiaries
Consolidated Balance Sheets
June 30, September 30,
1999 1998
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(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash $ 240,000 $0233,000
Accounts receivable, less allowance
for doubtful accounts of $338,000 and $267,000
at June 30 and September 30, respectively 11,716,000 8,549,000
Prepaid expenses and other current assets 154,000 343,000
----------- -----------
Total Current Assets 12,110,000 9,125,000
PROPERTY AND EQUIPMENT, NET 4,086,000 3,707,000
GOODWILL 1,297,000 60,000
OTHER ASSETS 24,000 21,000
----------- -----------
$17,517,000 $12,913,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Loans payable to bank $ 6,200,000 $ 3,100,000
Accounts payable and accrued expenses 1,525,000 682,000
Accrued payroll and related taxes 1,739,000 1,833,000
Income taxes 259,000 --
Current portion of long term debt -- 25,000
----------- -----------
Total Current Liabilities 9,723,000 5,640,000
LONG TERM DEBT -- 381,000
----------- -----------
Total Liabilities 9,723,000 6,021,000
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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 3,820,000 and 3,816,000
shares, respectively 38,000 38,000
Additional paid-in capital 3,669,000 3,658,000
Retained earnings 4,476,000 3,585,000
----------- -----------
8,183,000 7,281,000
LESS: Cost of 146,000 shares of common
stock held in treasury 389,000 389,000
----------- -----------
Total Stockholders' Equity 7,794,000 6,892,000
----------- -----------
$17,517,000 $12,913,000
=========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Joule Inc. And Subsidiaries
Consolidated Statements of Income
Three Months Ended Nine Months Ended
------------------------- -------------------------
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES $16,919,000 $14,392,000 $47,900,000 $40,342,000
----------- ----------- ----------- -----------
COSTS, EXPENSES AND OTHER:
Cost of services 13,819,000 11,730,000 38,790,000 32,988,000
Selling, general & administrative expenses 2,585,000 2,099,000 7,458,000 6,020,000
Interest expense 80,000 69,000 226,000 180,000
Other -- 4,000 -- 18,000
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAX PROVISION 435,000 490,000 1,426,000 1,136,000
INCOME TAX PROVISION 154,000 196,000 535,000 454,000
----------- ----------- ----------- -----------
NET INCOME $ 281,000 $ 294,000 $ 891,000 $ 682,000
=========== =========== =========== ===========
BASIC AND DILUTED EARNINGS PER SHARE $ 0.08 $ 0.08 $ 0.24 $ 0.19
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING-BASIC 3,674,000 3,670,000 3,674,000 3,670,000
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES AND
COMMON EQUIVALENTS OUTSTANDING - DILUTED 3,674,000 3,673,000 3,674,000 3,673,000
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
Joule Inc. And Subsidiaries
Consolidated Statements of Cash Flows
Nine Months Ended
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June 30, June 30,
1999 1998
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(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 891,000 $ 682,000
Adjustments to reconcile net income to
net cash flows used in operating
activities:
Depreciation and amortization 478,000 405,000
Provision for losses on accounts receivable 81,000 84,000
Changes in operating assets and liabilities:
Accounts receivable (3,248,000) (1,326,000)
Prepaid expenses and other assets 111,000 (310,000)
Accounts payable and accrued expenses 708,000 (307,000)
Accrued payroll and related taxes (94,000) 36,000
Current portion of long term debt (25,000) --
Income taxes 335,000 (137,000)
----------- -----------
Net cash flows used in operating activities (763,000) (873,000)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment (660,000) (502,000)
Acquisition of a business (1,300,000) --
----------- -----------
Net cash flows used in investing activities (1,960,000) (502,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in loans payable to bank 3,100,000 1,405,000
Payment of long term debt (381,000) (18,000)
Proceeds from exercise of stock options 11,000 --
----------- -----------
Net cash flows provided by financing activities 2,730,000 1,387,000
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NET CHANGE IN CASH 7,000 12,000
CASH, BEGINNING OF PERIOD 233,000 139,000
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CASH, END OF PERIOD $ 240,000 $ 151,000
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 200,000 $ 174,000
=========== ===========
Income taxes paid $ 201,000 $ 638,000
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</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) On May 16, 1999, the Company completed the acquisition of the principal
operating assets (excluding cash) of Ideal Technical Services("Ideal"), a
staffing company specializing in engineering and other technical services, for
$1.3 million. Ideal, which has offices in Mobile, Alabama and Houston, Texas,
had been a subsidiary of SkillMaster, Inc. of Houston, Texas. The purchase price
was funded by borrowings under the Company's bank credit facility with Summit
Bank (the "Bank"). The Bank increased the Company's line of credit from $6.0
million to $8.5 million in May to fund this acquisition and related working
capital requirements. Goodwill of $1,263,000 was recorded in connection with
this acquisition.
Assuming this transaction had been completed on October 1, 1998, unaudited pro
forma revenue, net income and earnings per share for the three months ended June
30, 1999 would have been $18,387,000, $254,000 and $0.07 per share, basic and
diluted; for the nine months ended June 30, 1999 such amounts would have been
$56,345,000, $592,000 and $0.16 per share, basic and diluted.
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. Approximately 95% or more of revenue in each period
was billed on a direct cost plus markup basis. Revenue increased approximately
18% to $16.9 million for the three months ended June 30, 1999 from $14.4 million
for the year earlier period. Revenue for the nine months of fiscal 1999 amounted
to $47.9 million, an increase of 19% or $7.6 million over the comparable nine
month period of 1998. Commercial staffing revenue increased 16% to $6.2 million
and 27% to $18.3 million for the respective three and nine month periods ended
June 30, 1999. Including revenues of $1.1 million related to the acquisition of
Ideal in May 1999, technical staffing revenues were $5.5 million and $13.7
million for the 1999 three month and nine month periods as compared with $4.4
million and $11.9 million for the respective 1998 periods. Industrial staffing
revenue rose 10% to $5.2 million and 14% to $15.9 million for the 1999 three and
nine month periods.
Cost of services were 81.7% and 81.0% of revenue in the current three
month and nine month periods compared to 81.5% and 81.8% in the same prior year
periods. 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, including a van transportation service which transports some
commercial staffing workers to job sites and the initial inclusion of Ideal
during the third quarter of 1999. Selling, general and administrative expenses
amounted to $2.6 million and $7.5 million for the three and nine months ended
June 30, 1999 compared to $2.1 million and $6.0 million for the year earlier
periods, and represented 15.3% and 15.6% of revenue in the 1999 periods, an
increase over the comparable 1998 periods of 14.6% and 14.9% of revenue.
Selling, general and administrative expenses principally include staff
employees' salaries and related costs, advertising, professional fees,
depreciation and amortization, provision for the allowance for doubtful accounts
and other costs related to operating the Company's branch offices. These
increases are principally due to higher staff employee related expenses as the
Company has increased its staff to accommodate growth.
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 $80,000 and $226,000 for the 1999 three and
nine month periods compared to $69,000 and $180,000 for the respective prior
year periods, reflecting an increase in average borrowings during 1999 to
support increasing business volume and the acquisition of Ideal. The effective
tax rate approximated 40% for the 1998 periods presented, while the 1999
effective tax rates, after giving effect to the utilization of certain tax
credits, approximated 35% and 38% for the respective three and nine month
periods ending June 30, 1999. As a result of the above, net income for the 1999
nine month period was $891,000 or $0.24 per share, basic and diluted, compared
with net income of $682,000 or $0.19 per share, basic and diluted, for the 1998
period; for the 1999 three month period, net income was $281,000 or $0.08 per
share, basic and diluted, compared to $294,000 or $0.08 per share, basic and
diluted, for the prior year period.
Liquidity and Capital Resources
Current assets at June 30, 1999 were $12,110,000 as compared to $9,125,000
at September 30, 1998 and current liabilities were $9,723,000 compared to
$5,640,000 as of September 30, 1998. 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. In February, 1999
the Company increased its bank line of credit from $4,500,000 to $6,000,000; in
May, 1999, it was further increased it to $8,500,000, principally in connection
with the acquisition of Ideal; loans thereunder are secured principally by
receivables with interest at LIBOR plus one and one-half percent with a prime
rate less one-quarter percent option; $6,200,000 was outstanding under this line
as of June 30, 1999. In April 1999 the Company repaid a mortgage loan which
approximated $400,000.
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 Form 8-K dated May 20, 1999 with respect to the
acquisition of the principal operating assets of Ideal (the "initial
8-K") pursuant to item 2. Form 8-K/A dated August 2, 1999 which amends
the initial 8-K to include the following financial information pursuant
to item 7:
(a) Financial statements of Ideal
o Balance Sheet as of December 31, 1998
o Statement of Operations and Accumulated Deficit for the year
ended December 31, 1998
o Statement of Cash Flows for the year ended December 31, 1998
o Notes to Financial Statements - December 31, 1998
(b) Pro Forma financial information
o Pro Forma Condensed Balance Sheet as of March 31, 1999
o Related Pro Forma Statements of Income for the year ended
September 30, 1998 and the six months ended March 31, 1999
o Notes to the Unaudited Pro Forma Condensed Financial
Statements
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 13, 1999
/s/ E. N. LOGOTHETIS
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E. N. Logothetis, Chairman and Chief Executive
Officer (Principal Executive Officer)
August 13, 1999
/s/ BERNARD G. CLARKIN
---------------------------------------------------
Bernard G. Clarkin, Vice President and Chief
Financial Officer (Principal Financial Officer)
8
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<PERIOD-START> OCT-01-1998
<PERIOD-END> JUN-30-1999
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0
0
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