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 March 31, 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 May 7, 1999, 3,674,000 shares of the Registrant's common stock were
outstanding.
<PAGE>
Part I - Financial Information Joule Inc. And Subsidiaries
Item 1. Financial Statements Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31 September 30
1999 1998
----------- -----------
ASSETS (Unaudited)
- ------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 202,000 $ 233,000
Accounts receivable, less allowance
for doubtful accounts of $323,000 and $267,000
for March 31 and September 30, respectively 10,377,000 8,549,000
Prepaid expenses and other current assets 184,000 343,000
----------- -----------
Total Current Assets 10,763,000 9,125,000
PROPERTY AND EQUIPMENT, NET 3,754,000 3,707,000
GOODWILL AND OTHER ASSETS 75,000 81,000
----------- -----------
$14,592,000 $12,913,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Loans payable to bank $ 4,050,000 $ 3,100,000
Accounts payable and accrued expenses 997,000 682,000
Accrued payroll and related taxes 1,508,000 1,833,000
Income taxes 130,000 --
Current portion of long term debt 394,000 25,000
----------- -----------
Total Current Liabilities 7,079,000 5,640,000
LONG TERM DEBT -- 381,000
----------- -----------
Total Liabilities 7,079,000 6,021,000
----------- -----------
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 3,820,000 and 3,816,000
shares, respectively 38,000 38,000
Additional paid-in capital 3,669,000 3,658,000
Retained earnings 4,195,000 3,585,000
----------- -----------
7,902,000 7,281,000
LESS: Cost of 146,000 shares of common
stock held in treasury 389,000 389,000
----------- -----------
Total Stockholders' Equity 7,513,000 6,892,000
----------- -----------
$14,592,000 $12,913,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
Joule Inc. And Subsidiaries
Consolidated Statements of Income
Three Months Ended Six Months Ended
------------------------- -------------------------
March 31, March 31, March 31, March 31,
1999 1998 1999 1998
----------- ----------- ----------- -----------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES $15,568,000 $13,646,000 $30,981,000 $25,950,000
----------- ----------- ----------- -----------
COSTS, EXPENSES AND OTHER:
Cost of services 12,601,000 11,223,000 24,971,000 21,258,000
Selling, general & administrative expenses 2,502,000 2,001,000 4,873,000 3,922,000
Interest expense 70,000 59,000 146,000 111,000
Other -- 13,000 -- 13,000
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAX PROVISION 395,000 350,000 991,000 646,000
INCOME TAX PROVISION 143,000 140,000 381,000 258,000
----------- ----------- ----------- -----------
NET INCOME $ 252,000 $ 210,000 $ 610,000 $ 388,000
=========== =========== =========== ===========
BASIC AND DILUTED EARNINGS PER SHARE $ 0.07 $ 0.06 $ 0.17 $ 0.11
=========== =========== =========== ===========
AVERAGE COMMON SHARES OUTSTANDING-BASIC 3,674,000 3,670,000 3,674,000 3,670,000
=========== =========== =========== ===========
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
Six Months Ended
--------------------------
March 31, March 31,
1999 1998
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(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income $ 610,000 $ 388,000
Adjustments to reconcile net income to
net cash flows provided by (used in) operating
activities:
Depreciation and amortization 310,000 246,000
Provision for losses on accounts receivable 56,000 58,000
Changes in operating assets and liabilities:
Accounts receivable (1,884,000) (1,032,000)
Prepaid expenses and other assets (20,000) (325,000)
Accounts payable and accrued expenses 317,000 (81,000)
Accrued payroll and related taxes (325,000) 68,000
Current portion of long term debt 369,000 --
Income taxes 298,000 (37,000)
----------- -----------
Net cash flows used in operating activities (269,000) (715,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment (342,000) (326,000)
----------- -----------
Net cash flows used in investing activities (342,000) (326,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in loans payable to bank 950,000 1,055,000
Reduction of long term debt (381,000) (12,000)
Proceeds from exercise of stock options 11,000 --
----------- -----------
Net cash flows provided by financing activities 580,000 1,043,000
----------- -----------
NET CHANGE IN CASH (31,000) 2,000
CASH, BEGINNING OF PERIOD 233,000 139,000
----------- -----------
CASH, END OF PERIOD $ 202,000 $ 141,000
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 123,000 $ 104,000
=========== ===========
Income taxes paid $ 175,000 $ 338,000
=========== ===========
</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.
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
14% to $15.6 million for the three months ended March 31, 1999 from $13.6
million for the year earlier period. Revenue for the first six months of fiscal
1999 amounted to $31.0 million, an increase of 19% or $5.0 million over the
comparable six month period of 1998. Commercial staffing revenue increased 19%
to $5.6 million and 33% to $12.1 million for the respective three and six month
periods ended March 31, 1999. Technical staffing revenue was $4.2 million in the
current 1999 quarter, a 7% increase over the 1998 quarterly revenue of $3.9
million, and rose 8% to $8.2 million as compared to the 1998 six month period.
Industrial staffing revenue rose 14% to $5.7 million and 16% to $10.7 million
for the 1999 three and six month periods.
Cost of services improved to 80.9% and 80.6% of revenue in both the
current three month and six month periods compared to 82.2% and 81.9% 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 initiated in
1998 to transport some commercial staffing workers to job sites. Selling,
general and administrative expenses amounted to $2.5 million and $4.9 million
for the three and six months ended March 31, 1999 compared to $2.0 million and
$3.9 million for the year earlier periods, and represented 16.1% and 15.7% of
revenue in the 1999 periods, an increase over the comparable 1998 periods of
14.7% and 15.1% 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 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 $70,000 and $146,000 for the 1999 three
and six month periods compared to $59,000 and $111,000 for the respective prior
year periods, reflecting an increase in average borrowings during 1999 to
support increasing business volume. 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 36% and 38% for
the respective three and six month periods ending March 31, 1999. As a result of
the above, net income for the 1999 six month period was $610,000 or $0.17 per
share, basic and diluted, compared with net income of $388,000 or $0.11 per
share, basic and diluted, for the 1998 period; for the 1999 three month period,
net income was $252,000 or $0.07 per share, basic and diluted, compared to
$318,000 or $0.06 per share, basic and diluted.
Liquidity and Capital Resources
Current assets at March 31, 1999 were $10,763,000 as compared to
$9,125,000 at September 30, 1998 and current liabilities were $7,079,000
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; 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; $4,050,000 was outstanding under this line as of
March 31, 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
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)
May 10, 1999
/s/ E. N. Logothetis
-------------------------------------------
E. N. Logothetis, Chairman and
Chief Executive Officer
(Principal Executive Officer)
May 10, 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-01-1999
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