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 December 31, 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 February 5, 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>
December 31, September 30,
1998 1998
----------- -----------
ASSETS (Unaudited)
- ------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 157,000 $ 233,000
Accounts receivable, less allowance
for doubtful accounts of $294,000 and $267,000
for December 31 and September 30, respectively 9,659,000 8,549,000
Prepaid expenses and other current assets 217,000 343,000
----------- -----------
Total Current Assets 10,033,000 9,125,000
PROPERTY AND EQUIPMENT, NET 3,662,000 3,707,000
GOODWILL AND OTHER ASSETS 78,000 81,000
----------- -----------
$13,773,000 $12,913,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Loans payable to bank $ 3,700,000 $ 3,100,000
Accounts payable and accrued expenses 1,108,000 682,000
Accrued payroll and related taxes 1,277,000 1,833,000
Income taxes 38,000 --
Current portion of long term debt 400,000 25,000
----------- -----------
Total Current Liabilities 6,523,000 5,640,000
LONG TERM DEBT -- 381,000
----------- -----------
Total Liabilities 6,523,000 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 3,816,000
shares 38,000 38,000
Additional paid-in capital 3,658,000 3,658,000
Retained earnings 3,943,000 3,585,000
----------- -----------
7,639,000 7,281,000
LESS: Cost of 146,000 shares of common
stock held in treasury 389,000 389,000
----------- -----------
Total Stockholders' Equity 7,250,000 6,892,000
----------- -----------
$13,773,000 $12,913,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
Joule Inc. And Subsidiaries
Consolidated Statements of Income
Three Months Ended
--------------------------
December 31, December 31,
1998 1997
------------ ------------
(Unaudited) (Unaudited)
REVENUES $15,413,000 $12,304,000
----------- -----------
COSTS, EXPENSES AND OTHER:
Cost of services 12,370,000 10,035,000
Selling, general & administrative expenses 2,371,000 1,921,000
Interest expense 76,000 52,000
----------- -----------
INCOME BEFORE INCOME TAX PROVISION 596,000 296,000
INCOME TAX PROVISION 238,000 118,000
----------- -----------
NET INCOME $ 358,000 $ 178,000
=========== ===========
BASIC AND DILUTED EARNINGS PER SHARE $ 0.10 $ 0.05
=========== ===========
AVERAGE COMMON SHARES OUTSTANDING-BASIC 3,670,000 3,670,000
=========== ===========
AVERAGE COMMON SHARES AND COMMON
EQUIVALENTS OUTSTANDING - DILUTED 3,671,000 3,673,000
=========== ===========
See accompanying notes to consolidated financial statements.
3
<PAGE>
Joule Inc. And Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Three Months Ended
December 31 December 31
1998 1997
------------ -----------
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 358,000 $ 178,000
Adjustments to reconcile net income to
net cash flows provided by (used in) operating
activities:
Depreciation and amortization 159,000 122,000
Provision for losses on accounts receivable 27,000 31,000
Changes in operating assets and liabilities:
Accounts receivable (1,137,000) (26,000)
Prepaid expenses and other assets (47,000) (400,000)
Accounts payable and accrued expenses 426,000 12,000
Accrued payroll and related taxes (555,000) (450,000)
Current portion of long term debt 375,000 --
Income taxes 206,000 (168,000)
----------- -----------
Net cash flows (used in) operating activities (188,000) (701,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment (107,000) (197,000)
----------- -----------
Net cash flows used in investing activities (107,000) (197,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in loans payable to bank 600,000 905,000
Payment of long term debt (381,000) (6,000)
----------- -----------
Net cash flows provided by financing activities 219,000 899,000
----------- -----------
NET CHANGE IN CASH (76,000) 1,000
CASH, BEGINNING OF PERIOD 233,000 139,000
----------- -----------
CASH, END OF PERIOD $ 157,000 $ 140,000
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 64,000 $ 48,000
=========== ===========
Income taxes paid $ 124,000 $ 335,000
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
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 25% to $ 15.4
million during the first three months of fiscal 1999 from $12.3 million for the
year earlier period. Commercial staffing revenue increased 48% to $6.5 in 1999
from $4.4 million in 1998. Technical staffing revenue was $3.9 million in 1999,
an 8% increase over the 1998 revenue of $3.6 million. Industrial staffing
revenue rose 17% to $5.0 million in 1999 from $4.3 million in 1998.
Cost of services improved to 80.3% of revenue in the 1999 first quarter
compared to 81.6% for the 1998 first quarter. 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 were $2.4
million or 15.4% of revenues for the 1999 period compared to $1.9 million, or
15.6% of revenues for the 1998 period. Selling, general and administrative
expenses include staff employees' salaries and related costs, advertising,
professional fees, depreciation, provision for the allowance for doubtful
accounts, rent and other costs related to operating the Company's branch
offices.
Interest expense was $76,000 for the 1999 quarter, a $24,000 increase from
1998, reflecting an increase in average borrowings to support increasing
business volume. The effective tax rate approximated 40% in both periods. As a
result of the above, net income increased to $358,000 or $0.10 per share, basic
and diluted, in fiscal 1999 compared with net income of $178,000 or $0.05 per
share, basic and diluted, for the 1998 period.
6
<PAGE>
JOULE INC. AND SUBSIDIARIES
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
Liquidity and Capital Resources
Current assets at December 31, 1998 were $10,033,000 as compared to
$9,125,000 at September 30, 1998 and current liabilities were $6,523,000
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. The
Company has a $4,500,000 bank line of credit; 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; $3,700,000 was outstanding
under this line as of December 31, 1998. The current portion of long term debt
of $400,000 at December 31, 1998 principally represents a balloon payment on a
mortgage due in December, 1999.
The Company believes that internally generated funds and available
borrowings will provide sufficient cash flow to meet its requirements for the
next 12 months.
Forward-Looking Information
Certain parts of this document include forward-looking statements within
the meaning of the federal securities laws that are subject to risks and
uncertainties. Factors that could cause the Company's actual results and
financial condition to differ from the Company's expectations include, but are
not limited to, a change in economic conditions that adversely affects the level
of demand for the Company's services, competitive market and pricing pressures,
the availability of qualified temporary workers, the ability of the Company to
manage growth through improved information systems and the training and
retention of new staff, and government regulation.
7
<PAGE>
JOULE INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Annual Meeting of Stockholders was held on February 3, 1999
(b) The following directors were elected at the annual meeting with the
votes as indicated:
VOTES FOR VOTES WITHHELD
--------- --------------
Richard Barnitt 3,619,143 13,450
Paul DeBacco 3,620,443 12,150
Robert W. Howard 3,620,443 12,150
Emanuel N. Logothetis 3,620,443 12,150
Nick M. Logothetis 3,620,443 12,150
Steven Logothetis 3,620,443 12,150
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)
February 10, 1999
E.N. Logothetis
---------------------------------------
E. N. Logothetis, Chairman
(Principal Executive Officer)
February 10, 1999
Bernard G. Clarkin
---------------------------------------
Bernard G. Clarkin, Vice President and
Chief Financial Officer
(Principal Financial Officer)
8
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<ARTICLE> 5
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> DEC-31-1998
<CASH> 157
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<RECEIVABLES> 9953
<ALLOWANCES> 294
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<CURRENT-ASSETS> 10033
<PP&E> 7594
<DEPRECIATION> 3932
<TOTAL-ASSETS> 13773
<CURRENT-LIABILITIES> 6523
<BONDS> 0
0
0
<COMMON> 38
<OTHER-SE> 7212
<TOTAL-LIABILITY-AND-EQUITY> 13773
<SALES> 0
<TOTAL-REVENUES> 15413
<CGS> 0
<TOTAL-COSTS> 12370
<OTHER-EXPENSES> 2344
<LOSS-PROVISION> 27
<INTEREST-EXPENSE> 76
<INCOME-PRETAX> 596
<INCOME-TAX> 238
<INCOME-CONTINUING> 358
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<NET-INCOME> 358
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
</TABLE>
