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, 2000
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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(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 10, 2000, 3,674,000 shares of the Registrant's common stock were
outstanding.
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Part I - Financial Information Joule Inc. And Subsidiaries
Item 1. Financial Statements Consolidated Balance Sheets
June 30, September 30,
2000 1999
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ASSETS (Unaudited)
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CURRENT ASSETS:
<S> <C> <C>
Cash $ 215,000 $ 152,000
Accounts receivable, less allowance
for doubtful accounts of $574,000 and $384,000
for June 30 and September 30, respectively 10,839,000 12,680,000
Prepaid expenses and other current assets 688,000 142,000
----------- -----------
Total Current Assets 11,742,000 12,974,000
PROPERTY AND EQUIPMENT, NET 4,054,000 4,092,000
GOODWILL 1,222,000 1,285,000
OTHER ASSETS 34,000 25,000
----------- -----------
$17,052,000 $18,376,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
CURRENT LIABILITIES:
Loans payable to bank $ 5,950,000 $ 7,700,000
Accounts payable and accrued expenses 1,288,000 1,436,000
Accrued payroll and related taxes 1,534,000 1,489,000
Income taxes 36,000 128,000
----------- -----------
Total Current Liabilities 8,808,000 10,753,000
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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
shares 38,000 38,000
Additional paid-in capital 3,669,000 3,669,000
Retained earnings 4,926,000 4,305,000
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8,633,000 8,012,000
LESS: Cost of 146,000 shares of common
stock held in treasury 389,000 389,000
----------- -----------
Total Stockholders' Equity 8,244,000 7,623,000
----------- -----------
$17,052,000 $18,376,000
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See accompanying notes to consolidated financial statements.
2
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Joule Inc. And Subsidiaries
Consolidated Statements of Income
Three Months Ended Nine Months Ended
------------------------ ------------------------
June 30, June 30, June 30, June 30,
2000 1999 2000 1999
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES $19,214,000 $16,919,000 $58,723,000 $47,900,000
----------- ----------- ----------- -----------
COSTS, EXPENSES AND OTHER:
Cost of services 15,372,000 13,819,000 47,656,000 38,790,000
Selling, general & administrative expenses 3,296,000 2,585,000 9,629,000 7,458,000
Interest expense 134,000 80,000 426,000 226,000
----------- ----------- ----------- -----------
INCOME BEFORE INCOME TAX PROVISION 412,000 435,000 1,012,000 1,426,000
INCOME TAX PROVISION 160,000 154,000 391,000 535,000
----------- ----------- ----------- -----------
NET INCOME $ 252,000 $ 281,000 $ 621,000 $ 891,000
=========== =========== =========== ===========
BASIC AND DILUTED EARNINGS PER SHARE $ 0.07 $ 0.08 $ 0.17 $ 0.24
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING-BASIC 3,674,000 3,674,000 3,674,000 3,674,000
=========== =========== =========== ===========
WEIGHTED AVERAGE COMMON SHARES AND
COMMON EQUIVALENTS OUTSTANDING - DILUTED 3,674,000 3,674,000 3,674,000 3,674,000
=========== =========== =========== ===========
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See accompanying notes to consolidated financial statements.
3
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Joule Inc. And Subsidiaries
Consolidated Statements of Cash Flows
Nine Months Ended
--------------------------
June 30, June 30,
2000 1999
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(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income $ 621,000 $ 891,000
Adjustments to reconcile net income to
net cash flows provided by (used in) operating
activities:
Depreciation and amortization 611,000 478,000
Provision for losses on accounts receivable 190,000 81,000
Changes in operating assets and liabilities:
Accounts receivable 1,651,000 (3,248,000)
Prepaid expenses and other assets (555,000) 111,000
Accounts payable and accrued expenses (148,000) 708,000
Accrued payroll and related taxes 45,000 (94,000)
Current portion of long term debt -- (25,000)
Income taxes (92,000) 335,000
----------- -----------
Net cash flows provided by (used in) operating activities 2,323,000 (763,000)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of a business -- (1,300,000)
Acquisitions of property and equipment (510,000) (660,000)
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Net cash flows used in investing activities (510,000) (1,960,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Increase (decrease) in loans payable to bank (1,750,000) 3,100,000
Payment of long term debt -- (381,000)
Proceeds from exercise of stock options -- 11,000
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Net cash flows (used in) provided by financing activities (1,750,000) 2,730,000
----------- -----------
NET CHANGE IN CASH 63,000 7,000
CASH, BEGINNING OF PERIOD 152,000 233,000
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CASH, END OF PERIOD $ 215,000 $ 240,000
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 428,000 $ 200,000
=========== ===========
Income taxes paid $ 490,000 $ 201,000
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</TABLE>
See accompanying notes to consolidated financial statements.
4
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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 principles 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) Segment Disclosures
The Company has determined that its reportable segments are those that are based
on the Company's method of internal reporting, which disaggregates its business
by segment. The Company's reportable segments are: (1) Commercial Staffing, (2)
Technical Staffing and (3) Industrial Staffing.
Information concerning operations by operating segment is as follows (in
000's):
Three Months Ended Nine Months Ended
June 30, June 30,
------------------- --------------------
2000 1999 2000 1999
------- ------ ------ ------
REVENUES
Commercial $ 5,778 $ 6,220 $ 21,353 $ 18,320
Technical 6,123 5,535 17,264 13,705
Industrial 7,313 5,164 20,106 15,875
-------- -------- -------- --------
$ 19,214 $ 16,919 $ 58,723 $ 47,900
-------- -------- -------- --------
INCOME BEFORE TAX PROVISION
Commercial $ 212 $ 233 $ 873 $ 825
Technical 579 531 1,330 1,262
Industrial 563 411 1,689 1,586
Corporate (unallocated,
including interest) (942) (740) (2,880) (2,247)
-------- -------- -------- --------
$ 412 $ 435 $ 1,012 $ 1,426
-------- -------- -------- --------
5
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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 95% of revenue is billed on a direct cost plus
markup basis. Revenue increased more than 14% to $19.2 million for the three
months ended June 30, 2000 from $16.9 million for the year earlier period.
Revenue for the nine months of fiscal 2000 amounted to $58.7 million, an
increase of 23% or $10.8 million over the comparable nine month period of 1999.
Commercial staffing revenue decreased 7% to $5.8 million for the three month
period ended June 30, 2000 while increasing 17% to $21.4 million for the nine
month period ended June 30, 2000. Technical staffing revenue increased 11% to
$6.1 million in the current 2000 quarter, and rose 26% to $17.3 million as
compared to the 1999 nine month period, reflecting the May 1999 acquisition of
Ideal Technical Services (Ideal), which contributed $.5 million and $4.0 million
of such increases in the respective three and nine month periods. Industrial
Staffing revenue rose 42% to $7.3 million and 27% to $20.1 million for the 2000
three and nine month periods, respectively.
Cost of services were 80.0% and 81.2% of revenue in the current three
month and nine month periods compared to 81.7% and 81.0% 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. Selling, general and administrative
expenses amounted to $3.3 million and $9.6 million for the three and nine month
periods ended June 30, 2000 compared to $2.6 million and $7.5 million for the
year earlier periods, and represented 17.2% and 16.4% of revenue in the
respective 2000 periods, increases over the comparable 1999 period percentages
of revenue of 15.3% and 15.6%, principally due to additional third quarter
nonrecurring employee benefits expense. 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, rent and other costs related to operating the
Company's branch offices.
6
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JOULE INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
Interest expense amounted to $134,000 and $426,000 for the 2000 three and
nine month periods compared to $80,000 and $226,000 for the respective prior
year periods, reflecting an increase in average borrowings to support the
Company's continuing growth, including the Ideal acquisition, as well as higher
interest rates. After giving effect to the utilization of certain tax credits,
the effective tax rates approximated 39% for the respective three and nine month
periods ending June 30, 2000, and 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
2000 nine month period was $621,000 or $0.17 per share, basic and diluted,
compared with net income of $891,000 or $0.24 per share, basic and diluted, for
the 1999 period; for the 2000 three month period, net income was $252,000 or
$0.07 per share, basic and diluted, compared to $281,000 or $0.08 per share,
basic and diluted.
Liquidity and Capital Resources
Current assets at June 30, 2000 were $11,742,000 as compared to $12,974,000
at September 30, 1999 and current liabilities were $8,808,000 compared to
$10,753,000 as of September 30, 1999. The decrease in current assets principally
relates to a reduction in accounts receivable of $1.8 million as a result of a
significant reduction in Days Sales Outstanding as of June 30, 2000 compared to
September 30, 1999, due to increased emphasis and investment in staff on credit
and collections; offsetting this decrease was a $.5 million increase in prepaid
expense representing pre-paid insurance. The decrease in current liabilities
principally resulted from a $1.8 million decrease in notes payable, reflective
of the collection efforts noted above. 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
$9,000,000 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; $5,950,000 was outstanding under this line
as of June 30, 2000. The Company's capital expenditures typically are relatively
modest because it is involved in a service business. 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
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JOULE INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
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.
8
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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 11, 2000
/s/ E. N. LOGOTHETIS
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E. N. Logothetis, Chairman and Chief Executive
Officer (Principal Executive Officer)
August 11, 2000
/s/ BERNARD G. CLARKIN
-----------------------------------------
Bernard G. Clarkin, Vice President and Chief
Financial Officer
(Principal Financial Officer)
9
