<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------------------
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
-------------------------
For the quarterly period ended March 31, 2000
Commission File Number 0-18711
ACTRADE INTERNATIONAL, LTD.
Incorporated under the laws of the State of Delaware
I. R. S. Employer Identification Number 13-3437739
7 Penn Plaza, Suite 422, New York, N.Y. 10001
Telephone Number (212) 563-1036
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities and 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
--- ---
Indicate the number of Shares outstanding of each of the Issuer's classes of
common stock, as of the latest practicable date. As of May 12, 2000 there were
outstanding 8,963,576 shares of Common Stock, par value $0.0001.
<PAGE>
INDEX
<TABLE>
<S> <C> <C>
Part 1. Financial Information
Item 1. Consolidated condensed financial statements:
Consolidated balance sheets as of March 31, 2000 and
June 30, 1999 3
Consolidated statements of income for the nine and
three months ended March 31, 2000 4
Consolidated statement of stockholders' equity for the
nine months ended March 31, 2000 5
Consolidated statements of cash flows for the nine
months ended March 31, 2000 and 1999 6
Notes to the consolidated financial statements 7-11
Item 2. Management's discussion and analysis of financial condition
and results of operations
Part II. Other Information
Exhibits and reports on Form 10Q
Signatures
</TABLE>
<PAGE>
ACTRADE INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2000 AND JUNE 30, 1999
DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
---- ----
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 7,010 $ 5,199
Accounts receivable - trade 16,059 12,414
Trade acceptance drafts receivable and other (net of deferred
income and allowance for doubtful accounts of $ 2,185 and $ 2,307
at March 31, 2000 and $ 1,276 and $ 1,560 at June 30, 1999 52,447 25,180
Deferred income taxes 1,764 398
------- -------
Total Current Assets 77,280 43,191
PROPERTY AND EQUIPMENT (Net of accumulated depreciation and
amoritization of $ 483 at March 31, 2000 and $ 291 at June 30, 1999) 1,518 954
Other 434 306
------- -------
TOTAL ASSETS $79,232 $44,451
======= =======
LIABILITIES & STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings $39,355 $14,262
Accounts payable and customer reserves payable 1,392 683
Accrued expenses 1,654 997
Income taxes payable 310 0
------- -------
Total Current Liabilities 42,711 15,942
------- -------
STOCKHOLDERS' EQUITY:
Common stock, $0.001 par value; authorized 100,000,000 shares,
issued, and outstanding 8,848,133 at March 31, 2000 and 8,528,051
at June 30, 1999 1 1
Additional paid in capital 18,688 14,614
Retained earnings 22,030 14,336
Accumulated other comprehensive income (3) 10
Treasury stock shares at cost; 243,191 at March 31, 2000 and
31,500 at June 30, 1999 (4,195) (452)
------- -------
Total Stockholders' Equity 36,521 28,509
------- -------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $79,232 $44,451
======= =======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
ACTRADE INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
NINE MONTHS AND THREE MONTHS ENDED MARCH 31, 2000 AND 1999
DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
MARCH 31, MARCH 31,
------------------------ -----------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross Sales - Trade Acceptance Drafts $219,992 $ 84,815 $ 86,395 $ 34,353
Gross Sales - International Merchandising Trade 101,121 52,290 36,189 18,538
-------- -------- -------- --------
Total Gross Sales $321,113 $137,105 $122,584 $ 52,891
======== ======== ======== ========
Gross Sales - International Merchandising Trade 101,121 52,290 36,189 18,538
Cost of Sales - International Merchandise Trade (92,114) (47,260) (32,706) (16,589)
-------- -------- -------- --------
Gross profit - International Merchandising Trade 9,007 5,030 3,483 1,949
Gross Profit - Trade Acceptance Drafts 12,832 3,987 4,681 1,566
-------- -------- -------- --------
Total Gross Profit 21,839 9,017 8,164 3,515
-------- -------- -------- --------
General, and Administrative expenses (6,910) (4,321) (2,847) (1,798)
Bad Debt Expense (3,626) (436) (1,310) (112)
-------- -------- -------- --------
Income from Operations 11,303 4,260 4,007 1,605
Other Income (Expenses):
Interest income 27 55 11 3
Interest expense (3,470) (413) (1,138) (261)
-------- -------- -------- --------
Income before Provision for Income Taxes 7,860 3,902 2,880 1,347
Provision for Income Taxes - (Expense) Benefit (166) 18 307 26
-------- -------- -------- --------
Net Income $ 7,694 $ 3,920 $ 3,187 $ 1,373
======== ======== ======== ========
Net Income per Common Share:
Basic $0.89 $0.46 $0.36 $0.16
Diluted $0.86 $0.45 $0.35 $0.16
Weighted Average Number of Shares Outstanding:
Basic 8,661,434 8,434,911 8,810,196 8,435,213
Diluted 8,926,306 8,763,992 9,203,399 8,739,762
</TABLE>
See notes to consolidated financial statements.
<PAGE>
ACTRADE INTERNATIONAL LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
NINE MONTHS ENDED MARCH 31, 2000
DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS
(UNAUDITED)
<TABLE>
<CAPTION>
COMMON STOCK
--------------------
ADDITIONAL ACCUM. OTHER TOTAL TOTAL
PAID-IN RETAINED COMP. TREASURY STOCKHOLDERS' COMP.
SHARES AMOUNT CAPITAL EARNINGS INCOME STOCK EQUITY INCOME
------ ------ ---------- -------- ------ ----- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, June 30, 1999 8,528,051 $1 $14,614 $14,336 $ 10 $ (452) $28,509
Comprehensive Income, Net of Tax:
Net Income 7,694 7,694 7,694
Other Comprehensive Income:
Foreign Currency
Translation Adjustments (13) (13) (13)
Total Comprehensive Income $7,681
======
Issuance of Common Stock upon
Exercise of Options 531,773 3,888 3,888
Purchase of Treasury Stock (211,691) (3,743) (3,743)
Warrants issued for compensation 186 186
Balance, March 31, 2000 8,848,133 $1 $18,688 $22,030 $(3) $(4,195) $36,521
========= == ======= ======= === ======= =======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
ACTRADE INTERNATIONAL, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED MARCH 31, 2000 AND 1999
DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
MARCH 31,
----------------------
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,694 $ 3,920
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 355 108
Bad debt expense 3,626 436
Deferred income 909 1,246
Compensation Expense - amortization of warrants issued 186 0
Changes in operating assets and liabilities:
Accounts receivable - trade and
Trade acceptance drafts receivable and other (35,447) (29,121)
Deferred income taxes and other assets (1,591) (983)
Accounts payable and customer reserves payable 709 3,428
Accrued expenses and other liabilities 657 (113)
Income taxes payable 310 (12)
------- -------
Net cash used in operating activities (22,592) (21,091)
------- -------
Cash flows from investing activities:
Purchase of property and equipment (835) (527)
------- -------
Net cash used in investing activities (835) (527)
------- -------
Cash flows from financing activities:
Proceeds from issuance of common stock 3,888 61
Purchase of treasury stock (3,743) (453)
Change in short-term borrowings 25,093 9,074
------- -------
Net cash provided by financing activities 25,238 8,682
------- -------
Net increase (decrease) in cash and cash equivalents 1,811 (12,936)
Cash, beginning of period 5,199 13,382
------- -------
Cash, end of period $ 7,010 $ 446
======= =======
Supplemental disclosures of cash flow information:
Interest paid during the fiscal period $ 1,441 $ 951
======= =======
Income taxes paid during the fiscal period $ 991 $ 670
======= =======
</TABLE>
See notes to consolidated financial statements.
<PAGE>
ACTRADE INTERNATIONAL, LTD. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
DOLLARS IN THOUSANDS EXCEPT PER SHARE AMOUNTS
1. Basis of Presentation:
The accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for interim financial information
and with the instructions to Form 10-Q. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments considered necessary for a fair presentation have been included. The
results of operations for the nine and three months ended are not necessarily
indicative of the results to be expected for the full year. For further
information, refer to the consolidated financial statements and footnotes
thereto included in the Annual Report of Actrade International, Ltd. and
subsidiaries (the "Company") Form 10-K for the year ended June 30, 1999.
The consolidated financial statements include the accounts of the Company and
its subsidiaries. Significant inter-company balances and transactions have been
eliminated in consolidation.
The preparation of financial statements in conformity with generally accepted
accounting principals requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from these estimates.
Amounts reported as of March 31, 1999 have been restated, see FORM 10Q/A for the
period ended March 31, 1999.
<PAGE>
2. Net Income Per Share:
The Company applies SFAS No. 128, EARNINGS PER SHARE. In accordance with SFAS
No. 128, basic net income per share has been computed based on the weighted
average of common shares outstanding. Diluted income per share gives the effect
to outstanding stock options. The treasury stock method is used to calculate the
dilutive effect of stock options issued. All of the net income reported in the
financial statements is available to common shareholders.
Net income per common share has been computed as follows:
<TABLE>
<CAPTION>
Nine months ended March 31,
----------------------------------------------------
2000 1999
----------------------- ------------------------
Basic Diluted Basic Diluted
----- ------- ----- -------
<S> <C> <C> <C> <C>
Net Income $7,694 $7,694 $3,920 $3,920
------ ------ ------ ------
Weighted average of
shares outstanding 8,661,434 8,661,434 8,434,911 8,434,911
Weighted average of
options outstanding 264,872 329,081
--------- ---------
Total equivalent shares 8,661,434 8,926,306 8,434,911 8,763,992
========= ========= ========= =========
Net income per common share $0.89 $0.86 $0.46 $0.45
===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
Three months ended March 31,
-----------------------------------------------------
2000 1999
------------------------- ------------------------
Basic Diluted Basic Diluted
----- ------- ----- -------
<S> <C> <C> <C> <C>
Net Income $3,187 $3,187 $1,373 $1,373
------ ------ ------ ------
Weighted average of
shares outstanding 8,810,196 8,810,196 8,435,213 8,435,213
Weighted average of
options outstanding 393,203 304,549
------- -------
Total equivalent shares 8,810,196 9,203,399 8,435,213 8,739,762
========= ========= ========= =========
Net income per common share $0.36 $0.35 $0.16 $0.16
===== ===== ===== =====
</TABLE>
<PAGE>
3. Common Stock and Stock Options:
During the third quarter, employees exercised 3,072 warrants resulting
in approximately $24,000 in proceeds to the Company.
On February 1, 2000, an officer exercised 207,157 warrants at $9.70.
Also on February 1, 2000, the Company purchased 104,386 shares of stock
from the same officer as Treasury stock at a price of $19.25.
On May 13, 1999, the Company issued 100,000 warrants at an exercise
price of $12.50 to an investment advisor for compensation. The warrants
will vest on May 13, 2000. The fair market value of the warrants at the
date of the issuance is being amortized on a straight-line basis over a
twelve-month period to compensation expense. The Company has recognized
approximately $186,000 in amortized compensation expense for the first
nine months of fiscal year 2000 as a result of this transaction.
4. Segment Information:
The Company's business operations are divided into two principal
business segments: TAD program and international merchandise trade
activities. The Company's business segments are based on business units
or entities that offer different products and services. The TAD program
is operated by Capital in the United States and Actrade Capital Canada
in Canada. The International Merchandise Trade activities are conducted
by International, Actrade SA and Resources. They are managed separately
because each business segment requires different strategic initiatives
and marketing.
The Company's gross sales, gross profit, income before provision for income
taxes, depreciation and amortization, interest expense and total assets for each
segment for the nine and three months ended March 31, 2000, and 1999 were as
follows:
<PAGE>
The following is a summary of the Company's segment information:
<TABLE>
<CAPTION>
Nine Months Ended Three Months Ended
MARCH 31, MARCH 31,
------------------------- -------------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Gross Sales:
Trade Acceptance Drafts $219,992 $ 84,815 $ 86,395 $34,353
International Merchandise Trade 101,121 52,290 36,189 18,538
--------- --------- --------- --------
$321,113 $137,105 $122,584 $52,891
========= ========= ========= ========
Gross Profit:
Trade Acceptance Drafts $ 12,832 $ 3,987 $ 4,681 $ 1,566
International Merchandise Trade 9,007 5,030 3,483 1,949
--------- --------- --------- --------
$ 21,839 $ 9,017 $ 8,164 $ 3,515
========= ========= ========= ========
Income before Provision for
Income Taxes:
Trade Acceptance Drafts $ 1,516 $ (190) $ 324 $ (250)
International Merchandise Trade 6,344 4,092 2,556 1,597
--------- --------- --------- --------
$ 7,860 $ 3,902 $ 2,880 $ 1,347
========= ========= ========= ========
Depreciation and Amortization:
Trade Acceptance Drafts $ 340 $ 91 $ 219 $ 44
International Merchandise Trade 15 17 7 8
--------- --------- --------- --------
$ 355 $ 108 $ 226 $ 52
========= ========= ========= ========
Interest Expense:
Trade Acceptance Drafts $ 1,464 $ 329 $ 561 $ 257
International Merchandise Trade 2,006 84 577 4
--------- --------- --------- --------
$ 3,470 $ 413 $ 1,138 $ 261
========= ========= ========= ========
Total Assets: JUNE 30, 1999
-------------
Trade Acceptance Drafts $ 41,629 $ 27,706 $ 16,727
International Merchandise Trade 37,603 14,377 27,724
--------- --------- ---------
$ 79,232 $ 42,083 $ 44,451
========= ========= =========
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL STATEMENT - FACTORS THAT MAY AFFECT FUTURE RESULTS.
With the exception of historical information, the matters discussed in
Management's Discussion and Analysis of Financial Condition and Results of
Operations contain forward looking statements under the 1995 Private Securities
Litigation Reform Act (the "Reform Act") that involve various risks and
uncertainties. Typically, these statements are indicated by words such as
"anticipates," "expects," "believes," "plans," "could," and similar words and
phrases. Factors that could cause the Company's actual results to differ
materially from management's projections, forecasts, estimates and expectations
include but are not limited to, the following:
Changes in the Company's currently available credit facilities;
The inability of the Company to extend or secure additional credit
facilities to fund the anticipated expansion of sales under its TAD
Program;
Unexpected economic changes both in the United States and overseas;
The imposition of new restrictions or regulations affecting either the
Company's international merchandise trade activities or its TAD Program
in the US or Canada.
To the extent possible, the following discussion will highlight the relative
needs of the Company with respect to both its international merchandise trade
activities and in connection with the ongoing expansion of its TAD Program.
- SEGMENT REPORTING DISCLOSURES.
The Company's sales are generated from two major business segments: the TAD
Program and international merchandise trade. A "TAD" is a post-dated payment
draft prepared by the seller of goods or services ("Suppliers") and accepted by
the buyer of the goods or services ("Buyers') by the Buyers signing and
delivering the draft back to the supplier. The TAD Program is operated by
Actrade Capital, Inc. ("Capital") in the United States and Actrade Capital
Canada, Inc. ("Actrade Canada") in Canada. The Company's international
merchandise trade operations are conducted through Actrade International Corp.
("International"), which is engaged in the re-sale of American made products to
foreign buyers and Actrade S.A., including its wholly owned subsidiary Actrade
Resources, Inc. ("Resources"), which engage in the sale of non-US products to
foreign buyers. See discussion immediately below. All figures included in the
following discussion have been rounded to the nearest $1,000 for presentation
purposes.
I. RESULTS OF OPERATIONS
A. NINE MONTHS ENDED MARCH 31, 2000, COMPARED TO THE NINE MONTHS ENDED
MARCH 31, 1999.
CONSOLIDATED SALES AND GROSS PROFIT.
During the first nine months of fiscal 2000, the Company had combined gross
sales of $321,113,000, compared with $137,105,000 for the first nine months
fiscal 1999, an increase of more than 134%. Gross profit climbed to $21,839,000
for the nine months ended March 31, 2000, compared to $9,017,000 for the same
period in fiscal 1999, an increase of over 142%. During this period, income from
operations reached $11,303,000 as compared to
<PAGE>
$4,260,000 for the same period last year. This represented an increase of over
165%.
The substantial increase in both gross sales and gross profit during the first
nine months of fiscal 2000 continues to be due primarily to the ongoing
expansion of operations through (i) significantly increased sales activity by
Capital through its TAD Program (discussed separately below) and (ii) increased
sales by the international merchandise trade division.
THE TRADE ACCEPTANCE DRAFT PROGRAM
During the first nine months of fiscal year 2000, gross sales on TAD
transactions reached $219,992,000 as compared to $84,815,000 for the first nine
months of fiscal year 1999, an increase of over 159%. After general and
administrative expenses, bad debt expense, interest income, interest expense,
but before a provision for income taxes, income (loss) from the TAD Program was
$1,516,000 for the first nine months of fiscal year 2000 compared to $(190,000)
for the comparable period of fiscal 1999.
In evaluating the TAD Program operating results for the first nine months of
fiscal 2000, the reader must consider the effect of the increase in the bad debt
expense ($3,626,000 for the nine months ended March 31, 2000 as compared to
$436,000 for same period last year). The bad debt expense reported by the
Company related solely to the TAD Program operations. A major reason for the
increase in this item is due to the large volume of TAD transactions and the
resultant increase of the bad debt write-offs and reserves.
INTERNATIONAL TRADE
Gross sales from the international trade division also were strong for the first
nine months of fiscal year 2000 reaching $101,121,000 for the period as compared
to $52,290,000 for the first nine months of fiscal year 1999, a 93% increase.
Cost of sales as a percent of gross sales increased slightly during the period
as compared to the prior fiscal year. This resulted in an 55% increase in income
before taxes to $6,344,000 from $4,092,000 in fiscal year 1999.
The increase in international merchandise trade activities was the result of
increased product sales by both Actrade S.A. and Resources, rather than from
price increases for the products sold.
CONSOLIDATED EXPENSES
General and administrative expenses for the nine months ended March 31, 2000
were $6,910,000, as compared to $4,321,000 for the same period last year, an
increase of 60%. The most significant of these increase included:
1. salaries and commissions totaling $3,609,000 in this period,
compared to $2,506,000 in the first nine months of fiscal 1999;
2. office rent of $414,000 in this period, compared to $231,000 in the
first nine months of fiscal 1999;
3. consulting costs and professional fees of $1,366,000 in this period,
compared to $357,000 for the first nine months of fiscal 1999;
<PAGE>
4. depreciation and amortization of $355,000 in this period, compared
to $108,000 in the first nine months of fiscal 1999; and
5. advertising and communication costs of $450,000 in this period,
compared to $344,000 in the first nine months of fiscal 1999.
The majority of these increased costs are directly attributable to the TAD
Program that required a significant expansion of both sales force and
back-office personnel. With respect to the balance of fiscal 2000, management
projects the costs related to the TAD Program operations, both in the United
States and in Canada will continue to escalate, particularly as marketing
efforts for the TAD Program increase and Capital begins implementation of its
E-Commerce program. However, management believes the impact of these continued
increased costs will be offset as Capital continues to see significantly
increased sales volume as the benefits of its prior expenditures mature into new
TAD business.
INTEREST EXPENSE AND NET INCOME
In the first nine months of fiscal 2000, the Company incurred interest expense
of $3,470,000 as compared to $413,000 in the same period last year. This
increase is due to the growth in operations of the TAD Program as well as
Actrade S.A. and Resources and results in part from the costs associated with
the new and extended credit facilities secured by Capital during fiscal 2000.
Management continues its efforts to secure additional or expanded credit
facilities in connection with its TAD Program and expects that this expense item
will continue to escalate as TAD Program operations continue to grow during the
balance of fiscal 2000 and beyond.
Net income for the nine months ended March 31, 2000 climbed to $7,694,000, as
compared to $3,920,000 for the same period last year, an increase of
approximately 96%. Based upon the Company's currently issued and outstanding
shares, earnings per share (diluted) for the first nine months of fiscal 2000
amounted to $.86 per share, as compared to $.45 for the first nine months of
fiscal 1999, or an increase of 91%.
B. 3RD QUARTER OF FISCAL 2000 COMPARED TO 3RD QUARTER FISCAL OF 1999
CONSOLIDATED SALES AND GROSS PROFIT.
For the three months ended March 31, 2000, gross sales increased to $122,584,000
(up over 132% from the third quarter of fiscal 1999) while gross profits climbed
to $8,164,000 (an increase of 132% from the third quarter of fiscal 1999). The
increase in gross sales during the third quarter of fiscal 2000 was also
primarily due to the expansion of the Company's operations through (i)
significantly increased TAD transactions through the TAD Program and (ii) the
increased international merchandise trade activities by Actrade S.A and
Resources. With respect to its international merchandise trade activities, this
increase was the result of increased product sales by both Actrade S.A. and
Resources, rather than from price increases for the products sold.
THE TRADE ACCEPTANCE DRAFT PROGRAM
Gross profit from the TAD Program for the three months ended March 31, 2000
(which represent revenues earned on TAD activities by both Capital and Actrade
Canada) totaled
<PAGE>
$4,681,000; while net income before a provision for income taxes was $324,000.
The increase in gross profit from the TAD Program is due to a substantially
increased number of TAD transactions that were a direct benefit of the
accelerated marketing and expansion program begun during the prior fiscal year
and which continues today.
However, as is the case in evaluating the nine-month results, in evaluating the
results for the third quarter of fiscal 2000, the effect of the Company election
to increase the bad debt expense is of equal significance. For the three-month
period, the Company recorded a bad debt expense of $1,310,000 as compared to
$112,000 for the same period of fiscal 1999.
INTERNATIONAL MERCHANDISE TRADE SALES
Gross sales from international merchandise trade during the third quarter of
fiscal 2000 climbed to $36,189,000, as compared to $18,538,000 in the third
quarter of fiscal 1999, an increase of 95%. This resulted in a 66% increase in
net income before taxes to $2,556,000 compared to $1,540,000 in fiscal year
1999.
Management attributes the continued growth in this business sector to the
ability to provide immediate payment to foreign suppliers as well as
facilitating access to flexible payment terms for the buyers. During the third
quarter of fiscal 2000, the Company's principal overseas markets continued to be
(i) South America (ii) Europe, (iii) the Pacific Rim and (iv) Middle East.
See "FINANCIAL STATEMENTS - NOTE 1 - BASIS OF PRESENTATION - GROSS SALES" AND
" - NOTE 4, SEGMENT INFORMATION" for additional information.
CONSOLIDATED EXPENSES
General and administrative expenses for the three months ended March 31, 2000
were $2,847,000, as compared to $1,798,000 for the same period last year, an
increase of 58%. Essentially the entire increase in general and administrative
expenses over fiscal 1999 is attributable to the expansion of operations of
Capital, Actrade Canada and increased costs related to the TAD Program. The most
significant changes for the quarterly period included:
1. salaries and commissions totaling $1,274,000 in this period,
compared to $987,000 in the third quarter of fiscal 1999;
2. office rent of $128,000 in this period, compared to $92,000 in the
third quarter of fiscal 1999;
3. consulting cost and professional fees of $751,000 in the third
quarter of fiscal 2000, compared to $159,000 for the third quarter
of fiscal 1999;
4. depreciation and amortization of $226,000 in this period, compared
to $52,000 in the third quarter of fiscal 1999; and
5. advertising and communication costs of $143,000 in this period,
compared to $146,000 in the third quarter of fiscal 1999.
As indicated above, the majority of these increased costs are directly
attributable to the TAD
<PAGE>
Program's expansion.
INTEREST EXPENSE AND NET INCOME
In the third quarter of fiscal 2000, the Company incurred interest expense of
$1,138,000 as compared to $261,000 in the same period last year. This increase
is due to the growth in operations of the TAD Program as well as Actrade S.A.
and Resources and results in part from the costs associated with the new credit
facilities secured by Capital during fiscal 1999.
During the third quarter, income from operations totaled $4,007,000 (up over
150% from the same period in fiscal 1999) and net earnings, after general and
administrative expense, bad debt expense, interest income, interest expense and
provision for taxes, reached $3,187,000 (an increase of over 132% from the third
quarter of fiscal 1999). Third quarter earning per share (diluted) totaled $.35
as compared to $.16 per share for the third quarter of fiscal 1999, an increase
of over 119%.
The Company's net income expressed as a percentage of gross profit remained
unchanged at 39% during the third quarter of fiscal 2000, as compared to the
third quarter of fiscal 1999.
DISCUSSION OF FINANCIAL CONDITION - LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, the Company had working capital of approximately $34,569,000
as compared to $27,249,000 at June 30, 1999. On a consolidated basis, at March
31, 2000, the Company had cash and cash equivalents on hand of $7,010,000 as
compared to $5,199,000 at June 30, 1999.
At March 31, 2000, Capital had approximately $80 million in open lines of credit
and $12.5 Million in credit insurance.
Total current liabilities at March 31, 2000 increased to $42,711,000 as compared
to $15,942,000 at June 30, 1999. The substantial increase in current liabilities
over the prior fiscal period is primarily due to increases in "short-term
borrowings," representing financing utilized by Capital for its TAD purchases
owed to various credit facilities, and "accounts payable and customer reserves
payable." The increase in accounts payable is due principally to the increased
credit facilities.
At March 31, 2000, the Company's total stockholders' equity increased to
$36,521,000 as compared to $28,509,000 at June 30, 1999. The principal source of
funds for the Company's operations continues to be revenues earned by its
operating subsidiaries.
During the balance of fiscal 2000, the Company projects no significant
additional capital expenditures in connection with any of the Company's
international merchandise trade operations. Management plans to utilize current
cash on hand in connection with its international merchandise trading operations
principally for (i) general working capital reserves to meet any extraordinary
or unexpected expenses; (ii) and to finance, if required, the Company's trading
operations.
However, in connection with the TAD Program, management expects that it will
have
<PAGE>
additional capital expenditures relating to the ongoing expansion of sales and
marketing operations by Capital and Actrade Canada, including implementation of
its E-Commerce initiative.
At March 31, 2000, there existed several credit facilities through which the
purchase of TADs were financed, including (1) a $25 million securitization
facility between Funding and ING Baring Capital Markets; (2) a $15 million
credit facility between Capital and Summit Bank; and (3) a $40 Million credit
facility between Capital and Banco Potuguese do Atlantico, in the United States.
In addition, Actrade Canada had a $5 million (Canadian) credit facility with a
financial institution in Canada.
Management expects that the TAD Program will continue to grow, in which case it
will require additional credit facilities to sustain the projected growth in TAD
purchases. Discussions are ongoing with several other financial institutions to
add additional credit facilities to fund the future expansion of the TAD
Program, as well as with Actrade's current financial institutions to increase or
expand existing facilities. However, no assurance can be given that such
discussions will result in the completion of any new or expanded financing
facilities for Capital or Actrade Canada. However, based upon its experience
with its present banks, as well as discussions with other financial
institutions, management believes that it will be able to secure adequate
financing means to sustain the growth of the TAD Program in the foreseeable
future.
Management knows of no other trends reasonably expected to have a material
impact upon the Company's operations or liquidity in the foreseeable future.
III INFLATION.
During the past few years inflation in the United States has been relatively
stable which, coupled with the relative strength of foreign currencies, has had
a beneficial effect upon the Company's operations in that the products it offers
have been competitively priced in relation to comparable foreign made products.
In management's opinion, this is expected to continue for the foreseeable
future. However, should the American economy again experience double digit
inflation rates, as was the case in the past, the impact upon prices for
American goods could adversely affect the Company's ability to effectively
compete in its overseas markets.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
None during this period.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 12, 2000
ACTRADE INTERNATIONAL, LTD.
BY: /s/ Joseph P. D'Alessandris
------------------------------
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 9-MOS YEAR
<FISCAL-YEAR-END> JUN-30-2000 JUN-30-1999
<PERIOD-START> JAN-01-2000 JUL-01-1998
<PERIOD-END> MAR-01-2000 JUN-30-1999
<CASH> 7,010 5,199
<SECURITIES> 0 0
<RECEIVABLES> 70,813 39,154
<ALLOWANCES> (2,307) (1,560)
<INVENTORY> 0 0
<CURRENT-ASSETS> 77,280 43,191
<PP&E> 2,001 1,245
<DEPRECIATION> (483) (291)
<TOTAL-ASSETS> 79,232 44,451
<CURRENT-LIABILITIES> 42,711 15,942
<BONDS> 0 0
<COMMON> 1 1
0 0
0 0
<OTHER-SE> 36,520 28,508
<TOTAL-LIABILITY-AND-EQUITY> 36,521 28,509
<SALES> 0 0
<TOTAL-REVENUES> 321,113 208,172
<CGS> 0 0
<TOTAL-COSTS> 299,274 191,800
<OTHER-EXPENSES> 6,910 6,483
<LOSS-PROVISION> 3,626 1,601
<INTEREST-EXPENSE> 3,470 1,777
<INCOME-PRETAX> 7,860 6,391
<INCOME-TAX> 166 157
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 7,694 6,234
<EPS-BASIC> .89 .73
<EPS-DILUTED> .86 .71
</TABLE>
