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, 2001
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
incorporation or organization) Identification No.)
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 13, 2001, 3,682,000 shares of the Registrant's common stock were
outstanding.
Part I - Financial Information
Item 1. Financial Statements
Joule Inc. And Subsidiaries
Consolidated Balance Sheets
June 30, September 30,
2001 2000
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ASSETS (Unaudited)
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CURRENT ASSETS:
Cash $ 236,000 $ 237,000
Accounts receivable, less allowance for
doubtful accounts of $609,000 at June 30
and $514,000 at September 30, respectively 9,763,000 9,749,000
Prepaid expenses and other current assets 1,049,000 848,000
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Total Current Assets 11,048,000 10,834,000
PROPERTY AND EQUIPMENT, NET 4,306,000 4,013,000
GOODWILL 1,138,000 1,201,000
OTHER ASSETS 51,000 304,000
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$16,543,000 $16,352,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Loans payable to bank $ 4,600,000 $ 4,980,000
Accounts payable and accrued expenses 1,440,000 1,269,000
Accrued payroll and related taxes 1,702,000 1,585,000
Income taxes -- 43,000
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Total Current Liabilities 7,742,000 7,877,000
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 shares 38,000 38,000
Additional paid-in capital 3,672,000 3,669,000
Retained earnings 5,473,000 5,150,000
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9,183,000 8,857,000
LESS: Cost of 144,000 shares of common
stock held in treasury 382,000 382,000
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Total Stockholders' Equity 8,801,000 8,475,000
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$16,543,000 $16,352,000
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See accompanying notes to consolidated financial statements.
2
Joule Inc. And Subsidiaries
Consolidated Statements of Income
Three Months Ended Nine Months Ended
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June 30, June 30, June 30, June 30,
2001 2000 2001 2000
------------ ------------ ------------ ------------
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
REVENUES $ 19,891,000 $ 19,214,000 $ 57,933,000 $ 58,723,000
------------ ------------ ------------ ------------
COSTS, EXPENSES AND OTHER:
Cost of services 15,823,000 15,372,000 46,530,000 47,656,000
Selling, general & administrative expenses 3,579,000 3,296,000 10,680,000 9,629,000
Interest expense 82,000 134,000 290,000 426,000
Interest income (16,000) - (75,000) -
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAX PROVISION 423,000 412,000 508,000 1,012,000
INCOME TAX PROVISION 166,000 160,000 185,000 391,000
------------ ------------ ------------ ------------
NET INCOME $ 257,000 $ 252,000 $ 323,000 $ 621,000
============ ============ ============ ============
BASIC AND DILUTED EARNINGS PER SHARE $ 0.07 $ 0.07 $ 0.09 $ 0.17
============ ============ ============ ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING-BASIC 3,682,000 3,674,000 3,681,000 3,674,000
============ ============ ============ ============
WEIGHTED AVERAGE COMMON SHARES AND
COMMON EQUIVALENTS OUTSTANDING - DILUTED 3,682,000 3,674,000 3,681,000 3,674,000
============ ============ ============ ============
See accompanying notes to consolidated financial statements.
3
Joule Inc. And Subsidiaries
Consolidated Statements of Cash Flows
Nine Months Ended
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June 30, June 30,
2001 2000
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(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 323,000 $ 621,000
Adjustments to reconcile net income to
net cash flows provided by (used in) operating
activities:
Depreciation and amortization 665,000 611,000
Provision for losses on accounts receivable 96,000 190,000
Changes in operating assets and liabilities:
Accounts receivable (110,000) 1,651,000
Prepaid expenses and other assets 55,000 (555,000)
Accounts payable and accrued expenses 171,000 (148,000)
Accrued payroll and related taxes 117,000 45,000
Income taxes (43,000) (92,000)
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Net cash flows provided by operating activities 1,274,000 2,323,000
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CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment (895,000) (510,000)
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Net cash flows used in investing activities (895,000) (510,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in loans payable to bank (380,000) (1,750,000)
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Net cash flows used in financing activities (380,000) (1,750,000)
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NET CHANGE IN CASH (1,000) 63,000
CASH, BEGINNING OF PERIOD 237,000 152,000
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CASH, END OF PERIOD $ 236,000 $ 215,000
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SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 308,000 $ 428,000
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Income taxes paid $ 396,000 $ 490,000
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See accompanying notes to consolidated financial statements.
4
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) During June 2001, the Financial Accounting Standards Board issued Statements
of Financial Accounting Standards No. 141, Business Combinations (SFAS No. 141)
and No. 142 Goodwill and Other Intangible Assets (SFAS NO. 142). SFAS No. 141
changes the accounting for business combinations, requiring that all business
combinations be accounted for using the purchase method and that intangible
assets be recognized as assets apart from goodwill if they arise from
contractual or other legal rights, or if they are separable or capable of being
separated from the acquired entity and sold, transferred, licensed, rented or
exchanged. SFAS No. 141 is effective for all business combinations initiated
after June 30, 2001. SFAS No. 142 specifies the financial accounting and
reporting for acquired goodwill and other intangible assets. Goodwill and
intangible assets that have indefinite useful lives will not be amortized but
rather will be tested at least annually for impairment. SFAS No. 142 is
effective for fiscal years beginning after December 15, 2001. However, early
adoption is allowed and the Company may elect to adopt SFAS No. 142 as of
October 1, 2001.
SFAS No. 142 requires that the useful lives of intangible assets acquired on or
before June 30, 2001 be reassessed and the remaining amortization periods
adjusted accordingly. Previously recognized intangible assets deemed to have
indefinite lives shall be tested for impairment. The Company has not fully
assessed the potential impact of the adoption of SFAS No. 142, which is
effective for the Company as of October 1, 2002 (however the Company can choose
early adoption on October 1, 2001). The Company anticipates that goodwill
recognized prior to July 1, 2001 will no longer be amortized upon adoption of
SFAS No. 142.
5
(3) 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
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June 30, June 30,
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2001 2000 2001 2000
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Revenues
Commercial ............... $ 6,393 $ 5,778 $ 18,783 $ 21,353
Technical ................ 6,685 6,123 19,370 17,264
Industrial ............... 6,813 7,313 19,780 20,106
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$ 19,891 $ 19,214 $ 57,933 $ 58,723
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Income Before Tax Provision
Commercial ................ $ 295 $ 212 $ 872 $ 873
Technical ................ 682 579 1,667 1,330
Industrial ............... 491 563 994 1,689
Corporate (unallocated,
including interest)..... (1,045) (942) (3,025) (2,880)
-------- -------- -------- --------
$ 423 $ 412 $ 508 $ 1,012
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6
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. Virtually all revenue is billed on a direct cost
plus markup basis. Revenue was $ 19.9 million for the three months ended June
30, 2001 compared to $19.2 million for the year earlier period. Revenue for the
first nine months of fiscal 2001 amounted to $57.9 million; for the comparable
nine month period of 2000 revenue was $58.7 million. Commercial staffing revenue
increased 11% to $6.4 million for the three month period ended June 30, 2001,
while decreasing 12% to $18.8 million for the nine month period ended June 30,
2001, reflective of the top line softness in this segment earlier in the year
partially due to a decision to focus on higher margin business. Technical
staffing revenue increased 9% to $6.7 million in the current 2001 quarter, and
rose 12% to $19.4 million as compared to the 2000 nine month period. While the
revenue for Industrial staffing of $19.8 million for the 2001 nine month period
approximated the 2000 nine month results of $20.1 million, revenue for the
current quarter declined $.5 million from the particularly strong prior year
quarter of $7.3 million. It is anticipated that revenue for the full year of
2001 for this segment will equal or exceed that of the prior year.
Cost of services improved to 79.5% and 80.3% of revenue in the current
three month and nine month periods compared to 80.0% and 81.2% 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 travel expenses and a van transportation service which
transports some commercial staffing workers to job sites. Selling, general and
administrative expenses were $3.6 million and $10.7 million for the three and
nine months ended June 30, 2001 compared to $3.3 million and $9.6 million for
the year earlier periods, and represented 18.0% and 18.4% of revenue in the 2001
periods, an increase over the comparable 2000 periods of 17.2% and 16.4% of
revenue. These percentage increases are principally related to higher staff
employee payroll and other branch related expenses. The Company initiated
certain personnel and other branch cost reductions during the third quarter
which had a positive impact in the quarter and will further benefit future
quarters. Selling, general and administrative expenses principally include staff
payroll and related expenses in addition to advertising, professional fees,
depreciation and amortization, provision for the allowance for doubtful
accounts, rent and other costs related to maintaining the Company's branch
offices.
7
JOULE INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Interest expense amounted to $82,000 and $290,000 for the 2001 three and
nine month periods compared to $134,000 and $426,000 for the respective prior
year periods, reflecting a decrease in average borrowings along with decreases
in interest rates. Interest income in the 2001 periods of $16,000 and $75,000,
respectively, relates to a current note receivable included in accounts
receivable. After giving effect to the utilization of certain tax credits the
effective tax rates approximated 39% and 36% for the respective three and nine
month periods ending June 30, 2001 and approximately 39% for the respective
three and nine month periods ending June 30, 2000. As a result of the above, net
income for the 2001 three month period was $257,000 or $0.07 per share, basic
and diluted, compared with net income of $252,000 or $0.07 per share, basic and
diluted, for the 2000 period; for the 2001 nine month period, net income was
$323,000 or $0.09 per share, basic and diluted, compared with $621,000 or $0.17
per share, basic and diluted, for the 2000 period.
Liquidity and Capital Resources
Current assets at June 30, 2001 were $11,048,000 compared to current assets
of $10,834,000 at September 30, 2000 and current liabilities were $7,742,000
compared to $7,877,000 as of September 30, 2000. The increase in current assets
primarily relates to an increase in prepaid expense of approximately $200,000,
principally related to prepayment of income taxes. The decrease in current
liabilities includes a $380,000 decrease in notes payable as well as an
approximate $100,000 increase in accrued payroll and related taxes due to a
higher level of business in the final week of the current period as well as
higher related payroll taxes due, and an approximate $200,000 increase in
accounts payable and accrued expenses reflecting the normal cyclical nature of
such accounts. While the Company's capital expenditures are generally relatively
modest due to the nature of its business, it was anticipated that approximately
$300,000 to $400,000 would be expended within the current fiscal year in
connection with the installation of a major new information technology system,
of which approximately $290,000 was incurred in the current nine month period.
8
JOULE INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
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-half percent
option; $4,600,000 was outstanding under this line as of June 30, 2001. 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 technology systems and the training
and retention of new staff, and government regulation.
9
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 13, 2001
/s/ E. N. Logothetis
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E. N. Logothetis, Chairman and
Chief Executive Officer (Principal
Executive Officer)
August 13, 2001
/s/ Bernard G. Clarkin
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Bernard G. Clarkin, Vice President
and Chief Financial Officer
(Principal Financial Officer)
10