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, 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 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 February 8, 2002, 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
December 31, September 30,
2001 2001
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ASSETS (Unaudited)
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CURRENT ASSETS:
Cash $ 214,000 $ 251,000
Accounts receivable, less allowance
for doubtful accounts of $615,000 at December 31
and $564,000 at September 30, respectively 9,231,000 11,124,000
Prepaid expenses and other current assets 1,022,000 1,009,000
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Total Current Assets 10,467,000 12,384,000
PROPERTY AND EQUIPMENT, NET 4,504,000 4,612,000
GOODWILL 1,129,000 1,129,000
OTHER ASSETS 68,000 55,000
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$16,168,000 $18,180,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Loans payable to bank $ 4,100,000 $ 5,250,000
Accounts payable and accrued expenses 1,496,000 1,783,000
Accrued payroll and related taxes 1,149,000 1,840,000
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Total Current Liabilities 6,745,000 8,873,000
CAPITAL LEASE OBLIGATIONS 187,000 207,000
DEFERRED COMPENSATION 18,000 -
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Total Liabilities 6,950,000 9,080,000
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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 3,826,000 shares 38,000 38,000
Additional paid-in capital 3,672,000 3,672,000
Retained earnings 5,888,000 5,772,000
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9,598,000 9,482,000
LESS: Cost of 143,000 and 144,000 shares of common
stock held in treasury, respectively 380,000 382,000
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Total Stockholders' Equity 9,218,000 9,100,000
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$16,168,000 $18,180,000
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See accompanying notes to consolidated financial statements.
2
Joule Inc. And Subsidiaries
Consolidated Statements of Income
Three Months Ended
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December 31, December 31,
2001 2000
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(Unaudited) (Unaudited)
REVENUES $ 19,389,000 $ 18,524,000
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COSTS, EXPENSES AND OTHER:
Cost of services 15,525,000 14,932,000
Selling, general & administrative expenses 3,635,000 3,471,000
Interest expense 58,000 107,000
Interest income (6,000) (35,000)
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INCOME BEFORE INCOME TAX PROVISION 177,000 49,000
INCOME TAX PROVISION 61,000 16,000
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NET INCOME $ 116,000 $ 33,000
============ ============
BASIC AND DILUTED EARNINGS PER SHARE $ 0.03 $ 0.01
============ ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING-BASIC 3,682,000 3,677,000
============ ============
WEIGHTED AVERAGE COMMON SHARES AND
COMMON EQUIVALENTS OUTSTANDING - DILUTED 3,687,000 3,677,000
============ ============
See accompanying notes to consolidated financial statements.
3
Joule Inc. And Subsidiaries
Consolidated Statements of Cash Flows
Three Months Ended
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December 31, December 31,
2001 2000
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(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 116,000 $ 33,000
Adjustments to reconcile net income to
net cash flows provided by (used in) operating
activities:
Depreciation and amortization 208,000 216,000
Provision for losses on accounts receivable 51,000 53,000
Changes in operating assets and liabilities:
Accounts receivable 1,842,000 854,000
Prepaid expenses and other assets (3,000) 27,000
Accounts payable and accrued expenses (287,000) (212,000)
Accrued payroll and related taxes (691,000) (387,000)
Income taxes - (43,000)
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Net cash flows provided by operating activities 1,236,000 541,000
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CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment (123,000) (357,000)
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Net cash flows used in investing activities (123,000) (357,000)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in loans payable to bank (1,150,000) (180,000)
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Net cash flows used in financing activities (1,150,000) (180,000)
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NET CHANGE IN CASH (37,000) 4,000
CASH, BEGINNING OF PERIOD 251,000 237,000
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CASH, END OF PERIOD $ 214,000 $ 241,000
============ ============
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 61,000 $ 112,000
============ ============
Income taxes paid $ 82,000 $ 194,000
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SUPPLEMENTAL DISCLOSURE OF NON-CASH TRANSACTION
Capitalized leases $ (20,000) $ -
============ ============
See accompanying notes to consolidated financial statements.
4
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 has adopted SFAS No. 142 as of October 1,
2001. Had the Company adopted the standards of SFAS No. 142, "Goodwill and Other
Intangibles," as of October 1, 2000, net income and basic and diluted earnings
per share for the three months ended December 31, 2000 would have been $46,000
and $0.01, respectively.
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 was
effective for the Company as of
5
October 1, 2001, but believes that goodwill recognized prior to July 1, 2001
will no longer be amortized upon adoption of SFAS No. 142.
(3) In August 2001, the Financial Accounting Standards Board issued SFAS
No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which
is effective for fiscal years beginning after December 15, 2001, and addresses
financial accounting and reporting for the impairment or disposal of long-lived
assets. This statement supersedes SFAS No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," and the
accounting and reporting provisions of Accounting Principals Board Opinion No.
30, "Reporting the Results of Operations - Reporting the Effects of Disposal of
a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring
Events and Transactions," for the disposal of a segment of a business. The
Company plans to adopt the standard October 1, 2002, and does not expect that
the adoption of SFAS No. 144 will have a material effect on its consolidated
results of operations or financial position.
(4) 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
December 31,
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2001 2000
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Revenues
Commercial ............. $ 5,904 $ 6,064
Technical .............. 5,994 6,203
Industrial ............. 7,491 6,257
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$ 19,389 $ 18,524
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Income Before Tax Provision
Commercial .............. $ 246 $ 297
Technical .............. 517 589
Industrial ............. 438 164
Corporate (unallocated,
including interest) (1,024) (1,001)
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$ 177 $ 49
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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 increased 5% to $ 19.4 million during the first three
months of fiscal 2002 from $18.5 million for the year earlier period. Commercial
staffing revenue decreased 3% to $5.9 in 2002 from $6.1 million in
2001.Technical staffing revenue decreased 3%to $6.0 million in the current
period from $6.2 million in the year earlier period. Industrial staffing revenue
rose 21% to $7.5 million in 2002 from $6.2 million in 2001.
Cost of services were 80.0% of revenues in the 2002 first quarter
compared to 80.6% for the 2001 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 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 in the
2002 period compared to $3.5 million for the 2001 period, representing 18.7% of
revenues in both periods. Selling, general and administrative expenses 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.
Interest expense decreased $49,000 in the 2002 quarter compared to the
2001 quarter, reflecting a decrease in average borrowings along with decreases
in interest rates. Interest income of $6,000 and $35,000 in the respective
quarters relates to a note receivable, which is included in accounts receivable.
After giving effect to the utilization of certain tax credits the effective tax
rates for the 2002 and 2001 periods were 34% and 33%, respectively. As a result
of the above, net income was $116,000 or $0.03 per share, basic and diluted, in
fiscal 2002 compared with net income of $33,000 or $0.01 per share, basic and
diluted, for the 2001 period.
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JOULE INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
Liquidity and Capital Resources
Current assets at December 31, 2001 were $10,467,000 compared to
current assets of $12,384,000 at September 30, 2001 and current liabilities were
$6,745,000 compared to $8,873,000 as of September 30, 2001. The decrease in
current assets principally relates to a $1.9 million decrease in accounts
receivable due to a decrease in days sales outstanding, the result of the
continuing emphasis on credit and collections, as well as slightly lower revenue
in the current period compared to the fourth quarter of fiscal 2001. The
decrease in current liabilities principally results from a $1,150,000 decrease
in notes payable, reflective of the improved receivable collections noted above;
an approximate $300,000 decrease in accounts payable and accrued expenses
principally related to normal accounts payable fluctuations; and an approximate
$700,000 decrease in accrued payroll and related taxes principally the result of
a lower level of business in the final week of the current period as compared to
the final week of September 2001. The Company's capital expenditures are
generally relatively modest due to the nature of its business. The deferred
compensation amount of $18,000 relates to a compensation plan initiated in the
quarter ended December 31, 2001.
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 need. 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;
$4,100,000 was outstanding under this line as of December 31, 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.
8
JOULE INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
On October 10, 2001, the Company issued an aggregate of 670
shares of Common Stock held in treasury as service awards to
certain employees who had completed five and twenty years of
service with the Company during fiscal 2001. The shares were not
registered under the Securities Act of 1933 based on the
conclusion that the awards would not be events of sale within the
meaning of Section 2 (a) (3) of the Act.
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 13, 2002 /s/ E.N. LOGOTHETIS
------------------------------------
E. N. Logothetis, Chairman and Chief
Executive Officer (Principal
Executive Officer)
February 13, 2002 /s/ BERNARD G. CLARKIN
------------------------------------
Bernard G. Clarkin, Vice President
and Chief Financial Officer
(Principal Financial Officer)
9