UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 31, 2000
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE EXCHANGE ACT
For the transition period from ____________ to ________________
Commission file number 001-14503
DECTRON INTERNATIONALE INC.
(Exact name of Small Business Issuer as Specified in Its Charter)
Quebec, Canada N\A
- --------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4300 Poirier Blvd.
Montreal, Quebec H4R 2C5
- ---------------- -------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(514) 334-9609 (Issuer's telephone number, including area code)
--------------
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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
|_|
The number of shares outstanding of the registrant's Common Stock, No
Par Value, on November 12, 2000 was 2,795,000 shares.
Transitional Small Business Disclosure Format (check one):
Yes No X
--- ---
DECTRON INTERNATIONALE INC.
OCTOBER 31, 2000 QUARTERLY REPORT ON FORM 10-QSB
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page Number
Item 1. Financial Statements
Interim Consolidated Balance Sheets as of October 31, 2000 and January 31, 2000....... 2
Interim Consolidated Statements of Earnings
for the three months and nine months ended October 31, 2000 and 1999............. 4
Interim Consolidated Statements of Cash Flows
for the nine months ended October 31, 2000 and 1999.............................. 6
Interim Consolidated Statements of Stockholders' Equity
for the nine months ended October 31, 2000 and 1999.............................. 9
Notes to Interim Consolidated Financial Statements.................................... 10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................................ 12
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K...................................................... 15
DECTRON INTERNATIONALE INC.
Interim Consolidated Balance Sheets
As at October 31, 2000 and January 31, 2000
(Amounts Expressed in United States Dollars)
October 31, January 31,
2000 2000
$ $
----------- -----------
A S S E T S
CURRENT
Cash 300,608 220,562
Accounts receivable 8,914,561 7,626,840
Income taxes receivable 42,589 -
Inventory 9,690,481 8,169,607
Prepaid expenses and sundry assets 958,495 1,062,973
Deferred income taxes 177,163 9,351
---------- ----------
TOTAL CURRENT ASSETS 20,083,897 17,089,333
LOANS RECEIVABLE 285,315 179,939
PROPERTY, PLANT AND EQUIPMENT 11,286,709 7,673,802
DEPOSIT ON BUILDING - 1,000,000
INTANGIBLES 144,703 99,218
GOODWILL 1,609,735 1,759,297
DEFERRED INCOME TAXES 284,665 107,152
---------- ----------
TOTAL ASSETS 33,695,024 27,908,741
========== ==========
The accompanying notes are an integral part of these
consolidated financial statements.
2
DECTRON INTERNATIONALE INC.
Interim Consolidated Balance Sheets
As at October 31, 2000 and January 31, 2000
(Amounts Expressed in United States Dollars)
October 31, January 31,
2000 2000
$ $
LIABILITIES
CURRENT
Bank loans 7,009,848 5,616,167
Accounts payable and accrued expenses 6,130,323 5,096,977
Income taxes payable - 64,013
Current portion of long-term debt 1,044,218 1,263,073
Current portion of deferred revenue 228,079
226,737
---------- ----------
TOTAL CURRENT LIABILITIES 14,411,126 12,268,309
LONG-TERM DEBT 7,707,224 4,657,838
DUE TO DIRECTOR 14,601 51,905
LOAN PAYABLE 248,690 275,057
DEFERRED REVENUE 1,091,902 732,158
---------- ----------
TOTAL LIABILITIES 23,473,543 17,985,267
---------- ----------
STOCKHOLDERS' EQUITY
CAPITAL STOCK 6,849,609 6,849,609
TREASURY STOCK (88,780) (88,780)
ACCUMULATED OTHER COMPREHENSIVE INCOME
(342,050) 289,121
RETAINED EARNINGS 3,802,702 2,873,524
---------- ----------
TOTAL STOCKHOLDERS' EQUITY 10,221,481 9,923,474
---------- ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY 33,695,024 27,908,741
========== ==========
The accompanying notes are an integral part of these
consolidated financial statements.
3
DECTRON INTERNATIONALE INC.
Interim Consolidated Statements of Earnings
For the Nine Months Ended October 31, 2000 and 1999
(Amounts Expressed in United States Dollars)
Nine Nine
Months Months
Ended Ended
October 31, October 31,
2000 1999
----------- -----------
$ $
Net sales 28,629,688 22,903,712
Cost of sales 18,653,229 15,756,438
---------- ----------
Gross profit 9,976,459 7,147,274
---------- ----------
Operating expenses
Selling 3,981,609 2,830,670
General and administrative 2,381,564 1,284,465
Depreciation and amortization 1,158,298 868,899
Interest expense 1,154,620 370,417
---------- ----------
8,676,091 5,354,451
---------- ----------
Earnings before income taxes 1,300,368 1,792,823
Income taxes 371,190 558,851
---------- ----------
Net Earnings 929,178 1,233,972
========= =========
Net earnings per common share, basic and diluted 0.33 0.44
========= =========
Weighted average number of common shares outstanding 2,795,000 2,795,000
========= =========
The accompanying notes are an integral part of these
consolidated financial statements.
4
DECTRON INTERNATIONALE INC.
Interim Consolidated Statements of Earnings
For the Three Months Ended October 31, 2000 and 1999
(Amounts Expressed in United States Dollars)
Three Three
Months Months
Ended Ended
October 31, October 31,
2000 1999
----------- -----------
$ $
Net sales 9,407,507 8,620,718
Cost of sales 5,489,276 5,959,116
--------- ---------
Gross profit 3,918,231 2,661,602
--------- ---------
Operating expenses
Selling 1,425,016 1,095,725
General and administrative 1,160,650 486,931
Depreciation and amortization 411,294 348,884
Interest expense 409,013 196,654
--------- ---------
3,405,973 2,128,194
--------- ---------
Earnings before income taxes 512,258 533,408
Income taxes 117,955 153,319
--------- ---------
Net Earnings 394,303 380,089
========= =========
Net earnings per common share, basic and diluted 0.14 0.14
========= =========
Weighted average number of common shares
outstanding 2,795,000 2,795,000
========= =========
The accompanying notes are an integral part of these
consolidated financial statements.
5
DECTRON INTERNATIONALE INC.
Interim Consolidated Statements of Cash Flows
For the Nine Months Ended October 31, 2000 and 1999
(Amounts Expressed in United States Dollars)
Nine Months Nine Months
Ended Ended
October 31, October 31,
2000 1999
----------- -----------
$ $
Cash flows from operating activities:
Net earnings 929,178 1,233,972
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 1,158,298 875,031
Increase in accounts receivable (1,287,721) (2,412,247)
Increase in income taxes receivable (42,589) -
Increase in inventory (1,520,874) (1,473,424)
(Increase) decrease in prepaid expenses and sundry
assets 104,478 (858,920)
Increase in accounts payable and accrued expenses 1,033,346 987,146
Increase (decrease) in income taxes payable (64,013) (1,649)
Increase in deferred revenue 358,402 143,527
(Increase) decrease in deferred income taxes (345,325) 11,503
----------- ----------
Net cash provided by (used in) operating activities 323,180 (1,495,061)
----------- -----------
The accompanying notes are an integral part of these
consolidated financial statements.
6
DECTRON INTERNATIONALE INC.
Interim Consolidated Statements of Cash Flows
For the Nine Months Ended October 31, 2000 and 1999
(Amounts Expressed in United States Dollars)
Nine Months Nine Months
Ended Ended
October 31, October 31,
2000 1999
----------- -----------
$ $
Cash flows from investing activities:
Acquisition of property, plant and equipment (4,525,198) (3,732,886)
Deposit on building 1,000,000 -
Acquisition of patents and trademarks (52,209) (100,000)
Acquisition of Goodwill (89,721) -
----------- -----------
Net cash used in investing activities (3,667,128) (3,832,886)
Cash flows from financing activities:
Repayments from (advances to) loans receivable (105,376) (14,682)
Advances from bank loans 1,393,681 1,819,670
Repayments of notes payable - (415,166)
Advance from note payable to bank - 4,000,000
Repayments of other loan payable - (64,553)
Advances from long-term debt 2,830,531 113,319
Repayments of due to director (37,304) -
Advances from (repayments of) loan payable (26,367) -
----------- -----------
Net cash provided by financing activities 4,055,165 5,438,588
Effect of foreign currency exchange rate changes (631,171) (136,173)
----------- -----------
The accompanying notes are an integral part of these
consolidated financial statements.
7
DECTRON INTERNATIONALE INC.
Interim Consolidated Statements of Cash Flows
For the Nine Months Ended October 31, 2000 and 1999
(Amounts Expressed in United States Dollars)
Nine Months Nine Months
Ended Ended
October 31, October 31,
2000 1999
----------- -----------
$ $
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 80,046 (25,532)
Cash and cash equivalents, beginning of year 220,562 389,702
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD 300,608 364,170
======= =======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid 889,614 248,279
======= =======
Income taxes paid 652,393 613,075
======= =======
The accompanying notes are an integral part of these
consolidated financial statements.
8
DECTRON INTERNATIONALE INC.
Interim Consolidated Statements of Cash Flows
For the Nine Months Ended October 31, 2000 and 1999
(Amounts Expressed in United States Dollars)
Capital Stock Cumulative Other
------------------------------- Retained Comprehensive Treasury
Number Amount Earnings Income Stock
------------- ---------------- ------------ ------------- --------
$ $ $
Balance January 31, 1998 91,267 1,934,695 617,580 (94,777) -
Redemption of shares (91,267) (1,934,695) - - -
Issuance of common shares 2,795,000 8,421,450 - - -
Cost of issuance - (1,553,921) - - -
Foreign currency translation - - - 27,110 -
Net earnings for the year - - 1,129,181 - -
--------- --------- --------- ---------- --------
Balance January 31, 1999 2,795,000 6,867,529 1,746,761 (67,667) -
========= ========= ========= ========= =========
Purchase of 20,000 common shares - - - - (88,780)
Share purchase plan receivable - (499,946) - - -
Deferred tax benefit - 482,026 - - -
Foreign currency translation - - - 356,788 -
Net earnings for the year - - 1,126,763 - -
--------- --------- --------- -------- -------
Balance January 31, 2000 2,795,000 6,849,609 2,873,524 289,121 (88,780)
========= ========= ========= ========= =========
Net earnings for the period ended
October 31, 2000 - - 929,178 - -
Foreign currency translation - - - (631,171) -
--------- --------- --------- -------- -------
Balance October 31, 2000 2,795,000 6,849,609 3,802,702 (342,050) (88,780)
========= ========= ========= ========= =========
9
DECTRON INTERNATIONALE INC.
Notes to Interim Consolidated Financial Statements
As at October 31, 2000 and January 31, 2000
(Amounts Expressed in United States Dollars)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a) Basis of Consolidated Financial Statements Presentation
These consolidated financial statements include the accounts of
Dectron Internationale Inc., Dectron Inc. Consolidated and
Circul-aire Group.
Dectron Inc. Consolidated is comprised of Dectron Inc. and of its
wholly-owned subsidiaries, Refplus Inc., Thermoplus Air Inc., Fiber
Mobile Ltd., Dectron U.S.A. Inc., Le Groupe Prodapec 2000 Inc. and
IPAC 2000 Inc.
Circul-aire Group is comprised of 9048-3140 Quebec Inc. and Cascade
Technologies Inc., and of its wholly-owned subsidiaries, PM Wright
Ltd., Purafil Canada Inc. and 122248 Canada Inc.
All inter-company profits, transactions and account balances have
been eliminated.
b) Foreign Currency Translation
The company maintains its books and records in Canadian dollars.
The operations of the company's subsidiary in the United States is
an integrated corporation. As a result, monetary assets and
liabilities in foreign currency are translated into Canadian
dollars at exchange rates in effect at the balance sheet date,
whereas non-monetary assets and liabilities are translated at the
average exchange rates in effect at transaction dates. Revenues and
expenses in foreign currency are translated at the average rate
effective during the year with the exception of depreciation, which
is translated at the historical rate. Gains and losses resulting
from the translation of foreign currency transactions are included
in earnings.
The translation of the financial statements from Canadian dollars
("CDN $") into United States dollars is performed for the convenience
of the reader. Balance sheet accounts are translated using closing
exchange rates in effect at the balance sheet date and income and
expense accounts are translated using an average exchange rate
prevailing during each reporting period. No representation is made that
the Canadian dollar amounts could have been, or could be, converted
into United States dollars at the rates on the respective dates and or
at any other certain rates. Adjustments resulting from the translation
are included in the accumulated other comprehensive income in
stockholder's equity.
10
DECTRON INTERNATIONALE INC.
Notes to Interim Consolidated Financial Statements
As at October 31, 2000 and January 31, 2000
(Amounts Expressed in United States Dollars)
2. SEGMENTED INFORMATION
October 31, October 31,
2000 1999
$ $
----------- -----------
a) The breakdown of sales by geographic area is as
follows:
Canada 8,546,297 8,438,300
United States of America 17,995,219 11,756,462
International 2,088,172 2,708,950
---------- ----------
28,629,688 22,903,712
========== ==========
b) The breakdown of identifiable assets by
geographic area is as follows:
October 31, October 31,
2000 1999
$ $
Canada 25,270,904 23,472,901
United States 8,424,120 4,253,727
---------- ----------
33,695,024 27,726,628
========== ==========
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto and the other historical financial
information of Dectron Internationale Inc. contained elsewhere in this Form
10-QSB. The statements contained in this Form 10-QSB that are not historical and
are forward looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the Exchange Act of 1934,
including statements regarding Dectron Internationale Inc. expectations,
intentions, beliefs or strategies regarding the future. Forward-looking
statements include Dectron Internationale, Inc.'s statements regarding
liquidity, anticipated cash needs and availability and anticipated expense
levels. All forward-looking statements included in this Form 10-QSB are based on
information available to Dectron Internationale Inc. on the date hereof, and
Dectron Internationale, Inc. assumes no obligation to update any such
forward-looking statement. It is important to note that Dectron Internationale,
Inc.'s actual results could differ materially from those in such forward-looking
statements. All dollar amounts stated throughout this Form-10QSB are in US
dollars unless otherwise indicated.
Results of Operations
Nine month period ended October 31, 2000 compared to Nine month period ended
October 31, 1999.
Revenues for the nine month period ended October 31, 2000 were
$28,629,688, a 25% increase over prior year revenues of $22,903,712. A major
part of this increase is due to the consolidation of the Company's newly
acquired division, Ipac 2000 Inc.
Gross profit increased by $2,829,185 to $9,976,459 over the same period
in 1999. This represents an increase of 3.64%, expressed in relation to sales.
Gross profit increased by 39.58% compared to an increase in sales of 25.0% for
the nine month period ended October 31, 2000.
Selling expenses increased by $1,150,939 for the nine month period
ended October 31, 2000 from $2,830,670 to $3,981,609. This increase reflects the
costs of integrating Ipac's sales and marketing personnel and related expenses
into the Company's results. As a percentage of revenues, selling expenses
increased from 12.36% to 13.91% during the nine months ended October 31, 2000.
General and administrative expenses increased by $1,097,099 from
$1,284,465 to $2,381,564. As a percentage of revenues, general and
administrative increased from 5.61% to 8.32%. This increase reflects the costs
of integrating Ipac's general and administrative expenses in the Company's
results.
Depreciation and amortization expenses increased by $289,399 from
$868,899 to $1,158,298. As a percentage of revenues, depreciation and
amortization expenses increased from 3.79% to 4.05%
Financing expenses increased by $784,203 from $370,417 to $1,154,620.
As a percentage of revenues, financing expenses increased from 1.62% to 4.03%.
This increase is due to new financing following the acquisition of Ipac 2000
Inc. and of new equipment in most of the Company's major divisions.
Earnings before income taxes were $1,300,368, a decrease of $492,455
compared to the nine
12
month period ended October 31, 1999. Relative to sales, earnings before income
taxes decreased from 7.83% for the nine month period ended October 31, 1999 to
4.54% in the nine month period ended October 31, 2000.
Provisions for Income taxes as a percentage of taxable earnings
decreased from 31.17% for the nine month period ended October 31, 1999 to 29.54%
for 2000. Income tax expenses decreased by $187,661 mainly because of the
decrease in taxable income.
As a result of the above factors, the Company's net earnings decreased
from $1,233,972 to $929,178 a decrease of 29.7%.
Three month period ended October 31, 2000 compared to Three month period ended
October 31, 1999.
Revenues for the three month period ended October 31, 2000 were
$9,407,507, a 9.13% increase over revenues of $8,620,718 for the comparable
prior year period.
Gross profit increased by $1,256,629 to $3,918,231 over the same
period. This represents an increase of 10.78%, expressed in relation to sales.
Gross profit increased by 47.21% compared to an increase in sales of 9.13%.
Selling expenses increased $329,291 in the three month period ended
October 31, 2000. This increase reflects the costs of integrating Ipac's sales
and marketing personnel and related expenses into the Company's results. As a
percentage of revenues, selling expenses increased from 12.71% to 15.15%.
General and administrative expenses increased by $673,719 to
$1,160,650. As a percentage of revenues, general and administrative expenses
increased from 5.65% to 12.34%. These increases reflect the costs of integrating
Ipac's general and administrative expenses in the Company's results.
Depreciation and amortization expenses increased by $62,410 from
$348,884 to $411,284. As a percentage of revenues, depreciation and amortization
expenses slightly increased from 4.05% to 4.37%
Financing expenses increased by $212,359 from $196,654 to $409,013. As
a percentage of revenues, financing expenses increased from 2.28% to 4.35%. This
increase is due to new financing following the acquisition of Ipac 2000 Inc. and
of new equipment in most of our major divisions.
Earnings before income taxes were $512,258, a decrease of $21,150,
compared to the three month period ended October 31, 1999. Relative to sales,
income before income taxes decreased from 6.19% for the three month period ended
October 31, 1999 to 5.45% in the three month period ended October 31, 2000.
Provision for Income taxes as a percentage of taxable earnings
decreased from 28.74% for the three month period ended October 31, 1999 to
23.03% for 2000. Income tax expenses decreased by $35,364 because of the
decrease in taxable income.
13
As a result of the above factors, the Company's net earnings increased
from $380,089 to $394,303, an increase of 3.74%.
Liquidity and Capital Resources
The Company had a positive net change in cash of $80,046 for the nine
month period ended October 31, 2000. The principal sources of cash were net
earnings in the amount of $929,178, an increase in accounts payables in the
amount of $1,033,346, advances of bank loans in the amount of $1,393,681,
advances from long- term debt of $2,830,531 and depreciation and amortization of
$1,158,298. Principal uses of cash were an increase in accounts receivable in
the amount of $1,287,721, acquisition of assets in the amount of $4,525,198 and
an increase in inventory in the amount of $1,520,874.
The Company had a slightly negative net change in cash of $25,532 for
the nine month period ended October 31, 1999. The principal sources of cash were
net earnings of $1,233,972, advances of bank loans in the amount of $1,819,670,
an increase in notes payable of $4,000,000, depreciation and amortization of
$875,031. Principal uses of cash were the acquisition of assets for $3,832,886,
an increase in accounts receivable in the amount of $2,412,247 an increase in
inventory in the amount of $1,473,424 and an increase of $858,920 in prepaid and
sundry assets.
As at October 31, 2000, the Company had an aggregated line of credit of
$13,000,000 CDN, of which $7,009,848 U.S. was outstanding, bearing interest at
Cdn prime plus .25% with the National Bank of Canada.
14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K.
The Company did not file any reports on Form 8-K during the three-month
period ended October 31, 2000.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
DECTRON INTERNATIONALE INC.
Dated: December 15, 2000 By: /s/ Mauro Parissi
----------------------------
Mauro Parissi
Chief Financial Officer and Secretary
15