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, 2001
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 December 13, 2001 was 2,795,000 shares.
Transitional Small Business Disclosure Format (check one):
Yes |_| No |X|
DECTRON INTERNATIONALE INC.
QUARTERLY REPORT ON FORM 10-QSB
OCTOBER 31, 2001
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
PART I - FINANCIAL INFORMATION
Page Number
Item 1. Financial Statements
Interim Consolidated Balance Sheets as of October 31, 2001 and January 31, 2001............... 3
Interim Consolidated Statements of Earnings
for the nine months ended October 31, 2001 and 2000......................................... 5
Interim Consolidated Statements of Earnings
for the three months ended October 31, 2001 and 2000........................................ 6
Interim Consolidated Statements of Cash Flows
for the nine months ended October 31, 2001 and 2000......................................... 7
Interim Consolidated Statements of Stockholders' Equity
for the nine months ended October 31, 2001 and 2000......................................... 10
Notes to Interim Consolidated Financial Statements............................................ 11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations....................................................................... 13
2
DECTRON INTERNATIONALE INC.
Interim Consolidated Balance Sheets
As at October 31, 2001 and January 31, 2001
(Amounts Expressed in United States Dollars)
October 31, January 31,
2001 2001
$ $
ASSETS
Cash 164,884 145,448
Accounts receivable 12,593,240 9,546,216
Income taxes receivable 159,073 352,323
Inventory 10,907,601 10,699,326
Prepaid expenses and sundry assets 751,216 766,318
Deferred income taxes 18,870 9,465
--------------- ---------------
24,594,884 21,519,096
Loans receivable 502,236 388,261
Property, plant and equipment 9,944,851 11,074,016
Intangibles 154,325 115,610
Goodwill 1,341,428 1,584,997
Deferred income taxes 639,761 478,005
--------------- ---------------
37,177,485 35,159,985
=============== ===============
3
DECTRON INTERNATIONALE INC.
Interim Consolidated Balance Sheets
As at October 31, 2001 and January 31, 2001
(Amounts Expressed in United States Dollars)
October 31, January 31,
2001 2001
$ $
LIABILITIES
Bank loans 9,654,194 8,333,669
Accounts payable and accrued expenses 7,219,920 7,172,312
Current portion of long-term debt 1,058,195 1,080,412
Current portion of deferred revenue 248,858 263,767
Note payable -- 83,394
--------------- ---------------
18,181,167 16,933,554
Long-term debt 5,767,924 6,722,601
Due to director -- 14,020
Loan payable 235,421 198,723
Deferred revenue 1,869,609 945,142
--------------- ---------------
26,054,121 24,814,040
--------------- ---------------
STOCKHOLDERS' EQUITY
Capital stock 6,824,904 6,718,510
Treasury Stock (88,780) (88,780)
Accumulated other comprehensive income (669,810) (14,735)
Retained earnings 5,057,050 3,730,950
--------------- ---------------
11,123,364 10,345,945
--------------- ---------------
Total liabilities and stockholders' equity 37,177,485 35,159,985
=============== ===============
The accompanying notes are an integral part of these
consolidated financial statements.
4
DECTRON INTERNATIONALE INC.
Interim Consolidated Statements of Earnings
For the Nine Month Period Ended October 31, 2001 and 2000
(Amounts Expressed in United States Dollars)
Nine Nine
Months Months
Ended Ended
October 31, October 31,
2001 2000
$ $
Net sales 28,299,060 28,629,688
Cost of sales 18,159,308 18,653,229
--------------- ---------------
Gross profit 10,139,752 9,976,459
--------------- ---------------
Operating expenses
Selling 3,886,551 3,981,609
General and administrative 2,418,703 2,381,564
Depreciation and amortization 1,148,136 1,158,298
Interest expense 1,170,819 1,154,620
--------------- ---------------
8,624,209 8,676,091
--------------- ---------------
Earnings before income taxes 1,515,543 1,300,368
Income taxes 189,443 371,190
--------------- ---------------
Net Earnings 1,326,100 929,178
=============== ===============
Net earnings per common share, basic and diluted 0.47 0.33
=============== ===============
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 Earnings
For the Three Month Period Ended October 31, 2001 and 2000
(Amounts Expressed in United States Dollars)
Three Three
Months Months
Ended Ended
October 31, October 31,
2001 2000
$ $
Net sales 9,965,921 9,407,507
Cost of sales 6,366,345 5,489,276
--------------- ---------------
Gross profit 3,599,576 3,918,231
--------------- ---------------
Operating expenses
Selling 1,299,141 1,425,016
General and administrative 972,287 1,160,650
Depreciation and amortization 374,952 411,294
Interest expense 349,722 409,013
--------------- ---------------
2,996,102 3,405,973
--------------- ---------------
Earnings before income taxes 603,474 512,258
Income taxes 75,351 117,955
--------------- ---------------
Net Earnings 528,123 394,303
=============== ===============
Net earnings per common share, basic and diluted 0.19 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.
6
DECTRON INTERNATIONALE INC.
Interim Consolidated Statements of Cash Flows
For the Nine Month Period Ending October 31, 2001 and 2000
(Amounts Expressed in United States Dollars)
Nine Nine
Months Months
Ended Ended
October 31, October 31,
2001 2000
$ $
Cash flows from operating activities:
Net earnings 1,326,100 929,178
Adjustments to reconcile net income to net cash used in operating
activities:
Depreciation and amortization 1,148,136 1,158,298
Increase in accounts receivable (3,047,024) (1,287,721)
Decrease (increase) in taxes receivables 193,250 (42,589)
Increase in inventory (208,275) (1,520,874)
Decrease in prepaid expenses and sundry assets 15,102 104,478
Increase in accounts payable and accrued expenses 47,608 1,033,346
Decrease in income taxes payable -- (64,013)
Increase in deferred revenue 909,558 358,402
Increase (decrease) in deferred income taxes 171,161 (345,325)
--------------- ---------------
Net cash provided by operating activities 555,616 323,180
--------------- ---------------
7
DECTRON INTERNATIONALE INC.
Interim Consolidated Statements of Cash Flows
For the Nine Month Period Ending October 31, 2001 and 2000
(Amounts Expressed in United States Dollars)
Nine Nine
Months Months
Ended Ended
October 31, October 31,
2001 2000
$ $
Cash flows from investing activities:
Acquisition of property, plant and equipment (111,987) (4,525,198)
Deposit on building -- 1,000,000
Acquisition of patents and trademarks (44,152) (52,209)
Acquisition of goodwill -- (89,721)
--------------- ---------------
Net cash used in investing activities (156,139) (3,667,128)
Cash flows from financing activities:
Repayments from share purchase plan receivable 106,394 --
Advances to loans receivable (113,975) (105,376)
Advances from bank loans 1,320,525 1,393,681
Repayments of notes payable (83,394) --
Advances from (repayments of) long-term debt (976,894) 2,830,531
Repayments of due to directors (14,020) (37,304)
Advances from (repayments of) loan payable 36,398 (26,367)
--------------- ---------------
Net cash provided by financing activities 275,034 4,055,165
Effect of foreign currency exchange rate changes (655,075) (631,171)
--------------- ---------------
8
DECTRON INTERNATIONALE INC.
Interim Consolidated Statements of Cash Flows
For the Nine Month Period Ending October 31, 2001 and 2000
(Amounts Expressed in United States Dollars)
Nine Nine
Months Months
Ended Ended
October 31, October 31,
2001 2000
$ $
NET INCREASE IN CASH AND
CASH EQUIVALENTS 19,436 80,046
Cash and cash equivalents, beginning of period 145,448 220,562
--------------- ---------------
CASH AND CASH EQUIVALENTS, END OF PERIOD 164,884 300,608
=============== ===============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Interest paid 901,751 889,614
=============== ===============
Income taxes paid 413,829 652,393
=============== ===============
The accompanying notes are an integral part of these
consolidated financial statements.
9
DECTRON INTERNATIONALE INC.
Consolidated Statements of Stockholders' Equity
As at October 31, 2001 and January 31, 2001
(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)
============ ============ ============ ============ ============
Share Purchase Plan Receivable (131,099)
Foreign Currency translation (303,856)
Net earnings for the year 857,426
============ ============ ============ ============ ============
Balance, January 31, 2001 2,795,000 6,718,510 3,730,950 (14,735) (88,780)
============ ============ ============ ============ ============
Share Purchase Plan Receivable 106,394
Foreign Currency translation (655,075)
Net earnings for the period 1,326,100
============ ============ ============ ============ ============
Balance, October 31, 2001 2,795,000 6,824,904 5,057,050 (669,810) (88,780)
============ ============ ============ ============ ============
The accompanying notes are an integral part of these
consolidated financial statements.
10
DECTRON INTERNATIONALE INC.
Notes to Interim Consolidated Financial Statements
As at October 31, 2001, January 31, 2001 and October 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.
11
DECTRON INTERNATIONALE INC.
Notes to Interim Consolidated Financial Statements
As at October 31, 2001, January 31, 2001 and October 31, 2000
(Amounts Expressed in United States Dollars)
2. SEGMENTED INFORMATION
October 31, October 31,
2001 2000
$ $
a) The breakdown of sales by geographic area is as
follows:
Canada 6,785,368 8,546,297
United States of America 19,899,044 17,995,219
International 1,614,648 2,088,172
--------------- ---------------
28,299,060 28,629,688
=============== ===============
b) The breakdown of identifiable assets by
geographic area is as follows:
October 31, October 31,
2001 2000
$ $
Canada 28,232,834 25,270,904
United States 8,944,651 8,424,120
--------------- ---------------
37,177,485 33,695,024
=============== ===============
12
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, 2001 compared to Nine month period ended
October 31, 2000.
Revenues for the nine month period ended October 31, 2001 were
$28,299,060 a 1.15% decrease over the nine month period ended October 31, 2000
of $28,629,688.
Gross profit increased for the nine month period ended October 31, 2001
by $163,293 to $10,139,752 over the same period in 2000. This represents an
increase of 0.98%, expressed in relation to sales.
Selling expenses decreased by $95,058 for the nine month period ended
October 31, 2001 from $3,981,609 to $3,886,551. As a percentage of revenues,
selling expenses decreased from 13.91% to 13.73% during the nine months ended
October 31, 2001.
General and administrative expenses increased by $37,139 from
$2,381,564 to $2,418,703. As a percentage of revenues, general and
administrative increased from 8.32% to 8.55%.
Depreciation and amortization expenses decreased by $10,162 from
$1,158,298 to $1,148,136. As a percentage of revenues, depreciation and
amortization expenses increased from 4.05% to 4.06%
Financing expenses increased by $16,199 from $1,154,620 to $1,170,819.
As a percentage of revenues, financing expenses increased from 4.03% to 4.14%.
Earnings before income taxes were of $1,515,543, an increase of
$215,175 compared to the nine month period ended October 31, 2000. Relative to
sales, earnings before income taxes increased from 4.54% for the nine month
period ended October 31, 2000 to 5.36% in the nine month period ended October
31, 2001.
Provision for Income taxes as a percentage of taxable earnings
decreased from 28.54% for the nine month ended October 31, 2000 to 12.5% for
2001. Tax expenses decreased by $181,747 because of the decrease in taxable
income.
As a result of the above factors, the Company's net earnings increased
from $929,178 to $1,326,100 an increase of $396,922 or 42.72%.
Three month period ended October 31, 2001 compared to Three month period ended
October 31, 2000.
Revenues for the three month period ended October 31, 2001 were
$9,965,921 a 5.94% increase over revenue for the three month period ended
October 31, 2000 of $9,407,707.
Gross profit decreased by $318,655 to $3,599,576 over the same period.
Gross profit decreased by 8.13% compared to an increase in sales of 5.94%.
13
Selling expenses decreased by $125,875 in the three month period ended
October 31, 2001. As a percentage of revenues, selling expenses decreased from
15.15% to 13.04%
General and administrative expenses decreased by $188,363 to $972,287.
As a percentage of revenues, general and administrative decreased from 12.34% to
9.76%.
Depreciation and amortization expenses decreased by $36,343 from
$411,294 to $374,952. As a percentage of revenues, depreciation and amortization
expenses decrease from 4.37% to 3.76%.
Financing expenses decreased by $59,291 from $409,013 to $349,722. As a
percentage of revenues, financing expenses decreased from 4.35% to 3.51%.
Earnings before income taxes were of $603,474, an increase of $91,216
compared to the three month period ended October 31, 2000. Relative to sales,
income before income taxes increased from 5.45% for the three month period ended
October 31, 2000 to 6.06% in the three month period ended October 31, 2001.
Provision for Income taxes as a percentage of taxable earnings
decreased from 23.03% for the three month period ended October 31, 2000 to
12.49% for the three month period ended October 31, 2001. Tax expenses decreased
by $42,604 because of a decrease in taxable income.
As a result of the above factors, the Company's net earnings increased
from $394,303 to $528,123, an increase of 33.94% .
Liquidity and Capital Resources
The Company had a positive net change in cash of $19,436 for the nine
month period ended October 31, 2001. The principal sources of cash were net
earnings in the amount of $1,326,100, advances of bank loans in the amount of
$1,320,525 and depreciation and amortization of $1,148,136. Principal uses of
cash were an increase in accounts receivable in the amount of $3,047,024 and
re-payments of long-term debt in the amount of $976,894.
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.
As at October 31, 2001, the Company had an aggregated line of credit
of $14,500,000 CDN, and $ 1,250,000 US of which $9,654,194 U.S. was outstanding,
bearing interest at Cdn prime plus .25% or .US prime plus 0.75% with the
National Bank of Canada.
14
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 13, 2001 By: /s/ Mauro Parissi
--------------------------------
Mauro Parissi
Chief Financial Officer
15