SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-QSB
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For The Quarter Ended April 30, 2002 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 For The Transition Period from _______to_______
Commission File Number 1-14503
DECTRON INTERNATIONALE INC.
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(Exact name of registrant as specified in its charter)
Quebec, Canada N/A
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4300 Poirier Blvd., Montreal H4R 2C5
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 514-334 9609
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 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 [ ]
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: June 12, 2002, 2,795,000
Common Shares outstanding
Transitional Small Business Disclosure (check One):
Yes [ ] No [ X ]
DECTRON INTERNATIONALE INC.
INDEX
PAGE
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PART I - FINANCIAL INFORMATION
Item 1- Financial Statements
Interim Consolidated Balance Sheets - at April 30, 2002 and January 31, 2002 ................................ 2-3
Interim Consolidated Statements of Earnings - For the three months ended
April 30, 2002 and the three months ended April 30, 2001 .................................................... 4
Interim Consolidated Statements of Cash Flows - For the three months ended
April 30, 2002 and three months ended April 30, 2001......................................................... 5-7
Interim Consolidated Statements of Stockholders' Equity...................................................... 8
Notes to Interim Financial Statements........................................................................ 9-10
Item 2 - Management's Discussion and Analysis of Financial
Conditions and Results of Operations.............................................................. 11-12
SIGNATURES................................................................................................... 13
Item 1. Financial Statements
DECTRON INTERNATIONALE INC.
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AS AT APRIL 30, 2002
TABLE OF CONTENTS
Interim Consolidated Balance Sheets 2 - 3
Interim Consolidated Statements of Earnings 4
Interim Consolidated Statements of Cash Flows 5 - 7
Interim Consolidated Statements of Stockholders' Equity 8
Notes to Consolidated Financial Statements 9 - 10
DECTRON INTERNATIONALE INC.
Interim Consolidated Balance Sheets
As at April 30, 2002 and January 31, 2002
(Amounts Expressed in United States Dollars) Page 2
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April 30, January 31,
2002 2002
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Assets
Current
Cash $ 371,148 $ 86,727
Accounts receivable 9,922,098 8,056,304
Income taxes receivable -- 58,313
Inventory 9,328,522 9,186,114
Prepaid expenses and sundry assets 780,458 555,327
Deferred income taxes 46,546 46,546
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20,448,772 17,989,331
Loans receivable 423,097 517,164
Property, plant and equipment 9,654,077 9,804,587
Intangibles 134,735 139,048
Goodwill 1,314,511 1,298,942
Deferred income taxes 812,333 811,566
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$ 32,787,525 $ 30,560,638
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DECTRON INTERNATIONALE INC.
Interim Consolidated Balance Sheets
As at April 30, 2002 and January 31, 2002
(Amounts Expressed in United States Dollars) Page 3
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April 30, January 31,
2002 2002
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Liabilities
Current
Bank loans $ 9,498,684 $ 8,326,166
Accounts payable and accrued expenses 5,048,991 4,341,533
Current portion of long-term debt 955,219 1,336,058
Income tax payable 48,039 --
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15,550,933 14,003,757
Long-term debt 5,444,273 5,170,364
Loan payable 194,071 192,355
Deferred revenue 1,400,560 1,343,816
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22,589,837 20,710,292
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Stockholders' equity
Capital stock 6,752,933 6,752,933
Treasury stock (88,780) (88,780)
Accumulated other comprehensive loss (470,927) (591,822)
Retained earnings 4,004,462 3,778,015
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10,197,688 9,850,346
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Total liabilities and stockholders' equity $ 32,787,525 $ 30,560,638
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DECTRON INTERNATIONALE INC.
Interim Consolidated Statements of Earnings
For the Three Month Period Ended April 30, 2002 and April 30, 2001
(Amounts Expressed in United States Dollars) Page 4
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Three Three
Months Months
Ended Ended
April 30, April 30,
2002 2001
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Net Sales $ 9,049,105 $ 9,639,831
Cost of sales 6,237,956 6,278,006
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Gross profit 2,811,149 3,361,825
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Operating expenses
Selling 1,142,851 1,303,430
General and administrative 751,299 791,640
Depreciation and amortization 316,708 379,989
Interest expense 285,781 419,611
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2,496,639 2,894,670
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Income before income taxes 314,510 467,155
Income taxes 88,063 58,394
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Net Income $ 226,447 $ 408,761
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Net earnings per common share, basic and diluted 0.08 0.15
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Weighted average number of common shares outstanding 2,795,000 2,795,000
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DECTRON INTERNATIONALE INC.
Interim Consolidated Statements of Cash Flows
For the Three Month Period Ending April 30, 2002 and April 30, 2001
(Amounts Expressed in United States Dollars) Page 5
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Three Three
Months Months
Ended Ended
April 30, April 30,
2002 2001
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Cash flows from operation activities:
Net Income $ 226,447 $ 408,761
Adjustments to reconcile net income to net cash (used in) provided by
operating activities:
Depreciation and amortization 316,708 379,989
Increase in accounts receivable (1,865,794) (2,422,804)
Decrease in income taxes receivables 58,313 11,359
Decrease (increase) in inventory 142,408 (25,496)
Increase in prepaid expenses and sundry assets (225,131) (145,153)
Increase in accounts payable and accrued expenses 707,458 1,019,672
Increase in income taxes payable 48,039 --
Increase in deferred revenue 56,744 242,455
Increase in deferred income taxes -- 15,928
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Net cash used in operating activities (534,808) (515,289)
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DECTRON INTERNATIONALE INC.
Interim Consolidated Statements of Cash Flows
For the Three Month Period Ending April 30, 2002 and April 30, 2001
(Amounts Expressed in United States Dollars) Page 6
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Three Three
Months Months
Ended Ended
April 30, April 30,
2002 2001
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Cash Flows from investing activities:
Acquisition of property, plant and equipment (19,995) --
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Net cash used in investing activities (19,995) --
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Cash flows from financing activities
Repayments from share purchase plan -- 106,394
Repayments from directors -- (14,020)
Repayments from loan receivable 94,067 6,402
Advances from bank loans 1,172,518 1,006,602
Repayments of notes payables -- (83,394)
Advances from (repayments of) long-term debt (106,930) (113,504)
Advances from (repayments of) loan payable -- 45,726
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Net cash provided by financing activities 1,159,655 954,206
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Effect of foreign currency exchange rate changes (320,431) (282,336)
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DECTRON INTERNATIONALE INC.
Interim Consolidated Statements of Cash Flows
For the Three Month Period Ending April 30, 2002 and April 30, 2001
(Amounts Expressed in United States Dollars) Page 7
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Three Three
Months Months
Ended Ended
April 30, April 30,
2002 2001
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NET INCREASE IN CASH AND CASH EQUIVALENTS 284,421 156,581
Cash and cash equivalents, beginning of period 86,727 145,448
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 371,148 $ 302,029
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 167,862 $ 290,270
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Income taxes paid $ 32,044 $ 208,449
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DECTRON INTERNATIONALE INC.
Interim Consolidated Statements of Stockholders' Equity
For the Three Month Period Ending April 30, 2002
(Amounts Expressed in United States Dollars) Page 8
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Cumulative Other
Retained Comprehensive Treasury
Number Amount Earnings Income Stock
--------------- --------------- --------------- --------------- ---------------
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 income for the year -- -- 1,126,763 -- --
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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 income for the year -- -- 857,426 -- --
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Balance January 31, 2001 2,795,000 $ 6,718,510 $ 3,730,950 $ (14,735) $ (88,780)
=============== =============== =============== =============== ===============
Share purchase plan
receivable -- $ 34,423 $ -- $ -- $ --
Foreign currency translation -- -- -- (577,087) --
Net income for the year -- -- 47,065 -- --
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Balance January 31, 2002 2,795,000 $ 6,752,933 $ 3,778,015 $ (591,822) $ (88,780)
=============== =============== =============== =============== ===============
Share purchase plan
receivable -- -- $ -- $ -- $ --
Foreign currency translation -- -- -- 120,895 --
Net income for the period -- -- 226,447 -- --
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Balance April 30, 2002 2,795,000 $ 6,752,933 $ 4,004,462 $ (470,927) $ (88,780)
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DECTRON INTERNATIONALE INC.
Notes to Interim Consolidated Financial Statements
As at April 30, 2002 and January 31, 2002
(Amounts Expressed in United States Dollars) Page 9
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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., Dectron U.S.A. Inc., and IPAC 2000 Inc. As of February
1, 2002, Fiber Mobile Ltd. and Le Groupe Prodapec (2000)
Inc. were wound up into Dectron Inc.
Circul-aire Group is comprised of Cascade Technologies
Inc., and of its wholly-owned subsidiaries, PM Wright Ltd.,
and Purafil Canada Inc. As of February 1, 2002, 9048-3140
Quebec Inc. was wound up into Dectron Internationale Inc. and
122248 Canada Inc. was wound up into Cascade Technologies 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 operation 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. Income and expenses in foreign
currency are translated at the average rate effective during
the year with the exception of depreciation and amortization,
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 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.
DECTRON INTERNATIONALE INC.
Notes to Interim Consolidated Financial Statements
As at April 30, 2002 and January 31,2001
(Amounts Expressed in United States Dollars) Page 10
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2. SEGMENTED INFORMATION
April 30, April 30,
2002 2001
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a) The breakdown of sales by geographic area is as follows:
Canada $ 3,198,507 $ 2,691,290
United States of America 5,558,524 6,188,264
International 292,074 760,277
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$ 9,049,105 $ 9,639,831
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b) The breakdown of identifiable assets by geographic area is as
follows:
Canada $ 23,691,714 $ 28,247,860
United States 9,095,811 9,076,412
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$ 32,787,525 $ 37,324,272
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ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Results of Operations
Three-month period ended April 30, 2002 compared to three-month period ended
April 30, 2001.
Revenues for the three-month period ended April 30, 2002 were
$9,049,105, a 6.1% decrease over prior year revenues of $9,639,831.
Gross profit decreased by $550,676 to $2,811,149 over the same period.
This represents a decrease of 3.8%, expressed in relation to sales.
Selling and marketing expenses decreased by $160,579 in the three-month
period ended April 30, 2002. As a percentage of revenues, selling and marketing
expenses decreased from 13.5% to 12.6%.
General and administrative expenses decreased by $40,341 from $791,640
to $751,299. As a percentage of revenues, general and administrative expenses
increased from 8.2% to 8.3%.
Amortization expenses decreased by $63,281 from $379,989 to $316,708.
As a percentage of revenues, amortization expenses decreased from 3.9% to 3.5%
of sales.
Financing expenses decreased by $133,830 from $419,611 to $285,781. As
a percentage of revenues, financing expenses decreased from 4.3% to 3.1%
Income before income taxes was $314,510 a decrease of $152,645 compared
to the three-month period ended April 30, 2001. Relative to sales, income before
income taxes decreased from 4.9% for the three month period ended April 30, 2001
to 3.5% in the three month period ended April 30, 2002.
Provisions for Income tax expenses as a percentage of taxable income
increased from 12.5% for the 3 month period ended April 30, 2001 to 28% for
2002. Tax expenses increased by $29,669.
As a result of the above factors, the Company's net income decreased
from $408,761 to $226,447 an decrease of 44.6%.
Three-month period ended April 30, 2001 compared to three-month period ended
April 30, 2000.
Revenues for the three-month period ended April 30, 2001 were
$9,639,831, a 11.8% increase over prior year revenues of $8,626,887.
Gross profit increased by $471,148 to $3,361,825 over the same period.
This represents an increase of 1.4%, expressed in relation to sales. Due to low
manufacturing costs, gross profit increased by 16.3% compared to an increase in
sales of 11.8%.
Selling and marketing expenses decreased by $13,731 in the three-month
period ended April 30, 2001. As a percentage of revenues, selling and marketing
expenses decreased from 15.2% to 13.5%.
General and administrative expenses increased by $205,604 from $586,036
to $791,640. As a percentage of revenues, general and administrative increased
from 6.8% to 8.2%.
Amortization expenses increased by $39,328 from $340,661 to $379,989.
As a percentage of revenues, amortization expenses remained stable at 3.9%
Financing expenses increased by $122,403 from $297,208 to $419,611. As
a percentage of revenues, financing expenses increased from 3.4% to 4.3%
Income before income taxes was $467,155 an increase of $117,544
compared to the three-month period ended April 30, 2000. Relative to sales,
income before income taxes increased from 4.1% for the three-month period ended
April 30, 2000 to 4.9% in the three month period ended April 30, 2001.
Provisions for Income tax expenses as a percentage of taxable income
decreased from 29.7% for the 3 month period ended April 30, 2000 to 12.5% for
2001. Tax expenses decreased by $45,315.
As a result of the above factors, the Company's net income increased
from $245,902 to $408,761 an increase of 66.2%.
Liquidity and Capital Resources
The Company had a positive net change in cash of $284,421 for the
three-month period ended April 30, 2002. The principal sources of cash were
advances from bank loans in the amount of $1,172,518 and an increase of accounts
payable in the amount of $707,458. The principal use of cash was an increase in
account receivable in the amount of $1,865,794.
The Company had a positive net change in cash of $156,581 for the
three-month period ended April 30, 2001. The principal sources of cash were an
increase of accounts payable in the amount of $1,019,672 and advances from bank
loans in the amount of $1,006,602. The principal use of cash was an increase in
account receivable in the amount of $2,422,804.
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.
June 14, 2002 By: /s/ Mauro Parissi
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Mauro Parissi
Chief Financial Officer and Secretary