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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, 2003
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.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 22-2735672
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1245 Route 1 South, Edison, New Jersey 08837
--------------------------------------------
(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 [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b.2 of the Act).
Yes [ ] No [X]
As of August 12, 2003, 3,684,000 shares of the Registrant's common stock were
outstanding.
Part I - Financial Information
Item 1. Financial Statements (unaudited)
Joule Inc. And Subsidiaries
Consolidated Balance Sheets
(Unaudited)
June 30, September 30,
2003 2002
----------- -----------
ASSETS
- ------
CURRENT ASSETS:
Cash $ 313,000 $ 174,000
Accounts receivable, less allowance
for doubtful accounts of $405,000 at June 30
and $503,000 at September 30, respectively 7,363,000 8,954,000
Prepaid insurance 955,000 1,210,000
Prepaid expenses and other current assets 790,000 550,000
----------- -----------
Total Current Assets 9,421,000 10,888,000
PROPERTY AND EQUIPMENT, NET 3,881,000 4,269,000
GOODWILL 1,176,000 1,129,000
OTHER ASSETS 335,000 213,000
----------- -----------
Total Assets $14,813,000 $16,499,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Loans payable to bank $ 3,400,000 $ 3,980,000
Accounts payable and accrued expenses 1,164,000 1,719,000
Accrued payroll and related taxes 1,373,000 1,604,000
----------- -----------
Total Current Liabilities 5,937,000 7,303,000
CAPITAL LEASE OBLIGATIONS 113,000 184,000
DEFERRED COMPENSATION 137,000 74,000
----------- -----------
Total Liabilities 6,187,000 7,561,000
----------- -----------
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 3,828,000 shares 38,000 38,000
Additional paid-in capital 3,674,000 3,672,000
Retained earnings 5,296,000 5,610,000
----------- -----------
9,008,000 9,320,000
LESS: Cost of 144,000 shares of common stock held in treasury 382,000 382,000
----------- -----------
Total Stockholders' Equity 8,626,000 8,938,000
----------- -----------
Total Liabilities and Stockholders' Equity $14,813,000 $16,499,000
=========== ===========
See accompanying notes to consolidated financial statements.
2
Joule Inc. And Subsidiaries
Consolidated Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
--------------------------- ----------------------------
June 30, June 30, June 30, June 30,
2003 2002 2003 2002
------------ ------------ ------------ ------------
REVENUES $ 17,799,000 $ 17,439,000 $ 51,325,000 $ 54,232,000
------------ ------------ ------------ ------------
COSTS, EXPENSES AND OTHER:
Cost of services 14,390,000 14,163,000 41,711,000 43,726,000
Selling, general & administrative expenses 3,172,000 3,573,000 10,037,000 10,871,000
Interest expense 31,000 32,000 93,000 126,000
Interest income -- -- -- (6,000)
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES 206,000 (329,000) (516,000) (485,000)
INCOME TAX PROVISION (BENEFIT) 80,000 (135,000) (202,000) (216,000)
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 126,000 $ (194,000) $ (314,000) $ (269,000)
============ ============ ============ ============
BASIC AND DILUTED INCOME (LOSS) PER SHARE $ 0.03 $ (0.05) $ (0.09) $ (0.07)
============ ============ ============ ============
WEIGHTED AVERAGE COMMON SHARES
OUTSTANDING - BASIC 3,684,000 3,682,000 3,684,000 3,682,000
============ ============ ============ ============
WEIGHTED AVERAGE COMMON SHARES AND
COMMON EQUIVALENTS OUTSTANDING - DILUTED 3,685,000 3,682,000 3,684,000 3,682,000
============ ============ ============ ============
See accompanying notes to consolidated financial statements.
3
Joule Inc. And Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Nine Months Ended
--------------------------
June 30, June 30,
2003 2002
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (314,000) $ (269,000)
Adjustments to reconcile net loss to
net cash flows provided by (used in) operating
activities, net of business acquired:
Depreciation and amortization 684,000 704,000
Writeoffs of property and equipment 70,000 --
Changes in operating assets and liabilities:
Accounts receivable 1,591,000 3,549,000
Prepaid expenses and other assets (105,000) (850,000)
Accounts payable and accrued expenses (555,000) (705,000)
Accrued payroll and related taxes (231,000) (453,000)
Deferred compensation 63,000 66,000
----------- -----------
Net cash flows provided by operating activities 1,203,000 2,042,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment (342,000) (474,000)
Payment for business acquired, net of cash received (55,000) --
----------- -----------
Net cash flows used in investing activities (397,000) (474,000)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Decrease in loans payable to bank (580,000) (1,550,000)
Repayment of obligations under capital leases (87,000) (65,000)
----------- -----------
Net cash flows used in financing activities (667,000) (1,615,000)
----------- -----------
NET CHANGE IN CASH 139,000 (47,000)
CASH, BEGINNING OF PERIOD 174,000 251,000
----------- -----------
CASH, END OF PERIOD $ 313,000 $ 204,000
=========== ===========
SUPPLEMENTAL CASH FLOW INFORMATION
Interest paid $ 95,000 $ 141,000
=========== ===========
Income taxes paid $ 24,000 $ 97,000
=========== ===========
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTMENT AND FINANCING ACTIVITIES:
Capitalized vehicle leases $ 16,000 $ 39,000
=========== ===========
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 consolidated
financial statements are unaudited. Management believes all adjustments,
consisting only of normal and recurring adjustments, necessary to present fairly
the consolidated 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 the consolidated financial
statements have been omitted in accordance with accounting principles generally
accepted in the United States of America for interim financial statements and
the published rules and regulations of the Securities and Exchange Commission.
These unaudited consolidated financial statements should be read in conjunction
with the consolidated 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) In August 2001, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 143, "Accounting for
Asset Retirement Obligations", which addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs. SFAS No. 143 requires an
enterprise to record the fair value of an asset retirement obligation as a
liability in the period in which it incurs a legal obligation associated with
the retirement of tangible long-lived assets. Since the requirement is to
recognize the obligation when incurred, approaches that have been used in the
past to accrue the asset retirement obligation over the life of the asset are no
longer acceptable. SFAS No. 143 also requires the enterprise to record the
contra to the initial obligation as an increase to the carrying amount of the
related long-lived asset (i.e., the associated asset retirement costs) and to
depreciate that cost over the life of the asset. The liability is increased at
the end of each period to reflect the passage of time (i.e., accretion expense)
and changes in the estimated future cash flows underlying the initial fair value
measurement. The Company adopted SFAS No. 143 effective October 1, 2002 and it
had no effect on the consolidated financial statements.
(3) In October 2001, the FASB issued SFAS No. 144, "Accounting for
Impairment or Disposal of Long-Lived Assets", which addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
While SFAS No. 144 supersedes SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be disposed of", it retains many
of the fundamental provisions of that statement. SFAS No. 144 also supersedes
the accounting and reporting provisions of APB 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. However, it retains
the requirement in Opinion No. 30 to report separately discontinued operations
and extends that reporting to a component of an entity that either has been
disposed of (by sale, abandonment, or in distribution to owners) or is
classified as held for sale. The Company adopted SFAS No. 144 effective October
1, 2002 and it had no effect on the consolidated financial statements.
(4) In December 2002, the FASB issued SFAS No. 148, "Accounting for
Stock-Based Compensation - Transition and Disclosure" which amends SFAS No. 123,
"Accounting for Stock-Based Compensation" and APB Opinion No. 28, "Interim
Financial Reporting". SFAS No. 148 amends the disclosure provisions for SFAS No.
123 to require prominent disclosures about the method of accounting for
stock-based employee compensation and the effects on reported net income and
earnings per share. In addition, this statement amends APB Opinion No. 28,
"Interim Financial Reporting" to require disclosure about those effects in
interim financial information. The Company adopted SFAS No. 148 effective
January 1, 2003 and reports the following information concerning its stock-based
compensation plan for the three and nine months ended June 30, 2003 and 2002.
5
At June 30, 2003, the Company has two stock-based employee compensation plans,
which are described more fully in Note 5 to the Company's consolidated financial
statements included in Form 10-K for the fiscal year ended September 30, 2002.
The Company accounts for those plans under the recognition and measurement
principles of APB Opinion No. 25, "Accounting for Stock Issued to Employees,"
and related interpretations. No stock-based employee and director compensation
cost is reflected in net income (loss) as all options granted under those plans
had an exercise price equal to the fair value of the underlying common stock on
the date of grant. The following table illustrates the effect on net income
(loss) and income (loss) per share as if the Company had applied the fair value
recognition provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation", to stock-based employee compensation.
Three Months Ended Nine Months Ended
June 30, June 30,
------------------------- --------------------------
2003 2002 2003 2002
----------- ----------- ----------- -----------
Net income (loss) as reported $ 126,000 $ (194,000) $ (314,000) (269,000)
Deduct: Total stock-based
employee compensation expense
determined under fair value
based method for all awards,
net of related tax effects .... (1,000) (3,000) (5,000) (8,000)
----------- ----------- ----------- -----------
Pro forma net income (loss) .... $ 125,000 $ (197,000) $ (319,000) $ (277,000)
=========== =========== =========== ===========
Income (loss) per share:
Basic - as reported ........... $ 0.03 $ (0.05) $ (0.09) $ (0.07)
=========== =========== =========== ===========
Basic - pro forma ............. $ 0.03 $ (0.05) $ (0.09) $ (0.08)
=========== =========== =========== ===========
Diluted - as reported ......... $ 0.03 $ (0.05) $ (0.09) $ (0.07)
=========== =========== =========== ===========
Diluted - pro forma ........... $ 0.03 $ (0.05) $ (0.09) $ (0.08)
=========== =========== =========== ===========
6
(5) 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)
Industrial Staffing, and (3) Technical Staffing.
Information concerning operations by operating segment is as follows
(in 000's):
Three Months Ended Nine Months Ended
June 30, June 30,
------------------------ ------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Revenues
Commercial .................... $ 4,973 $ 5,079 $ 13,919 $ 15,613
Industrial .................... 5,427 5,614 16,668 19,753
Technical ..................... 7,399 6,746 20,738 18,866
---------- ---------- ---------- ----------
$ 17,799 $ 17,439 $ 51,325 $ 54,232
---------- ---------- ---------- ----------
Income (Loss) Before Income Taxes
Commercial .................... $ 271 $ 41 $ 367 328
Industrial .................... 113 (207) 343 377
Technical ..................... 792 845 1,826 1,887
Corporate (unallocated,
including interest) ....... (970) (1,008) (3,052) (3,077)
---------- ---------- ---------- ----------
$ 206 (329) $ (516) $ (485)
---------- ---------- ---------- ----------
(6) Litigation
The Company is subject to various claims and legal proceedings that
arise in the ordinary course of its business activities. Management believes
that any liability that may ultimately result from the resolution of these
matters will not have a material adverse effect on the consolidated financial
condition, results of operations or liquidity of the Company.
(7) Mergers and Acquisitions
On January 27, 2003, the Company acquired Wennik & Motta in an asset
purchase business combination. The acquisition cost was immaterial to the
Company; the Company is obligated to pay contingent consideration over one year
based on earnings of Wennik & Motta which may range up to approximately $60,000.
Wennik & Motta is a staffing firm in Boston, Massachusetts, which places
marketing and creative personnel with its clients. Goodwill of $47,000 has been
allocated to the Technical segment.
7
JOULE INC. AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Critical Accounting Policies
During December 2001, the Securities and Exchange Commission ("SEC")
published a Commission Statement in the form of Financial Reporting Release No.
60 which encouraged that all registrants discuss their most "critical accounting
policies" in management's discussion and analysis of financial condition and
results of operations. The SEC has defined critical accounting policies as those
that are both important to the portrayal of a company's financial condition and
results, and that require management's most difficult, subjective or complex
judgments, often as a result of the need to make estimates about the effect of
matters that are inherently uncertain. While the Company's significant
accounting policies are summarized in Note 2 to the consolidated financial
statements included in the Company's Form 10-K for the fiscal year ended
September 30, 2002, the Company believes the following accounting policies to be
critical:
Revenue - 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 graphic
design/marketing) personnel, and industrial (skilled craft industrial plant and
facility maintenance) labor. Virtually all revenue is billed on a direct cost
plus markup basis. Revenues are recorded when services are rendered.
Long-Lived Assets -The Company reviews amortizable long-lived assets
and goodwill for impairment whenever events or changes in business circumstances
occur that indicate the carrying amount of the assets may not be recovered. The
Company assesses the recoverability of long-lived assets held and to be used
based on undiscounted cash flows. In accordance with SFAS No. 142, goodwill is
not amortized but is tested at the segment level at least annually for
impairment. If impairment is indicated, the impairment is measured as the
difference between the carrying value and the fair value of the asset.
Valuation of Stock Options - SFAS No. 123, "Accounting for Stock-Based
Compensation", permits an entity to continue to account for director and
employee stock-based compensation under APB Opinion No. 25, "Accounting for
Stock Issued to Employees", or adopt a fair value based method of accounting for
such compensation. The Company has elected to continue to account for
stock-based compensation under Opinion No. 25. Accordingly, compensation expense
is recognized on fixed option grants only if the fair value of the underlying
stock exceeds the exercise price of the option at the date of grant and it is
recognized on a straight-line basis over the vesting period. Had the Company
elected to adopt the measurement provisions of SFAS No. 123 compensation expense
would have been recognized based on the fair value of the options at the grant
date. Estimating the fair value of stock options involves a number of judgments
and variables that are subject to significant change. A change in the fair value
estimate could have a significant effect on the amount of the proforma net
income (loss) disclosed in Note 4 to the Company's consolidated financial
statements included in this Form 10-Q.
8
Management Estimates - Management of the Company is required to make
certain estimates and assumptions during the preparation of consolidated
financial statements in accordance with accounting principles generally accepted
in the United States of America. These estimates and assumptions impact the
reported amount of assets and liabilities and disclosures of contingent assets
and liabilities as of the date of the consolidated financial statements.
Estimates and assumptions are reviewed periodically and the effects of revisions
are reflected in the consolidated financial statements in the period they are
determined to be necessary. Some of the more significant estimates made by
management include the allowance for doubtful accounts and various other
operating allowances and accruals.
Related Party Transactions
The Company paid certain major stockholders Board of Director's fees of
approximately $10,000 and $13,000 for the nine months ended June 30, 2003 and
June 30, 2002, respectively. For the nine months ended June 30, 2003 and June
30, 2002 the Company recognized $287,000 and $340,000, respectively, in revenues
from a company owned by a stockholder. In addition, accounts receivable include
amounts due for services rendered to a company owned by a stockholder of $61,000
and $36,000 as of June 30, 2003 and September 30, 2002, respectively.
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 graphic
design/marketing) 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 $17.8 million for the three months ended June 30,
2003 compared to $17.4 million for the year earlier period. Revenue for the
first nine months of fiscal 2003 amounted to $51.3 million; for the comparable
nine-month period of 2002 revenue was $54.2 million. Technical staffing revenue
increased 10% for both the three and nine-month periods ended June 30, 2003 to
$7.4 million and $20.7 million, respectively. These increases related primarily
to the continuing strength of its scientific business that places personnel with
pharmaceutical, bio-tech, chemical, and consumer products clients as well as the
acquisition of a staffing firm which places marketing and creative personnel.
Commercial staffing revenue decreased 2% to $5.0 million and 11% to $13.9
million for the respective three and nine-month periods ended June 30, 2003.
Industrial staffing revenue decreased 3% to $5.4 million for the three-month
period ended June 30, 2003 compared to the 2002 similar period. For the
nine-month period ended June 30, 2003, revenue declined 16% to $16.7 million
compared to the year earlier period. These declines were due to the uneven
recovery of the economy which negatively impacted demand for the Company's light
industrial and industrial personnel. Demand for these services were uneven
throughout fiscal 2002 and have continued to demonstrate weakness in fiscal
2003.
9
Cost of services was 80.8% of revenue in the current quarter compared
to 81.3% for the prior year three-month period. For the nine-month period cost
of services were 81.3% of revenues in 2003 compared to 80.6% in the same prior
year period. 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 $3.2 million and
$10.0 million for the three and nine months ended June 30, 2003, respectively,
compared to $3.6 million and $10.9 million for the year earlier periods, and
represented 17.8% and 19.6% of revenue in the respective 2003 periods, a
decrease from the comparable 2002 periods of 20.5% and 20.0% of revenue,
respectively. 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 officers. The Company
has reduced selling, general and administrative expenses by $401,000 and
$834,000 for the respective three and nine-month periods ended June 30, 2003
compared to the same periods for 2002 through a decrease in staff payroll and
related expenses, some branch closures, a reduction in the provision for losses
on accounts receivable and an overall decrease in other costs related to the
Company's branch offices. The Company continues to review and reduce personnel
and other branch costs which has had a positive impact during the first three
quarters of fiscal 2003, and will further benefit future periods.
Interest expense amounted to $31,000 and $93,000 for the 2003 three and
nine-month periods, respectively, compared to $32,000 and $126,000 for the
respective prior year periods, reflecting a decrease in average borrowings along
with decreases in interest rates. Interest income of $6,000 in 2002 relates to a
note receivable, which was paid in full in 2002. After giving effect to the
utilization of certain tax credits, the effective tax rate was 39% for the
three-month period ending June 30, 2003. For the three-months ended June 30,
2002, the effective tax rate benefit was 41%; the effective tax rate benefits
were 39% and 45% for the nine-months ended June 30, 2003 and 2002, respectively.
As a result of the above, net income for the 2003 three-month period was
$126,000 or $0.03 per share, basic and diluted, compared with the net loss of
$194,000 or $0.05 per share, basic and diluted, for the 2002 period; for the
2003 nine-month period, the net loss was $314,000 or $0.09 per share, basic and
diluted, compared with the net loss of $269,000 or $0.07 per share, basic and
diluted, for the 2002 period.
10
Liquidity and Capital Resources
Current assets at June 30, 2003 were $9,421.000 compared to current
assets of $10,888,000 at September 30, 2002 and current liabilities were
$5,937,000 compared to $7,303,000 as of September 30, 2002. The decrease in
current assets principally relates to a $1.6 million reduction in accounts
receivable due to lower revenue in the current period compared to the fourth
quarter of fiscal 2002, as well as a continuing emphasis on credit and
collections. The decrease in current liabilities results from a $580,000
decrease in bank borrowings, reflective of the lower receivables noted above, a
$555,000 decrease in accounts payable and accrued expenses principally related
to normal accounts payable fluctuations and a lower sales level for the current
quarter compared to the quarter ended September 30, 2002, and a $231,000
decrease in accrued payroll and related taxes due to a lower level of business
in the final week of the current period as compared to the final week of
September 2002. The Company's capital expenditures are generally relatively
modest due to the nature of its business.
Employees typically are paid on a weekly basis. Clients generally are
billed on a weekly basis. The Company has 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;
$3,400,000 was outstanding under this line as of June 30, 2003. In March, 2003,
the Company used its bank line of credit to obtain a $1,000,000 letter of credit
in favor of its workers compensation insurance carrier as a part of its
insurance renewal. The Company and its bank are in the process of formalizing a
new three-year, asset-based line of credit. The Company expects that interest
rates will be slightly higher under the new agreement. Since the new agreement
was not formalized by the maturity date of the line of credit (May 31, 2003),
the bank has agreed to extend the existing agreement until the new agreement is
completed. The Company anticipates the new agreement will be in place by late
August 2003. The Company believes that internally generated funds and available
borrowings will provide sufficient cash flow to meet its requirements for at
least the next 12 months.
Below is a table that presents the Company's contractual obligations
and commercial commitments as of June 30, 2003:
Payments Due by Fiscal Year
-------------------------------------------------
2005 and
Total 2003* 2004 Thereafter
---------- ---------- ---------- ----------
Loan payable to bank .................. $3,400,000 $3,400,000 $ -- $ --
Capital lease obligations
including interest ................ 239,000 31,000 121,000 87,000
Operating leases ...................... 612,000 96,000 358,000 158,000
---------- ---------- ---------- ----------
Total contractual cash obligations .... $4,251,000 $3,527,000 $ 479,000 $ 245,000
========== ========== ========== ==========
*Represents contractual cash obligations for the three months ended September
30, 2003.
11
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
In the normal course of business, the Company is exposed to
fluctuations in interest rates as it seeks debt financing to meet its working
capital needs. The Company does not employ specific strategies, such as the use
of derivative instruments or hedging, to manage its interest rate exposures.
Since the fiscal year ended September 30, 2002, there has been no change with
respect to the Company's interest rate exposures or its approach toward those
exposures. Further, the Company does not expect its interest rate exposures on
its borrowings to change significantly in the near term.
The Company is also exposed to market risks with respect to the
unvested portion of its deferred compensation program. Participants in the
program may direct the investment of deferred compensation amounts into various
debt and equity investments. Such investments are classified as trading
securities and as such are carried on the Company's consolidated balance sheet
at fair value with changes in their fair values recognized each period in the
Company's consolidated statements of operations. Therefore, the Company is
exposed to changes in interest rates and the volatility of the stock and bond
markets. There have been no changes with respect to the Company's market risks
since the fiscal year ended September 30, 2002.
Item 4. - Controls and Procedures
An evaluation of the effectiveness of the design and operation of the
Company's disclosure controls and procedures was carried out as of June 30, 2003
under the supervision and with the participation of the Company's management,
including the Chairman of the Board and Chief Executive Officer and the Vice
President and Chief Financial Officer (the "Certifying Officers"). Based on that
evaluation, the Certifying Officers concluded that the Company's disclosure
controls and procedures are effective to bring to the attention of the Company's
management the relevant information necessary to permit an assessment of the
need to disclose material developments and risks pertaining to the Company's
business in its periodic filings with the Securities and Exchange Commission.
There were no changes to the Company's internal control over financial reporting
during the quarter ended June 30, 2003 that materially affected, or are
reasonably likely to materially affect, the Company's internal control over
financial reporting.
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 systems and the training and
retention of new staff, and government regulation.
12
JOULE INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
During the first quarter of fiscal 2003, the Company issued an
aggregate of 1,260 shares of Common Stock from authorized but unissued
status as service awards to certain employees who had completed five
and twenty years of service with the Company during fiscal 2002. 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:
Exhibit 31.1 - Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 - Principal Executive Officer
Exhibit 31.2 - Certification pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 - Principal Financial Officer
Exhibit 32.1 - Certification pursuant to 18 USC Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 -
Principal Executive Officer
Exhibit 32.2 - Certification pursuant to 18 USC Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 -
Principal Financial Officer
(b) Reports on Form 8-K
Form 8-K dated May 7, 2003 with respect to the issuance of the press
release for the second quarter ended March 31, 2003 (Item 7).
13
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 12, 2003 /s/ E.N. LOGOTHETIS
----------------------------------------
E. N. Logothetis, Chairman and Chief
Executive Officer
(Principal Executive Officer)
August 12, 2003 /s/ BERNARD G. CLARKIN
----------------------------------------
Bernard G. Clarkin, Vice President and
Chief Financial Officer
(Principal Financial Officer)
14
EXHIBIT INDEX
31.1 - Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
- Principal Executive Officer
31.2 - Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
- Principal Financial Officer
32.1 - Certification pursuant to 18 USC Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 - Principal Executive
Officer
32.2 - Certification pursuant to 18 USC Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002 - Principal Financial
Officer