FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
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Washington, D.C. 20549
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For The Fiscal Year Ended September 30, 2003
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 - 1-9477
JOULE INC.
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(Exact name of registrant as specified in its charter)
Delaware 22-2735672
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1245 U.S. Route 1 South, Edison, New Jersey 08837
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 732-548-5444
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Securities registered pursuant to Section 12(b) of the Securities Exchange Act
of 1934 (the "Exchange Act"):
Name of each exchange
Title of each class on which registered
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Common Stock, par value $.01 per share American Stock Exchange
Securities registered pursuant to Section 12(g) of the Exchange Act: None
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Exchange Act 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 if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b.2 of the Exchange Act). Yes [ ] No [X].
The aggregate market value of the Common Stock held by non-affiliates of the
registrant, based upon the closing price of the Common Stock on the American
Stock Exchange on March 31, 2003, was approximately $1,041,000.
As of December 19, 2003, there were 3,683,650 shares of Common Stock
outstanding.
PART I
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ITEM 1. BUSINESS
Recent Developments
On August 20, 2003, at a meeting of the Company's Board of Directors,
Emanuel N. Logothetis, Chairman of the Board and Chief Executive Officer of the
Company, his sons, Nick M. Logothetis and Steven Logothetis, both of whom are
directors of Joule, his wife, Helen Logothetis, his daughter, Julie Logothetis,
and John G. Wellman, Jr., President and Chief Operating Officer of the Company
(such persons being hereafter referred to herein collectively as the "Purchaser
Group") advised the independent directors of their proposal (the "Going Private
Proposal") to acquire all of the outstanding shares of common stock of the
Company not owned by the members of the Purchaser Group for a price of $1.35 per
share. The proposal contemplated a going private transaction through a tender
offer to be made by JAC Acquisition Company, Inc. (the "Purchaser"), a newly
formed corporation owned by the members of the Purchaser Group, to be followed,
if as a result of such tender offer the Purchaser owned at least 90% of the
outstanding shares of common stock of the Company, by a short-form merger that,
under the laws of the State of Delaware, could be consummated without any action
or vote of the Company's Board of Directors or stockholders. In such event, the
common stock of the Company would be owned solely by the members of the
Purchaser Group and would no longer be publicly traded. If the merger were
consummated, stockholders who do not tender their shares would have the
statutory right to demand payment of the judicially appraised fair value of
their shares.
A special committee comprised of the three independent members of the
Company's Board of Directors (the "Special Committee") was formed to evaluate
and negotiate the Going Private Proposal. Following negotiations with the
Special Committee, on November 21, 2003, the Purchaser commenced a tender offer
(the "Tender Offer") for all of the outstanding common stock of the Company not
owned by the Purchaser Group at $1.52 per share. The Tender Offer was scheduled
to expire at 12:00, midnight, Eastern Standard Time, on December 19, 2003. On
December 22, 2003, the Purchaser announced that it has extended the expiration
of the Tender Offer to 5:00 p.m., Eastern Standard Time, on January 15, 2004,
unless further extended. As of December 19, 2003, approximately 350,000 shares
of common stock of the Company had been tendered and not withdrawn.
General
Joule Inc. and its subsidiaries are engaged in the business of
personnel outsourcing, as a supplier to industry of staffing service personnel.
These services focus on supplying commercial (skilled office and light
industrial) workers, technical professionals, and skilled craft industrial plant
and facility maintenance personnel to business and industry on a temporary
basis.
All employees on assignment to the Company's clients are on the
Company's payroll only during the periods of their assignments. By prior
understanding, their employment is continued after completion of an assignment
only if another suitable assignment is available. Historically, substantially
all revenue is billed based on direct cost plus a mark-up to cover the Company's
overhead and profit. In addition, the Company recognizes revenues under fixed
priced contracts and for permanent placement services. At September 30, 2003,
approximately 1,800 employees were on assignment to more than 300 clients for
periods ranging in duration from one day to several years.
The Company was incorporated in New Jersey in 1967 as the successor to
a business organized in 1965 and was reincorporated in Delaware on July 28,
1986.
Description of Services
The Company supplies commercial (office and light industrial) workers
to business and industry. The office workers are comprised of word processing,
data entry, consumer service and other office service personnel. Light
industrial workers may work in warehouse, packaging or light assembly
environments. Recruitment and assignment of such personnel are conducted through
eight offices in New Jersey and New York. The assignments last from one day to
several months or longer. Assignments are sometimes made to fill vacancies in a
client's work force caused by vacations, illnesses, terminations or
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reassignments of the client's full-time employees and, in other cases, to
supplement the client's normal work force to meet peak work loads, handle
special projects or provide special expertise. Often clients elect to staff a
portion of their service requirements on a longer term basis with personnel
employed and provided by the Company. The client is charged an hourly rate that
comprises the direct labor rate of the personnel provided, associated costs
(such as fringe benefits and payroll taxes) and a mark-up to cover the Company's
overhead and profit. The Company has a van transportation program to transport
some of its commercial staffing workers to job sites. Employees who use this
service, which is voluntary, pay a daily fee which partially offsets the cost of
the program. During 2003, the number of office and light industrial workers on
assignment per week averaged more than 1,000 and such services contributed
approximately 28%, 30% and 32% of revenues in 2003, 2002 and 2001, respectively.
The Company's technical employees include engineers, designers,
draftsmen, information technology personnel, scientists, lab technicians and
graphic designers, who are often furnished on a project basis. Recruitment and
assignment of these personnel are conducted through four offices in New Jersey,
Pennsylvania, Alabama and Massachusetts. A client that has an in-house
engineering or other technical department, such as a laboratory, is able to
supplement its permanent staff in a particular skill or for a specific project
by utilizing personnel provided by the Company to implement the client's designs
or program. Generally, several candidates are interviewed by the client before
an assignment is made. The work is performed at the client's facility under the
client's supervision. The Company is neither an independent consultant nor
professionally liable. The client is charged at an hourly rate that comprises
the direct labor rate of the personnel provided, associated costs (such as
fringe benefits and payroll taxes) and a mark-up to cover the Company's overhead
and profit. There are many technical personnel who choose to work on temporary
assignments rather than hold permanent positions because of the opportunity to
work on diverse projects and to choose times of employment. While they are not
guaranteed steady employment, are not eligible for promotion and receive lesser
fringe benefits than their full-time counterparts, such persons frequently are
compensated at higher rates than full-time, permanent personnel with similar
backgrounds and experience and have a greater opportunity for overtime
compensation. During 2003, the number of technical workers on assignment per
week averaged 400, and such services contributed approximately 41%, 35% and 33%
of revenues in 2003, 2002 and 2001, respectively.
The Company also provides skilled craft industrial plant and facility
maintenance labor services personnel at oil refineries, utilities, chemical,
pharmaceutical and industrial plants, and office buildings. These assignments
often encompass responsibility for performance of discrete functions for
customers on an ongoing basis. Recruitment and assignment of such personnel are
done from offices in New Jersey, New York, and Illinois. The Company provides
the services of stationary engineers, welders, electricians, millwrights,
insulators, pipefitters and other tradesmen as well as the necessary supervisory
personnel and certain materials and equipment. The Company may furnish a base
crew of tradesmen that is assigned to the client's facility on a full-time basis
that can be supplemented as needed to provide additional services requested by
the client. The Company also undertakes specific projects, such as oil and
chemical plant repairs, shutdowns, dismantling, and relocation and re-assembly
of plant equipment. It also sends crews throughout the United States to install
original equipment for manufacturers. The Company generally charges clients at
hourly rates, which include a mark-up for overhead and profit, for the different
classifications of tradesmen and supervisory personnel, and on a cost-plus basis
for materials and equipment. During 2003, the average number of such skilled
industrial service personnel on assignment per week to clients was approximately
200. Historically, a substantial percentage of industrial services contracts are
renewed. Skilled industrial services contributed approximately 31%, 35% and 35%
of revenues in fiscal 2003, 2002 and 2001, respectively.
The use by clients of staffing services personnel provided by the
Company allows them to hire only such permanent employees as are required for
their regular core work loads. Clients are thus able to shift to the Company the
cost and inconvenience associated with the employment of non-core personnel,
including advertising, interviewing, screening, testing, training, fringe
benefits, record keeping, payroll taxes and insurance. The Company is able to
absorb such costs more effectively than its clients because its employees, once
recruited, are generally assigned to a succession of positions with different
clients.
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Customers and Marketing
The majority of the Company's business orders each year were with
clients that it had done business for more than two years.
The Company markets its services primarily through sales calls by its
own sales personnel and through direct mail solicitation, participation in trade
exhibitions and advertising. In 2003 and 2002, one customer accounted for
approximately 14% and 10% of revenues, respectively; no customer accounted for
more than 10% of revenues in 2001.
Personnel Assignment and Recruitment
The Company maintains a computerized data base of information on
potential employees. It uses optical scanning equipment, where appropriate, to
enhance its resume data base retrieval system. The data base contains
information on office services and light industrial personnel, engineering and
other technical and scientific personnel, and skilled industrial personnel,
classified by skill, residence, experience and current availability for
assignment. When called upon to fill an assignment, the Company's recruiting
specialists match the client's specifications with the information in the data
base on these potential employees. The ability to update, expand and rapidly
access the data base is important to the Company's success. The Company's branch
offices have direct, on-line access to the data base. Direct access is
especially important in the office services and technical areas where immediate
response to client orders is required. In addition, it is important in the
technical services operation because of the diversity of skills involved.
The Company recruits personnel through advertisements in local media
and trade journals, at job fairs, and through referrals by current and past
employees. Personnel listed in the Company's data base generally do not work
exclusively for the Company. Compensation and location of the assignment are the
principal factors considered by such personnel when choosing from competing
assignments. The Company considers its pay scale to be competitive.
Competition
The Company faces intense competition from a large number of local and
regional firms as well as national personnel outsourcing firms. The Company
competes with these firms for potential employees as well as for clients. Some
of the regional firms and all of the national firms with which it competes are
substantially larger and possess substantially greater operating, financial and
personnel resources than the Company. The Company competes primarily on the
basis of price, quality and reliability of service.
Employees
At September 30, 2003, the Company employed approximately 170 full and
part-time employees in its headquarters and branch offices other than those on
assignment to clients and had approximately 1,800 persons on assignment. The
Company is a party to collective bargaining agreements covering approximately
140 employees engaged in skilled craft industrial and facility maintenance work.
The Company considers its relationships with its employees to be satisfactory.
ITEM 2. PROPERTIES
The Company leases most of its facilities. The Company's corporate
headquarters are located in Edison, New Jersey and comprise approximately 8,000
square feet. The Company owns that building as well as a building adjacent to
its corporate headquarters which serves as operational headquarters for one of
the Company's divisions and a building in Gibbstown, New Jersey housing an
industrial services unit. Thirteen additional facilities, comprising
approximately 31,000 square feet of space, are leased at rentals and under terms
and conditions prevailing in the various locations. The Company's facilities are
appropriate and adequate for its current needs.
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ITEM 3. LEGAL PROCEEDINGS
In the opinion of management, there are no material pending legal
proceedings to which the Company is a party or of which any of its property is
the subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not Applicable.
Executive Officers of the Company
The names, ages and positions of all of the executive officers of the
Company as of December 19, 2003 are listed below along with their business
experience during the past five years. Officers are elected annually by the
Board of Directors and serve at the pleasure of the Board. There are no
arrangements or understandings between any officer and any other person pursuant
to which the officer was selected. Emanuel N. Logothetis and John Logothetis are
second cousins.
Emanuel N. Logothetis, age 73, founded the Company in 1965 and was
President and Chief Executive Officer until August 10, 1987, when he was elected
Chairman of the Board. He was reelected President on August 3, 1988. In February
1999, he relinquished the Presidency but continues as Chairman of the Board and
Chief Executive Officer.
John G. Wellman, Jr., age 55, was elected President and Chief Operating
Officer in February 1999. He was elected Executive Vice President and Chief
Operating Officer on May 6, 1998. He was appointed to the same positions when he
joined the Company in March 1998. Prior to that, he was Executive Vice President
of Oxford and Associates, Inc., a technical staffing firm, from 1986 through
February 1998.
Bernard G. Clarkin, age 54, was elected Vice President in February 1994
and Chief Financial Officer, Treasurer, and Secretary in February 1990. He was
Controller, Treasurer and Secretary of the Company from February 1989 until
February 1990.
John Logothetis, age 50, was elected a Vice President on July 1, 1986.
He had been General Manager of the Facilities Maintenance Operation since June
1984 and prior thereto had been Manager of Supplemental Services since joining
the Company in December 1976.
Stephen Demanovich, age 49, was elected a Vice President in May 1997.
He had been General Manager of Joule Technical Staffing since March 1995 and
prior thereto had been Recruiting Manager since joining the Company in February
1989.
Joseph Vendetti, age 56, was elected a Vice President in August 2000.
He had been a General Manager of Joule Technical Services since 1994. Prior to
that he was Regional Director for Joule Technical Services since joining the
Company in 1990.
John Porch, age 51, was elected Vice President in August 2000. He had
been a General Manager of Joule Industrial Contractors since 1996. Mr. Porch has
been employed by Joule since 1980 holding a series of increasingly more
responsible positions.
Judith Bryant, age 48, was appointed Vice President in October 2000
when she joined the Company to head its Commercial Staffing business unit. Prior
to that she worked for Office Specialists, currently a part of Randstad North
America (a large staffing company), as a Market Manager. She joined Office
Specialists in 1994.
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PART II
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market for Registrant's Common Equity and Related Stockholder Matters
The Company's Common Stock is traded on the American Stock Exchange
under the symbol JOL. The high and low sales prices for the Common Stock as
reported by the American Stock Exchange were as follows:
High Low
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Calendar 2001
Fourth Quarter $3.20 $ .70
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Calendar 2002
First Quarter 3.19 1.45
Second Quarter 1.90 1.10
Third Quarter 1.53 1.00
Fourth Quarter 1.15 0.65
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Calendar 2003
First Quarter 1.25 0.86
Second Quarter 1.20 0.85
Third Quarter 1.60 1.37
Fourth Quarter
(through December 31) 1.55 1.37
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As of December 24, 2003, there were approximately 200 holders of record
of the Company's Common Stock. No cash dividends have been declared on the
Common Stock.
ITEM 6. SELECTED FINANCIAL DATA
Years Ended September 30,
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2003 2002 2001 2000 1999
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(In thousands, except per share data)
Revenues ........................................................... $ 68,717 $ 72,796 $ 78,654 $ 76,504 $ 68,153
Net (Loss) Income .................................................. (264) (162) 622 845 720
Net (Loss) Income Per Basic and Diluted Share ...................... (0.07) (0.04) 0.17 0.23 0.20
Total Assets (at end of fiscal year) ............................... 15,297 16,499 18,331 16,352 18,376
Non-Current Capital Lease Obligations (at end of fiscal year) ...... 85 184 207 -- --
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ITEM 7. 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 this Annual Report on Form 10-K for the fiscal year ended
September 30, 2003, the Company believes the following accounting policies to be
critical:
Revenue Recognition - 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. Substantially all revenue is billed on a
direct cost plus markup basis. In addition, the Company recognizes revenues
under fixed priced contracts and permanent placement services. Revenues are
recorded when services are rendered.
Long-Lived Assets - The Company reviews amortizable long-lived assets
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 Statement of Financial Accounting
Standard (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.
The annual goodwill impairment assessment involves estimating the fair
value of the reporting unit and comparing it with its carrying amount. If the
carrying value of the reporting unit exceeds its fair value, additional steps
are followed to recognize a potential impairment loss. Calculating the fair
value of the reporting unit requires significant estimates and assumptions by
management. The Company estimates the fair value of its reporting unit by
applying third-party market value indicators to the reporting unit's projected
revenues, earnings before net interest and taxes (EBIT), and earnings before net
interest, taxes, depreciation and amortization (EBITDA), and calculating an
average of the three extended market values. Estimating the fair value of the
reporting unit requires significant estimates and assumptions by management, as
the calculation is dependent on estimates for future revenues, EBIT and EBITDA,
all of which are impacted by economic conditions related to the industry in
which the Company operates, as well as conditions in the U.S. capital markets. A
decline in the estimated fair value of a reporting unit could result in an
impairment charge to goodwill, which could have a material adverse effect on our
business, financial condition and results of operations.
Stock Options - At September 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 this Form 10-K for the
fiscal year ended September 30, 2003.
The Company applies Accounting Principles Board Opinion No. 25 and
related interpretations in accounting for the Company's stock options.
Accordingly, compensation expense is recorded on the date of grant of an option
to an employee or member of the Board of Directors only if the fair market value
of the underlying stock at the time of grant exceeds the exercise price. No
options have been granted with an exercise price less than the fair market value
of the Company's common stock at the date of grant. Had the Company elected to
account for its stock options using SFAS No. 123, compensation expense would
have been recognized on options granted based on their fair value. 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 compensation expense disclosed.
The proforma effect on net (loss) income and related per share amounts of
applying SFAS No. 123 for each of the fiscal years ended September 30, 2003,
2002 and 2001 is described in Note 2 to the Company's consolidated financial
statements.
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 and the
reported revenues and expenses during the reporting period. 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 other operating allowances and accruals.
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Related Party Transactions
The Company paid certain major stockholders Board of Director's fees of
approximately $14,000, $16,000, and $14,000, for the fiscal year 2003, 2002, and
2001, respectively. In fiscal 2003 and 2002, the Company provided temporary
office services to Symphony Suites, a company owned by Nick M. Logothetis, a
director and significant shareholder. Billing rates are comparable to those used
for other customers; amounts charged during fiscal 2003 and 2002 were $413,000
and $424,000, respectively; $85,000 and $36,000 was outstanding at September 30,
2003 and 2002, respectively. The highest amount outstanding during fiscal 2003
was $94,000. The Company's Board of Directors has approved the transactions
outlined above. Any substantial change in the terms of any such transactions and
any additional transactions with affiliates of the Company will be submitted to
the Board for approval.
The Company rented a facility from E.N. Logothetis, a significant
stockholder for approximately $16,000, $16,000, and $15,000 for each of the
years ended September 30, 2003, 2002 and 2001, respectively. The Company's
rental agreement with the stockholder is on a month-to-month basis.
Results of Operations
The following table sets forth the percentage relationship of certain
items in the Company's consolidated statements of operations:
Years Ended September 30,
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2003 2002 2001
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Revenues ............................................... 100.0% 100.0% 100.0%
Costs, expenses and other
Cost of services ................................... 81.2 80.7 80.2
Selling, general & administrative expenses ......... 19.2 19.4 18.2
Interest expense, net .............................. 0.2 0.2 0.3
(Loss) income before income taxes ...................... (0.6) (0.4) 1.3
Income tax (benefit) provision ......................... (0.2) (0.1) 0.5
Net (loss) income ...................................... (0.4) (0.2) 0.8
====== ====== ======
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. Substantially all revenue is billed on a direct
cost plus markup basis. Revenue decreased 6% to $68.7 million in fiscal 2003
from $72.8 million in fiscal 2002, which revenue decreased 7% from the 2001
level of $78.7 million. Technical staffing revenue increased 9% to $28.0 million
in 2003 compared to $25.8 million in 2002, which was slightly higher than
revenue of $25.7 million in 2001. 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 in fiscal 2003 of a staffing firm which places marketing and
creative personnel. Commercial staffing revenue decreased 11% to $19.2 million
compared to $21.5 million in 2002 and decreased 15% during 2002 below 2001
revenue of $25.3 million. Industrial staffing revenue amounted to $21.5 million,
a 16% decrease below 2002 revenue of $25.5 million, while 2002 revenue
represents an 8% decrease from 2001 revenue of $27.6 million. These declines
were due to the uneven recovery of the economy which negatively impacted demand
for the Company's Commercial light industrial and Industrial personnel. Demand
for these services was uneven throughout fiscal 2002 and continued to
demonstrate weakness in fiscal 2003, although the Commercial staffing group saw
some improvement in the latter part of fiscal 2003.
Cost of services were 81.2%, 80.7%, and 80.2% of revenues in fiscal
years 2003, 2002, and 2001, respectively. These expenses consist primarily of
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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 amounted to $13.2 million
in 2003, $14.2 million in 2002, and $14.3 million in 2001. Such expenses were
19.2%, 19.4%, and 18.2% of revenues in 2003, 2002, and 2001, 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 offices. In 2003 and 2002,
selling, general and administrative expenses increased as a percentage of
revenue compared to 2001 principally as a result of lower revenue in these
years. The Company has reduced selling, general and administrative expenses in
2003 through a decrease in staff payroll and related expenses, some branch
closures, a reduction in the provision for losses on accounts receivable due to
improved credit and collections results and an overall decrease in other costs
related to the Company's branch offices. The Company continues to monitor these
expenses and expects that such cost controls will further benefit future
periods. In addition, the Company stopped amortizing its goodwill beginning in
fiscal year 2002 in accordance with SFAS No. 142.
Interest expense decreased to $128,000 in 2003 from $160,000 in 2002
and $357,000 in 2001 reflecting a decrease in average borrowings along with
decreases in interest rates. Interest income of $6,000 in 2002 and $85,000 in
2001 related 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 benefit was 37% for 2003 and 2002; for 2001 the effective tax
rate was 37%. As a result of the above, the net loss was $264,000 or $0.07 per
basic and diluted share in 2003 compared with a net loss of $162,000 or $0.04
per basic and diluted share in 2002. In 2001 net income was $622,000 or $0.17
per basic and diluted share.
Liquidity and Capital Resources
Current assets at September 30, 2003 were $9,937,000 compared to
$10,888,000 at September 30, 2002 and current liabilities at September 30, 2003
were $6,374,000 compared to $7,303,000 as of September 30, 2002. The decrease in
current assets principally relates to a decrease in accounts receivable of $1.0
million due to a decrease in days sales outstanding, the result of a continuing
emphasis on credit and collections, as well as a decrease in revenue in the
fourth quarter of 2003 compared to the 2002 fourth quarter. An increase in
prepaid expenses and other current assets of $56,000, principally related to
prepayment of income taxes. Other assets increased $288,000, principally due to
increases in the contributions to the deferred compensation plan, deferred loan
costs related to a new loan and deferred tax assets. The decrease in current
liabilities principally resulted from a $830,000 decrease in loans payable,
reflective of the lower accounts receivable noted above, a $331,000 increase in
accrued payroll and related taxes which was due to an extra day's accrued
payroll at September 30, 2003 compared to the prior year end and a $430,000
decrease in accounts payable and accrued expenses principally related to normal
accounts payable fluctuations and a lower sales level for September 2003
compared to September 2002. The increase in deferred compensation of $88,000
principally represents fiscal 2003 participant contributions to that plan.
The Company's capital expenditures are relatively modest due to the
nature of its business. Included in the Company's expenditures for fiscal 2003
were $135,000 for machinery and equipment and $101,000 for computers and
software. Employees typically are paid on a weekly basis. Clients generally are
billed on a weekly basis. The Company has generally utilized bank borrowings to
meet its working capital needs. In August 2003, the Company signed a three year
loan agreement in the form of a line of credit of $7,500,000 that bears interest
at LIBOR plus two and three-quarter percent with a prime rate plus one-half
percent option. The Company used its bank line of credit to obtain a $1,000,000
letter of credit in favor of its worker compensation insurance carrier as a part
of its insurance renewal in 2003. Borrowings are collateralized principally by
accounts receivable. Under the terms of the loan agreement, the Company is
prohibited from making any dividend distributions. The loan agreement also
contains a provision that limits the amount of capital expenditures that the
Company may make in any calendar year to $600,000. Total capital expenditures in
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fiscal 2003 were $353,000. The terms of the loan agreement also include certain
financial covenants including fixed charge coverage ratio, minimum net income
and maximum leverage ratio. The Company is in compliance with the financial
covenants at September 30, 2003. In addition to the letter of credit, $3,150,000
was outstanding under this line as of September 30, 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.
The following is a table that presents the Company's contractual
obligations and commercial commitments as of September 30, 2003:
Payments Due by Fiscal Year
-------------------------------------------------
2006 and
Total 2004 2005 Thereafter
---------- ---------- ---------- ----------
Loan payable to bank .................................. $3,150,000 $3,150,000 $ -- $ --
Capital lease obligations including interest .......... 206,000 121,000 67,000 18,000
Operating leases ...................................... 526,000 368,000 156,000 2,000
---------- ---------- ---------- ----------
Total contractual cash obligations .................... 3,882,000 3,639,000 223,000 20,000
========== ========== ========== ==========
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.
ITEM 7A. 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. The
fair value of the loans payable to bank as of September 30, 2003 approximates
its carrying value. There has been no change with respect to the Company's
interest rate exposures or its approach toward those exposures. The Company
believes that effects of changes in interest rates are limited and would not
have a material impact on the Company's financial position or results of
operations. 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 statement of operations. Therefore, the Company is
exposed to changes in interest rates and the volatility of the stock and bond
markets.
10
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Independent Auditors' Report
----------------------------
The Stockholders and Board of Directors
Joule Inc.:
We have audited the accompanying consolidated balance sheets of Joule Inc. and
subsidiaries as of September 30, 2003 and 2002 and the related consolidated
statements of operations, cash flows and changes in stockholders' equity for
each of the years in the two year period ended September 30, 2003. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. The consolidated statements of
operations, cash flows and changes in stockholders' equity for the year ended
September 30, 2001 were audited by other auditors who have ceased operations.
Those auditors expressed an unqualified opinion on those consolidated financial
statements, before the revision described in Note 2 to the consolidated
financial statements, in their report dated November 9, 2001.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the 2003 and 2002 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of Joule
Inc. and subsidiaries as of September 30, 2003 and 2002, and the results of
their operations and their cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States of America.
As discussed above, the 2001 consolidated financial statements of Joule Inc. and
subsidiaries were audited by other auditors who have ceased operations.
As described in Note 2, these consolidated financial statements have been
revised to include the transitional disclosures required by Statement of
Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets,"
which was adopted by the Company as of October 1, 2001. In our opinion, the
disclosures for 2001 in Note 2 are appropriate. However, we were not engaged to
audit, review, or apply any procedures to the 2001 consolidated financial
statements of Joule Inc. and subsidiaries other than with respect to such
disclosures and, accordingly, we do not express an opinion or any other form of
assurance on the 2001 consolidated financial statements taken as a whole.
/s/ KPMG LLP
Short Hills, New Jersey
December 5, 2003, except as to Note 14,
which is as of December 22, 2003
11
Joule Inc. And Subsidiaries
Consolidated Balance Sheets
---------------------------
September 30,
---------------------------
2003 2002
------------ ------------
ASSETS
CURRENT ASSETS:
Cash $ 177,000 $ 174,000
Accounts receivable, less allowance for doubtful
accounts of $393,000 in 2003 and $503,000 in
2002 7,940,000 8,954,000
Prepaid insurance 1,214,000 1,210,000
Prepaid expenses and other current assets 606,000 550,000
------------ ------------
Total Current Assets 9,937,000 10,888,000
PROPERTY AND EQUIPMENT, NET 3,675,000 4,269,000
GOODWILL 1,184,000 1,129,000
OTHER ASSETS 501,000 213,000
------------ ------------
Total Assets $ 15,297,000 $ 16,499,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Loans payable to bank $ 3,150,000 $ 3,980,000
Accounts payable and accrued expenses 1,289,000 1,719,000
Accrued payroll and related taxes 1,935,000 1,604,000
------------ ------------
Total Current Liabilities 6,374,000 7,303,000
------------ ------------
CAPITAL LEASE OBLIGATIONS 85,000 184,000
DEFERRED COMPENSATION 162,000 74,000
------------ ------------
Total Liabilities 6,621,000 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 in 2003 and 3,826,000 shares in 2002 38,000 38,000
Additional paid-in capital 3,674,000 3,672,000
Retained earnings 5,346,000 5,610,000
------------ ------------
9,058,000 9,320,000
LESS: Cost of 144,000 shares of
common stock held in treasury 382,000 382,000
------------ ------------
Total Stockholders' Equity 8,676,000 8,938,000
------------ ------------
Total Liabilities & Stockholders' Equity $ 15,297,000 $ 16,499,000
============ ============
The accompanying notes to consolidated financial statements are an integral part
of these statements.
12
Joule Inc. and Subsidiaries
Consolidated Statements of Operations
-------------------------------------
Years Ended September 30,
-------------------------
2003 2002 2001
------------ ------------ ------------
REVENUES $ 68,717,000 $ 72,796,000 $ 78,654,000
COSTS, EXPENSES, AND OTHER:
Cost of services 55,816,000 58,750,000 63,059,000
Selling, general and administrative expenses 13,189,000 14,151,000 14,332,000
Interest expense 128,000 160,000 357,000
Interest income -- (6,000) (85,000)
------------ ------------ ------------
(Loss) income before income taxes (416,000) (259,000) 991,000
Income tax (benefit) provision (152,000) (97,000) 369,000
------------ ------------ ------------
Net (loss) income $ (264,000) $ (162,000) $ 622,000
============ ============ ============
Basic and diluted (loss) earnings per share $ (0.07) $ (0.04) $ 0.17
============ ============ ============
Weighted average common shares outstanding:
Basic 3,684,000 3,682,000 3,682,000
Diluted 3,684,000 3,682,000 3,682,000
============ ============ ============
The accompanying notes to consolidated financial statements are an integral part
of these statements.
13
Joule Inc. and Subsidiaries
Consolidated Statements of Cash Flows
-------------------------------------
Years Ended September 30,
--------------------------------------------
2003 2002 2001
------------ ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (264,000) $ (162,000) $ 622,000
Adjustments to reconcile net (loss) income to net
cash flows provided by operating activities:
Depreciation and amortization 902,000 935,000 883,000
Writeoffs of property and equipment 34,000 -- --
Gain on sale of property and equipment (7,000) -- --
Changes in operating assets and liabilities:
Accounts receivable 1,014,000 2,170,000 (1,375,000)
Prepaid expenses and other assets (246,000) (669,000) 47,000
Accounts payable and accrued expenses (430,000) (241,000) 430,000
Accrued payroll and related taxes 331,000 (236,000) 255,000
Deferred compensation 88,000 74,000 --
------------ ------------ ------------
Net cash flows provided by operating activities 1,422,000 1,871,000 862,000
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of property and equipment (353,000) (498,000) (1,118,000)
Purchases of marketable securities
for deferred compensation plan (103,000) (87,000) --
Disposal of property and equipment 45,000 -- --
Payments for business acquired, net of cash received (63,000) -- --
------------ ------------ ------------
Net cash flows used in investing activities (474,000) (585,000) (1,118,000)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Decrease) increase in loans payable to bank, net (830,000) (1,270,000) 270,000
Repayment of obligations under capital leases (115,000) (93,000) --
------------ ------------ ------------
Net cash flows (used in) provided by financing activities (945,000) (1,363,000) 270,000
------------ ------------ ------------
NET CHANGE IN CASH 3,000 (77,000) 14,000
CASH, BEGINNING OF PERIOD 174,000 251,000 237,000
------------ ------------ ------------
CASH, END OF PERIOD $ 177,000 $ 174,000 $ 251,000
============ ============ ============
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 128,000 $ 173,000 $ 376,000
============ ============ ============
Income taxes paid $ 95,000 $ 102,000 $ 632,000
============ ============ ============
SUPPLEMENTAL DISCLOSURE OF NON-CASH
INVESTMENT AND FINANCING ACTIVITIES:
Capitalized vehicle leases $ 16,000 $ 94,000 $ 291,000
============ ============ ============
The accompanying notes to consolidated financial statements are an integral part
of these statements.
14
Joule Inc. and Subsidiaries
Consolidated Statements of Changes in Stockholders' Equity
----------------------------------------------------------
For the Three-Year Period Ended September 30, 2003
-------------------------------------------------------------------------------------------------
Preferred Shares of Common Additional Retained Treasury Total
Stock Common Stock Paid-in Earnings Stock Stockholders'
Stock Capital Equity
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balances, September 30, 2000 -- 3,820,000 $ 38,000 $ 3,669,000 $ 5,150,000 $ (382,000) $ 8,475,000
Net income -- -- -- -- 622,000 -- 622,000
Stock Awards -- 6,000 -- 3,000 -- -- 3,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balances, September 30, 2001 -- 3,826,000 38,000 3,672,000 5,772,000 (382,000) 9,100,000
Net loss -- -- -- -- (162,000) -- (162,000)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balances, September 30, 2002 -- 3,826,000 38,000 3,672,000 5,610,000 (382,000) 8,938,000
Net loss -- -- -- -- (264,000) -- (264,000)
Stock Awards -- 2,000 -- 2,000 -- -- 2,000
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balances, September 30, 2003 -- 3,828,000 $ 38,000 $ 3,674,000 $ 5,346,000 $ (382,000) $ 8,676,000
=========== =========== =========== =========== =========== =========== ===========
The accompanying notes to consolidated financial statements are an integral part
of these statements.
15
Notes To Consolidated Financial Statements
Note 1 - Description of Business:
Joule Inc. ("Joule" or "the Company") is engaged in the business of
personnel outsourcing. 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. In the fiscal years ended September 30, 2003 and
2002, one customer accounted for approximately 14% and 10% of revenues,
respectively. No customer accounted for more than 10% of revenues in fiscal
2001.
Note 2 - Summary of Significant Accounting Policies:
Basis of Presentation - The consolidated financial statements include
the accounts of the Company and its wholly-owned subsidiaries. All intercompany
transactions have been eliminated in consolidation.
Use of Estimates - The preparation of accrual basis financial
statements requires management to make estimates that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. Some of the more significant estimates made by management
include the allowance for doubtful accounts and other operating allowances and
accruals. Included in accrued expenses as of September 30, 2003 and 2002 are
amounts for accrued vacation of $364,000 and $368,000, respectively.
Property and Equipment - Property and equipment are stated at cost.
Leased assets meeting the criteria for capitalization are included in property
and equipment. Depreciation has been provided primarily by the straight-line
method, at rates based upon estimated useful lives of 3 to 5 years for
automotive equipment and 5 to 10 years for machinery, equipment, furniture and
fixtures. Improvements to leasehold property are amortized on the straight-line
method over the remaining lease term or the useful lives of related property,
whichever is shorter. Buildings are depreciated over 30 years.
Revenue Recognition - The Company's revenues are derived from providing
staffing services to its customers. Substantially all revenue is billed on a
direct cost plus markup basis. In addition, the Company recognizes revenues
under fixed priced contracts and permanent placement services. Revenues are
recorded when services are rendered.
Income Taxes - The Company accounts for income taxes using the asset
and liability method which results in the determination of deferred taxes based
on the estimated future tax effects of differences between the financial
statement and tax bases of assets and liabilities using enacted tax rates
currently in effect. A valuation allowance is to be provided when it is more
likely than not that some portion or all of the deferred tax assets will not be
realized.
Earnings Per Share - The Company presents basic earnings per share
(EPS) and diluted EPS. Basic EPS is calculated by dividing net (loss) income by
the weighted average number of shares of common stock outstanding during the
period.
Diluted EPS is calculated by dividing net (loss) income by the weighted
average number of shares of common stock outstanding plus additional common
shares that could be issued in connection with potentially dilutive securities.
Diluted shares outstanding for 2001 are equal to basic shares as outstanding
exercisable stock options have exercise prices greater than the fair value of
the Company's common stock during those years. Diluted shares outstanding for
2003 and 2002 are equal to basic shares as outstanding exercisable stock options
are anti-dilutive as a result of the net losses in such fiscal years.
16
Stock Options - At September 30, 2003, the Company has two stock-based
employee compensation plans, which are described more fully in Note 5. 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 (loss) income 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.
In December 2002, the Financial Accounting Standards Board (FASB)
issued Statement of Accounting Standards (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 years ended September 30, 2003, 2002 and 2001.
Years Ended
September 30,
2003 2002 2001
---------- ---------- ----------
Net (loss) income as reported ...... $ (264,000) $ (162,000) $ 622,000
Add: Amount charged to expense
under intrinsic method ............ -- -- --
Deduct: Total stock-based
employee compensation expense
determined under fair value
based method for all awards,
net of related tax effects ........ (26,000) (93,000) 53,000
---------- ---------- ----------
Pro forma net (loss) income ........ $ (290,000) $ (255,000) $ 569,000
========== ========== ==========
(Loss) income per share:
Basic - as reported ............... $ (0.07) $ (0.04) $ 0.17
========== ========== ==========
Basic - pro forma ................. $ (0.08) $ (0.07) $ 0.15
========== ========== ==========
Diluted - as reported ............. $ (0.07) $ (0.04) $ 0.17
========== ========== ==========
Diluted - pro forma ............... $ (0.08) $ (0.07) $ 0.15
========== ========== ==========
The fair value of options granted is estimated on the date of grant
using the Black-Scholes option-pricing model. The weighted average fair values
of options granted in 2003 is $0.71; 2002 is $0.69; in 2001 is $1.16; based upon
the following weighted average assumptions: expected volatility (48% in 2003,
104% in 2002, and 62% in 2001), risk-free interest rate (2% in 2003, 2002 and
2001), expected life (5 years in 2003, 2002 and 2001), and expected dividend
yield (0% in 2003, 2002 and 2001).
Long-Lived Assets - In August 2001, the FASB issued 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
17
obligation as a liability in the period in which it incurs a legal obligation
associated with the retirement of tangible long-lived assets. 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.
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.
The Company assesses the recoverability of its long-lived assets
whenever events or changes in circumstances indicate that the carrying value of
the asset may not be recoverable. Factors the Company considers important which
could trigger an impairment review include:
o Significant under-performance relative to expected historical
performance or projected future operating results;
o Significant changes in the manner or use of the assets or the
strategy of the Company's overall business; and
o Significant adverse changes in the business climate in which the
Company operates.
If the Company identifies the existence of one or more of the above
indicators, the Company would determine if the asset is impaired by comparing
its net undiscounted cash flows to its carrying value. If the expected future
net undiscounted cash flows are less than the carrying value of the asset, the
Company would record an impairment loss based on the difference between the
asset's estimated fair value and its carrying value.
Goodwill - During 1999, the Company acquired Ideal Technical Services
("Ideal") for $1,374,000, which was accounted for under the purchase method. In
connection with this acquisition, the Company recorded $1,269,000 of goodwill,
allocated to the Technical segment. Goodwill had been amortized over a period of
twenty years through September 30, 2001. Amortization of goodwill amounted to
$72,000 in 2001, which is included in selling, general and administrative
expenses.
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
of which $23,000 has been earned through September 30, 2003. Wennik & Motta is a
staffing firm in Boston, Massachusetts, which places marketing and creative
personnel with its clients. Goodwill of $55,000 has been allocated to the
Technical segment.
18
In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other
Intangible Assets". SFAS No. 142 requires that goodwill and identifiable
intangible assets with indefinite useful lives no longer be amortized, but
tested for impairment annually. SFAS No. 142 also requires the amortization of
identifiable intangible assets with finite lives, although the statement no
longer limits the amortization period to 40 years. Identifiable intangible
assets that are subject to amortization are to be tested for impairment in
accordance with SFAS No. 144. As of September 30, 2001, the Company had
$1,129,000 of net goodwill and no acquired intangible assets. In accordance with
SFAS No. 142, goodwill is to be tested for impairment at a level of reporting
referred to as a "reporting unit".
The annual goodwill impairment assessment involves estimating the fair
value of the reporting unit and comparing it with its carrying amount. If the
carrying value of the reporting unit exceeds its fair value, additional steps
are followed to recognize a potential impairment loss. Calculating the fair
value of the reporting unit requires significant estimates and assumptions by
management. The Company estimates the fair value of its reporting unit by
applying third-party market value indicators to the reporting unit's projected
revenues, earnings before net interest and taxes (EBIT), and earnings before net
interest, taxes, depreciation and amortization (EBITDA), and calculating an
average of the three extended market values. Estimating the fair value of the
reporting unit requires significant estimates and assumptions by management, as
the calculation is dependent on estimates for future revenues, EBIT and EBITDA,
all of which are impacted by economic conditions related to the industry in
which the Company operates, as well as conditions in the U.S. capital markets. A
decline in the estimated fair value of a reporting unit could result in an
impairment charge to goodwill, which could have a material adverse effect on our
business, financial condition and results of operations.
The Company elected to early-adopt the provisions of SFAS No. 142 as of
October 1, 2001 and identified its reporting units to be its operating segments
(see Note 9 below). The carrying value of each reporting unit was determined by
assigning assets and liabilities, including the existing goodwill and intangible
assets, to those reporting units as of October 1, 2001. In connection with the
adoption of SFAS No. 142, the Company completed the transitional goodwill
impairment assessment with no adjustment to the carrying value of goodwill as of
October 1, 2001. The annual impairment test is performed after completion of the
Company's annual financial operating plan, which occurs in the fourth quarter of
its fiscal year. The Company completed the annual impairment test with no
adjustment to the carrying value of goodwill as of September 30, 2003 and 2002
Had the Company adopted the standards of SFAS No. 142, as of October 1,
2000, net income and basic and diluted earnings per share would have been
$665,000 and $0.18, respectively, after adding back $72,000 of goodwill
amortization net of related tax effect for the year ended September 30, 2001.
Exit or Disposal Activities - In July 2002, the FASB issued SFAS No.
146, "Accounting for Costs Associated with Exit or Disposal Activities". This
Standard supercedes the accounting guidance provided by Emerging Issues Task
Force Issue No. 94-3, "Liability Recognition for Certain Employee Termination
Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred
in a Restructuring)". SFAS No. 146 requires the Company to recognize costs
associated with exit activities when they are incurred rather than at the date
of a commitment to an exit or disposal plan. SFAS No. 146 is to be applied
prospectively to exit or disposal activities initiated after December 31, 2002.
The Company adopted SFAS No. 146 effective January 1, 2003 and it had no effect
on the consolidated financial statements.
Investments in Securities - The investment assets of the Deferred
Compensation Plan (see Note 10 below) are classified as trading securities and
as such all realized and unrealized gains and losses are included in the
determination of net (loss) income.
19
Note 3 - Property and Equipment:
Property and equipment consists of:
September 30,
---------------------------
2003 2002
---------- ----------
Land $ 671,000 $ 671,000
Buildings and buildings/leasehold
improvements 2,384,000 2,434,000
Computer equipment and software 1,646,000 1,551,000
Automotive vehicles 1,160,000 1,470,000
Furniture and equipment 844,000 667,000
---------- ----------
6,705,000 6,793,000
Less: Accumulated depreciation
and amortization 3,030,000 2,524,000
---------- ----------
$3,675,000 $4,269,000
========== ==========
Note 4 - Loans Payable To Bank:
On August 22, 2003 the Company signed a three year loan agreement with
Fleet Capital in the form of a line of credit of $7,500,000 that bears interest
at LIBOR plus two and three-quarter percent with a prime rate plus one-half
percent option. Previously, the Company had an annual line of credit of
$9,000,000 that bore interest at LIBOR plus one and one-half percent with a
prime rate less one-half percent option. The average interest rate at September
30, 2003 and 2002 was 3.9% and 3.38%, respectively. An unused line of credit fee
of 0.375% per annum is payable on the average monthly amount by which the
$7,500,000 exceeds the sum of the outstanding principal balance of the line of
credit plus the letter of credit amount. The loan agreement provides for a
maximum revolving credit facility of $7,500,000 (not to exceed 85% of the
Company's "Eligible Receivables" as such term is defined in the loan agreement,
less any outstanding letter of credits). The Company classifies all outstanding
amounts as current liabilities in accordance with Emerging Issues Task Force
(EITF) No. 95-22, "Balance Sheet Classification of Borrowings Outstanding under
Revolving Credit Agreements That Include both a Subjective Acceleration Clause
and a Lock-Box Arrangement". The Company used its bank line of credit to obtain
a $1,000,000 letter of credit in March 2003 in favor of its worker compensation
insurance carrier as a part of its insurance renewal. At September 30, 2003 and
2002, $3,350,000 and $5,020,000, respectively, of the lines of credit were
unused and available. Borrowings are collateralized principally by accounts
receivable. Under the terms of the loan agreement, the Company is prohibited
from making any dividend distributions. The loan agreement also contains a
provision that limits the amount of capital expenditures that the Company may
make in any calendar year to $600,000. Total capital expenditures in fiscal 2003
were $353,000. The terms of the loan agreement also includes certain financial
covenants including fixed charge coverage ratio, minimum net income and maximum
leverage ratio. The Company is in compliance with all financial covenants at
September 30, 2003.
Note 5 - Stock Option Plans:
The Company adopted a new stock option plan in 2001. The Company's 2001
Stock Option Plan provides for the grant of non-qualified or incentive stock
options covering up to an aggregate of 500,000 shares of common stock to
directors, officers, and other employees of the Company. The option exercise
price cannot be less than the fair value of the Company's common stock at the
date the options are granted. At September 30, 2003, there were 25,000 and
176,000 stock options outstanding under the 2001 and 1991 Stock Option Plans,
respectively, at prices ranging from $0.88 to $5.38, of which 25,000 and 156,000
options are exercisable, respectively. The weighted average fair values of
options granted in 2003 is $0.71; 2002 is $0.69; in 2001 is $1.16. The weighted
20
average exercise price of outstanding stock options was $3.64 as of September
30, 2003. No new options will be granted under the 1991 plan. In 2003, options
for 12,500 shares were granted under the 2001 plan at an exercise price of $0.92
per share. In 2002, options for 12,500 shares were granted under the 2001 plan
at an exercise price of $0.88 per share. In 2001, options for 11,000 shares were
granted under the 1991 plan at an exercise price of $2.00 per share and options
for 5,000 shares expired.
The following is a summary of the activity in the Company's Stock
Option Plans which include the 1991 Stock Option Plan and the 2001 Stock Option
Plan:
Weighted Weighted
Average Options Average
Exercise Exercisable Grant-Date
Options Price At End of Year Fair-Value
-------------- -------------- -------------- --------------
Outstanding at September 30, 2000 170,000 $4.10 55,000
Granted at exercise prices which equaled
the fair market value on the date of grant 11,000 $1.16
Exercised --
Cancelled (5,000)
---------
Outstanding at September 30, 2001 176,000 $4.03 96,000
Granted at exercise prices which equaled
the fair market value on the date of grant 12,500 $0.69
Exercised --
Cancelled --
---------
Outstanding at September 30, 2002 188,500 $3.83 138,000
Granted at exercise prices which equaled
the fair market value on the date of grant 12,500 $0.71
Exercised --
Cancelled --
---------
Outstanding at September 30, 2003 201,000 $3.64 181,000
=========
As of September 30, 2003, the Stock Options Plans had options
outstanding and exercisable by price range as follows:
Weighted
Average Weighted Weighted
Remaining Average Average
Exercise Options Contractual Exercise Options Exercise
Prices Outstanding Life Price Exercisable Price
------ ----------- ---- ----- ----------- -----
$5.38 100,000 4.46 $5.38 100,000 $5.38
$4.00 10,000 4.75 4.00 10,000 4.00
$2.00 66,000 6.47 2.00 46,000 2.00
$0.88 12,500 8.00 0.88 12,500 0.88
$0.92 12,500 9.00 0.92 12,500 0.92
--------- ---------
201,000 5.63 3.64 181,000 3.83
========= =========
21
Note 6 - Income Taxes:
The (benefit) provision for income taxes is comprised of the following:
Years Ended September 30,
--------------------------------------
2003 2002 2001
---------- ---------- ----------
Current:
Federal $ (116,000) $ (58,000) $ 374,000
State 35,000 26,000 48,000
---------- ---------- ----------
(81,000) (32,000) 422,000
---------- ---------- ----------
Deferred:
Federal (2,000) (19,000) (46,000)
State (69,000) (46,000) (7,000)
---------- ---------- ----------
(71,000) (65,000) (53,000)
---------- ---------- ----------
Total $ (152,000) $ (97,000) $ 369,000
========== ========== ==========
The (benefit) provision for income taxes varied from the income tax
computed at the U.S. Federal statutory rates of 34% in fiscal 2003, 2002 and
2001 for the following reasons:
Years Ended September 30,
--------------------------------------
2003 2002 2001
---------- ---------- ----------
Expected Federal income
tax (benefit) expense $ (142,000) $ (88,000) $ 337,000
State income taxes (23,000) (13,000) 27,000
Tax credits (35,000) (17,000) (19,000)
Nondeductible costs of
going private transaction 20,000 -- --
Other items 28,000 21,000 24,000
---------- ---------- ----------
Total $ (152,000) $ (97,000) $ 369,000
========== ========== ==========
At September 30, 2003 and 2002, the tax effects of temporary
differences that give rise to the deferred tax assets are as follows:
September 30,
-----------------------
2003 2002
---------- ----------
Deferred tax assets:
Bad debt allowance $ 157,000 $ 201,000
Accrued vacation 127,000 125,000
Deferred compensation 66,000 27,000
Depreciation & amortization 1,000 13,000
Federal tax credits 35,000 --
Accrued expenses 20,000 20,000
Charitable contributions 4,000 --
State NOL carryforwards 71,000 24,000
---------- ----------
Deferred tax assets $ 481,000 $ 410,000
========== ==========
22
The deferred tax assets are included in prepaid expense and other
current assets and other assets in the consolidated balance sheets. At September
30, 2003, the Company has state net operating loss carryforwards of
approximately $1,200,000 that will expire beginning in the year 2009. Federal
tax credits of $35,000 expire in 2008.
Based upon the level of historical taxable income and projections for
future taxable income over the period in which the Company's deferred tax assets
are deductible, management believes it is more likely than not the Company will
realize the benefits of these deductible differences.
Note 7 - Commitments and Contingencies:
The Company's facilities are leased under noncancellable terms expiring
through 2006. Rent expense was $480,000, $545,000, and $541,000 for the years
ended September 30, 2003, 2002 and 2001, respectively. The Company also leases
certain automobiles under capital lease arrangements.
Aggregate rentals for the remaining lease terms at September 30, 2003
are as follows:
Capital Operating
Year Ending September 30, Leases Leases
- ------------------------ --------- ---------
2004 .............................. $ 121,000 $ 368,000
2005 .............................. 67,000 156,000
2006 .............................. 18,000 2,000
--------- ---------
.................................... 206,000 $ 526,000
=========
Amount representing interest (9,000)
---------
Capital lease obligations 197,000
Obligations due within one year 112,000
---------
Long-term lease obligations $ 85,000
=========
Note 8 - Transactions with Major Stockholders and Affiliates:
The Company rented a facility from E.N. Logothetis, a significant
stockholder for approximately $16,000, $16,000, and $15,000 for each of the
years ended September 30, 2003, 2002 and 2001, respectively. The Company's
rental agreement with the stockholder is on a month-to-month basis.
The Company paid certain major stockholders Board of Director's fees of
approximately $14,000, $16,000, and $14,000, for the fiscal year 2003, 2002, and
2001, respectively. In fiscal 2003 and 2002, the Company provided temporary
office services to Symphony Suites, a company owned by Nick M. Logothetis, a
director and significant shareholder. Billing rates are comparable to those used
for other customers; amounts charged during fiscal 2003 and 2002 were $413,000
and $424,000, respectively; $85,000 and $36,000 was outstanding at September 30,
2003 and 2002, respectively. The highest amount outstanding during fiscal 2003
was $94,000. The Company's Board of Directors has approved the transactions
outlined above. Any substantial change in the terms of any such transactions and
any additional transactions with affiliates of the Company will be submitted to
the Board for approval.
23
Note 9 - Segment Disclosures:
The Company has determined its reportable segments based on the
Company's method for making operating decisions, assessing performance and
reporting internally. The Company's reportable segments are: (1) Commercial
Staffing, (2) Technical Staffing and (3) Industrial Staffing.
Information concerning operations by operating segment is as follows
(in 000's):
2003 2002 2001
-------- -------- --------
Revenues
Commercial $ 19,188 $ 21,522 $ 25,322
Technical 27,997 25,779 25,733
Industrial 21,532 25,495 27,599
-------- -------- --------
$ 68,717 $ 72,796 $ 78,654
-------- -------- --------
(Loss) Income Before Income Taxes
Commercial $ 757 $ 610 $ 1,330
Technical 2,426 2,731 2,186
Industrial 410 391 1,506
Corporate (unallocated
including interest) (4,009) (3,991) (4,031)
-------- -------- --------
$ (416) $ (259) $ 991
-------- -------- --------
Depreciation
& Amortization
Commercial $ 229 $ 260 $ 214
Technical 67 101 179
Industrial 305 299 262
Corporate (unallocated) 301 275 228
-------- -------- --------
$ 902 $ 935 $ 883
-------- -------- --------
Identifiable Assets
Commercial $ 2,466 $ 3,199 $ 4,454
Technical 4,610 4,416 3,849
Industrial 3,607 4,605 5,950
Corporate (unallocated) 4,614 4,279 4,078
-------- -------- --------
$ 15,297 $ 16,499 $ 18,331
-------- -------- --------
Additions to Long-
Lived Assets(1)
Commercial $ 56 $ 182 $ 167
Technical 16 30 32
Industrial 180 97 446
Corporate (unallocated) 109 296 764
-------- -------- --------
$ 361 $ 605 $ 1,409
-------- -------- --------
(1) Principally property & equipment additions
24
Note 10 - Deferred Compensation Plan:
In October 2001, the Company initiated a deferred compensation plan
that permits certain members of management to defer portions of their
compensation. The plan provides for Company matching contributions for certain
amounts deferred by participants in the plan. All amounts deferred are held in a
"Rabbi trust" and invested in stocks, bonds and other investments at the
direction of the participants. For the years ended September 30, 2003 and 2002,
$4,000 and $12,000 of vested Company contributions have been charged to
compensation expense. The Company has included in "deferred compensation"
$162,000 and $74,000 at September 30, 2003 and 2002, respectively, to reflect
its liability under the plan. The Company has included in "Other assets"
$224,000 and $100,000 at September 30, 2003 and 2002, respectively, which
represents the fair value of the marketable securities in the plan.
Note 11 - 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.
Note 12 - Retirement Plan:
The Company maintains a defined contribution, 401(k) retirement plan
for substantially all its employees. The Company currently matches 10% of the
employee's contribution of up to 6% of compensation, as defined. The Company's
match is invested solely at the direction of the plan's participants. Total
Company contributions for the years ended September 30, 2003, 2002 and 2001 were
$112,000, $125,000, and $112,000, respectively.
Note 13 - Selected Quarterly Financial Data (Unaudited):
A summary of quarterly financial information for fiscal 2003 and 2002
is as follows (in 000's, except per share data):
First Second Third Fourth
Quarter Quarter Quarter Quarter
--------- --------- --------- ---------
2003:
Revenues $ 17,017 $ 16,508 $ 17,799 $ 17,393
Gross margin 3,232 2,973 3,409 3,287
Net income (loss) (115) (325) 126 50
Basic and diluted
earnings (loss) per share (0.03) (0.09) 0.03 0.01
2002:
Revenues $ 19,389 $ 17,404 $ 17,439 $ 18,564
Gross margin 3,864 3,366 3,276 3,540
Net income (loss) 116 (191) (194) 107
Basic and diluted
earnings (loss) per share 0.03 (0.05) (0.05) 0.03
Note 14 - Going Private Proposal and Subsequent Events:
On August 21, 2003, the Company announced that it had received a
non-binding proposal from a purchaser group consisting of Emanuel N. Logothetis,
the founder, Chairman of the Board and Chief Executive Officer of the Company,
members of his immediate family and John G. Wellman, Jr., President and Chief
Operating Officer of the Company, to acquire all of the outstanding shares of
the Company's common stock not already owned by the purchaser group. In this
25
connection, the Company incurred costs of approximately $50,000 through
September 30, 2003, related to fees incurred by the Special Committee of the
Board of Directors (the "Special Committee") to analyze the purchaser group's
offer, which are included in selling, general and administrative expense.
The Special Committee is comprised of the three independent members of
the Company's Board of Directors and was formed to evaluate and negotiate the
going private proposal. Following negotiations with the Special Committee, on
November 21, 2003, a corporation formed by the purchaser group commenced a
tender offer (the "Tender Offer") for all of the outstanding common stock of the
Company not owned by the purchaser group at $1.52 per share. The Tender Offer
was scheduled to expire at 12:00, midnight, Eastern Standard Time, on December
19, 2003. On December 22, 2003, the purchaser group announced that it had
extended the expiration of the Tender Offer to 5:00 p.m., Eastern Standard Time,
on January 15, 2004, unless further extended. As of December 19, 2003,
approximately 350,000 shares of common stock of the Company had been tendered
and not withdrawn.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
ITEM 9A. CONTROLS AND PROCEDURES
An evaluation of the effectiveness of the Company's disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) promulgated under
the Exchange Act) was carried out as of September 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,
on a timely basis, 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 September 30, 2003 that have materially affected, or
are reasonably likely to materially affect, the Company's internal control over
financial reporting.
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors
Set forth below is certain information regarding the members of the
Board of Directors of the Company:
Principal Occupation Director
Name Age or Employment Since
- ---- --- ------------- -----
Richard Barnitt 65 Financial Consultant (a) 1996
Robert W. Howard 61 Chairman, Reisen Lumber Industries, Inc. (b) 1988
Emanuel N. Logothetis 73 Chairman of the Board and Chief Executive 1965
Officer of the Company (c)
Nick M. Logothetis 51 President, Chartwell Consulting Group (d) 1980
Steven Logothetis 49 Managing Director of Hemp Basics LLC (e) 1981
Andrew G. Spohn 59 Senior Vice President, Lee Hecht Harrison (f) 2000
26
a) Mr. Barnitt has served as a financial consultant to various companies,
including the Company (from 1989 to 2003), since his retirement in 1988
from Kidde Inc., where he had been employed since 1963, most recently as
Senior Vice President and Chief Financial Officer.
b) Mr. Howard served as Executive Vice President of Reisen Lumber and Millwork
Company from 1981 to April 1986 when he was made President of Reisen Lumber
Industries. He was named Chairman of the Board of Reisen in 1995.
c) Emanuel N. Logothetis founded the Company in 1965 and was President and
Chief Executive Officer until August 10, 1987, when he was elected Chairman
of the Board. He was reelected President on August 3, 1988 and served in
such capacity until February 3, 1999.
d) Chartwell Consulting Group is an operator of business centers.
e) Steven Logothetis is an attorney and investor and has been Managing
Director of Hemp Basics LLC, a textile converter, since September 1999.
f) Mr. Spohn was a Senior Vice President of Lee Hecht Harrison, a career
consulting firm and subsidiary of Adecco SA, from 2001 to 2003. From 1999
to 2001, he was a business consultant focusing on strategic planning and
human resources. Previously he was Chief Executive Officer of Singer Asset
Finance Company, L.L.C., a wholly owned subsidiary of Enhance Financial
Services Group, from 1997 to 1999. He was Managing Partner of New Jersey
Title Insurance Company from 1993 to 1997.
The information with respect to the executive officers of the Company
required to be included pursuant to this Item 10 is included under the caption
"Executive Officers of the Company" in Part I of this Annual Report on Form
10-K.
Audit Committee
The Board of Directors has designated from among its members an Audit
Committee for the purpose of overseeing the accounting and reporting processes
of the Company and the audits of it financial statements. The Audit Committee
consists of Robert W. Howard, Andrew G. Spohn and Richard Barnitt, all of whom
are "independent" as defined in the corporate governance listing standards of
the American Stock Exchange currently in effect as they relate to audit
committees. The Board of Directors has determined that Richard Barnitt is an
"audit committee financial expert" as defined by the rules of the Securities and
Exchange Commission.
Code of Ethics
The Company's Audit Committee has adopted a code of ethics that applies
to the Company's Chairman of the Board and Chief Executive Officer (principal
executive officer), President and Chief Operating Officer (principal operating
officer) and Vice President, Chief Financial Officer and Secretary (principal
financial and accounting officer). A copy of the Code of Ethics will be
provided, without charge, to any person who submits a written request to the
Secretary of the Company at 1245 U.S. Route 1 South, Edison, NJ 08837.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of the Common Stock, to
file reports of ownership and changes in ownership of the Common Stock with the
Securities and Exchange Commission and to provide copies to the Company. Based
upon a review of the copies of the forms furnished to the Company and upon
written representations from certain reporting persons that no forms were
required, the Company believes that all Section 16(a) filing requirements were
complied with during fiscal 2003.
ITEM 11. EXECUTIVE COMPENSATION
Executive Compensation
Set forth below is certain summary information with respect to the
compensation of the Company's Chief Executive Officer and the four most highly
compensated executive officers other than the Chief Executive Officer based on
amounts reported as salary and bonus for the fiscal year ended September 30,
2003 (the "Named Executives").
27
SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Awards
----------
Shares of
Common Stock All Other
Name and Annual Compensation Underlying Compensation
Principal Position Year Salary ($) Bonus ($) Options (#) ($) (1)
- --------------------------- ---- ---------- ---------- ---------- ----------
Emanuel N. Logothetis 2003 $ 254,321 $ -- -- $ --
Chairman of the Board 2002 256,961 18,000 -- --
and Chief Executive Officer 2001 220,000 19,000 -- --
John G. Wellman, Jr 2003 254,321 -- -- 2,104
President and Chief 2002 256,961 22,750 -- 2,600
Operating Officer 2001 220,000 -- -- 1,414
Bernard G. Clarkin 2003 125,000 5,000 2,500 1,488
Vice President and 2002 120,000 7,500 2,500 1,912
Chief Financial Officer (2) 2001 115,000 10,044 2,250 1,876
Stephen Demanovich 2003 125,000 116,459 2,500 1,488
Vice President 2002 125,000 23,950 2,500 1,874
2001 124,500 89,266 5,625 1,748
Judith Bryant 2003 125,000 5,000 2,500 1,488
Vice President 2002 125,000 23,182 2,500 1,875
2001 120,200 -- -- 938
(1) Represents the Company's matching of voluntary contributions by such person
under its 401-k Plan.
(2) In the event Mr. Clarkin's employment is actually or constructively
terminated following an acquisition, merger or change in control of the
Company, he would be entitled to receive two years' compensation and his
unvested options would automatically vest.
Stock Options
The following table contains information covering options to purchase
shares of the Company's Common Stock granted to the Named Executives in fiscal
2003 pursuant to the Company's 2001 Stock Option Plan.
OPTION GRANTS IN LAST FISCAL YEAR
Number of
Shares of Percent of Total
Common Stock Options Granted Exercise Grant Date
Underlying to Employees Price Expiration Present Value
Name Option Granted in 2003 ($/Sh) Date (#) (1)
- ---- -------------- ------- ------ ---- -------
Judith Bryant 2,500 20% 0.92 October 1, 2012 $1,600
Bernard G. Clarkin 2,500 20% 0.92 October 1, 2012 1,600
Stephen Demanovich 2,500 20% 0.92 October 1, 2012 1,600
28
(1) The Grant Date Present Value has been calculated using the Black-Scholes
option pricing model and assumes a risk-free rate of return of 2%, an
option term of five years, a dividend yield of 0% and a stock volatility of
48%. No adjustment was made for nontransferability or forfeitures. Such
assumptions are based upon historical experience and are not a forecast of
future stock price performance or volatility or of future dividend policy.
Such information, which is presented in accordance with the requirements of
the Securities and Exchange Commission, is not necessarily indicative of
the actual value that such options will have to the Named Executives, which
will be dependent upon market prices for the Common Stock.
The following table sets forth information with respect to unexercised
options held by the Named Executives at September 30, 2003.
FISCAL YEAR END OPTIONS VALUES
Number of Shares of
Common Stock Value of Unexercised
Underlying In-the-Money
Unexercised Options at Options at
September 30, 2003 (#) September 30, 2003 ($) (1)
---------------------- --------------------------
Exercisable/ Exercisable/
Name Unexercisable Unexercisable
- ---- ------------- -------------
Judith Bryant 5,000/0 $2,950/0
Bernard G. Clarkin 12,250/0 2,950/0
Stephen Demanovich 20,625/0 2,950/0
John G. Wellman, Jr. 130,000/20,000 0/0
(1) Calculated by determining the difference between the exercise price and the
closing price of the Company's Common Stock on the American Stock Exchange
for September 30, 2003.
Report of the Compensation Committee
The Compensation Committee administers the compensation program for the
executive group. Included in this group are the Chairman/Chief Executive
Officer, President/Chief Operating Officer, other corporate officers and
selected key managers. The committee is composed of directors who are not
employees of the Company.
The annual base salary paid to the Chairman/Chief Executive Officer, in
fiscal 2003, was $254,000. The Chairman/Chief Executive Officer is not eligible
to receive options under the terms of the Company's Stock Option Plan. In
determining whether changes in the compensation level of the Chairman/Chief
Executive Officer would be appropriate, the Compensation Committee considers the
overall performance of the Company for the prior year.
Salary levels for the other members of the senior management group have
been established and are based on external salary information as well as the
overall performance of the Company. The information gathered is evaluated by the
Compensation Committee in light of the current responsibilities of the
individuals involved and serves as the basis for the establishment of salary
ranges and also in recommending salary changes. The basis for determining
payment of a bonus to an individual is based on a subjective evaluation of the
individual's performance as well as overall corporate performance. Any
compensation change made to members of the senior management group will have the
approval of the Committee and the Chairman/Chief Executive Officer.
29
Compensation Committee
Andrew G. Spohn
Steven Logothetis
Nick M. Logothetis
Compensation Committee Interlocks and Insider Participation
Nick M. Logothetis, a member of the Compensation Committee, served as
President of the Company from August 1987 to August 1988. Prior thereto, he was
Executive Vice President of the Company from March 1980.
Performance Graph
Set forth below is a graph comparing the total returns (assuming
reinvestment of dividends) of the Company, the American Stock Exchange Market
Index and a Peer Group Index comprised of companies engaged in the help supply
services business. The graph assumes $100 invested on October 1, 1998 in the
Company and each of the indices and reinvestment of any dividends.
COMPARE 5-YEAR CUMULATIVE TOTAL RETURN AMONG JOULE, INC.,
AMEX MARKET INDEX AND SIC CODE INDEX
[GRAPHIC CHART OMITTED]
- --------------------------------------------------------------------------------------------------
Company/Index/Market 9/30/98 9/30/99 9/29/00 9/28/01 9/30/02 9/30/03
- --------------------------------------------------------------------------------------------------
Joule, Inc. 100.00 66.67 50.00 29.33 38.33 49.67
Help Supply Services 100.00 108.48 114.08 70.54 69.85 94.62
AMEX Market Index 100.00 116.46 139.28 104.43 113.45 140.20
- --------------------------------------------------------------------------------------------------
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS
The following table sets forth information regarding the beneficial
ownership of Common Stock by each person known to management of the Company to
own beneficially 5% or more of the issued and outstanding Common Stock as of
December 23, 2003:
30
Beneficial Ownership (a)
Number of
Name (b) Shares Percent
- -------- ------ -------
Emanuel N. Logothetis 1,167,747 (c) 31.7%
Helen Logothetis 1,167,747 (d) 31.7
Nick M. Logothetis 476,702 12.9
Steven Logothetis 476,622 12.9
Julie Logothetis 493,348 13.4
(a) As used in this Form 10-K, "beneficial ownership" means the sole or shared
power to direct the voting and/or disposition of Shares of Common Stock. In
addition, a person is deemed to have beneficial ownership of any shares of
Common Stock that such person has the right to acquire within 60 days.
(b) Emanuel N. Logothetis is the husband of Helen Logothetis. They are the
parents of Nick M. Logothetis, Steven Logothetis and Julie Logothetis. The
address of the members of the Logothetis family is 1245 U.S. Route 1 South,
Edison, New Jersey 08837.
(c) Consists of 807,125 shares of Common Stock as to which Mr. Logothetis has
sole voting and disposition power and the 360,622 shares referred to in (d)
below that are beneficially owned solely by Helen Logothetis, as to which
shares he disclaims beneficial ownership.
(d) Consists of 360,622 shares of Common Stock as to which Mrs. Logothetis has
sole voting and disposition power and the 807,125 shares referred to in (c)
above that are beneficially owned solely by Emanuel N. Logothetis, as to
which shares she disclaims beneficial ownership.
The following table sets forth certain information, as of December 23,
2003, with respect to the ownership of shares of Common Stock by (i) the current
directors of the Company, (ii) the Named Executives referred to under "Item 11.
Executive Compensation," and (iii) all directors and executive officers of the
Company as a group:
Number of Shares of
Common Stock and Percent of
Name Class Beneficially Owned (a)
- ---- ----------------------------
Richard Barnitt 1,000
Judith Bryant 5,000
Bernard G. Clarkin 12,845
Stephen Demanovich 20,720
Robert W. Howard 9,200
Emanuel N. Logothetis 1,167,747 (31.7%)
Nick M. Logothetis 476,702 (12.9%)
Steven Logothetis 476,622 (12.9%)
Andrew G. Spohn 3,200
John G. Wellman, Jr. 172,075 (4.7%)
Directors and Executive
Officers as a group (13 persons) 2,363,729 (64.2%)
(a) Except for the 360,622 shares of Common Stock owned by his wife and
attributed to Emanuel N. Logothetis, as more fully set forth under
"Beneficial Ownership Of More Than 5% Of The Outstanding Common Stock,"
such person has sole voting and disposition power with respect to the
shares shown in this column. Includes 12,250 shares for Mr. Clarkin, 20,625
shares for Mr. Demanovich, 5,000 shares for Ms. Bryant, 150,000 shares for
Mr. Wellman and 160,688 shares for all directors and executive officers as
a group that may be acquired within 60 days after December 23, 2003 upon
exercise of options. Unless otherwise indicated, beneficial ownership of
any named individual does not exceed 1% of the outstanding shares.
31
The Company's 1991 Stock Option Plan and 2001 Stock Option Plan were
each approved by the stockholders. Additional information regarding the
Company's stock option plans appears in "Note 5-Stock Option Plans" of the Notes
to Consolidated Financial Statements included in this report. The Company has no
other equity compensation plan. The number of stock options outstanding under
the stock option plans, the weighted average exercise price of outstanding
options and the number of shares remaining available for issuance, in each case
as of September 30, 2003, were as follows:
Number of shares
remaining available for
Number of shares to Weighted average future issuance under
be issued upon exercise exercise price of plans (excluding shares
Plan category of outstanding options outstanding options reflected in column (a))
------------- ---------------------- ------------------- ------------------------
Stock Option Plans
approved by stockholders 200,688 $3.64 475,000
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company provided temporary office services to Symphony Suites, a
company owned by Nick M. Logothetis, a director and shareholder. Billing rates
are comparable to those used for other customers; amounts charged during fiscal
2003 were $413,000 and $85,000 was outstanding at September 30, 2003. The
highest amount outstanding during fiscal 2003 was $94,000. The Company rented a
facility from E.N. Logothetis, Chairman of the Board and Chief Executive
Officer, a significant stockholder for approximately $16,000, $16,000, and
$15,000 for each of the years ended September 30, 2003, 2002 and 2001,
respectively. The Company's rental agreement with the stockholder is on a
month-to-month basis. The Company's Board of Directors has approved the
transactions outlined above. Any substantial change in the terms of any such
transactions and any additional transactions with affiliates of the Company will
be submitted to the Board for approval.
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
For the fiscal years ended September 30, 2003 and 2002, the Company
paid (or will pay) the following fees to KPMG LLP (and its affiliates) for
services rendered during the year or for the audit in respect of that year.
2003 2002
-------- --------
Audit Fees $ 59,000 $ 43,000
Audit -Related Fees 26,000 24,000
Tax Fees 27,000 26,000
All Other Fees -- --
-------- --------
Total $112,000 $ 93,000
======== ========
The Audit Fees include amounts billed for the audit of the Company's
annual consolidated financial statements for fiscal 2003 and 2002 and the timely
review of the consolidated financial statements included in the Forms 10-Q filed
by the Company during such years. Other Audit Related Fees include amounts
billed for completion of quarterly reviews and audits of the Company's employee
benefit plans. Tax Fees include tax compliance, tax advice and tax planning. It
is expected that KPMG LLP will provide similar non-audit services during fiscal
2004. The Audit Committee reviewed and approved in advance the audit and
non-audit services rendered by KPMG LLP during fiscal 2003 and has considered
and concluded that the provision of the non-audit services is compatible with
maintaining the independence of KPMG LLP.
32
PART IV
-------
ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Financial Statements
--------------------
The following financial statement schedules are included at the
indicated page in this Annual Report on Form 10-K and incorporated in
this Item 15(a) by reference:
Independent Auditor's Report as to 2003 Schedules..........F-1
Financial Statement Schedules:
VIII - Valuation and Qualifying Accounts..........F-2
IX - Short-term Borrowings......................F-3
All other schedules are omitted since they are not required or are not
applicable or since the information is furnished elsewhere in the
financial statements or notes thereto.
(b) Reports on Form 8-K
-------------------
On August 21, 2003, the Company filed a report on Form 8-K announcing
it had received a non-binding proposal for a going private transaction
from a purchaser group.
On August 11, 2003, the Company filed a report on Form 8-K with respect
to the issuance of the press release for the third quarter ended June
30, 2003.
(c) Exhibits
--------
3.1 Certificate of Incorporation, filed as Exhibit 3.1 to the
Company's Registration Statement on Form S-1 (File No.
33-7617) under the Securities Act of 1933, as amended (the
"Form S-1"), and incorporated herein by reference.
3.2 By-laws, as amended, filed as Exhibit 3.2 to the Form S-1 and
incorporated herein by reference.
4.1 Loan and Security Agreement, dated as of February 20, 1991,
between registrant and United Jersey Bank Central, N.A., filed
as Exhibit 4.1 to the Company's Annual Report on Form 10-K for
the year ended September 30, 1991 and incorporated herein by
reference.
4.1a Third Modification and Extension Agreement, dated August 23,
1995, between registrant and United Jersey Bank, filed as
Exhibit 4.1a to the Company's Annual Report on Form 10-K for
the year ended September 30, 1995 and incorporated herein by
reference.
4.1b Fourth Modification and Extension Agreement, dated February 6,
1996, between registrant and United Jersey Bank, filed as
Exhibit 4.1b to the Company's Annual Report on Form 10-K for
the year ended September 30, 1996 and incorporated herein by
reference.
33
4.1c Fifth Modification and Extension Agreement, dated May 31,
1996, between registrant and United Jersey Bank, filed as
Exhibit 4.1c to the Company's Annual Report on Form 10-K for
the year ended September 30, 1996 and incorporated herein by
reference.
4.1d Sixth Modification and Extension Agreement, dated May 31,
1997, between registrant and Summit Bank, filed as Exhibit
4.1d to the Company's Annual Report on Form 10-K for the year
ended September 30, 1997 and incorporated herein by reference.
4.1e Seventh Modification and Extension Agreement, dated May 31,
1998, between registrant and Summit Bank, filed as Exhibit
4.1e to the Company's Annual Report on Form 10-K for the year
ended September 30, 1998 and incorporated herein by reference.
4.1f Eighth Modification and Extension Agreement, dated February 5,
1999, between registrant and Summit Bank, filed as Exhibit
4.1f to the Company's Annual Report on Form 10-K for the year
ended September 30, 1999 and incorporated herein by reference.
4.1g Ninth Modification and Extension Agreement, dated May 10,
1999, between registrant and Summit Bank, filed as Exhibit
4.1g to the Company's Annual Report on Form 10-K for the year
ended September 30, 1999 and incorporated herein by reference.
4.1h Tenth Modification and Extension Agreement, dated November 15,
1999, between registrant and Summit Bank, filed as Exhibit
4.1h to the Company's Annual Report on Form 10-K for the year
ended September 30, 2000 and incorporated herein by reference.
4.1i Letter Amendment, dated May 26, 2000, between registrant and
Summit Bank, filed as Exhibit 4.1i to the Company's Annual
Report on Form 10-K for the year ended September 30, 2000 and
incorporated herein by reference.
4.1j Letter Amendment dated May 31, 2001 between registrant and
Fleet Bank, filed as Exhibit 4.1j to the Company's Annual
Report on Form 10-K for the year ended September 30, 2001 and
incorporated herein by reference.
4.1k Thirteenth Amendment and Modification Agreement, dated
September 15, 2001, between registrant and Fleet Bank, filed
as Exhibit 4.1k to the Company's Annual Report on Form 10-K
for the year ended September 30, 2001 and incorporated herein
by reference.
4.1l Fourteenth Amendment and Modification Agreement, dated May 31,
2002, between registrant and Fleet Bank, filed as Exhibit 4.1l
to the Company's Annual Report on Form 10-K for the year ended
September 30, 2002 and incorporated herein by reference.
4.1m Loan and Security Agreement, dated as of August 22, 2003,
between registrant and Fleet Capital, filed as Exhibit 4.1m to
the Company's Form 10-K for the year ended September 30, 2003.
10.4* 1991 Stock Option Plan, filed as Exhibit 10.11 to the
Company's Annual Report on Form 10-K for the year ended
September 30, 1991 and incorporated herein by reference.
10.5* 2001 Stock Option Plan, filed as Exhibit 10.5 to the Company's
Annual Report on Form 10-K for the year ended September 30,
2001 and incorporated herein by reference.
34
10.6* Joule Inc. Deferred Compensation Plan filed as Exhibit 10.6 to
the Company's Annual Report on Form 10-K for the year ended
September 30, 2001 and incorporated herein by reference.
21 List of Subsidiaries.
23 Consent of KPMG LLP.
31.1 Certification of Chief Executive Officer pursuant to Rule
13a-14(a) (Section 302 Certification), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to Rule
13a-14(a) (Section 302 Certification), as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 --
Chief Executive Officer.
32.2 Certification pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 --
Chief Financial Officer
99.1 Report of Independent Public Accountants of Arthur Andersen
LLP dated November 9, 2001 with respect to the consolidated
financial statements for the fiscal years 2001, 2000 and 1999.
99.2 Report of Independent Public Accountants of Arthur Andersen
LLPdated November 9, 2001 as to 2001, 2000 and 1999 schedules.
* Compensatory Plan
35
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.
JOULE INC.
Dated: January 9, 2004 /s/ EMANUEL N. LOGOTHETIS
-----------------------------
Emanuel N. Logothetis,
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities indicated on January 8, 2004.
/s/ EMANUEL N. LOGOTHETIS /s/ BERNARD G. CLARKIN
- ------------------------------------ ------------------------------------
Emanuel N. Logothetis Bernard G. Clarkin
Chairman of the Board and Vice President and Chief Financial
Director (Principal Executive Officer) Officer (Principal Financial Officer
and Principal Accounting Officer)
/s/ NICK M. LOGOTHETIS
- ------------------------------------ ------------------------------------
Nick M. Logothetis - Director Steven Logothetis - Director
/s/ RICHARD BARNITT /s/ ANDREW SPOHN
- ------------------------------------ ------------------------------------
Richard Barnitt - Director Andrew Spohn - Director
- ------------------------------------
Robert W. Howard - Director
36
INDEPENDENT AUDITORS' REPORT
----------------------------
The Stockholders and Board of Directors
Joule Inc.:
We have audited in accordance with auditing standards generally accepted in the
United States of America, the consolidated financial statements of Joule Inc.
and subsidiaries as of September 30, 2003 and 2002 and for the years then ended,
included in this Form 10-K, and have issued our report thereon dated December 5,
2003, except as to Note 14, which is as of December 22, 2003. Our audits were
made for the purpose of forming an opinion on those statements taken as a whole.
The financial statement schedules of valuation and qualifying accounts and
short-term borrowings, as of September 30, 2003 and 2002 and for the years then
ended, are the responsibility of the Company's management and are presented for
purposes of complying with the Securities and Exchange Commission's rules and
are not part of the basic 2003 and 2002 consolidated financial statements and,
in our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic 2003 and 2002
consolidated financial statements taken as a whole.
The basic 2001 consolidated financial statements of Joule, Inc. and subsidiaries
were audited by other auditors who have ceased operations. Those auditors
indicated in their report dated November 9, 2001 that the financial statement
schedules of valuation and qualifying accounts and short-term borrowings as of
September 30, 2001 and for the year then ended fairly state in all material
respects the financial data required to be set forth therein in relation to the
basic financial statements taken as a whole.
/s/ KPMG LLP
Short Hills, New Jersey
December 5, 2003
F-1
SCHEDULE VIII
-------------
JOULE INC. AND SUBSIDIARIES
---------------------------
VALUATION AND QUALIFICATION ACCOUNTS AND RESERVES
-------------------------------------------------
BALANCE CHARGED TO CHARGED BALANCE
BEGINNING COSTS AND TO OTHER END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- ----------- ---------- ---------- ---------- ---------- ----------
Allowance for
doubtful accounts:
Years Ended:
September 30, 2001 $ 514,000 $ 358,000 -- $ 308,000 $ 564,000
September 30, 2002 $ 564,000 $ 57,000 -- $ 118,000 $ 503,000
September 30, 2003 $ 503,000 -- -- $ 110,000 $ 393,000
F-2
SCHEDULE IX
-----------
JOULE INC AND SUBSIDIARIES
--------------------------
SHORT-TERM BORROWINGS
---------------------
WEIGHTED
WEIGHTED MAXIMUM AVERAGE AVERAGE
CATEGORY OF AVERAGE AMOUNT OF AMOUNT INTEREST
AGGREGATE INTEREST BORROWINGS OUTSTANDING RATE
SHORT-TERM BALANCE AT RATE AT END DURING THE DURING THE DURING THE
BORROWINGS END OF YEAR OF YEAR YEAR YEAR* YEAR*
---------- ----------- ------- ---- ----- -----
YEARS ENDED
SEPTEMBER 30, 2001 BANKS $5,250,000 4.41% $6,000,000 $5,179,000 6.89%
SEPTEMBER 30, 2002 BANKS $3,980,000 3.38% $5,700,000 $4,323,000 4.02%
SEPTEMBER 30, 2003 BANKS $3,150,000 3.90% $4,625,000 $3,929,000 3.56%
*Average amount outstanding is based on daily averages. Weighted average
interest rate during each year is calculated by dividing interest expense on
short term borrowings by the average amount outstanding.
F-3
EXHIBIT INDEX
Exhibit Description of Exhibit Page
- ------- ---------------------- ----
Number
- ------
3.1 Certificate of Incorporation, filed as Exhibit 3.1 to the *
Company's Registration Statement on Form S-1 (File No.
33-7617) under the Securities Act of 1933, as amended (the
"Form S-1"), and incorporated herein by reference.
3.2 By-laws, as amended, filed as Exhibit 3.2 to the Form S-1 *
and incorporated herein by reference.
4.1 Loan and Security Agreement, dated as of February 20, 1991, *
between registrant and United Jersey Bank Central, N.A.,
filed as Exhibit 4.1 to the Company's Annual Report on Form
10-K for the year ended September 30, 1991 and incorporated
herein by reference.
4.1a Third Modification and Extension Agreement, dated August 23, *
1995, between registrant and United Jersey Bank, filed as
Exhibit 4.1a to the Company's Annual Report on Form 10-K for
the year ended September 30, 1995 and incorporated herein by
reference.
4.1b Fourth Modification and Extension Agreement, dated February *
6, 1996, between registrant and United Jersey Bank, filed as
Exhibit 4.1b to the Company's Annual Report on form 10-K for
the year ended September 30, 1996 and incorporated herein by
reference.
4.1c Fifth Modification and Extension Agreement, dated May 31, *
1996, between registrant and United Jersey Bank, filed as
Exhibit 4.1c to the Company's Annual Report on Form 10-K for
the year ended September 30, 1996 and incorporated herein by
reference.
4.1d Sixth Modification and Extension Agreement, dated May 31, *
1997, between registrant and Summit Bank, filed as Exhibit
4.1d to the Company's Annual Report on Form 10-K for the
year ended September 30, 1997 and incorporated herein by
reference.
4.1e Seventh Modification and Extension Agreement, dated May 31, *
1998, between registrant and Summit Bank, filed as Exhibit
4.1e to the Company's Annual Report on Form 10-K for the
year ended September 30, 1998 and incorporated herein by
reference.
4.1f Eighth Modification and Extension Agreement, dated February *
5, 1999, between registrant and Summit Bank, filed as
Exhibit 4.1f to the Company's Annual Report on Form 10-K for
the year ended September 30, 1999 and incorporated herein by
reference.
4.1g Ninth Modification and Extension Agreement, dated May 10, *
1999, between registrant and Summit Bank, filed as Exhibit
4.1g to the Company's Annual Report on Form 10-K for the
year ended September 30, 1999 and incorporated herein by
reference.
4.1h Tenth Modification and Extension Agreement, dated November *
15, 1999, between registrant and Summit Bank, filed as
Exhibit 4.1h to the Company's Annual Report on Form 10-K
for the year ended September 30, 2000 and incorporated
herein by reference.
4.1i Letter Amendment, dated May 26, 2000, between registrant *
and Summit Bank, filed as Exhibit 4.1i to the Company's
Annual Report on Form 10-K for the year ended September 30,
2000 and incorporated herein by reference.
4.1j Letter Amendment dated May 31, 2001 between registrant and *
Fleet Bank, filed as Exhibit 4.1j to the Company's Annual
Report on Form 10-K for the year ended September 30, 2001
and incorporated herein by reference.
4.1k Thirteenth Amendment and Modification Agreement, dated *
September 15, 2001, between registrant and Fleet Bank,
filed as Exhibit 4.1k to the Company's Annual Report on
Form 10-K for the year ended September 30, 2001 and
incorporated herein by reference.
4.11 Fourteenth Amendment and Modification Agreement, dated May *
31, 2002, between registrant and Fleet Bank, filed as
Exhibit 4.1l to the Company's Annual Report on Form 10-K
for the year ended September 30, 2002 and incorporated
herein by reference.
4.1m Loan and Security Agreement, dated as of August 22, 2003, 43
between registrant and Fleet Capital, filed as Exhibit 4.1m
to the Company's Form 10-K for the year ended September 30,
2003.
10.4 1991 Stock Option Plan, filed as Exhibit 10.11 to the *
Company's Annual Report on Form 10-K for the year ended
September 30, 1991 and incorporated herein by reference.
10.5 2001 Stock Option Plan, filed as Exhibit 10.5 to the *
Company's Annual Report on Form 10-K for the year ended
September 30, 2001 and incorporated herein by reference.
10.6 Joule Inc. Deferred Compensation Plan filed as Exhibit 10.6 *
to the Company's Annual Report on Form 10-K for the year
ended September 30, 2001 and incorporated herein by
reference.
21 List of Subsidiaries 99
23 Consent of KPMG LLP. 100
31.1 Certification of Chief Executive Officer pursuant to Rule 101
13a-14(a) (Section 302 Certification), as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
31.2 Certification of Chief Financial Officer pursuant to Rule 102
13a-14(a) (Section 302 Certification), as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002
32.1 Certification pursuant to 18 U.S.C. Section 1350 as adopted 103
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Chief Executive Officer.
32.2 Certification pursuant to 18 U.S.C. Section 1350 as adopted 104
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
Chief Financial Officer.
99.1 Report of Independent Public Accountants of Arthur Andersen 105
LLP dated November 9, 2001 with respect to the consolidated
financial statements for the fiscal years 2001, 2000 and
1999.
99.2 Report of Independent Public Accountants of Arthur Andersen 106
LLP dated November 9, 2001 as to 2001, 2000 and 1999
schedules.