-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KIWe8OofSeNl6GkU4J0EdVjC5u+2wWDw+YFnCVpvWBE5ZqJHnP8aCfIKho9IA5l7 EQqvckFIWjd9j77xdKdwVg== 0000891554-97-001224.txt : 19971230 0000891554-97-001224.hdr.sgml : 19971230 ACCESSION NUMBER: 0000891554-97-001224 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971229 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: JOULE INC CENTRAL INDEX KEY: 0000798168 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-FACILITIES SUPPORT MANAGEMENT SERVICES [8744] IRS NUMBER: 222735672 STATE OF INCORPORATION: DE FISCAL YEAR END: 0927 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-09477 FILM NUMBER: 97745316 BUSINESS ADDRESS: STREET 1: 1245 U.S. ROUTE 1 SOUTH CITY: EDISON STATE: NJ ZIP: 08837 BUSINESS PHONE: 9085485444 MAIL ADDRESS: STREET 1: 1245 U.S. ROUTE 1 SOUTH CITY: EDISON STATE: NJ ZIP: 08837 10-K 1 FORM 10-K FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF (X) THE SECURITIES EXCHANGE ACT OF 1934 For The Fiscal Year Ended September 30, 1997 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. (Exact name of registrant as specified in its charter) Delaware 22-2735672 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1245 U.S. Route 1 South, Edison, New Jersey 08837 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: 732-548-5444 Securities registered pursuant to Section 12(b) of the Act: Common Stock, par value $.01 per share Securities registered pursuant to Section 12(g) of the 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 Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes __X__ No _____. Indicate by check mark 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] 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 December 8, 1997, was approximately $5,627,000. As of December 8, 1997, there were 3,670,000 shares of Common Stock outstanding. DOCUMENTS INCORPORATED BY REFERENCE Certain portions of the Company's Annual Report to Stockholders for the fiscal year ended September 30, 1997 filed with the Securities and Exchange Commission (The "Commission") pursuant to Rule 14a-3 under the Securities Exchange Act of 1934 (The "1997 Annual Report"), are incorporated by reference in Part II, Items 5-8, and Part IV of this Annual Report on Form 10-K. Certain portions of the Company's Proxy Statement to be filed with the Commission pursuant to Rule 14a-6 under the Securities Exchange Act of 1934 in connection with the Company's 1998 Annual Meeting of Stockholders (the "Proxy Statement") are incorporated by reference in Part III, Items 10-13, of this Annual Report on Form 10-K. PART I ITEM 1. BUSINESS 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. The Company derived 71%, 68% and 67% of its revenue from services provided to customers in New Jersey in 1997, 1996 and 1995, respectively. 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, over 90% of revenue is billed based on direct cost plus a mark-up to cover the Company's overhead and profit. During the fiscal year ended September 30, 1997, the Company furnished approximately 6,600 employees to approximately 1,100 clients. At September 30, 1997, approximately 1,300 employees were on assignment to approximately 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 (skilled 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 is conducted through seven offices in New Jersey and one in Florida. 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, termination or reassignments of the client's full-time employees or 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. During 1997, the number of office and light industrial workers on assignment per week averaged 800, and such services contributed approximately 38%, 31% and 31% of revenues in 1997, 1996 and 1995, respectively. The Company's technical employees include engineers, designers, draftsmen, information technology personnel, scientists and lab technicians, who are often furnished on a project basis. Recruitment and assignment of these personnel are conducted from Edison, New Jersey. A client that has an in-house engineering or other technical department 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 2 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 personnel with similar backgrounds and experience and have a greater opportunity for overtime compensation. During 1997, the number of technical workers on assignment per week approximated 300, and such services contributed approximately 27%, 24% and 20% of revenues in 1997, 1996 and 1995, respectively. The Company also provides skilled craft industrial plant and facility maintenance labor services 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. The Company provides the services of 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 reassembly of plant equipment. 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 1997, the average number of such skilled industrial service personnel on assignment per week to clients was approximately 250. Historically, a substantial percentage of industrial services contracts are renewed. Skilled industrial services contributed approximately 35%, 45% and 49% of revenues in fiscal 1997, 1996 and 1995, 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. 3 Customers and Marketing A significant portion of the Company's business represents repeat orders. For fiscal 1997 over 80% of the Company's revenues were derived from assignments to clients with which the Company 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. No customer accounted for more than 10% of revenues in 1997, 1996 or 1995. Personnel Assignment and Recruitment The Company maintains a computerized data base of information on potential employees. It uses optical scanning equipment 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 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 firms. The Company competes with these firms for potential employees as well as for clients. Many 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. Its primary geographic market is New Jersey and, to a lesser extent, the nearby states. 4 Employees At September 30, 1997, the Company employed approximately 100 full and part-time permanent employees in its headquarters and branch offices other than those on assignment to clients and had approximately 1,300 persons on assignment to approximately 300 clients. The Company is a party to collective bargaining agreements covering approximately 200 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. At September 30, 1997, the Company was party to eleven leases comprising approximately 36,000 square feet. The Company's corporate headquarters are located in Edison, New Jersey and comprise approximately 8,000 square feet. The Company owns that building and two others, including a building in Gibbstown, N.J. which serves as an office and depot for its industrial services group and a building adjacent to its corporate headquarters which serves as operational headquarters of the Company's commercial and technical staffing groups. Three facilities are leased from Emanuel N. Logothetis, the Chairman of the Board of the Company, and corporations that are owned by him and the members of his family, at an aggregate annual rent of approximately $50,000, plus applicable real estate taxes, under terms and conditions that, in the opinion of management, are not less favorable than would have been available from unaffiliated parties. Eight additional facilities, comprising approximately 32,000 square feet of space, are leased from unaffiliated parties at rentals and under terms and conditions prevailing in the various locations. The Company's facilities are appropriate and adequate for its current needs. For information concerning the Company's lease obligations, see Notes 6 and 7 of Notes to Consolidated Financial Statements. 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. 5 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 8, 1997 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 67, 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. Bernard G. Clarkin, age 48, 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 44, 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 43, 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. Anthony Trotter, age 40, was appointed Vice President in August, 1997 when he joined the Company. Prior to that he was employed as Vice President of Staff Management Services from October, 1995 through July, 1997. He was Vice President of Best Temporaries from December, 1994 through September, 1995. Prior to that he was an Area Manager for Novell Services, Inc. from March, 1992 through August, 1994. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The information required by this Item is incorporated by reference to the information under the caption "Stock Market Information" on page 12 of the 1997 Annual Report. 6 ITEM 6. SELECTED FINANCIAL DATA The information required by this Item is incorporated by reference to the "Selected Financial Information", included on the inside cover of the 1997 Annual Report. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The information required by this Item is incorporated by reference to the information under the same caption on page 6 of the 1997 Annual Report. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The information required by this Item is incorporated by reference to the Consolidated Financial Statements appearing on pages 7 to 11 of the 1997 Annual Report. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information with respect to the directors of the Company required to be included pursuant to this Item 10 will be included under the caption "Election of Directors - Director Compensation" in the Company's Proxy Statement, and is incorporated in this Item 10 by reference. 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. 7 ITEM 11. EXECUTIVE COMPENSATION The information with respect to executive compensation required to be included pursuant to this Item 11 will be included under the caption "Compensation of Executive Officers-Certain Transactions" in the Proxy Statement and is incorporated in this Item 11 by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information regarding security ownership of certain beneficial owners and management that is required to be included pursuant to this Item 12 will be included under the captions "Beneficial Ownership of More than 5% of the Outstanding Common Stock" and "Beneficial Ownership of Management" in the Proxy Statement and is incorporated in this Item 12 by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information with respect to any reportable transaction, business relationship or indebtedness between the Company and the beneficial owners of more than 5% of the Common Stock, the directors or nominees for director of the Company, the executive officers of the Company or the members of the immediate families of such individuals that is required to be included pursuant to this Item 13 will be included under the caption "Compensation of Executive Officers-Certain Transactions" in the Proxy Statement and is incorporated in this Item 13 by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Financial Statements The following Financial Statements of JOULE Inc. and subsidiaries and Report of Independent Public Accountants are incorporated in Part IV by reference to the 1997 Annual Report. Report of Independent Public Accountants with respect to the financial statements for the fiscal years, 1997, 1996 and 1995, respectively. Consolidated Balance Sheets of September 30, 1997 and 1996, respectively. Consolidated Statements of Income for the Years Ended September 30, 1997, 1996 and 1995, respectively. 8 Consolidated Statements of Changes in Stockholders Equity for the Years Ended September 30, 1997, 1996 and 1995, respectively. Consolidated Statements of Changes in Cash Flows for the Years Ended September 30, 1997, 1996 and 1995, respectively. Notes to Consolidated 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 14(a) by reference: Report of Independent Public Accountants as to 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 No reports on Form 8-K were filed during the last quarter of the period covered by this report. 9 (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. 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. The Company hereby agrees to furnish to the Commission upon its request any instrument defining the rights of holders of long-term debt of the Company and its consolidated subsidiaries and for any of its unconsolidated subsidiaries for which financial statements are required to be filed with respect to long-term debt which does not exceed 10 percent of the total assets of the registrant and its subsidiaries on a consolidated basis. 10.1 -- Lease Agreement, dated April 1, 1986, between Registrant and Emanuel N. Logothetis for premises at 362 Parsippany Road, Parsippany, New Jersey, filed as Exhibit 10.5 to the Form S-1 and incorporated herein by reference. 10 10.2 -- Lease Agreement, dated January 1, 1987, between Registrant and E. N. Logothetis for Unit G, Mercerville Professional Park Condominiums, 2333 Whitehorse - Mercerville Road, Hamilton Township, New Jersey, filed as Exhibit 10.12 to the Company's Annual Report on Form 10-K for the year ended September 25, 1987 and incorporated herein by reference. 10.3* -- 1988 Non-qualified Stock Option Plan, filed as Exhibit 10.13 to the Company's Annual Report on Form 10-K for the year ended September 30, 1991 and incorporated herein by reference. 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. 13 -- Annual Report to Stockholders for the year ended September 30, 1997. 21 -- List of Subsidiaries. 23 -- Consent of Independent Public Accountants 27 -- Financial Data Schedule (in EDGAR filing only) - ---------- * Compensatory Plan 11 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: December 23, 1997 Emanuel N. Logothetis --------------------- Emanuel N. Logothetis, Chairman of the Board and President 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 December 23, 1997. Emanuel N. Logothetis Bernard G. Clarkin - ------------------------------- ---------------------------------------- Emanuel N. Logothetis Bernard G. Clarkin Chairman of the Board, President Vice President and Chief Financial (Principal Executive Director Officer (Principal Financial Officer) Officer and Accounting Officer) Nick M. Logothetis - ------------------------------- ---------------------------------------- Nick M. Logothetis - Director Steven Logothetis - Director Richard Barnitt Paul De Bacco - ------------------------------- ---------------------------------------- Richard Barnitt- Director Paul DeBacco - Director - ------------------------------- ---------------------------------------- Robert W. Howard - Director Anthony Grillo - Director 12 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To Joule Inc.: We have audited in accordance with generally accepted auditing standards, the financial statements included in Joule Inc. and subsidiaries annual report to shareholders incorporated by reference in this Form 10-K, and have issued our report thereon dated November 18, 1997. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The schedules listed in the index above are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic 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 financial statements taken as a whole. ARTHUR ANDERSEN LLP Roseland, New Jersey November 18, 1997 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, 1995 $186,000 $120,000 -- $166,000 $140,000 September 30, 1996 $140,000 $109,000 -- $ 32,000 $217,000 September 30, 1997 $217,000 $ 87,000 $104,000 $200,000
F-2 SCHEDULE IX JOULE INC AND SUBSIDIARIES SHORT-TERM BORROWINGS
WEIGHTED MAXIMUM AVERAGE WEIGHTED CATEGORY OF AVERAGE AMOUNT OF AMOUNT AVERAGE AGGREGATE INTEREST RATE BORROWINGS OUTSTANDING INTEREST RATE SHORT-TERM BALANCE AT AT END OF DURING THE DURING THE DURING THE BORROWINGS END OF YEAR YEAR YEAR YEAR* YEAR* ----------- ----------- ------------- ---------- ----------- ------------- YEARS ENDED SEPTEMBER 30, 1995 BANKS $4,105,000 9.75% $4,155,000 $3,472,000 10.0% SEPTEMBER 30, 1996 BANKS $2,343,000 7.70% $4,305,000 $3,027,000 8.75% SEPTEMBER 30, 1997 BANKS $1,295,000 7.75% $2,743,000 $2,070,000 7.83%
*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 Number Description of Exhibit Page - ------ ---------------------- ---- 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 an 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, 18 1997, between registrant and Summit bank. The Company hereby agrees to furnish to the Commission upon its request any instrument defining the rights of holders of long-term debt of the Company and its consolidated subsidiaries and for any of its unconsolidated subsidiaries for which financial statements are required to be filed with respect to long-term debt which does not Page ---- exceed 10 percent of the total assets of the registrant and * its subsidiaries on a consolidated basis. 10.1 Lease Agreement, dated April 1, 1986, between Registrant and * Emanuel N. Logothetis for premises at 362 Parsippany Road, Parsippany, New Jersey, filed as Exhibit 10.5 to the Form S-1 and incorporated herein by reference. 10.2 Lease Agreement, dated January 1, 1987, between Registrant * and E.N. Logothetis for Unit G, Mercerville Professional Park Condominiums, 2333 Whitehorse - Mercerville Road, Hamilton Township, New Jersey, filed as Exhibit 10.12 to the Company's Annual Report on Form 10-K for the year ended September 25, 1987 and incorporated herein by reference. 10.3** 1988 Non-qualified Stock Option Plan, filed as Exhibit 10.13 * to the Company's Annual Report on Form 10-K for the year ended September 30, 1991 and incorporated herein by reference. 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. 13 Annual Report to Stockholders for the year ended September 38 30, 1997. 21 List of Subsidiaries 55 23 Consent of Independent Public Accountants 57 27 Financial Data Schedule (in EDGAR Filing only) * Incorporated by Reference ** Compensatory Plan EX-4.1D 2 SIXTH MODIFICATION AND EXTENSION AGREEMENT EXHIBIT-4.1d - -------------------------------------------------------------------------------- SIXTH MODIFICATION AND EXTENSION AGREEMENT by and among JOULE, INC., as the Borrower and JOULE MAINTENANCE CORPORATION, JOULE TECHNICAL SERVICES, INC. and JOULE TECHNICAL STAFFING, INC., collectively as the Corporate Guarantors and SUMMIT BANK as the Lender Dated: As of May 31, 1997 - -------------------------------------------------------------------------------- SIXTH MODIFICATION AND EXTENSION AGREEMENT THIS SIXTH MODIFICATION AND EXTENSION AGREEMENT (including all amendments, modifications and supplements is hereinafter referred to as the "Sixth Modification Agreement"), is made as of this 31st day of May, 1997, by and among JOULE, INC., a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, having its principal executive office located at 1245 Route 1 South, Edison, New Jersey 08837 (hereinafter referred to as the "Borrower"), AND JOULE MAINTENANCE CORPORATION, a corporation duly organized, validly existing and in good standing under the laws of the State of New Jersey, having its principal executive office located at 1245 Route 1 South, Edison, New Jersey 08837 (hereinafter referred to as "Joule Maintenance Corporation"), AND JOULE TECHNICAL SERVICES, INC., as successor-in-interest pursuant to the merger of JOULE ENGINEERING CORP., JOULE TEMPORARIES CORPORATION, JOULE MAINTENANCE OF MARYLAND, INC., JOULE TECHNICAL CORPORATION, JOULE MAINTENANCE OF GIBBSTOWN, INC., JOULE MAINTENANCE OF NEW YORK, INC. AND TIGER MAINTENANCE, a corporation duly organized, validly existing and in good standing under the laws of the State of New Jersey, having its principal executive office located at 1245 Route 1 South, Edison, New Jersey 08837 (hereinafter referred to as "Joule Technical Services, Inc."), AND JOULE TECHNICAL STAFFING, INC., a corporation duly organized, validly existing and in good standing under the laws of the State of New Jersey, having its principal executive office located at 1245 Route 1 South, Edison, New Jersey 08837 (hereinafter referred to as "Joule Technical Staffing, Inc." and hereinafter Joule Maintenance Corporation, Joule Technical Services, Inc. and Joule Technical Staffing, Inc. shall be collectively be referred to as the "Corporate Guarantors"), AND SUMMIT BANK, as successor-in-interest to UNITED JERSEY BANK, having an office located at 210 Main Street, Hackensack, New Jersey 07601, being a banking institution duly organized and validly existing under the laws of the State of New Jersey (hereinafter referred to as the "Lender"). 1 W I T N E S S E T H: WHEREAS, on or about February 20, 1991, the Borrower requested and the Lender agreed to make a revolving credit loan in the aggregate principal amount of up to Four Million and 00/100 ($4,000,000.00) Dollars for the purposes of (i) refinancing certain of the Borrower's then existing indebtedness to First Fidelity Bank, National Association and (ii) financing the general working capital requirements of the Borrower (hereinafter referred to as the "Revolving Credit Loan"), all as more fully provided for in that certain Loan and Security Agreement dated February 20, 1991, executed by and between the Borrower and the Lender (hereinafter referred to as the "Loan Agreement"); and WHEREAS, the Revolving Credit Loan is evidenced by a certain Revolving Note dated February 20, 1991, executed by the Borrower, as the maker, and delivered to the Lender, as the payee, in the original aggregate principal amount of the Revolving Credit Loan (hereinafter referred to as the "Revolving Note"); and WHEREAS, pursuant to the Loan Agreement, the Borrower, Joule Maintenance Corporation, Joule Maintenance of Gibbstown, Inc. (hereinafter referred to as "Joule Maintenance of Gibbstown, Inc."), Joule Engineering Corp. (hereinafter referred to as "Joule Engineering Corp."), Joule Engineering of California, Inc. (hereinafter referred to as "Joule Engineering of California, Inc."), Joule Technical Corporation (hereinafter referred to as "Joule Technical Corporation"), Joule Temporaries Corporation (hereinafter referred to as "Joule Temporaries Corporation"), Joule Maintenance of New York, Inc. (hereinafter referred to as "Joule Maintenance of New York, Inc."), Joule Maintenance of Maryland, Inc. (hereinafter referred to as "Joule Maintenance of Maryland, Inc."), Joule Engineering of Pennsylvania, Inc. (hereinafter referred to as "Joule Engineering of Pennsylvania, Inc."), Joule Constructors, Inc. (hereinafter referred to as "Joule Constructors, Inc."), Joule Temporaries of Edison, Inc. (hereinafter referred to as "Joule Temporaries of Edison, Inc."), Joule Temporaries of Parsippany, Inc. (hereinafter referred to as "Joule Temporaries of Parsippany, Inc."), Joule Operating Services, Inc. (hereinafter referred to as "Joule Operating Services, Inc."), Tiger Maintenance, Inc. (hereinafter referred to as "Tiger Maintenance, Inc.") and Joule Maintenance of Bayonne, Inc. (hereinafter referred to as "Joule Maintenance of Bayonne, Inc." and hereinafter Joule Maintenance Corporation, Joule Maintenance of Gibbstown, Inc., Joule Engineering Corp., Joule Engineering of California, Inc., Joule Technical Corporation, Joule Temporaries Corporation, Joule Maintenance of New York, Inc., Joule Maintenance of Maryland, Inc., Joule Engineering of Pennsylvania, Inc., Joule Constructors, Inc., Joule Temporaries of Edison, Inc., Joule Temporaries of Parsippany, Inc., Joule Operating Services, Inc., Tiger Maintenance, Inc., and Joule Maintenance of Bayonne, Inc. shall be collectively referred to as the "Original Corporate Guarantors") and granted to the Lender a valid first lien security interest in and to certain Collateral, as more fully and accurately described in the Loan Agreement; and WHEREAS, as of February 20, 1991, Emanuel N. Logothetis, as the guarantor (hereinafter referred to as the "Individual Guarantor"), executed and delivered to the Lender, as the lender, a certain Individual Guaranty, pursuant to which the Individual Guarantor agreed to guaranty the full, prompt and unconditional payment of when due of any and all present and future obligations or liabilities of any kind of the Borrower owing to the Lender, including, without limitation, repayment in full of the Revolving Credit Loan (hereinafter referred to as the "Individual Guaranty"); and WHEREAS, as of February 20, 1991, each Original Corporate Guarantor, collectively as the guarantor, executed and delivered to the Lender, as the lender, a separate Corporate Guaranty, pursuant to which each Original Corporate Guarantor agreed to guaranty the full, prompt and unconditional payment of when due of any and all present and future obligations or liabilities of any kind of the Borrower owing to the Lender, including, 2 without limitation, repayment in full of the Revolving Credit Loan (hereinafter referred to as the "Corporate Guaranty"); and WHEREAS, on January 17, 1991, the Borrower, as the assignor, delivered to the Lender, as the assignee, a certain Assignment of Life Insurance Policy as Collateral with respect to that certain life insurance policy no. U01426631 issued by the Hartford Insurance Company upon the life of the Individual Guarantor (hereinafter referred to as the "Assignment #1"), as collateral security for the Borrower's obligations under the Loan Agreement; and WHEREAS, on February 20, 1991, Joule Maintenance Corporation, as successor-in-interest to Joule Maintenance Corp., as the assignor, executed and delivered to the Lender, as the assignee, a certain Collateral Assignment of Contract Proceeds with respect to that certain contract between Joule Maintenance Corporation and the United States Government identified as Contract No. DAHC21-85-C-0021 (hereinafter referred to as the "Assignment #2"), as collateral security for the repayment of the liabilities and obligations of Joule Maintenance Corporation to the Lender under the Loan Agreement and the Corporate Guaranty; and WHEREAS, on September 1, 1991, the Borrower, as the maker, executed and delivered to the Lender, as the payee, a certain Promissory Note for the purpose of extending the term of the Revolving Credit Loan from the then current maturity date of "September 1, 1991", to a new maturity date of "January 15, 1992" (hereinafter referred to as the "Extension Agreement #1"); and WHEREAS, on January 15, 1992, the Borrower, as the maker, executed and delivered to the Lender, as the payee, a certain Master Advance Note for the purpose of extending the term of the Revolving Credit Loan from the then current maturity date of "January 15, 1992" to a new maturity date of "January 31, 1993" (hereinafter referred to as the "Extension Agreement #2"); and WHEREAS, on January 31, 1993, the Borrower, as the maker, executed and delivered to the Lender, as the payee, a certain Master Advance Note for the purpose of extending the term of the Revolving Credit Loan from the then current maturity date of "January 31, 1993" to a new maturity date of "January 31, 1994" (hereinafter referred to as the "Extension Agreement #3"); and WHEREAS, on January 31, 1994, the Borrower, as the maker, executed and delivered to the Lender, as the payee, a certain Master Advance Note for the purpose of extending the term of the Revolving Credit Loan from the then current maturity date of "January 31, 1994" to a new maturity date of "March 31, 1994" (hereinafter referred to as the "Extension Agreement #4"); and 3 WHEREAS, on March 31, 1994, the Borrower, the Original Corporate Guarantors, the Individual Guarantor and the Lender entered into a certain First Modification and Extension Agreement for the purposes of (i) in Article I, Section 1.1 of the Loan Agreement, extending the Termination Date of the Revolving Note from the then current Termination Date of "March 31, 1994" to a new Termination Date of "January 31, 1995"; (ii) amending and modifying the Lender's address from the old address of "630 Franklin Boulevard, Somerset, New Jersey 08875" to "4365 Route 1 South, Princeton, New Jersey 08540"; (iii) providing for a mutual waiver of jury trial; and (iv) providing for semi-annual audits of Collateral (hereinafter referred to as the "First Modification Agreement"); and WHEREAS, on March 31, 1994, the Borrower, as the maker, executed and delivered to the Lender, as the payee, a certain First Allonge to $4,000,000.00 Revolving Note for the purposes of (i) extending the maturity date of the Revolving Note from the then current maturity date of "March 31, 1994" to a new maturity date of "January 31, 1995" and (ii) amending and modifying the Lender's address from the old address of "630 Franklin Boulevard, Somerset, New Jersey 08875" to "4365 Route 1 South, Princeton, New Jersey 08540" (hereinafter referred to as the "First Allonge"); and WHEREAS, Joule Engineering of California, Inc., Joule Engineering of Pennsylvania, Inc., Joule Constructors, Inc., Joule Temporaries of Edison, Inc., Joule Temporaries of Parsippany, Inc. and Joule Operating Services, Inc. each had their respective charters revoked and are no longer doing business; and WHEREAS, as of January 31, 1995, the Borrower, the Original Corporate Guarantors, the Individual Guarantor and the Lender entered into a certain Second Modification and Extension Agreement (hereinafter referred to as the "Second Modification Agreement") for the purposes of (i) in Article I, Section 1.1 of the Loan Agreement, extending the Termination Date of the Revolving Note from the then current Termination Date of "January 31, 1995" to a new Termination Date of "January 31, 1996"; (ii) in Article II, Section 2.4 of the Loan Agreement, decreasing the interest rate from the existing interest rate of "Base Rate plus one and one-half percent (1.5%) per annum" to a new interest rate of "Base Rate plus one percent (1.0%) per annum"; (iii) amending and modifying the Lender's audits of Collateral from semi-annual audits of Collateral to annual audits of Collateral; and (iv) amending and modifying the Lender's name from the existing name of "United Jersey Bank/Central, N.A." to the new name of "United Jersey Bank"; and WHEREAS, as of January 31, 1995, the Borrower, as the maker, executed and delivered to the Lender, as the payee, a certain Second Allonge to $4,000,000.00 Revolving Note for the purposes of (i) extending the maturity date of the Revolving Note from the then current maturity date "January 31, 1995" to a new maturity date of "January 31, 1996"; (ii) decreasing the interest rate from the existing interest rate of "Base Rate plus one and one-half percent (1.5%) per annum" to the new interest rate of "Base Rate plus one percent (1.0%) per annum"; and (iii) amending and modifying the name of the Lender from the Lender's existing name of "United Jersey Bank/Central, N.A." to the Lender's new name of "United Jersey Bank" (hereinafter referred to as the "Second Allonge"); and 4 WHEREAS, on August 23, 1995, the Borrower, the Original Corporate Guarantors and the Lender entered into a certain Third Modification and Extension Agreement (hereinafter referred to as the "Third Modification Agreement") for the purposes of (i) in Article I, Section 1.1 of the Loan Agreement, increasing the original aggregate principal amount of the Revolving Credit Loan from the existing aggregate principal amount of "$4,000,000.00" to the new increased aggregate principal amount of "$4,500,000.00"; (ii) in Article I, Section 1.1 of the Loan Agreement, extending the Termination Date of the Revolving Note from the then current Termination Date of "January 31, 1996" to a new Termination Date of "May 31, 1996"; (iii) in Article II, Section 2.2 of the Loan Agreement, providing for the issuance of Letters of Credit; (iv) providing for a new section of the Loan Agreement, Section 5.23, which provides for the Borrower's Maximum Debt to Tangible Net Worth Ratio of 2.0 -to- 1.0; (v) in Article V of the Loan Agreement, providing for a new section, Section 5.24, which provides for the Borrower's Maximum Debt Service Coverage Ratio of 1.5 - -to- 1.0; (vi) providing for a release of the Individual Guarantor from the Individual Guaranty; and (vii) amending and modifying the Lender's address from the existing address of "4365 Route 1 South, Princeton, New Jersey 08540" to a new address of "Raritan Plaza II, Fieldcrest Avenue, Edison, New Jersey 08837"; and WHEREAS, on August 23, 1995, the Borrower, as the maker, executed and delivered to the Lender, as the payee, a certain Third Allonge to $4,000,000.00 Revolving Note for the purposes of (i) increasing the original aggregate principal amount of the Revolving Credit Loan from the existing aggregate principal amount of "$4,000,000.00" to a new increased aggregate principal amount of "4,500,000.00"; (ii) extending the maturity date of the Revolving Note from the then current maturity date of "January 31, 1996" to a new maturity date of "May 31, 1996"; and (iii) amending and modifying the Lender's address from the existing address of "4365 Route 1 South, Princeton, New Jersey 08540" to a new address of "Raritan Plaza II, Fieldcrest Avenue, Edison, New Jersey 08837" (hereinafter referred to as the "Third Allonge"); and WHEREAS, Joule Maintenance Corp. and Joule Maintenance of Bayonne, Inc. were merged and consolidated and Joule Maintenance Corporation is the successor-in-interest to both companies; and WHEREAS, on February 6, 1996, the Borrower, the Original Corporate Guarantors and the Lender entered into a certain Fourth Modification and Extension Agreement (hereinafter referred to as the "Fourth Modification Agreement") for the purposes of (i) in Article I, Section 1.1 of the Loan Agreement, providing for the definition of "Borrowing"; (ii) in Article I, Section 1.1 of the Loan Agreement, providing for the definition of "Eurodollar Affiliate"; (iii) in Article I, Section 1.1 of the Loan Agreement, providing for the definition of "Eurodollar Interest Period"; (iv) in Article I, Section 1.1 of the Loan Agreement, providing for the definition of "Eurodollar Interest Payment Date"; (v) in Article I, Section 1.1 of the Loan Agreement, providing for the definition of "Eurodollar Interest Rate Determination Date"; (vi) in Article I, Section 1.1 of the Loan Agreement, providing for the definition of "Eurodollar Portion"; (vii) in Article I, Section 1.1 of the Loan Agreement, providing for the definition of "Eurodollar Rate"; (viii) in Article I, Section 1.1 of the Loan Agreement, providing of the definition of "Eurodollar Rate Loans"; (ix) in Article I, Section 1.1 of the Loan Agreement, providing for the definition of "Eurodollar Rate Taxes"; (x) in Article I, Section 1.1 of the Loan Agreement, providing for the definition of "Eurodollar Reserve Percentage"; (xi) in Article I, Section 1.1 of the Loan 5 Agreement, providing for the definition of "Funding Segment"; (xii) in Article II, Section 2.4 of the Loan Agreement, deleting the existing Section 2.4 and inserting a new Section 2.4 which provides that the Borrower may select an interest rate from the interest rate options between either (1) the Base Rate option or (2) the Eurodollar Rate Option; (xiii) in a new section of Article II of the Loan Agreement, Section 2.11, providing for the Borrower's payment of an unused commitment fee; and (xiv) in a new section of Article II of the Loan Agreement, Section 2.12, providing for the special provisions governing Eurodollar Rate Loans; and WHEREAS, on February 6, 1996, the Borrower, as the maker, executed and delivered to the Lender, as the payee, a certain Fourth Allonge to $4,000,000.00 Revolving Note for the purpose of deleting the existing Paragraph 2 of the Revolving Note and inserting a new Paragraph 2 which provides that the interest rate to be charged on the outstanding aggregate principal amount of the Loan shall be set forth in Article II, Section 2.4 of the Loan Agreement (hereinafter referred to as the "Fourth Allonge"); and WHEREAS, as of May 31, 1996, the Borrower, as the maker, executed and delivered to the Lender, as the payee, a certain Fifth Allonge to $4,000,000.00 Revolving Note for the purpose of extending the maturity date of the Revolving Note from the then existing maturity date of "May 31, 1996" to a new maturity date of "May 31, 1997" (hereinafter referred to as the "Fifth Allonge"); and WHEREAS, as of May 31, 1996, the Borrower, the Original Corporate Guarantors and the Lender entered into a certain Fifth Modification and Extension Agreement (hereinafter referred to as the "Fifth Modification Agreement") for the purpose of in Article I, Section 1.1 of the Loan Agreement, extending the Termination Date of the Revolving Note from the then existing Termination Date of "May 31,1996" to a new Termination Date of "May 31, 1997"; and WHEREAS, pursuant to a certain Certificate of Merger from the Office of the Secretary of State of the State of New Jersey dated February 3, 1997, Joule Engineering Corp. was merged with Joule Technical Services, Inc.; and WHEREAS, pursuant to a certain Certificate of Merger from the Office of the Secretary of State of the State of New Jersey dated February 3, 1997, Joule Temporaries Corporation was merged with Joule Technical Services, Inc.; and WHEREAS, pursuant to a Certain Certificate of Merger from the Office of the Secretary of State of the State of New Jersey dated February 3, 1997, Joule Maintenance of Maryland, Inc. was merged with Joule Technical Services, Inc.; and WHEREAS, pursuant to a Certain Certificate of Merger from the Office of the Secretary of State of the State of New Jersey dated February 3, 1997, Joule Technical Corporation was merged with Joule Technical Services, Inc.; and WHEREAS, pursuant to a Certain Certificate of Merger from the Office of the Secretary of State of the State of New Jersey dated February 3, 1997, Joule Maintenance of Gibbstown, Inc. was merged with Joule Technical Services, Inc.; and 6 WHEREAS, pursuant to a Certain Certificate of Merger from the Office of the Secretary of State of the State of New Jersey dated _________, 1997, Joule Maintenance of New York, Inc. was merged with Joule Technical Services, Inc.; and WHEREAS, Tiger Maintenance is no longer doing business and has had its charter revoked; and WHEREAS, as of even date herewith, the Borrower as the maker, has executed and delivered to the Lender, as the payee, a certain Sixth Allonge to $4,000,000.00 Revolving Note for the purposes of (i) extending the maturity date of the Revolving Note from the existing maturity date of "May 31, 1997" to a new maturity date of "May 31, 1998" and (ii) amending and modifying the Lender's address from the existing address of "Raritan Plaza II, Fieldcrest Avenue, Edison, New Jersey 08837" to a new address of "210 Main Street, Hackensack, New Jersey 07601" (hereinafter referred to as the "Sixth Allonge"); and WHEREAS, as of even date herewith, the Borrower, the Corporate Guarantors and the Lender have agreed to enter into this Sixth Modification Agreement for the purposes of (i) in Article I, Section 1.1 of the Loan Agreement, deleting the existing definition of "Corporate Guarantors" and inserting a new definition of "Corporate Guarantors" in its place and stead; (ii) in Article I, Section 1.1 of the Loan Agreement, extending the Termination Date of the Revolving Note from the existing Termination Date of "May 31, 1997" to a new Termination Date of "May 31,1998"; (iii) in Article V, Section 5.8(d) of the Loan Agreement providing for the consolidated balance sheet of the Obligors; (iv) in the Loan Agreement, amending and modifying the Lender's address from the existing address of "Raritan Plaza II, Fieldcrest Avenue, Edison, New Jersey 08837" to a new address of "210 Main Street, Hackensack, New Jersey 07601"; (v) in the "Loan Documents" (as such term is hereinafter defined), providing that any and all references to the "Corporate Guarantors" shall be deemed to refer to the Corporate Guarantors; (vi) in the Loan Documents, deleting any and all references to the existing maturity date of "May 31, 1997" and inserting a new maturity date of "May 31, 1998" in its place and stead and (vii) in the Loan Documents, amending and modifying the Lender's address from the existing address of "Raritan Plaza II, Fieldcrest Avenue, Edison, New Jersey 08837" to a new address of "210 Main Street, Hackensack, New Jersey 07601"; and WHEREAS, all words and terms not defined herein shall have the meaning as contained in the Loan Agreement, as amended and modified up through and including the Fifth Modification Agreement; and WHEREAS, the aforesaid Revolving Note, the Loan Agreement, the Corporate Guaranty, the Assignment #1, the Assignment #2, the Extension Agreement #1, the Extension Agreement #2, the Extension Agreement #3, the Extension Agreement #4, the First Allonge, the First Modification Agreement, the Second Allonge, the Second Modification Agreement, the Third Allonge, the Third Modification Agreement, the Fourth Allonge, the Fourth Modification Agreement, the Fifth Allonge, the Fifth Modification Agreement and any and all of the documents, agreements, certificates and instruments executed in connection herewith shall be hereinafter collectively referred to as the "Loan Documents"; and 7 NOW, THEREFORE, in consideration of these premises and the mutual representations, covenants and agreements of the Borrower, the Corporate Guarantors and the Lender, each party binding itself and its successors and assigns, does hereby promise, covenant and agree as follows: 1. There is, as of May 13, 1997, presently due and owing on the Revolving Note the principal sum $2,300,000.00, without defense, offset or counterclaim, all of which are hereby expressly waived by the Borrower and the Corporate Guarantors as of the date hereof. The foregoing principal balance is allocated as follows: (a) $2,300,000.00 for outstanding Advances of direct loans under the Note and (b) $-0- for Letters of Credit. 2. By execution hereof, the Borrower and the Corporate Guarantors acknowledge and agree that the Lender's consent to enter into this Sixth Modification Agreement is contingent upon the following: (a) the payment by the Borrower of all costs, expenses and fees of the transaction contemplated by this Sixth Modification Agreement, including, but not limited to (i) all search costs and expenses, (ii) all fees and expenses of the Lender's attorneys and (iii) all accrued and unpaid interest up to and including the date hereof; and (b) the continued delivery by the Borrower to the Lender of copies of all valid insurance certificates with respect to worker's compensation, general liability, umbrella liability and other insurance required pursuant to the Loan Agreement, as previously amended and modified, all of which name the Lender as lender and/or loss payee with respect to Accounts Receivable, Inventory, Equipment and other corporate assets. 3. To the best of the Borrower's and each Corporate Guarantor's knowledge, the Borrower and each Corporate Guarantor represent that the liens on the Collateral granted to the Lender under the Loan Agreement, as amended and modified up through and including this Sixth Modification Agreement, continue to be valid and enforceable first lien on the Collateral. 4. The Loan Agreement, as previously amended and modified, is hereby further amended and modified, as follows: (a) Article I, Section 1.1 of the Loan Agreement shall be amended and modified as follows: (i) Subsection (o) shall be deleted in its entirety and the following new subsection (o) shall be inserted in its place and stead: "(o) "Corporate Guarantors" shall mean each subsidiary of the Borrower now or hereafter existing, including, without limitation (i) Joule Maintenance Corporation, a corporation duly organized, validly existing and in good standing under the laws of the State of New Jersey, having its principal executive office located at 1245 Route 1, South, Edison, New Jersey 08837, (ii) Joule Technical Services, Inc., a corporation duly organized, validly existing and in 8 good standing under the laws of the State of New Jersey, having its principal executive office located at 1245 Route 1 South, Edison, New Jersey 08837 and (iii) Joule Technical Staffing, Inc., a corporation duly organized, validly existing and in good standing under the laws of the State of New Jersey, having its principal executive offices located at 1245 Route 1 South, Edison, New Jersey 08837." (ii) Subsection (ll) shall be amended and modified by deleting the existing Termination Date of "May 31,1997" and inserting a new Termination Date of "May 31, 1998" in its place and stead. (b) Article V, Section 5.8(d) shall be amended and modified by inserting after the existing phrase: "fiscal year) a" the following new term: "consolidated". (c) Any and all references to the Lender's existing address of "Raritan Plaza II, Fieldcrest Avenue, Edison, New Jersey 08837" shall be deleted and a reference to the new address of "210 Main Street, Hackensack, New Jersey 07601" shall be inserted in its place and stead. 5. The Loan Documents, as previously amended and modified, are hereby further amended and modified as follows: (a) Any and all references to "Joule Maintenance of Gibbstown, Inc.", "Joule Engineering Corp.", "Joule Technical Corporation", Joule Temporaries Corporation", "Joule Maintenance of New York, Inc.", "Joule Maintenance of Maryland, Inc." and/or "Tiger Maintenance, Inc." shall be deemed to refer to "Joule Technical Services, Inc." and "Joule Technical Staffing, Inc." in their place and stead. (b) Any and all references to the existing maturity date of "May 31, 1997" shall be deleted and a new maturity date of "May 31, 1998" shall be inserted in its place and stead. (c) Any and all references to the Lender's existing address of "Raritan Plaza II, Fieldcrest Avenue, Edison, New Jersey 08837" shall be deleted and a reference to the new address of "210 Main Street, Hackensack, New Jersey 07601" shall be inserted in its place and stead. 6. To the best of the Borrower's and each of the Corporate Guarantors' knowledge, all representations and warranties contained in the Loan Documents, as amended and modified through this Sixth Modification Agreement are true, accurate and complete as of the date hereof and shall be deemed continuing representations and warranties so long as the Revolving Credit Loan shall remain outstanding. 7. The Borrower, Joule Maintenance Corporation and Joule Technical Services, Inc. expressly confirm and affirm that the addition of Joule Technical Staffing, Inc. to the Corporate Guaranty does not affect the enforceability and validity of the Corporate Guaranty with respect to 9 Joule Maintenance Corporation and Joule Technical Services, Inc., and the Corporate Guaranty remains in full force and effect as a continuing guaranty of the full, prompt and unconditional payment of all present and future obligations and/or liabilities of any kind of the Borrower due and owing to the Lender, including, without limitation, the repayment in full of the Revolving Credit Loan 8. All other terms and conditions of the Loan Documents, as amended and modified through this Sixth Modification Agreement remain in full force and effect, except as amended and modified herein, and the parties hereto hereby expressly confirm and reaffirm all of their respective liabilities, obligations, duties and responsibilities under and pursuant to said Loan Documents, including, without limitation, the obligations of the Corporate Guarantors under the Corporate Guaranty, as amended and modified by this Sixth Modification Agreement. 9. It is the intention of the parties hereto that this Sixth Modification Agreement shall not constitute a novation and shall in no way adversely affect or impair the lien priority of the Loan Documents. In the event this Sixth Modification Agreement, or any portion to affect the lien priority of the Loan Documents, then to the extent such instrument creates a charge upon the Loan Documents in excess of that contemplated and permitted thereby, and to the extent third parties acquiring an interest in the Loan Documents between the time of recording of the Loan Documents and the recording of this Sixth Modification Agreement are prejudiced hereby, if any, this Sixth Modification Agreement shall be void and of no force and effect; provided, however, that notwithstanding the foregoing, the parties hereto, as between themselves, shall be bound by all terms and conditions hereof until all indebtedness evidenced by the Revolving Note shall have been paid in full and the Revolving Credit Loan terminated. 10. The Borrower and the Corporate Guarantors do hereby: (a) ratify, confirm and acknowledge that, as amended and modified hereby, the Loan Documents continue to be valid, binding and in full force and effect; (b) covenant and agree to perform all of their respective obligations contained in the Loan Documents, as amended and modified hereby; (c) represent and warrant that, after giving effect to the transactions contemplated by this Sixth Modification Agreement, no "Event of Default" (as such term is defined in the Loan Agreement), exists or will exist upon the delivery of notice, passage of time, or both; (d) acknowledge and agree that nothing contained herein and no actions taken pursuant to the terms hereof are intended to constitute a novation of the Revolving Note and the Revolving Credit Loan, or any waiver of the other Loan Documents, and do not constitute a release, termination or waiver of any of the liens, security interests or rights or remedies granted to the Lender under the Loan Documents, all of which liens, security interests, rights or remedies are hereby ratified, confirmed and continued as security for the Revolving Credit Loan, as amended and modified hereby; and 10 (e) acknowledge and agree that the failure by the Borrower and/or the Corporate Guarantors to comply with or perform any of their respective covenants, agreements or obligations contained herein shall constitute an Event of Default under the Loan Agreement. IN WITNESS WHEREOF, the parties have caused this Sixth Modification Agreement to be duly executed, sealed and attested and/or witnessed, as appropriated, and delivered, all as of the day and year first above written. [SEAL] JOULE, INC. ATTEST: _____________________________ By: ___________________________________ Bernard G. Clarkin Emanuel N. Logothetis Secretary President [SEAL] JOULE MAINTENANCE CORPORATION ATTEST: _____________________________ By: ___________________________________ Bernard G. Clarkin Emanuel N. Logothetis Secretary President [SEAL] JOULE TECHNICAL ATTEST: SERVICES, INC. _____________________________ By: ___________________________________ Bernard G. Clarkin Emanuel N. Logothetis Secretary President [SEAL] JOULE TECHNICAL ATTEST: STAFFING, INC. _____________________________ By: ___________________________________ Bernard G. Clarkin Emanuel N. Logothetis Secretary President 11 SUMMIT BANK, as successor-in- interest to UNITED JERSEY BANK By: ___________________________________ Bonnie Gershon Vice President 12 STATE OF NEW JERSEY : : ss. COUNTY OF MIDDLESEX : BE IT REMEMBERED, that on this ____ day of June, 1997, before me, the subscriber, an officer duly authorized pursuant to N.J.S.A. 46:14-6 to take acknowledgments for use in the State of New Jersey, personally appeared Bonnie Gershon, who, I am satisfied is the person who executed the within Instrument, as the Vice President of Summit Bank, the corporation named therein, and I having first made know to him the contents thereof, he did thereupon acknowledge that the said Instrument made by the said corporation and sealed with its corporate seal and delivered by him as such officer, is the voluntary act and deed of said corporation, made by virtue of authority from its Board of Directors, for the uses and purposes therein expressed. ________________________________________ Notary Public of the State of New Jersey STATE OF NEW JERSEY : : ss. COUNTY OF MORRIS : BE IT REMEMBERED, that on this ____ day of June, 1997, before me, the subscriber, an officer duly authorized pursuant to N.J.S.A. 46:14-6 to take acknowledgments for use in the State of New Jersey, personally appeared Emanuel N. Logothetis, who, I am satisfied is the person who executed the within Instrument, as the President of Joule, Inc., Joule Maintenance Corporation, Joule Technical Services, Inc. and Joule Technical Staffing, Inc., the corporations named therein, and I having first made know to him the contents thereof, he did thereupon acknowledge that the said Instrument made by said corporations and sealed with their corporate seals and delivered by him as such officer, is the voluntary act and deed of said corporations, made by virtue of authority from their respective Boards of Directors, for the uses and purposes therein expressed. ________________________________________ Notary Public of the State of New Jersey 13 SIXTH ALLONGE TO $4,000,000.00 REVOLVING NOTE DATED FEBRUARY 20, 1991 THIS SIXTH ALLONGE (hereinafter referred to as the "Sixth Allonge") is made as of this 31st day of May, 1997, by and between JOULE, INC., having its principal executive offices located at 1245 Route 1 South, Edison, New Jersey 08837, being a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware (hereinafter referred to as the "Undersigned"), AND SUMMIT BANK, as successor-in-interest to UNITED JERSEY BANK, having an office located at 210 Main Street, Hackensack, New Jersey 07601, being a banking corporation duly organized and validly existing under the laws of the State of New Jersey (hereinafter referred to as the "Lender"). BACKGROUND A. On February 20, 1991, the Lender extended to the Undersigned a revolving credit loan in the original aggregate principal amount of up to $4,000,000.00 (hereinafter referred to as the "Loan"), pursuant to the terms and conditions of that certain Loan and Security Agreement dated February 20, 1991, executed by and between the Undersigned and the Lender (hereinafter referred to as the "Loan Agreement"). B. On February 20, 1991, the Undersigned, as the maker, executed and delivered to the Lender, as the payee, a certain Revolving Note in the original aggregate principal amount of the Loan (hereinafter referred to as the "Note"). C. On September 1, 1991, the Borrower, as the maker, executed and delivered to the Lender, as the payee, a certain Promissory Note for the purpose of extending the term of the Loan from the then current maturity date of "September 1, 1991" to a new maturity date of "January 15, 1992" (hereinafter referred to as the "Extension Agreement #1"). D. On January 15, 1992, the Borrower, as the maker, executed and delivered to the Lender, as the payee, a certain Master Advance Note for the purpose of extending the term of the Loan from the then current maturity date of "January 15, 1992" to a new maturity date of "January 31, 1993" (hereinafter referred to as the "Extension Agreement #2"). E. On January 31, 1993, the Borrower, as the maker, executed and delivered to the Lender, as the payee, a certain Master Advance Note for the purpose of extending the term of the Loan from the then current maturity date of "January 31, 1993" to a new maturity date of "January 31, 1994" (hereinafter referred to as the "Extension Agreement #3"). F. On January 31, 1994, the Borrower, as the maker, executed and delivered to the Lender, as the payee, a certain Master Advance Note for the purpose of extending the term of the Loan from the then current maturity date of "January 31, 1994" to a new maturity date of "March 31, 1994" (hereinafter referred to as the "Extension Agreement #4"). G. As of March 31, 1994, pursuant to a certain First Modification and Extension Agreement (hereinafter referred to as the "First Modification Agreement"), executed by and among, inter alia, the Undersigned and the Lender, the parties agreed, among other things (i) to extend the maturity date of the Loan from the then current maturity date of "March 31, 1994" to a new maturity date of "January 31, 1995" and (ii) to amend and modify the Lender's address from the existing address of "630 Franklin Boulevard, Somerset, New Jersey 08875" to a new address of "4365 Route 1 South, Princeton, New Jersey 08540". H. As of March 31, 1994, pursuant to the terms of a certain First Allonge to $4,000,000.00 Revolving Note (hereinafter referred to as the "First Allonge"), executed by the Undersigned, as the maker, and delivered to the Lender, as the payee, the Undersigned and the Lender agreed to amend and modify the terms of the Note, as previously amended and modified, for the purposes of (i) extending the term of the Loan from the then current maturity date of "March 21, 1994" to the new maturity date of "January 31, 1995" and (ii) amending and modifying the Lender's address from the existing address of "630 Franklin Boulevard, Somerset, New Jersey 08875" to a new address of "4365 Route 1 South, Princeton, New Jersey 08540". I. As of January 31, 1995, pursuant to the terms of a certain Second Modification and Extension Agreement (hereinafter referred to as the "Second Modification Agreement"), executed by and among, inter alia, the Undersigned and the Lender, the parties agreed, among other things (i) to extend the maturity date of the Loan from the then current maturity date of "January 31, 1995" to a new maturity date of "January 31, 1996"; (ii) to amend and modify the interest rate on the aggregate principal amount of the Loan from the existing interest rate of "Bank's Base Rate plus one and one-half percent (1.5%) on a floating basis" to a new interest rate of "Bank's Base Rate plus one percent (1.0%) on a floating basis"; (iii) to amend and modify the Lender's name from the existing name of "United Jersey Bank/Central, N.A." to a new name of "United Jersey Bank". J. As of January 31, 1995, pursuant to the terms of a certain Second Allonge to $4,000,000.00 Revolving Note (hereinafter referred to as the "Second Allonge"), executed by the Undersigned, as the maker, and the Lender, as the payee, the Undersigned and the Lender agreed to amend and modify the terms of the Note, as previously amended and modified, for the purposes of (i) extending the maturity date of the Loan from the then current maturity date of "January 31, 1995" to the new maturity date of "January 31, 1996"; (ii) amending and modifying the interest rate charged on the outstanding aggregate principal amount of the Loan from the existing interest rate of "Bank's Base Rate plus one and one-half percent (1.5%) on a floating basis" to a new interest rate of "Bank's Base Rate plus one percent (1.0%) on a floating basis"; and (iii) amending and modifying the Lender's name from the existing name of "United Jersey Bank/Central, N.A." to the new name of "United Jersey Bank". K. As of August 25, 1994, pursuant to the terms of a certain Third Modification and Extension Agreement (hereinafter referred to as the "Third Modification Agreement"), executed by and among, inter alia, the Undersigned and the Lender, the parties agreed, among other things (i) to amend and modify the aggregate principal amount of the Loan from the existing principal amount of "$4,000,000.00" to the new increased principal amount of "$4,500,000.00"; (ii) to -2- extend the maturity date of the Loan from the then current maturity date of "January 31, 1996" to a new maturity date of "May 31, 1996"; and (iii) to amend and modify the Lender's address from the existing address of "4365 Route 1 South, Princeton, New Jersey 08540" to the Lender's new address of "Raritan Plaza II, Fieldcrest Avenue, Edison, New Jersey 08837". L. As of August 23, 1995, pursuant to the terms of a certain Third Allonge to $4,000,000.00 Revolving Note (hereinafter referred to as the "Third Allonge"), executed by the Undersigned, as the maker, and delivered to the Lender, as the payee, the Undersigned and the Lender agreed to amend and modify the terms of the Note, as previously amended and modified, for the purposes of (i) amending and modifying the aggregate principal among of "$4,000,000.00" to the new increased principal amount of "$4,500,000.00"; (ii) to extend the maturity date of the Loan from the then current maturity date of "January 31, 1996" to a new maturity date of "May 31, 1996"; and (iii) to amend and modify the Lender's address from the existing address of "4365 Route 1 South, Princeton, New Jersey 08540" to the Lender's new address of "Raritan Plaza II, Fieldcrest Avenue, Edison, New Jersey 08837". M. As of February 6, 1996, pursuant to the terms of a certain Fourth Modification and Extension Agreement (hereinafter referred to as the "Fourth Modification Agreement"), executed by and among, inter alia, the Undersigned and the Lender, the parties agreed, among other things, to delete the existing Paragraph 2 of the Note and to insert a new Paragraph 2 in its place and stead, which provides that interest shall be due and payable as set forth in the Loan Agreement, as previously amended and modified. N. As of February 6, 1996, pursuant to the terms of a certain Fourth Allonge to $4,000,000 Note (hereinafter referred to as the "Fourth Allonge"), executed by the Undersigned, as the maker, and delivered to the Lender, as the payee, the Undersigned and the Lender agreed to amend and modify the Note, as previously amended and modified, for the purpose of deleting the existing Paragraph 2 of the Note and inserting a new Paragraph 2 in its place and stead, which provides that interest shall be due and payable as set forth in the Loan Agreement, as previously amended and modified. O. As of May 31, 1996, pursuant to the terms of a certain Fifth Modification and Extension Agreement (hereinafter referred to as the "Fifth Modification Agreement"), executed by and among, inter alia, the Undersigned and the Lender, the parties agreed, among other things, to extend the maturity date of the Loan from the then current maturity date of "May 31, 1996" to a new maturity date of "May 31, 1997". P. As of May 31, 1996, pursuant to the terms of a certain Fifth Allonge to $4,000,000 Note (hereinafter referred to as the "Fifth Allonge"), executed by the Undersigned, as the maker, and delivered to the Lender, as the payee, the Undersigned and the Lender agreed to amend and modify the Note, as previously amended and modified, for the purpose of extending the term of the term of the Loan from the then current maturity date of "May 31, 1996" to a new maturity date of "May 31, 1997". Q. As of even date herewith, pursuant to a certain Sixth Modification and Extension Agreement (hereinafter referred to as the "Sixth Modification Agreement"), executed by and among, inter alia, the Undersigned and the Lender, the parties agreed, among other things, (i) to -3- extend the maturity date of the Loan from the current maturity date of "May 31, 1997" to a new maturity date of "May 31, 1998" and (ii) to amend and modify the Lender's address from the existing address of "Raritan Plaza II, Fieldcrest Avenue, Edison, New Jersey 08837" to the Lender's new address of "210 Main Street, Hackensack, New Jersey 07601". R. The Undersigned and the Lender now desire to further amend and modify the terms of the Note, as previously amended and modified, to reflect the terms and conditions of the Sixth Modification Agreement. NOW, THEREFORE, in consideration of the mutual benefits inuring to the Undersigned and the Lender and intending to be legally bound hereby, the Note, as previously amended and modified, is hereby further amended and modified as follows: 1. Maturity Date. Any and all references to the existing maturity date of "May 31, 1997" shall be deleted and a new maturity date of "May 31, 1998" shall be inserted in its place and stead. 2. Lender's Address. Any and all references to the Lender's existing address of "Raritan Plaza II, Fieldcrest Avenue, Edison, New Jersey 08837" shall be deleted and a reference to the new address of "210 Main Street, Hackensack, New Jersey 07601" shall be inserted in its place and stead. 3. Modification of Note. The Note, as amended and modified hereby, is the "Note" as defined in the Loan Agreement, as previously amended and modified by the Extension Agreement #1, the Extension Agreement #2, the Extension Agreement #3, the Extension Agreement #4, the First Allonge, the Second Allonge, the Third Allonge, the Fourth Allonge, the Fifth Allonge and as further amended and modified by this Sixth Allonge. All other provisions of the Note and of all other agreements and instruments executed in connection therewith shall not be modified hereby, except as expressly set forth herein, and this Sixth Allonge shall not be considered as a waiver of any of the Lender's rights under the Note as heretofore existing or as hereafter modified by this Sixth Allonge. 4. Construction. Any capitalized terms used in this Sixth Allonge not otherwise defined herein shall have the meaning as set forth in the Sixth Modification Agreement. 5. Single Instrument. The Undersigned hereby directs the Lender to affix this Sixth Allonge to the Note, whereupon the Note, the Extension Agreement #1, the Extension Agreement #2, the Extension Agreement #3, the Extension Agreement #4, the First Allonge, the Second Allonge, the Third Allonge, the Fourth Allonge, the Fifth Allonge and this Sixth Allonge will become and constitute a single instrument. IN WITNESS WHEREOF, the Lender and the Undersigned have executed this Sixth Allonge under the seal on the date first above written. UNDERSIGNED: -4- [SEAL] ATTEST: JOULE, INC. _____________________________ By: ___________________________________ Bernard G. Clarkin Emanuel N. Logothetis Secretary President LENDER: SUMMIT BANK, as successor-in-interest to UNITED JERSEY BANK By: ___________________________________ Bonnie Gershon Vice President -5- EX-13 3 ANNUAL REPORT EXHIBIT-13 -------------------------- JOULE [LOGO] -------------------------- WE KEEP AMERICA WORKING... 1997 ANNUAL REPORT STAFFING SOLUTIONS ------------------------------------------------------- COMMERCIAL -------------------------------------------------- TECHNICAL --------------------------------------------- INDUSTRIAL JOULE INC. AND SUBSIDIARIES ---------------------------------- COMPANY VISION - -------------------------------------------------------------------------------- JOULE is a publicly owned American Stock Exchange technical staffing services company, founded over 30 years ago, that specializes in changing the "fixed overhead" of Fortune 500 companies into "variable overhead" through outsourcing of non-core staffing needs. Outsourcing allows a company to turn over various support positions to specialized outside vendors so that it can concentrate on building and managing its core business. At the same time it enjoys the benefit of a more variable cost structure along with improved quality since the outsourcing vendor must be competitive as well as specialized in its field. Today's global economy demands that companies constantly strive to become more efficient and flexible in order to survive and prosper. JOULE accomplishes this by supplying thousands of employees each year to its customers who are billed on an hourly basis. The staffing services business markets through thirteen branches, mainly in the New Jersey area, using the trademarks "JOULE Technical Staffing Services", "JOULE Industrial Services", "JOULE Staffing Services" and "People Providers". As companies have re-engineered their operations, market opportunities have continued to develop for JOULE. More and more companies in an increasing number of industries are seeking the advantages of outsourced staffing, thereby improving the quality of their support services while also better controlling their costs. JOULE believes this trend toward outsourcing will continue to offer excellent growth opportunities for it in the future. ---------------------------------- SELECTED FINANCIAL INFORMATION - --------------------------------------------------------------------------------
Year Ended September 30, --------------------------------------------------------- 1997 1996 1995 1994 1993 ========================================================================================= (In thousands, except per share data) Revenues .................... $ 48,590 $ 48,449 $ 43,641 $ 36,216 $ 32,123 Net Income (Loss) ........... 1,066 1,026 938 710 (3,376)(1) Net Income (Loss)Per Share... 0.29 0.28 0.26 0.20 (0.93)(1) Total Assets ................ 10,843 10,809 10,802 8,576 6,508 Long Term Debt .............. 406 431 456 424 -- Total Liabilities ........... 4,657 5,710 6,883 5,609 4,251 =========================================================================================
(1) Includes a non-recurring net charge of $3,955,000 or $1.10 per share (after a related tax benefit of $2,026,000) to eliminate the carrying value of claims with a U.S. Government Agency. [THE FOLLOWING TABLES WERE REPRESENTED BY BAR CHARTS IN THE PRINTED MATERIAL] -------------- ---------------- Revenues Income* -------------- ---------------- ($ in millions) ($ in thousands) 1993 32.1 1993 729 1994 36.2 1994 1,264 1995 43.6 1995 1,962 1996 48.4 1996 1,925 1997 48.6 1997 1,992 * Revenue less Cost of Services and S, G & A Expenses JOULE INC. AND SUBSIDIARIES - ---------------------------------- TO OUR STOCKHOLDERS: - -------------------------------------------------------------------------------- Fiscal 1997 was a year in which we worked to further develop and strengthen Joule's competitive edge in the staffing service industry. As a result of our efforts, we achieved record revenues for the sixth consecutive year, improved our gross, operating and net margins, strengthened our management team, and expanded our customer base in both new and existing markets. Revenues for fiscal 1997, while a record at $48.6 million, were only modestly above the year ago figure of $48.4 million. Commercial and Technical Services continue to benefit from the increased demand for outsourcing services as well as from marketing initiatives designed to capitalize on opportunities in these areas. In fiscal 1997, Commercial Staffing's revenues jumped 23 percent to $18.5 million from $15.0 million in fiscal 1996, and Technical Staffing's revenues increased to $13.1 million from $11.6 million in fiscal 1996, an improvement of 19 percent. The strong performances from the Commercial and Technical Staffing groups were partially offset by lower sales of Industrial Staffing Services. The decline in Industrial Staffing revenues stemmed largely from the wind down and completion of several large contracts between the 1996 and 1997 fiscal years. With aggressive efforts underway to capture new contracts in this area, we expect to see improvement in fiscal 1998. Net income for the 1997 fiscal year rose to $1.1 million, or $0.29 per share, from $1.0 million, or $0.28 per share, for fiscal 1996. Excluding a non-recurring charge in fiscal 1993, earnings have grown every year since 1990. Our primary growth strategy for Commercial Staffing and Technical Staffing centers on geographic expansion. Commercial Staffing is aggressively exploiting our footholds beyond New Jersey in Pennsylvania, New York, Maryland and Delaware, and plans to open multiple offices in some of these areas to further capitalize on our recent successes in these markets. In particular, we have targeted the Philadelphia market for 1998. We are also hoping to develop the Florida market by opening several new facilities to support our existing Ft. Lauderdale, Florida office. Technical Staffing has achieved initial success in geographically expanding its client base nationwide from our centralized office. In fiscal 1997, Technical Staffing added two regional managers with significant experience at large national competitors to aid the expansion process. We also significantly increased the number of primary vendor arrangements with our Technical Staffing clients. We will look for further growth in the next couple of years by expanding our presence in the fields of science and information technology. In July, Joule appointed Anthony Trotter Vice President of Staffing Services. An important addition to the Company, Tony brings to Joule more than 10 years of management experience in the staffing services industry and an impressive record of growing businesses. Also in fiscal 1997, Stephen Demanovich was named Vice President of Technical Services. Since joining Joule in 1989, Steve, with more than 20 years experience in staffing services, has demonstrated leadership and vision in his various managerial capacities. Under his direction for the last three years, the Technical Services division has more than doubled its revenues. Tony and Steve are part of a promising senior management team I am creating to ensure Joule's long-term success and commitment to the individual shareholder and customer. While I am re-evaluating my role in operations, my goal is to build a team that offers Joule fresh perspectives and an invigorating desire to grow this Company. This team will manage the day-to-day operations of Joule and help develop and implement the short and long-term initiatives of the Company's growth strategy. In conclusion, I would like to thank our shareholders, employees and customers for their continued loyal support. While fiscal 1997 did not exceed our every expectation, the momentum that our Commercial Staffing and Technical Staffing groups achieved in fiscal 1997 and the opportunities that lie ahead in our industry give us a great sense of optimism and enthusiasm as Joule enters fiscal 1998. /s/ Emanuel N. Logothetis Emanuel N. Logothetis Chairman and President --- 1 JOULE INC. AND SUBSIDIARIES JOULE SOLUTIONS - -------------------------------------------------------------------------------- STAFFING SERVICES / ON-SITE COORDINATION / PROJECT MANAGEMENT - -------------------------------------------------------------------------------- TECHNICAL - ---------------------------------- Offers traditional staffing as well as single source management programs in three core disciplines: Engineering, Scientific and Information Technology. Engineering Engineers, architects, designers, CAD operators, inspectors, planners. Scientific Chemists, biologists, clinical researchers, lab technicians, food scientists, chemical operators, statistical programmers, clinical data coordinators. Information Programmers, system analysts, network engineers, PC techs, Technology computer operators, database administrators, database analysts. - -------------------------------------------------------------------------------- INDUSTRIAL - ---------------------------------- On demand, project and work force management solutions of craft and trade skilled personnel. Industrial Electrician, welder, millwright, mechanical machinist, mason, rigger, fitter specialist and other trade specialists. Project Solutions Nationwide refurbishing and refitting support of industrial facilities. Outsourcing Term technical maintenance support of heavy industrial or manufacturing clients. - -------------------------------------------------------------------------------- COMMERCIAL - ---------------------------------- Services ranging from clerical, administrative, customer service and light industrial staffing to work force management. Light Industrial Assembly line/production personnel, freight forwarding handlers, and production supervision. Administrative Office automation support, customer service personnel, general clerical and incoming call support. --- 2 [PHOTO] Nation's Largest Educational Materials Provider Joule Solution: On-Site Management Of National Customer Service Center Mahwah, New Jersey Total service support illustrates the business solution approach Joule provides to its clients. When the nation's largest educational materials provider expanded their nationwide customer service center, Joule distinguished itself with a total business solution that addressed the critical skill needs and out of the way recruiting challenges. Today, a Joule on-site account management team orientates and coordinates a flexible workforce of up to 75 incoming call specialists. In addition, a Joule's shuttle fleet provides our employees with free transportation to this rurally located call center facility. This unique blend of on-site management, stringent employee selection and dedicated transportation led to the trust and confidence necessary to place Joule in charge of their company's flexible workforce. ================================================================================ COMMERCIAL [PHOTO] STAFFING ================================================================================ [THE FOLLOWIG TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL] --------------- Revenue Growth --------------- ($ in millions) 1994 10.9 1995 13.6 1996 15.0 1997 18.5 As a long-time provider of temporary placement in Commercial Staffing, Joule's strength is finding qualified people for our clients using our network of offices. Through these offices, we readily place with our clients a wide spectrum of skilled personnel with flexible service contracts, ranging from one-day light industrial assemblers to full-time executive assistants. Because of our long-time success in this division and the continued demand for our personnel, Joule is implementing short and long-term strategic plans to geographically expand this network of offices through the opening of new service centers. --- 3 Global Pharmaceutical Leader Joule Solution: On-Site Coordination of Scientific and Engineering Staff Kenilworth, New Jersey [PHOTO] Technical Staffing's capabilities were recognized when a major pharmaceutical company selected Joule over other national staffing service providers to be its primary technical staffing vendor. During Fiscal 1997 this Vendor On Premise program was fully implemented and has proven to be a milestone for Joule. The overwhelming success of this program has generated significant industry recognition and has helped Joule extend our presence to other companies in the pharmaceutical and health care sectors. ================================================================================ [PHOTO] TECHNICAL STAFFING ================================================================================ [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL] ----------------- Technical Revenue ----------------- engineering 53% scientific 36% information technology 11% Joule Technical Staffing is a regional leader in providing technical staffing solutions to clients in several core disciplines: Engineering, Scientific and Information Technology. We offer our clients a cost-effective method of meeting peak workloads by supplying highly qualified technical personnel. Our success is driven by proactive recruiting programs including state of the art resume scanning and retrieval tools coupled with comprehensive applicant screening and qualification processes. These methods ensure that our clients receive a prompt response to their requests for qualified personnel. Joule's service driven programs have led Technical Staffing to double its 1994 revenues through 1997. --- 4 [PHOTO] Nation's Largest Steel Producer Joule Solution: On-Site Term Agreement Maintaining Equipment and Plant Capital Resources Fairless Hills, Pennsylvania The nation's largest steel producer required a solution to support peak demand operations and maintenance requirements at their 12 million square foot rolled steel plant in Fairless Hills. Joule responded with an on-site managed project team of up to twenty master millwrights, mechanics, riggers and welders to support critical path operations. This dedicated team of craft technicians services the imposing primary rolled steel production line extending more than one mile in length. Joule's project team is an ongoing and integral part of this plant's strategy to maintain consistent on-line production capability. The primary Joule/client solution allows the nation's largest steel provider to maximize production capabilities by having an immediate response to both unanticipated and planned project work. ================================================================================ INDUSTRIAL [FOUR PHOTOS] STAFFING ================================================================================ [THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL] ------------------ Industrial Revenue ------------------ outsourcing 43% industrial 40% projects 17% With the unique application of craft and trade personnel, Joule Industrial Staffing supports industrial and manufacturing companies with supplemental staffing, project support and on-site facility management solutions. Under a flexible, or term arrangement, Joule provides skilled workers, tools and materials necessary for the installation or retrofitting of equipment, plant and facilities. To support client requirements for shutdowns (down-time), Joule augments maintenance teams with the skilled personnel and project supervision necessary to ensure an efficient and expedient turn around. Joule delivers the skills and resources to "Keep America Working". --- 5 JOULE INC. AND SUBSIDIARIES ----------------------------------------------------------- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - -------------------------------------------------------------------------------- Results of Operations The following table sets forth the percentage relationship of certain items in the Company's consolidated statements of income:
Year Ended September 30, ---------------------------------- 1997 1996 1995 ================================================================================================================= Revenues.................................................................. 100.0% 100.0% 100.0% Costs, expenses and other Cost of services........................................................ 81.3 83.2 83.1 Selling, general & administrative expenses.............................. 14.6 12.9 12.5 Interest expense........................................................ 0.4 0.6 0.9 Other................................................................... -- -- 0.1 Income before income tax provision........................................ 3.7 3.3 3.4 Income tax provision...................................................... 1.5 1.2 1.3 Net income................................................................ 2.2 2.1 2.1 ==================================================================================================================
The Company's revenues are derived from providing staffing services to its customers. Such services include providing commercial (office and light industrial) workers, technical personnel, and industrial (skilled craft industrial plant and facility maintenance) labor. Over 90% of revenue in each year is billed on a direct cost plus markup basis. Revenues in fiscal 1997 ($48.6 million) approximated revenues for fiscal 1996 of $48.4 million, which revenues were 11% higher than 1995 revenues of $43.6 million. Commercial revenue increased 23% to $18.5 million in 1997 from $15.0 million in 1996, following a 10% increase in 1996 over 1995 revenue of $13.6 million. Technical staffing revenue was $13.1 million in 1997, a 13% increase over 1996 revenue of $11.6 million. This followed a 32% increase over 1995 revenue of $8.8 million. While industrial revenue registered a moderate 3% increase for 1996 over 1995 sales of $21.2 million, 1997 sales declined 22% to $17.0 million, reflecting the adverse impact of the wind down and completion of certain long term contracts. The increases in revenue during these years for commercial and technical services are attributable to a larger customer base, as the demand for such outsourcing services grows, and the Company's continuing pursuit of both existing and new market niches. Cost of services improved to 81.3% of revenue in fiscal 1997 compared to 83.2% in 1996 and 83.1% in 1995. These expenses consist primarily of compensation to employees on assignment to clients and related costs, including social security, unemployment taxes, general liability and workers' compensation insurance, and other costs of services. Selling, general and administrative expenses amounted to $7.1 million in 1997, compared to $6.2 million in 1996 and $5.4 million in 1995. Such expenses were 14.6%, 12.9% and 12.5% of revenues in 1997, 1996 and 1995, respectively. The 1997 percentage increase in selling, general and administrative expenses principally reflects the anticipation of higher sales which have not yet fully materialized. Selling, general and administrative expenses include the salaries and related costs of staff employees, advertising, professional fees, depreciation, provision for the allowance for doubtful accounts and other costs related to maintaining the Company's branch offices. Interest expense decreased to $214,000 in 1997 from $311,000 in 1996 and from $396,000 in 1995, due principally to a reduction in average borrowings and also to lower interest rates. Effective tax rates for fiscal 1997, 1996 and 1995 were 40%, 37% and 38%. As a result of the above, net income increased to $1,066,000 or $0.29 per share in 1997 compared with net income of $1,026,000 or $0.28 per share in 1996 and $938,000 or $0.26 per share in 1995. Liquidity and Capital Resources Current assets at September 30, 1997 were $7,105,000 as compared to $8,623,000 at September 30, 1996 and current liabilities were $4,251,000 compared to $5,279,000 as of September 30, 1996. During the year the Company acquired land and buildings from an affiliate, which the Company had previously leased for use in its operations, in settlement of a receivable of $1,750,000 due from the affiliate. The appraised and recorded value of the property approximated the receivable. 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. The Company has a $4,500,000 bank line of credit; loans thereunder are secured principally by receivables and bear interest at the bank's prime rate with a LIBOR plus two and one quarter percent option; $1,295,000 was outstanding under this line as of September 30, 1997. The Company believes that internally generated funds and available borrowings will provide sufficient cash flow to meet its requirements for the next 12 months. --- 6 JOULE INC. AND SUBSIDIARIES ---------------------------------- CONSOLIDATED BALANCE SHEETS - --------------------------------------------------------------------------------
September 30, ------------------------- 1997 1996 ========================================================================================== ASSETS CURRENT ASSETS: Cash ....................................................... $ 139,000 $ 175,000 Accounts receivable, less allowance for doubtful accounts of $200,000 and $217,000 in 1997 and 1996, respectively ..... 6,820,000 8,128,000 Prepaid expenses and other current assets .................. 146,000 320,000 - ------------------------------------------------------------------------------------------ Total Current Assets ................................... 7,105,000 8,623,000 PROPERTY AND EQUIPMENT, NET .................................. 3,633,000 2,019,000 GOODWILL AND OTHER ASSETS .................................... 105,000 167,000 - ------------------------------------------------------------------------------------------ $10,843,000 $10,809,000 ========================================================================================== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Loans payable to bank ...................................... $ 1,295,000 $ 2,343,000 Accounts payable and accrued expenses ...................... 1,472,000 1,817,000 Accrued payroll and related taxes .......................... 1,291,000 1,094,000 Income taxes ............................................... 168,000 -- Current portion of long term debt .......................... 25,000 25,000 - ------------------------------------------------------------------------------------------ Total Current Liabilities .............................. 4,251,000 5,279,000 LONG TERM DEBT ............................................... 406,000 431,000 Total Liabilities ...................................... 4,657,000 5,710,000 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 3,816,000 and 3,811,000 shares in 1997 and 1996, respectively .... 38,000 38,000 Additional paid-in capital ................................. 3,658,000 3,637,000 Retained earnings .......................................... 2,879,000 1,813,000 - ------------------------------------------------------------------------------------------ 6,575,000 5,488,000 LESS: Cost of 146,000 shares of common stock held in treasury 389,000 389,000 - ------------------------------------------------------------------------------------------ Total Stockholders' Equity ............................. 6,186,000 5,099,000 - ------------------------------------------------------------------------------------------ $10,843,000 $10,809,000 ==========================================================================================
See accompanying notes to consolidated financial statements. --- 7 JOULE INC. AND SUBSIDIARIES ------------------------------------- CONSOLIDATED STATEMENTS OF INCOME - --------------------------------------------------------------------------------
Years Ended September 30, -------------------------------------------- 1997 1996 1995 =========================================================================================================== REVENUES .................................................... $ 48,590,000 $ 48,449,000 $ 43,641,000 - ----------------------------------------------------------------------------------------------------------- COSTS, EXPENSES AND OTHER: Cost of services .......................................... 39,485,000 40,293,000 36,245,000 Selling, general and administrative expenses .............. 7,113,000 6,231,000 5,434,000 Interest expense .......................................... 214,000 311,000 396,000 Other ..................................................... 2,000 (13,000) 53,000 - ----------------------------------------------------------------------------------------------------------- Income before income tax provision .......................... 1,776,000 1,627,000 1,513,000 Income tax provision ........................................ 710,000 601,000 575,000 - ----------------------------------------------------------------------------------------------------------- Net income .................................................. $ 1,066,000 $ 1,026,000 $ 938,000 =========================================================================================================== Net income per common share ................................. $ 0.29 $ 0.28 $ 0.26 =========================================================================================================== Weighted average number of shares and equivalents outstanding 3,666,000 3,651,000 3,628,000 ===========================================================================================================
See accompanying notes to consolidated financial statements. ---------------------------------------------------------- CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY - --------------------------------------------------------------------------------
Number of Additional Retained Shares of Common Paid-in Earnings Treasury Common Stock Stock Capital (Deficit) Stock ==================================================================================================================================== Balances, September 30, 1994 ................ 3,750,000 $ 38,000 $ 3,488,000 $ (151,000) $ 408,000 Net Income ................................ -- -- -- 938,000 -- Exercise of Stock Options ................. 10,000 -- 14,000 -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Balances, September 30, 1995 ................ 3,760,000 38,000 3,502,000 787,000 408,000 Net Income ................................ -- -- -- 1,026,000 -- Issuance of 4,000 Treasury Shares ......... 4,000 -- -- -- (19,000) Exercise of Stock Options ................. 47,000 -- 135,000 -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Balances, September 30, 1996 ................ 3,811,000 38,000 3,637,000 1,813,000 389,000 Net Income ................................ -- -- -- 1,066,000 -- Exercise of Stock Options ................. 5,000 -- 21,000 -- -- - ----------------------------------------------------------------------------------------------------------------------------------- Balances, September 30, 1997 ................ 3,816,000 $ 38,000 $ 3,658,000 $ 2,879,000 $ 389,000 ===================================================================================================================================
See accompanying notes to consolidated financial statements. --- 8 JOULE INC. AND SUBSIDIARIES ------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS - --------------------------------------------------------------------------------
Years Ended September 30, ------------------------------------------------ 1997 1996 1995 ==================================================================================================================================== CASH FLOWS FROM OPERATING ACTIVITIES: Net income ................................................................. $ 1,066,000 $ 1,026,000 $ 938,000 Adjustments to reconcile net income to net cash flows provided by (used in) operating activities: Depreciation and amortization .......................................... 453,000 400,000 346,000 Loss from disposal of equipment ........................................ -- -- 4,000 Provision for losses on accounts receivable ............................ 87,000 109,000 120,000 Changes in operating assets and liabilities: Accounts receivable .................................................. (231,000) 277,000 (2,341,000) Prepaid expenses and other assets .................................... 206,000 7,000 404,000 Accounts payable and accrued expenses ................................ (642,000) 680,000 231,000 Accrued payroll and related taxes .................................... 197,000 11,000 382,000 Income taxes ......................................................... 168,000 (77,000) (138,000) - ------------------------------------------------------------------------------------------------------------------------------------ Net cash flows provided by (used in) operating activities ........ 1,304,000 2,433,000 (54,000) - ------------------------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions of property and equipment ..................................... (288,000) (695,000) (738,000) - ------------------------------------------------------------------------------------------------------------------------------------ Net cash flows used in investing activities ...................... (288,000) (695,000) (738,000) - ------------------------------------------------------------------------------------------------------------------------------------ CASH FLOWS FROM FINANCING ACTIVITIES: Increase (decrease) in loans payable to bank ............................... (1,048,000) (1,762,000) 742,000 Payment of long term debt .................................................. (25,000) (25,000) (19,000) Additions of long term debt ................................................ -- -- 76,000 Proceeds from exercise of stock options .................................... 21,000 154,000 14,000 - ------------------------------------------------------------------------------------------------------------------------------------ Net cash flows provided by (used in) financing activities ........ (1,052,000) (1,633,000) 813,000 - ------------------------------------------------------------------------------------------------------------------------------------ NET CHANGE IN CASH ........................................................... (36,000) 105,000 21,000 CASH, BEGINNING OF PERIOD .................................................... 175,000 70,000 49,000 - ------------------------------------------------------------------------------------------------------------------------------------ CASH, END OF PERIOD .......................................................... $ 139,000 $ 175,000 $ 70,000 ==================================================================================================================================== SUPPLEMENTAL CASH FLOW INFORMATION: Interest paid .............................................................. $ 223,000 $ 318,000 $ 410,000 ==================================================================================================================================== Income taxes paid .......................................................... $ 374,000 $ 763,000 $ 722,000 ====================================================================================================================================
NON-CASH TRANSACTIONS: During 1997, the Company acquired land and buildings in settlement of a $1,750,000 receivable. See accompanying notes to consolidated financial statements. --- 9 JOULE INC. AND SUBSIDIARIES ------------------------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Basis of Presentation--The consolidated financial statements include the accounts of JOULE INC. and its wholly-owned subsidiaries. All significant intercompany transactions have been eliminated in consolidation. Use of Estimates--The preparation of accrual basis financial statements requires management to make estimates and assumptions 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. Property and Equipment--Property and equipment are stated at cost. Depreciation has been provided by use of various methods, primarily straight-line, 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--Revenue is recorded after services are rendered. Income Taxes--The Company accounts for income taxes pursuant to the provisions of Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes", which utilizes the liability method and 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. Net Income Per Share--Net income per share is based upon the weighted average number of shares and common stock equivalents outstanding during each year. Common stock equivalents consist of outstanding stock options using the treasury stock method, if dilutive. Statement of Financial Accounting Standards No. 128, "Earnings per Share", which becomes effective for the fiscal year beginning October 1, 1997, establishes new standards for computing and presenting earnings per share (EPS). The new standard requires the presentation of basic EPS and diluted EPS. Basic EPS is calculated by dividing income available to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted EPS is calculated by dividing income available to common shareholders by the weighted average number of common shares outstanding adjusted to reflect potentially dilutive securities. Previously reported EPS amounts must be restated under the new standard when it becomes effective. For the years ended September 30, 1997, 1996 and 1995, basic EPS and diluted EPS would not have been effected. Goodwill--Goodwill is being amortized over a period of approximately ten years. Amortization of goodwill amounted to $24,000 in each of 1997, 1996 and 1995. Long-Lived Assets--The provisions of Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets", require, among other things, that an entity review its long-lived assets and certain related intangibles for impairment whenever changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. The Company does not believe that any impairment currently exists related to the long-lived assets. NOTE 2--PROPERTY AND EQUIPMENT: Property and equipment consists of: September 30, --------------------------- 1997 1996 ================================================================================ Machinery and equipment ...................... $2,495,000 $2,268,000 Furniture and fixtures ....................... 550,000 539,000 Automotive equipment ......................... 1,062,000 1,015,000 Building and leasehold improvements .......... 292,000 287,000 Buildings .................................... 1,834,000 584,000 Land ......................................... 670,000 170,000 - -------------------------------------------------------------------------------- 6,903,000 4,863,000 Less: Accumulated depreciation and amortization ................................. 3,270,000 2,844,000 - -------------------------------------------------------------------------------- $3,633,000 $2,019,000 ================================================================================ NOTE 3--LOANS PAYABLE TO BANK AND LONG TERM DEBT: The Company has an annual renewable line of credit of $4,500,000 with interest at its bank's prime rate with a LIBOR plus two and one-quarter percent option. At September 30, 1997, $3,205,000 of the line of credit was unused, substantially all of which was available for use. Related loans are collateralized principally by accounts receivable. There is a mortgage loan for $431,000 on the Company's staffing operations building. At September 30, 1997, $25,000 was due within one year and classified as a current liability. Additional principal payments approximating $25,000 per year will be made until December 1999, when there will be a balloon payment due for the balance. The interest rate is the bank's base rate plus 1 1/2%. NOTE 4--STOCK OPTION PLAN: The Company's 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 price cannot be less than the fair market value of the stock at the time the options are granted. At September 30, 1997, there were 120,000 stock options outstanding at prices ranging from $3.50 to $4.25 of which 2,500 options are exercisable. There are also 6,500 stock options outstanding at September 30, 1997 from a previous stock option plan at prices ranging from $2.63 to $6.13. In 1997, 1996 and 1995, 5,000, 47,000 and 10,000 options were exercised, respectively. In 1997 and 1996, 110,000 and 15,000 options were granted at prices ranging from $3.50 to $4.25. Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation", which became effective for the fiscal year beginning October 1, 1996, permits an entity to continue to account for employee stock-based compensation under APB Opinion No. 25, "Accounting for Stock ---- 10 Issued to Employees", or adopt a fair value based method of accounting for such compensation. The Company has elected to continue to account for stock-based compensation under Opinion No. 25. Accordingly, no compensation expense has been recognized in connection with options granted. Had compensation expense for options granted subsequent to October 1, 1995 under the Company's stock option plans been determined based on the fair value at the date of grant in accordance with Statement No. 123, the Company's net income and net income per share would have been as follows: 1997 1996 ================================================================================ Net income As reported ...................... $ 1,066,000 $ 1,026,000 Pro forma ........................ 1,062,000 1,023,000 Net income per share As reported ...................... 0.29 0.28 Pro forma ........................ 0.29 0.28 ================================================================================ 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 fiscal 1997 and 1996 were $4.23 and $4.00, respectively, based upon the following weighted average assumptions: expected volatility (25% in 1997 and 1996), risk-free interest rate (6.50% in 1997 and 1996), expected life (3 years in 1997 and 1996), and expected dividend yield (0% in 1997 and 1996). Because the amounts reported above only reflect pro forma compensation expense for options granted subsequent to October 1, 1995, they are not necessarily representative of the effect on pro forma operating results determined under Statement No. 123. NOTE 5--INCOME TAXES: Comparative analyses of the provision for income taxes follows: September 30, ---------------------------------------- 1997 1996 1995 ================================================================================ Current: Federal ...................... $551,000 $454,000 $446,000 State and Local .............. 159,000 147,000 129,000 - -------------------------------------------------------------------------------- $710,000 $601,000 $575,000 ================================================================================ The provision for income taxes varied from the tax computed at the U.S. Federal statutory rates of 34% in fiscal 1997, 1996 and 1995 for the following reasons: September 30, ----------------------------------- 1997 1996 1995 ================================================================================ U.S. Federal Tax at statutory rates ...... $ 604,000 $ 553,000 $ 514,000 State income taxes, net of Federal tax benefit .................... 106,000 98,000 85,000 Utilization of operating loss carryforward -- (52,000) -- Job Tax Credits .......................... -- -- (16,000) Other .................................... -- 2,000 (8,000) - -------------------------------------------------------------------------------- $ 710,000 $ 601,000 $ 575,000 ================================================================================ NOTE 6--COMMITMENTS AND CONTINGENCIES: The Company's facilities are leased under noncancellable terms expiring through 2000. Rent expense was $286,000, $273,000 and $275,000 for the years ended September 30, 1997, 1996 and 1995, respectively. Aggregate rentals for the remaining lease terms at September 30, 1997 are as follows: Year Ending September 30, ================================================================ 1998................................................. $157,000 1999................................................. 149,000 2000................................................. 123,000 - ---------------------------------------------------------------- $429,000 ================================================================ NOTE 7--TRANSACTIONS WITH MAJOR STOCKHOLDERS AND AFFILIATES: The Company rented facilities from certain of its stockholders and their affiliates for approximately $199,000 for each of the three years ended September 30, 1997. At September 30, 1997 the Company had related lease commitments of $16,000, $16,000 and $1,000 for the years ending September 30, 1998, 1999 and 2000. Further, in 1997 the Company entered into a three year lease with the purchaser of property formerly owned by an affiliate. Annual rentals under this lease approximate $133,000. The Company subleases most of this space to an affiliate which reimburses the Company approximately $120,000 per year. The Company paid various major stockholders legal and consulting fees of $16,000, $21,000 and $16,000 for the years 1997, 1996 and 1995; accounts receivable include amounts due from a stockholder of $22,000, $67,000 and $94,000 at September 30, 1997, 1996 and 1995, respectively. During the year ended September 30, 1997 the Company acquired land and buildings from Kahle Engineering Corp. (Kahle), an affiliate, which the Company had previously leased for use in its operations in settlement of a receivable of $1,750,000 due from Kahle. The appraised and recorded value of the property approximated the receivable. NOTE 8--GEOGRAPHIC INFORMATION: The Company is engaged in the staffing services business, providing personnel to business and industry. The Company derived 71%, 68% and 67%, of its revenues from services provided to customers in New Jersey in 1997, 1996 and 1995, respectively. ---- 11 - -------------------------------------------------- REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS - -------------------------------------------------- To the Stockholders and Board of Directors of Joule Inc. We have audited the accompanying consolidated balance sheets of Joule Inc. (a Delaware corporation) and subsidiaries as of September 30, 1997 and 1996 and the related consolidated statements of income, changes in stockholders' equity and cash flows for each of the three years in the period ended September 30, 1997. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. 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 financial statements referred to above present fairly, in all material respects, the financial position of Joule Inc. and subsidiaries as of September 30, 1997 and 1996, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 1997 in conformity with generally accepted accounting principles. /s/ Arthur Andersen LLP Roseland, New Jersey November 18, 1997 - ---------------------------------- STOCK MARKET INFORMATION - ---------------------------------- 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 ==================================================================== Calendar 1995 Fourth Quarter............................ 4 1/2 3 1/2 - -------------------------------------------------------------------- Calendar 1996 First Quarter............................. 5 3/4 3 1/4 Second Quarter............................ 8 1/4 3 1/4 Third Quarter............................. 6 3/4 4 1/8 Fourth Quarter............................ 5 1/4 3 5/8 - -------------------------------------------------------------------- Calendar 1997 First Quarter............................. 4 3/4 3 5/8 Second Quarter............................ 3 15/16 3 1/8 Third Quarter............................. 5 1/4 3 7/16 Fourth Quarter (through December 8)....... 6 1/4 3 7/16 ==================================================================== As of November 28, 1997, there were approximately 600 holders of the Company's Common Stock. No cash dividends have been declared on the Common Stock. ---- 12 JOULE INC. AND SUBSIDIARIES ----------------------------------- CORPORATE DATA - -------------------------------------------------------------------------------- BOARD OF DIRECTORS Richard P. Barnitt Financial Consultant Paul L. DeBacco President Michael Christopher Group, Inc. Anthony Grillo Senior Managing Director The Blackstone Group, L.P. Robert W. Howard Chairman of the Board Reisen Lumber Industries, Inc. Emanuel N. Logothetis Chairman of the Board, President and Chief Executive Officer Nick M. Logothetis President Chartwell Consulting Group Steven Logothetis Attorney OFFICERS Emanuel N. Logothetis Chairman of the Board, President and Chief Executive Officer Bernard G. Clarkin Vice President, Chief Financial Officer and Secretary John F. Logothetis Vice President Stephen Demanovich Vice President Anthony Trotter Vice President CORPORATE INFORMATION For a copy of Form 10-K or other information about the Corporation, contact: Investor Relations Secretary JOULE INC. 1245 Route 1 South Edison, New Jersey 08837 (732) 548-5444 AUDITORS Arthur Andersen LLP 101 Eisenhower Parkway Roseland, New Jersey 07068 TRANSFER AGENT & REGISTRAR Continental Stock Transfer & Trust Co. 2 Broadway New York, NY 10275-0491 JOULE Common Stock is traded on the American Stock Exchange under the symbol JOL. ANNUAL MEETING The annual meeting of JOULE Inc. will be held on Wednesday, February 4, 1998 at 10:30 a.m., at the Pines Manor, Edison, New Jersey. JOULE INC. OFFICES Headquarters 1245 Route 1 South Edison, New Jersey 08837 (732) 548-5444 Fax (732) 494-6346 1235 Route 1 South Edison, New Jersey 08837 (732) 906-0906 362 Parsippany Road Parsippany, New Jersey 07054 (973) 428-8100 1271 Paterson Plank Road Secaucus, New Jersey 07094 (201) 348-3677 The Atrium 80 Route 4 East 1st Floor, Suite 105 Paramus, New Jersey 07652 (201) 845-0900 429 East Broad Street Gibbstown, New Jersey 08027 (609) 423-7500 (215) 342-3300 1333 New Road Atlantic City, New Jersey 08225 (609) 383-1433 2333 Whitehorse-Mercerville Road Trenton, New Jersey 08619 (609) 588-5900 77 Main Street P.O. Box 7 Fishkill, New York 12524 (914) 897-3900 2400 West Cypress Creek Road Suite 100 Ft. Lauderdale, Florida 33309 (954) 492-1110 4300-A Ridge Road Baltimore, Maryland 21236 (410) 284-3400 1500 N. Kings Highway Suite 104 Cherry Hill, New Jersey 08034 (609) 216-0301 ------------------------ JOULE [LOGO] ------------------------ 1245 Route 1 South Edison, New Jersey 08837 732-548-5444 EX-21 4 SUBSIDIARIES EXHIBIT 21 SUBSIDIARIES OF JOULE INC. Subsidiary State of Incorporation ---------- ---------------------- JOULE Maintenance Corporation New Jersey JOULE Technical Staffing, Inc. New Jersey JOULE Technical Services, Inc. New Jersey 20 Orchard St., Inc. New Jersey EX-23 5 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS Exhibit 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report incorporated by reference to this Form 10-K, into the Company's previously filed Registration Statement File No. 33-57996. ARTHUR ANDERSEN LLP Roseland, New Jersey December 30, 1997 EX-27 6 FDS --
5 12-MOS SEP-30-1997 SEP-30-1997 139 0 7020 200 0 7105 6903 3270 10843 4251 406 0 0 38 6148 10843 0 48590 0 39485 7028 87 214 1776 710 1066 0 0 0 1066 .29 .29
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