JANEL CORPORATION The following discussion and analysis should be read in conjunction with our
unaudited interim condensed consolidated financial statements and related notes
thereto as of and for the three months ended
As used throughout this Report, "we," "us", "our," "Janel," "the Company,"
"Registrant" and similar words refer to
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q (the "Report") contains certain statements
that are, or may deemed to be, "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934 and that reflect management's current expectations with
respect to our operations, performance, financial condition, and other
developments. These forward-looking statements may generally be identified by
the use of the words "may," "will," "intends," "plans," projects," "believes,"
"should," "expects," "predicts," "anticipates," "estimates," and similar
expressions or the negative of these terms or other comparable terminology.
These statements are necessarily estimates reflecting management's best judgment
based upon current information and involve a number of risks, uncertainties and
assumptions. We caution readers not to place undue reliance on any such
forward-looking statements, which speak only as of the date made, and readers
are advised that various factors, including, but not limited to, those set forth
elsewhere in this Report, could affect our financial performance and could cause
our actual results for future periods to differ materially from those
anticipated or projected. While it is impossible to identify all such factors,
such factors include, but are not limited to, the impact of the coronavirus on
the worldwide economic conditions and on our businesses, our strategy of
expanding our business through acquisitions of other businesses? the risk that
we may fail to realize the expected benefits or strategic objectives of any
acquisition, or that we spend resources exploring acquisitions that are not
consummated? risks associated with litigation, including contingent auto
liability and insurance coverage; indemnification claims and other unforeseen
claims and liabilities that may arise from an acquisition? economic and other
conditions in the markets in which we operate? the risk that we may not have
sufficient working capital to continue operations? instability in the financial
markets? our dependence on key employees? impacts from climate change, including
the increased focus by third-parties on sustainability issues and our ability to
comply therewith; competition from parties who sell their businesses to us and
from professionals who cease working for us? terrorist attacks and other acts of
violence or war? security breaches or cybersecurity attacks; our compliance with
applicable privacy, security and data laws? competition faced by our logistics
services freight carriers with greater financial resources and from companies
that operate in areas in which we plan to expand? our dependence on the
availability of cargo space from third parties? recessions and other economic
developments that reduce freight volumes? other events affecting the volume of
international trade and international operations? risks arising from our
logistics services business' ability to manage staffing needs? competition faced
in the freight forwarding, freight brokerage, logistics and supply chain
management industry? industry consolidation and our ability to gain sufficient
market presence with respect to our logistics services business? risks arising
from our ability to comply with governmental permit and licensing requirements
or statutory and regulatory requirements? seasonal trends? competition faced by
our manufacturing (Indco) business from competitors with greater financial
resources? Indco's dependence on individual purchase orders to generate revenue?
any decrease in the availability, increase in the cost or supply shortages, of
raw materials used by Indco? Indco's ability to obtain and retain skilled
technical personnel? risks associated with product liability claims due to
alleged defects in Indco's products? risks arising from the environmental,
health and safety regulations applicable to Indco? the reliance of our Indco and
life sciences businesses on a single location to manufacture their products? the
ability of our life sciences business to compete effectively? the ability of our
life sciences business to introduce new products in a timely manner? product or
other liabilities associated with the manufacture and sale of new products and
services? changes in governmental regulations applicable to our life sciences
business? the ability of our life sciences business to continually produce
products that meet high quality standards such as purity, reproducibility and/or
absence of cross-reactivity? the controlling influence exerted by our officers
and directors and one of our stockholders? our inability to issue dividends in
the foreseeable future? and risks related to ownership of our common stock,
including volatility and the lack of a guaranteed continued public trading
market for our common stock, the impact of COVID-19 on our operations and
financial results; and such other factors that may be identified from time to
time in our
19
--------------------------------------------------------------------------------
Table of Contents
OVERVIEW
Management at the holding company focuses on significant capital allocation decisions, corporate governance and supporting Janel's subsidiaries where appropriate. Janel expects to grow through its subsidiaries' organic growth and by completing acquisitions. We plan to either acquire businesses within our existing segments or expand our portfolio into new strategic segments. Our acquisition strategy focuses on reasonably-priced companies with strong and capable management teams, attractive existing business economics and stable and predictable earnings power.
Logistics
The Company's Logistics segment is comprised of several wholly-owned subsidiaries. The Company's Logistics segment is a non-asset based, full-service provider of cargo transportation logistics management services, including freight forwarding via air, ocean and land-based carriers, customs brokerage services, warehousing and distribution services, trucking, and other value-added logistics services. In addition to these revenue streams, the Company earns accessorial revenue in connection with its core services. Accessorial revenue includes, but is not limited to, fuel service charges, wait time fees, hazardous cargo fees, labor charges, handling, cartage, bonding and additional labor charges.
On
On
Life Sciences
The Company's Life Sciences segment is comprised of several wholly-owned subsidiaries. The Company's Life Sciences segment manufactures and distributes high-quality monoclonal and polyclonal antibodies, diagnostic reagents and other immunoreagents for biomedical research and provides antibody manufacturing for academic and industry research scientists. Our Life Sciences segment also produces products for other life science companies on an original equipment manufacturer (OEM) basis.
On
20
--------------------------------------------------------------------------------
Table of Contents
Manufacturing
The Company's Manufacturing segment is comprised of
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our Condensed Consolidated Financial Statements have been prepared in accordance
with generally accepted accounting principles in
Our senior management has reviewed the critical accounting policies and
estimates with the Audit Committee of our Board of Directors. Our significant
accounting policies are described in Note 1, "Summary of Business and
Significant Accounting Policies," in the Notes to our Consolidated Financial
Statements for the fiscal year ended
NON-GAAP FINANCIAL MEASURES
While we prepare our financial statements in accordance with
Organic Growth
Our non-GAAP financial measure of organic growth represents revenue growth excluding revenue from acquisitions within the preceding 12 months. The organic growth presentation provides useful period-to-period comparison of revenue results as it excludes revenue from acquisitions that would not be included in the comparable prior period.
Adjusted Operating Income
As a result of our acquisition strategy, our net income includes material non-cash charges relating to the amortization of customer-related intangible assets in the ordinary course of business as well as other intangible assets acquired in our acquisitions. Although these charges may increase as we complete more acquisitions, we believe we will be growing the value of our intangible assets such as customer relationships. Because these charges are not indicative of our operations, we believe that adjusted operating income is a useful financial measure for investors because it eliminates the effect of these non-cash costs and provides an important metric for our business that is more representative of the actual results of our operations.
Adjusted operating income (which excludes the non-cash impact of amortization of intangible assets, stock-based compensation and cost recognized on the sale of acquired inventory valuation) is used by management as a supplemental performance measure to assess our business's ability to generate cash and economic returns.
Adjusted operating income is a non-GAAP measure of income and does not include the effects of preferred stock dividends, interest and taxes.
We believe that organic growth and adjusted operating income provide useful
information in understanding and evaluating our operating results in the same
manner as management. However, organic growth and adjusted operating income are
not financial measures calculated in accordance with
21--------------------------------------------------------------------------------
Table of Contents
In addition, although other companies in our industry may report measures titled
organic growth, adjusted operating income or similar measures, such non-GAAP
financial measures may be calculated differently from how we calculate our
non-GAAP financial measures, which reduces their overall usefulness as
comparative measures. Because of these limitations, you should consider organic
growth and adjusted operating income alongside other financial performance
measures, including total revenue, operating income and our other financial
results presented in accordance with
Results of Operations -
Our results of operations and period-over-period changes are discussed in the following section. The tables and discussion should be read in conjunction with the accompanying Condensed Consolidated Financial Statements and the notes thereto.
Our consolidated results of operations are as follows:
Three Months Three Months
Ended Ended
December 31, December 31,
2021 2020
Revenues $ 83,314 $ 26,478
Forwarding expenses and cost of revenues 67,825 20,029
Gross profit 15,489 6,449
Operating expenses 12,847 5,960
Operating income $ 2,642 $ 489
Net income $ 1,688 $ 255
Adjusted operating income $ 3,362 $ 978
Consolidated revenues for the three months ended
The following table sets forth a reconciliation of operating income to adjusted
operating income:
Three Months Ended
December 31,
2021 2020
Operating income $ 2,642 $ 489
Amortization of intangible assets 509 251
Stock-based compensation 40 24
Cost recognized on sale of acquired inventory 171 214
Adjusted operating income $ 3,362 $ 978
22--------------------------------------------------------------------------------
Table of Contents
Results of Operations - Logistics - Three Months Ended
Our Logistics business helps its clients move and manage freight efficiently to reduce inventories and to increase supply chain speed and reliability. Key services include customs entry filing, arrangement of freight forwarding by air, ocean and ground, warehousing, cargo insurance procurement, logistics planning, product repackaging and online shipment tracking.
Three Months
Ended
December 31,
2021 2020
Revenue $ 77,556 $ 22,260
Forwarding expense 65,610 18,395
Gross profit $ 11,946 $ 3,865
Gross profit margin 15.4 % 17.4 %
Selling, general and administrative expenses
$ 2,597 $ 491 Revenue
Total revenue for the three months ended
Gross Profit
Gross profit for the three months ended
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months ended
Income from Operations
Income from operations increased to
23--------------------------------------------------------------------------------
Table of Contents
Results of Operations - Life Sciences - Three Months Ended
The Company's Life Sciences segment manufactures and distributes high-quality monoclonal and polyclonal antibodies, diagnostic reagents and other immunoreagents for biomedical research and provides antibody manufacturing for academic and industry research scientists. Our Life Sciences business also produces products for other life science companies on an OEM basis.
Life Sciences - Selected Financial Information:
Three Months
Ended
December 31,
2021 2020
Revenue $ 3,244 $ 2,349
Cost of sales 830 542Cost recognized upon sale of acquired inventory 171 214 Gross profit
$ 2,243 $ 1,593 Gross profit margin 69.1 % 67.8 %
Selling, general and administrative expenses
$ 993 $ 617 Revenue
Total revenue was
Gross Profit
Gross profit was
Selling, General and Administrative Expenses
Selling, general and administrative expenses for the Life Sciences segment were
Income from Operations
Income from operations for the three months ended
Results of Operations - Manufacturing - Three Months Ended
The Company's Manufacturing segment reflects its majority-owned Indco subsidiary, which manufactures and distributes industrial mixing equipment.
24
--------------------------------------------------------------------------------
Table of Contents
Manufacturing - Selected Financial Information:
Three Months Ended
December 31,
2021 2020
Revenue $ 2,514 $ 1,869
Cost of revenues 1,214 878
Gross profit $ 1,300 $ 991
Gross profit margin 51.7 % 53.0 %
Selling, general and administrative expenses
$ 571 $ 349 Revenue
Total revenue was
Gross Profit
Gross profit was
Selling, General and Administrative Expenses
Selling, general and administrative expenses were
Income from Operations
Income from operations was
Results of Operations - Corporate and Other - Three Months Ended
Below is a reconciliation of income from operating segments to net income (loss) available to common stockholders.
Three Months Ended
December 31,
2021 2020
(In thousands)
Total income from operating segments $ 4,161 $ 1,457
Administrative expenses (1,000 ) (707 )
Amortization expense (509 ) (251 )
Stock-based compensation (10 ) (10 )
Total Corporate expenses (1,519 ) (968 )
Interest expense (279 ) (119 )
Net income before taxes 2,363 370
Income tax expense (675 ) (115 )
Net income 1,688 255
Preferred stock dividends (211 ) (174 )
Net income Available to Common Stockholders
25
--------------------------------------------------------------------------------
Table of Contents
Total Corporate Expenses
Total corporate expenses, which include amortization of intangible assets,
stock-based compensation and merger and acquisition expenses, increased by
Interest Expense
Interest expense for the consolidated company increased
Income Taxes Expense
On a consolidated basis, the Company recorded an income tax expense of
Preferred Stock Dividends
Preferred stock dividends include any dividends accrued but not paid on the
Company's Series C Cumulative Preferred Stock (the "Series C Stock"). For the
three months ended
Net Income
Net income was
Income Available to Common Shareholders
Income available to holders of common shares was
LIQUIDITY AND CAPITAL RESOURCES
General
Our ability to satisfy liquidity requirements, including satisfying debt obligations and fund working capital, day-to-day operating expenses and capital expenditures, depends upon future performance, which is subject to general economic conditions, competition and other factors, some of which are beyond Janel's control. Our Logistics segment depends on commercial credit facilities to fund day-to-day operations as there is a difference between the timing of collection cycles and the timing of payments to vendors.
26--------------------------------------------------------------------------------
Table of Contents
As a customs broker, our Logistics segment makes significant cash advances for a
select group of our credit-worthy customers. These cash advances are for
customer obligations such as the payment of duties and taxes to customs
authorities primarily in
The COVID-19 pandemic has negatively impacted our liquidity and cash flows. On
Our subsidiaries depend on commercial credit facilities to fund day-to-day operations as there is a difference between the timing of collection cycles and the timing of payments to vendors. Generally, we do not make significant capital expenditures.
Janel's cash flow performance for the 2022 fiscal year may not necessarily be indicative of future cash flow performance.
As of
Cash flows from operating activities
Net cash provided by operating activities was
Cash flows from investing activities
Net cash used in investing activities totaled
Cash flows from financing activities
Net cash used in financing activities was
27
--------------------------------------------------------------------------------
Table of Contents
Off-Balance Sheet Arrangements
As of
© Edgar Online, source
