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 and nine months endedJune 30, 2022 , which have been prepared in accordance with generally accepted accounting principles inthe United States ("U.S. GAAP"). Amounts presented in this section are in thousands, except share and per share data.
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, our strategy of expanding our business through acquisitions of other businesses and other strategic transactions, such as the proposed Rubicon Transaction? the risk that we may fail to realize the expected benefits or strategic objectives of any acquisition or strategic transaction, or that we spend resources exploring acquisitions or strategic transactions that are not consummated? the impact of the coronavirus on worldwide economic conditions and on our businesses; 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 (including rising inflation and interest rates)? 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, and such other factors that may be identified from time to time in ourSecurities and Exchange Commission ("SEC") filings. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those projected. You should not place undue reliance on any of our forward-looking statements which speak only as of the date they are made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. For a more detailed discussion of these factors, see our periodic reports filed with theSEC , including our most recent Annual Report on Form 10-K for the fiscal year endedSeptember 30, 2021 . 23
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OVERVIEW
Janel Corporation ("Janel," the "Company" or the "Registrant") is a holding company with subsidiaries in three business segments: Logistics (previously known as Global Logistics Services), Life Sciences and Manufacturing. In the fourth quarter of 2021, our former Global Logistics Services segment was renamed "Logistics"; this change related to the name only and had no impact on the Company's previously reported historical financial position, results of operations, cash flow or segment level results. The Company strives to create shareholder value primarily through three strategic priorities: supporting its businesses' efforts to make investments and to build long-term profits? allocating Janel's capital at high risk-adjusted rates of return? and attracting and retaining exceptional talent. 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
OnDecember 31, 2020 , the Company completed a business combination whereby it acquired substantially all of the assets and certain liabilities ofW.R. Zanes & Co. of LA., Inc., ("W.R. Zanes") which we include in our Logistics segment. 24
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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.
OnDecember 4, 2020 , the Company completed a business combination whereby it acquired all of the membership interests ofImmunoChemistry Technologies, LLC . ("ICT") which we include in our Life Sciences segment.
Manufacturing
The Company's Manufacturing segment is comprised ofIndco, Inc. ("Indco"). Indco is a majority-owned subsidiary of the Company that manufactures and distributes mixing equipment and apparatus for specific applications within various industries. Indco's customer base is comprised of small- to mid-sized businesses as well as other larger customers for which Indco fulfills repetitive production orders.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Our Condensed Consolidated Financial Statements have been prepared in accordance with generally accepted accounting principles inthe United States . These generally accepted accounting principles require management to make estimates and assumptions that affect the reported amounts of assets, liabilities, net sales and expenses during the reporting period. Our senior management has reviewed the critical accounting policies and estimates with the Audit Committee of our Board of Directors. For a description of the Company's critical accounting policies and estimates, refer to "Part II-Item 7-Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Estimates" in our Annual Report on Form 10-K filed with theSEC onDecember 27, 2021 . Critical accounting policies are those that are most important to the portrayal of our financial condition, results of operations and cash flows and require management's most difficult, subjective and complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. If actual results were to differ significantly from estimates made, the reported results could be materially affected. There were no significant changes to our critical accounting policies during the nine months endedJune 30, 2022 .
NON-GAAP FINANCIAL MEASURES
While we prepare our financial statements in accordance withU.S. GAAP, we also utilize and present certain financial measures, in particular adjusted operating income, which is not based on or included inU.S. GAAP (we refer to these as "non-GAAP financial measures"). 25
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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 withU.S. GAAP and should not be considered as a substitute for total revenue, operating income or any other operating performance measures calculated in accordance withU.S. GAAP. Using these non-GAAP financial measures to analyze our business has material limitations because the calculations are based on the subjective determination of management regarding the nature and classification of events and circumstances that users of the financial statements may find significant. In addition, although other companies 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 withU.S. GAAP.
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.
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Our consolidated results of operations are as follows:
Three Months Ended Three Months Ended Nine Months Ended Nine Months Ended
June 30, June 30, June 30, June 30,
(in thousands) 2022 2021 2022 2021
Revenue $ 78,984 $ 34,826 $ 243,149 $ 91,446
Forwarding expenses and cost of revenues 61,819 26,058 193,986 68,680
Gross profit 17,165 8,768 49,163 22,766
Operating expenses 13,994 7,446 41,203 20,114
Income from operations 3,171 1,322 7,960 2,652
Net income 2,158 870 5,119 1,721
Adjusted operating income $ 3,822 $ 1,868 $ 10,638 $ 4,301
Consolidated revenues for the three months ended June 30, 2022 were $78,984 ,
which was $44,158 or 127% higher than the prior year period. Revenues over this
period increased due to a recovery from the impact of the COVID-19 pandemic
experienced in the prior year period as well as an increase in revenue of
$27,759 from an acquisition. Consolidated revenues for the nine months ended
June 30, 2022 were $243,149 , which was $151,703 or 166% higher than the prior
year period. Revenues over this period increased across all three segments due
to a recovery from the impact of the COVID-19 pandemic experienced in the prior
year period as well as an increase in revenue of $78,367 from acquisitions.
Income from operations for the three months ended June 30, 2022 was $3,171
compared with $1,322 in the prior year period. Income from operations for the
nine months ended June 30, 2022 was $7,960 compared with $2,652 in the prior
year period. The increase for both the three and nine months ended June 30, 2022
resulted from a recovery from the impact of the COVID-19 pandemic experienced in
the prior year period as well as an increase in income from operations of $1,723
and $3,977 , respectively from acquisitions, partially offset by stock-based
compensation and higher spending in the Corporate segment.
Net income for the three months ended June 30, 2022 totaled $2,158 or $1.93 per
diluted share, compared to net income of $870 or $0.88 per diluted share for the
three months ended June 30, 2021 . Net income for the nine months ended June 30,
2022 totaled $5,119 or $4.85 per diluted share, compared to net income of $1,721
or $1.75 per diluted share for the nine months ended June 30, 2021 .
Adjusted operating income for the three months ended June 30, 2022 increased to
$3,822 versus $1,868 in the prior year period. Adjusted operating income for the
nine months ended June 30, 2022 increased to $10,638 versus $4,301 in the prior
year period. The increase for both the three and nine months ended June 30, 2022
resulted from a recovery in profits from the impact of the COVID-19 pandemic for
our segments and the contribution of income from acquisitions.
The following table sets forth a reconciliation of operating income to adjusted
operating income:
Three Months Three Months Nine Months Nine Months
Ended June 30, Ended June 30, Ended June 30, Ended June 30,
(in thousands) 2022 2021 2022 2021
Income from operations $ 3,171 $ 1,322 $ 7,960 $ 2,652 Amortization of intangible assets
489 288 1,485 832
Stock-based compensation 32 31 800 85
Cost recognized on sale of acquired inventory 130 227 393 732
Adjusted operating income $ 3,822 $ 1,868 $ 10,638 $ 4,301
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Results of Operations - Logistics - Three and Nine 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 arrangement of freight forwarding by air, ocean and ground,
customs entry filing, warehousing, cargo insurance procurement, logistics
planning, product repackaging and online shipment tracking.
Three Months Ended Nine Months Ended
June 30, June 30,
2022 2021 2022 2021
(in thousands)
Revenue $ 73,684 $ 29,369 $ 226,313 $ 76,002
Forwarding expenses 59,889 24,173 187,780 62,818
Gross Profit 13,795 5,196 38,533 13,184
Gross profit margin 18.7 % 17.7 % 17.0 % 17.3 %
Selling, general & administrative 10,387 4,523 29,802 11,640
Income from operations $ 3,408 $ 673 $ 8,731 $ 1,544
Revenue
Total revenue for the three months ended June 30, 2022 was $73,684 as compared
to $29,369 for the three months ended June 30, 2021 , an increase of $44,315 or
151%. Of the increase in revenue, an acquisition accounted for $27,759 of
additional revenue compared to the prior year period and $16,556 represented
organic growth and increased revenues resulting from the rise in transportation
rates as a result of capacity issues globally.
Total revenue for the nine months ended June 30, 2022 was $226,313 as compared
to $76,002 for the nine months ended June 30, 2021 , an increase of $150,311 or
198%. Of the increase in revenue, two acquisitions accounted for $77,112 of
additional revenue compared to the prior year period and $73,199 represented
organic growth and increased revenues resulting from the rise in transportation
rates as a result of capacity issues globally.
Gross Profit
Gross profit for the three months endedJune 30, 2022 was$13,795 , an increase of$8,599 , or 165%, as compared to$5,196 for the three months endedJune 30, 2021 . An acquisition accounted for$7,182 of additional gross profit compared to the prior year period. A recovery in business accounted for the balance of the gross profit increase compared with the depressed levels in the prior fiscal year and drove organic gross profit growth of 27%. Gross margin as a percentage of revenue increased to 18.7% for the three months endedJune 30, 2022 , compared to 17.7% for the prior year period, due to higher gross profit margins at an acquired business partially offset by lower gross profit margins due to the increase in transportation rates. Gross profit for the nine months endedJune 30, 2022 was$38,533 , an increase of$25,349 , or 192%, as compared to$13,184 for the nine months endedJune 30, 2021 . This increase was mainly the result of increased revenue from two acquisitions and organic growth in our base business due to a global economic recovery from the impact of the COVID-19 pandemic. Gross profit as a percentage of revenue decreased to 17.0% compared to 17.3% for the prior year period due to the increase in transportation rates versus the prior year period partially offset by higher gross profit margins at an acquired business. 28
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Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months endedJune 30, 2022 were$10,387 , as compared to$4,523 for the three months endedJune 30, 2021 . This increase of$5,864 , or 130%, was mainly due to additional expenses from an acquired business. As a percentage of revenue, selling, general and administrative expenses were 14.1% and 15.4% of revenue for the three months endedJune 30, 2022 and 2021, respectively. The decline in selling, general and administrative expenses as a percentage of revenue largely reflected the rise in transportation rates as a result of capacity issues globally and favorable operating leverage due to strong organic growth. Selling, general and administrative expenses for the nine months endedJune 30, 2022 were$29,802 , as compared to$11,640 for the nine months endedJune 30, 2021 . This increase of$18,162 , or 156%, was mainly due to additional expenses from acquired businesses. As a percentage of revenue, selling, general and administrative expenses were 13.2% and 15.3% of revenue for the nine months endedJune 30, 2022 and 2021, respectively. The decline in selling, general and administrative expenses as a percentage of revenue largely reflected the rise in transportation rates as a result of capacity issues globally and favorable operating leverage due to strong organic growth.
Income from Operations
Income from operations increased to$3,408 for the three months endedJune 30, 2022 , as compared to income from operations of$673 for the three months endedJune 30, 2021 , an increase of$2,735 . Income from operations increased as a result of the contribution of revenue from an acquisition and favorable operating leverage from revenue growth. Operating margin as a percentage of gross profit for the three months endedJune 30, 2022 was 24.7% compared to 13.0% in the prior year period largely due to operating leverage from significantly higher gross profit as business recovered compared with the depressed levels in the prior year period. Income from operations increased to$8,731 for the nine months endedJune 30, 2022 , as compared to$1,544 for the nine months endedJune 30, 2021 , an increase of$7,187 , or 465%. Income from operations increased during the nine months endedJune 30, 2022 as a result of acquisitions and favorable leverage from revenue growth relative to the prior year period. Our operating margin as a percentage of gross profit for the nine months endedJune 30, 2022 was 22.7% compared to 11.7% in the prior year period largely due to operating leverage from significantly higher gross profit as business recovered compared with the depressed levels in the prior year period.
Results of Operations - Life Sciences - Three and Nine 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.
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Life Sciences - Selected Financial Information:
Three Months Ended Nine Months Ended
June 30, June 30,
2022 2021 2022 2021
(in thousands)
Revenue $ 2,738 $ 3,384 $ 9,257 $ 8,973
Cost of sales 518 714 2,123 2,145
Cost recognized upon sales of acquired
inventory 130 227 393 732
Gross profit 2,090 2,443 6,741 6,096
Gross profit margin 76.3 % 72.2 % 72.8 % 67.9 %
Selling, general and administrative 1,225 1,084 3,758 3,273
Income from Operations $ 865 $ 1,359 $ 2,983 $ 2,823
Revenue
Total revenue was $2,738 and $3,384 for the three months ended June 30, 2022 and
2021, respectively, reflecting a decrease of $646 or 19.1% compared to the prior
year period due to the timing of orders, in particular for diagnostic reagents.
Total revenue was $9,257 and $8,973 for the nine months ended June 30, 2022 and
2021, respectively, remained relatively unchanged with an increase of $284 or
3.2%.
Gross Profit
Gross profit was $2,090 and $2,443 for the three months ended June 30, 2022 and
2021, respectively, a decrease of $353 or 14.5%. During the three months ended
June 30, 2022 and 2021, gross profit margin was 76.3% and 72.2%, respectively,
as cost recognized upon sale of acquired inventory declined and product mix
improved.
Gross profit was $6,741 and $6,096 for the nine months ended June 30, 2022 and
2021, respectively, an increase of $645 or 10.6%. In the nine months ended June
30, 2022 and 2021, the Life Sciences segment had a gross profit margin of 72.8%
and 67.9%, respectively. Gross profit margin for both periods increased in line
with revenue with consistent contributions from an acquisition and as cost
recognized upon the sale of acquired inventory decreased.
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 endedJune 30, 2022 and 2021 was$865 and$1,359 , respectively, a decrease of$494 or 36.4%, due to the timing of orders, in particular to diagnostic reagents. Income from operations for the nine months endedJune 30, 2022 and 2021 was$2,983 and$2,823 , respectively, an increase of$160 or 5.7%, largely due to positive operating leverage from the increase in revenue as a result of the recovery from the impact of the COVID-19 pandemic experienced in the prior fiscal year and lower cost recognized on acquired inventory and, to a lesser extent, a contribution from an acquisition. 30
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Results of Operations - Manufacturing - Three and Nine Months Ended
The Company's Manufacturing segment reflects its majority-owned Indco subsidiary, which manufactures and distributes industrial mixing equipment.
Manufacturing - Selected Financial Information:
Three Months Ended Nine Months Ended
June 30, June 30,
2022 2021 2022 2021
(in thousands)
Revenue $ 2,562 $ 2,073 $ 7,579 $ 6,471
Cost of sales 1,282 944 3,690 2,985
Gross profit 1,280 1,129 3,889 3,486
Gross profit margin 50.0 % 54.5 % 51.3 % 53.9 %
Selling, general and administrative 676 682 2,170 2,007
Income from Operations $ 604 $ 447 $ 1,719 $ 1,479
Revenue
Total revenue was $2,562 and $2,073 for the three months ended June 30, 2022 and
2021, respectively, an increase of $489 . Total revenue was $7,579 and $6,471 for
the nine months ended June 30, 2022 and 2021, respectively, an increase of
$1,108 , or 17.1%. The increase in revenue for the nine months ended June 30,
2022 reflected a broad increase across the business and higher product pricing
relative to the COVID-19-related slowdown reflected in the prior year period.
Gross Profit
Gross profit was$1,280 and$1,129 for the three months endedJune 30, 2022 and 2021, respectively, an increase of$151 , or 13.8%. Gross profit margin for the three months endedJune 30, 2022 and 2021 was 50.0% and 54.5%, respectively. Gross profit was$3,889 and$3,486 for the nine months endedJune 30, 2022 and 2021, respectively, an increase of$403 , or 11.6%. Gross profit margin for the nine months endedJune 30, 2022 and 2021 was 51.3% and 53.9%, respectively. The year-over-year decrease in gross profit margin for both periods was generally due to the mix of business.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were$676 and$682 for the three months endedJune 30, 2022 and 2021, respectively, a decrease of$6 or 1.0%. Selling, general and administrative expenses were$2,170 and$2,007 for the nine months endedJune 30, 2022 and 2021, respectively, an increase of$163 or 8.1%. The increase in expenses relative to revenue for the three- and nine-month periods reflected the mix of business.
Income from Operations
Income from operations was$604 for the three months endedJune 30, 2022 compared to$447 for the three months endedJune 30, 2021 , representing a 35.1% increase from the prior year period due to favorable order timing versus the prior year period. Income from operations was$1,719 for the nine months endedJune 30, 2022 compared to$1,479 for the nine months endedJune 30, 2021 , representing an 16.3% increase from the prior year period. The increase was due to favorable operating leverage as revenue recovered from the impact of the COVID-19 pandemic. 31
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Results of Operations - Corporate and Other - Three and Nine Months Ended
Below is a reconciliation of income from operating segments to net income available to common stockholders.
Three Months Ended Nine Months Ended
June 30, June 30,
(in thousands) 2022 2021 2022 2021
Total income from operating segments $ 4,877 $ 2,479 $ 13,433 $ 5,846
Corporate expenses (1,185 ) (838 ) (3,188 ) (2,277 )
Amortization expense (489 ) (288 ) (1,485 ) (832 )
Stock-based compensation (32 ) (31 ) (800 ) (85 )
Total Corporate expenses (1,706 ) (1,157 ) (5,473 ) (3,194 )
Interest expense (299 ) (141 ) (847 ) (418 )
Gain on Paycheck Protection Program loan
forgiveness - - - 135
Net income before taxes 2,872 1,181 7,113 2,369
Income tax expense (714 ) (311 ) (1,994 ) (648 )
Net income 2,158 870 5,119 1,721
Preferred stock dividends (71 ) (197 ) (515 ) (566 )
Non-controlling interest dividends - - (61 ) -
Net Income Available to Common
Stockholders $ 2,087 $ 673 $ 4,543 $ 1,155
Total Corporate Expenses
Total Corporate expenses, which include amortization of intangible assets,
stock-based compensation and merger and acquisition expenses, increased by $549
or 47.5%, to $1,706 in the three months ended June 30, 2022 as compared to
$1,157 for the three months ended June 30, 2021 . Total Corporate expenses
increased by $2,279 or 71.4%, to $5,473 for the nine months ended June 30, 2022
as compared to $3,194 for the nine months ended June 30, 2021 . The increase in
both periods was due primarily to stock-based compensation related to restricted
stock issuance with immediate vesting, higher accounting related professional
expense, increased merger and acquisition expenses and increases in amortization
of intangible expenses. We incur merger and acquisition deal-related expenses
and intangible amortization at the Corporate level rather than at the segment
level.
Interest Expense
Interest expense for the consolidated company increased $158 or 112.1%, to $299
for the three months ended June 30, 2022 from $141 for the three months ended
June 30, 2021 . Interest expense for the consolidated company increased by $429
or 102.6%, to $847 for the nine months ended June 30, 2022 from $418 for the
nine months ended June 30, 2021 . The increase in both periods was primarily due
to higher average debt balances to support our acquisition efforts and higher
interest rates.
Income Tax Expense
On a consolidated basis, the Company recorded an income tax expense of $714 for
the three months ended June 30, 2022 , as compared to an income tax expense of
$311 for the three months ended June 30, 2021 . On a consolidated basis, the
Company recorded an income tax expense of $1,994 for the nine months ended June
30, 2022 , as compared to an income tax expense of $648 for the nine months ended
June 30, 2021 . The increase in expense for both periods was primarily due to an
increase in pretax income.
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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 Preferred Stock"). For the three months endedJune 30, 2022 and 2021, preferred stock dividends were$71 and$197 , respectively, representing a decrease of$126 , or 64.0%. For the nine months endedJune 30, 2022 and 2021, preferred stock dividends were$515 and$566 , respectively, representing a decrease of$51 , or 9.0%. The decrease in preferred stock dividends in both periods was the result of the Company retiring$6,000 of Series C Preferred Stock onMarch 31, 2022 and the annual dividend rate change from 9% to 5%.
Net Income
Net income was$2,158 , or$1.93 per diluted share, for the three months endedJune 30, 2022 compared to net income of$870 or$0.88 per diluted share, for the three months endedJune 30, 2021 . Net income was$5,119 , or$4.85 per diluted share, for the nine months endedJune 30, 2022 compared to net income of$1,721 , or$1.75 per diluted share, for the nine months endedJune 30, 2021 . The increase for both periods was primarily due to higher revenues and gross profit, partially offset by higher selling, general and administrative expenses across our operating segments and at Corporate.
Income Available to Common Stockholders
Income available to holders of Common Stock was$2,087 , or$1.87 per diluted share, for the three months endedJune 30, 2022 compared to income available to holders of Common Stock of$673 , or$0.68 per diluted share, for the three months endedJune 30, 2021 . Income available to holders of Common Stock was$4,543 , or$4.31 per diluted share, for the nine months endedJune 30, 2022 compared to income available to holders of Common Stock of$1,115 , or$1.17 per diluted share, for the nine months endedJune 30, 2021 . The increase in net income for both periods was primarily due to higher revenues, partially offset by higher selling, general and administrative expenses across our businesses and Corporate in both periods and an increase in the dividend rate with respect to the Series C Stock as ofJanuary 1, 2021 to 8%.
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 our 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. 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 inthe United States . Increases in duty rates could result in increases in the amounts we advance on behalf of our customers. Cash advances are a "pass through" and are not recorded as a component of revenue and expense. The billings of such advances to customers are accounted for as a direct increase in accounts receivable from the customer and a corresponding increase in accounts payable to governmental customs authorities. These "pass through" billings can influence our traditional credit collection metrics. 33
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For customers that meet certain criteria, we have agreed to extend payment terms beyond our customary terms. Management believes that it has established effective credit control procedures and has historically experienced relatively insignificant collection problems. 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.
Our cash flow performance for the 2022 fiscal year may not necessarily be indicative of future cash flow performance.
Cash flows from operating activities
Net cash provided by operating activities was$8,678 for the nine months endedJune 30, 2022 , versus$139 provided by operating activities for the nine months endedJune 30, 2021 . The increase in cash provided by operations for the nine months endedJune 30, 2022 compared to the prior year period was driven principally by higher profits and lower net working capital at our Logistics segment.
Cash flows from investing activities
Net cash used in investing activities totaled$589 for the nine months endedJune 30, 2022 , versus$3,001 for the nine months endedJune 30, 2021 . We used$477 for the acquisition of property and equipment for the nine months endedJune 30, 2022 compared to$2,874 for the acquisition of two businesses and$127 for the acquisition of property and equipment for the nine months endedJune 30, 2021 .
Cash flows from financing activities
Net cash used in financing activities was$10,487 for the nine months endedJune 30, 2022 , versus net cash provided by financing activities of$2,439 for the nine months endedJune 30, 2021 . Net cash used in financing activities for the nine months endedJune 30, 2022 primarily included repayment of funds from our line of credit, repurchase of Series C Stock and dividends paid to holders of Series C Stock, repayment of funds from our term loan and notes payable related party, partially offset by proceeds from stock option exercises. Net cash provided financing activities for the nine months endedJune 30, 2021 primarily included funds from our line of credit partially offset by repayments of term loans.
Off-Balance Sheet Arrangements
As of
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