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 six months endedMarch 31, 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, 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 ourSecurities and Exchange Commission ("SEC") filings. In addition, the global economic climate and additional or unforeseen effects from the COVID-19 pandemic amplify many of these risks. 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 . 20
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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.
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. 21
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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 six months endedMarch 31, 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").
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. 22
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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.
Our consolidated results of operations are as follows:
Three Months Ended Three Months Ended Six Months Ended Six Months Ended
March 31, March 31, March 31, March 31,
(in thousands) 2022 2021 2022 2021
Revenue $ 80,851 $ 30,142 $ 164,165 $ 56,620
Forwarding expenses and cost of revenues 64,342 22,593 132,167 42,622
Gross profit 16,509 7,549 31,998 13,998
Operating expenses 14,362 6,708 27,209 12,668
Operating income 2,147 841 4,789 1,330
Net income 1,273 596 2,961 851
Adjusted operating income $ 3,454 $ 1,455 $ 6,816 $ 2,433
Consolidated revenues for the three months ended March 31, 2022 were $80,851 ,
which is $50,709 or 168% higher than the prior year period. Revenues 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 $25,107 from an
acquisition. Consolidated revenues for the six months ended March 31, 2022 were
$164,165 or 190% higher than the prior year period. Revenues 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
$57,050 from acquisitions.
Operating income for the three months ended March 31, 2022 was $2,147 compared
with $841 in the prior year period. Operating income for the six months ended
March 31, 2022 was $4,789 compared with $1,330 in the prior year period. The
increase for both the three and six months ended March 31, 2022 resulted from
the economic recovery experienced across all of our segments as well as an
increase in operating income of $971and $1,203 , respectively from acquisitions,
partially offset by stock-based compensation and higher spending in the
Corporate segment.
Net income for the three months ended March 31, 2022 totaled approximately
$1,273 or $1.23 per diluted share, compared to net income of $596 or $0.61 per
diluted share for the three months ended March 31, 2021 . Net income for the six
months ended March 31, 2022 totaled approximately $2,961 or $2.89 per diluted
share, compared to net income of $851 or $0.87 per diluted share for the three
months ended March 31, 2021 .
Adjusted operating income for the three months ended March 31, 2022 increased to
$3,454 versus $1,455 in the prior year period. Adjusted operating income for the
six months ended March 31, 2022 increased to $6,816 versus $2,433 in the prior
year period. The increase for both the three and six months ended March 31, 2022
resulted from a recovery in profits from the impact of the COVID-19 pandemic for
our segments and the contribution of acquisitions.
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The following table sets forth a reconciliation of operating income to adjusted
operating income:
Three Months Three Months Six Months Six Months
Ended March 31, Ended March 31, Ended March 31, Ended March 31,
(in thousands) 2022 2021 2022 2021
Operating income $ 2,147 $ 841 $ 4,789 $ 1,330
Amortization of intangible assets 487 293 996 544
Stock-based compensation 728 30 768 54
Cost recognized on sale of acquired inventory 92 291 263 505
Adjusted operating income $ 3,454 $ 1,455 $ 6,816 $ 2,433
Results of Operations - Logistics - Three and Six 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 Six Months Ended
March 31, March 31,
2022 2021 2022 2021
(in thousands)
Revenue $ 75,073 $ 24,373 $ 152,629 $ 46,633
Forwarding expenses 62,281 20,250 127,891 38,645
Gross Profit 12,792 4,123 24,738 7,988
Gross profit margin 17.0 % 16.9 % 16.2 % 17.1 %
Selling, general & administrative 10,066 3,743 19,415 7,117
Income from operations $ 2,726 $ 380 $ 5,323 $ 871
Revenue
Total revenue for the three months ended March 31, 2022 was $75,073 as compared
to $24,373 for the three months ended March 31, 2021 , an increase of $50,700 or
208%. Of the increase in revenue, one acquisition accounted for $25,017 of
additional revenue compared to the prior year period and $25,683 represented
organic growth primarily due to the rise in transportation rates as a result of
capacity issues globally.
Total revenue for the six months ended March 31, 2022 was $152,629 as compared
to $46,633 for the six months ended March 31, 2021 , an increase of $105,996 or
227%. Of the increase in revenue, two acquisitions accounted for $49,353 of
additional revenue compared to the prior year period and $56,643 represented
organic growth primarily due to the rise in transportation rates as a result of
capacity issues globally.
Gross Profit
Gross profit for the three months ended March 31, 2022 was $12,792 , an increase
of $8,669 , or 210%, as compared to $4,123 for the three months ended March 31,
2021 . One acquisition accounted for $6,337 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 57%. Gross margin as a percentage
of revenue increased to 17.0% for the three months ended March 31, 2022 ,
compared to 16.9% 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 six months ended March 31, 2022 was $24,738 , an increase of
$16,750 , or 209.7%, as compared to $7,988 for the six months ended March 31,
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 16.2% compared to 17.1% 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.
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Selling, General and Administrative Expenses
Selling, general and administrative expenses for the three months endedMarch 31, 2022 were$10,066 , as compared to$3,743 for the three months endedMarch 31, 2021 . This increase of$6,323 , or 169%, was mainly due to additional expenses from an acquired business. As a percentage of revenue, selling, general and administrative expenses were 13.4% and 15.4% of revenue for the three months endedMarch 31, 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 six months endedMarch 31, 2022 were$19,415 , as compared to$7,117 for the six months endedMarch 31, 2021 . This increase of$12,298 , or 173%, was mainly due to additional expenses from acquired businesses. As a percentage of revenue, selling, general and administrative expenses were 12.7% and 15.3% of revenue for the six months endedMarch 31, 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$2,726 for the three months endedMarch 31, 2022 , as compared to income from operations of$380 for the three months endedMarch 31, 2021 , an increase of$2,346 . Income from operations increased as a result of the economic recovery from the impact of the COVID-19 pandemic compared to the prior year period and contributions from an acquisition. Operating margin as a percentage of gross profit for the three months endedMarch 31, 2022 was 21.3% compared to 9.2% 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$5,323 for the six months endedMarch 31, 2022 , as compared to$871 for the six months endedMarch 31, 2021 , an increase of$4,452 , or 511%. Income from operations increased during the six months endedMarch 31, 2022 as a result of contributions from two acquisitions relative to the prior year period. Our operating margin as a percentage of gross profit for the six months endedMarch 31, 2022 was 21.5% compared to 10.9% 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 Six 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 Six Months Ended
March 31, March 31,
2022 2021 2022 2021
(in thousands)
Revenue $ 3,275 $ 3,240 $ 6,519 $ 5,589
Cost of sales 775 889 1,605 1,431
Cost recognized upon sales of acquired
inventory 92 291 263 505
Gross profit 2,408 2,060 4,651 3,653
Gross profit margin 73.5 % 63.6 % 71.3 % 65.4 %
Selling, general and administrative 1,283 1,213 2,533 2,189
Income from Operations $ 1,125 $ 847 $ 2,118 $ 1,464
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Revenue
Total revenue was$3,275 and$3,240 for the three months endedMarch 31, 2022 and 2021, respectively, an increase of$35 or 1.1% comparable to prior year. Total revenue was$6,519 and$5,589 for the six months endedMarch 31, 2022 and 2021, respectively, an increase of$930 or 16.6%. Of the$930 increase in revenue,$523 or 9.3% represented organic growth as the Life Sciences business experienced a recovery from the impact of the COVID-19 pandemic with the balance of growth from an acquisition, as well as the introduction of new products and services. Gross Profit Gross profit was$2,408 and$2,060 for the three months endedMarch 31, 2022 and 2021, respectively, an increase of$348 or 16.9%. During the three months endedMarch 31, 2022 and 2021, gross profit margin was 73.5% and 63.6%, respectively, as cost recognized upon sale of acquired inventory declined and product mix improved. Gross profit was$4,651 and$3,653 for the six months endedMarch 31, 2022 and 2021, respectively, an increase of$998 or 27.3%. In the six months endedMarch 31, 2022 and 2021, the Life Sciences segment had a gross profit margin of 71.3% and 65.4%, 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 delivered.
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 endedMarch 31, 2022 and 2021 was$1,125 and$847 , respectively, an increase of$278 or 32.8%. Income from operations for the six months endedMarch 31, 2022 and 2021 was$2,118 and$1,464 , respectively, an increase of$654 or 44.7%, 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.
Results of Operations - Manufacturing - Three and Six 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 Six Months Ended
March 31, March 31,
2022 2021 2022 2021
(in thousands)
Revenue $ 2,503 $ 2,529 $ 5,017 $ 4,398
Cost of sales 1,194 1,163 2,408 2,041
Gross profit 1,309 1,366 2,609 2,357
Gross profit margin 52.3 % 54.0 % 52.0 % 53.6 %
Selling, general and administrative 765 683 1,494 1,325
Income from Operations $ 544 $ 683 $ 1,115 $ 1,032
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Revenue
Total revenue was$2,503 and$2,529 for the three months endedMarch 31, 2022 and 2021, respectively, a decrease of$26 . Total revenue was$5,017 and$4,398 for the six months endedMarch 31, 2022 and 2021, respectively, an increase of$619 , or 14.1%. The increase in revenue for the six months endedMarch 31, 2022 reflected a broad increase across the business relative to the COVID-19 related slowdown in the prior year period.
Gross Profit
Gross profit was$1,309 and$1,366 for the three months endedMarch 31, 2022 and 2021, respectively, a decrease of$57 , or 4.2%. Gross profit margin for the three months endedMarch 31, 2022 and 2021 was 52.3% and 54.0%, respectively. Gross profit was$2,609 and$2,357 for the six months endedMarch 31, 2022 and 2021, respectively, an increase of$252 , or 10.7%. Gross profit margin for the six months endedMarch 31, 2022 and 2021 was 52.0% and 53.6%, respectively. The year-over-year decrease in gross profit margin was generally due to the mix of business.
Selling, General and Administrative Expenses
Selling, general and administrative expenses were$765 and$683 for the three months endedMarch 31, 2022 and 2021, respectively, an increase of$82 or 12.0%. Selling, general and administrative expenses were$1,494 and$1,325 for the six months endedMarch 31, 2022 and 2021, respectively, an increase of$169 or 12.8%. The increase in expenses relative to revenue for the three- and six-month periods reflect the mix of business.
Income from Operations
Income from operations was$544 for the three months endedMarch 31, 2022 compared to$683 for the three months endedMarch 31, 2021 , representing a 20.4% decrease from the prior year period due to favorable order timing in the prior year period. Income from operations was$1,115 for the six months endedMarch 31, 2022 compared to$1,032 for the six months endedMarch 31, 2021 , representing an 8% 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.
Results of Operations - Corporate and Other - Three and Six Months Ended
Below is a reconciliation of income from operating segments to net income available to common stockholders.
Three Months Ended Six Months Ended
March 31, March 31,
(in thousands) 2022 2021 2022 2021
Total income from operating
segments $ 4,395 $ 1,910 $ 8,556 $ 3,367
Corporate expenses (1,033 ) (764 ) (2,003 ) (1,471 )
Amortization expense (487 ) (293 ) (996 ) (544 )
Stock-based compensation (728 ) (12 ) (768 ) (22 )
Total Corporate expenses (2,248 ) (1,069 ) (3,767 ) (2,037 )
Interest expense (269 ) (158 ) (548 ) (277 )
Gain on Paycheck Protection Program loan
forgiveness - 135 - 135
Net income before taxes 1,878 818 4,241 1,188
Income tax expense (605 ) (222 ) (1,280 ) (337 )
Net income 1,273 596 2,961 851
Preferred stock dividends (233 ) (195 ) (444 ) (369 )
Non-controlling interest dividends (61 ) - (61 ) -
Net Income Available to Common
Stockholders $ 979 $ 401 $ 2,456 $ 482
Total Corporate Expenses
Total Corporate expenses, which include amortization of intangible assets,
stock-based compensation and merger and acquisition expenses, increased by
$1,179 or 110%, to $2,248 in the three months ended March 31, 2022 as compared
to $1,069 for the three months ended March 31, 2021 . Total Corporate expenses
increased by $1,730 or 84.9%, to $3,767 for the six months ended March 31, 2022
as compared to $2,037 for the six months ended March 31, 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.
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Interest Expense
Interest expense for the consolidated company increased$111 or 70.3%, to$269 for the three months endedMarch 31, 2022 from$158 for the three months endedMarch 31, 2021 . Interest expense for the consolidated company increased by$271 or 97.8%, to$548 for the six months endedMarch 31, 2022 from$277 for the six months endedMarch 31, 2021 . The increase in both periods was primarily due to higher average debt balances to support our acquisition efforts and higher working capital within Logistics to support business growth.
Income Taxes Expense
On a consolidated basis, the Company recorded an income tax expense of$605 for the three months endedMarch 31, 2022 , as compared to an income tax expense of$222 for the three months endedMarch 31, 2021 . On a consolidated basis, the Company recorded an income tax expense of$1,280 for the six months endedMarch 31, 2022 , as compared to an income tax expense of$337 for the six months endedMarch 31, 2021 . The increase in expense for both periods was primarily due to an increase in pretax income. 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 endedMarch 31, 2022 and 2021, preferred stock dividends were$233 and$195 , respectively, representing an increase of$38 , or 19.5%. For the six months endedMarch 31, 2022 and 2021, preferred stock dividends were$444 and$369 , respectively, representing an increase of$75 , or 20.3%. The increase in preferred stock dividends was the result of a higher number of shares of Series C Stock outstanding throughMarch 31, 2022 and an increase in dividend rate as ofJanuary 1, 2022 to 9%. The Company purchased$6,000 of Series C Stock onMarch 31, 2022 and lowered the annual dividend rate from 9% to 5%. Net Income Net income was$1,273 , or$1.23 per diluted share, for the three months endedMarch 31, 2022 compared to net income of$596 or$0.61 per diluted share, for the three months endedMarch 31, 2021 . Net income was$2,961 , or$2.89 per diluted share, for the six months endedMarch 31, 2022 compared to net income of$851 , or$0.87 per diluted share, for the six months endedMarch 31, 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
Income available to holders of Common Stock was$2,456 , or$2.40 per diluted share, for the six months endedMarch 31, 2022 compared to income available to holders of Common Stock of$482 , or$0.49 per diluted share, for the six months endedMarch 31, 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%. 28
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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. 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. The COVID-19 pandemic has negatively impacted our liquidity and cash flows. OnApril 19, 2020 , we entered into a loan agreement with Santander and executed aU.S. Small Business Administration note pursuant to which we borrowed$2,726 from Santander pursuant to the Paycheck Protection Program ("PPP") under The Coronavirus Aid, Relief and Economic Security Act, Section 7(a)(36) of the Small Business Act in order to be able to continue to cover our payroll costs, group health care benefits, mortgage payments, rent and utilities. The duration and magnitude of the pandemic is not reasonably estimable at this point, and if the pandemic persists, our liquidity and capital resources could be further negatively impacted. During fiscal 2021, the Company applied for and received forgiveness for its PPP Loan. 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$5,991 for the six months endedMarch 31, 2022 , versus$714 provided by operating activities for the six months endedMarch 31, 2021 . The increase in cash provided by operations for the six months endedMarch 31, 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$382 for the six months endedMarch 31, 2022 , versus$2,959 for six months endedMarch 31, 2021 . We used$270 for the acquisition of property and equipment for the six months endedMarch 31, 2022 compared to$2,874 for the acquisition of two businesses and$85 for the acquisition of property and equipment for the six months endedMarch 31, 2021 .
Cash flows from financing activities
Net cash used in financing activities was$8,409 for the six months endedMarch 31, 2022 , versus net cash provided by financing activities of$2,405 for the six months endedMarch 31, 2021 . Net cash used in financing activities for the six months endedMarch 31, 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 six months endedMarch 31, 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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