<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarter Ended
JUNE 30, 1997
Commission File Number 33-98404
T.J.T., INC.
(Exact name of small business issuer as specified in its charter)
WASHINGTON 82-0333246
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
843 NORTH WASHINGTON, P.O. BOX 278, EMMETT, IDAHO 83617
(Address of principal executive offices)
(208) 365-5321
(Issuer's telephone number)
- -------------------------------------------------------------------------------
The registrant's common stock and warrants are registered on the Nasdaq SmallCap
Market
- -------------------------------------------------------------------------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements the past 90 days. Yes [X] No [ ]
- -------------------------------------------------------------------------------
At June 30, 1997, 4,563,564 shares of the registrant's common stock were
outstanding.
- -------------------------------------------------------------------------------
Page 1 of 12
<PAGE>
T.J.T., INC.
FORM 10-QSB
JUNE 30, 1997
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
PAGE
Item 1. Financial Statements
Balance Sheets at June 30, 1997 and
September 30, 1996 3
Statements of Income for the Three Months
and Nine Months Ended June 30, 1997 and 1996 4
Statements of Cash Flows for the Nine
Months Ended June 30, 1997 and 1996 5
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
2
<PAGE>
<TABLE>
<CAPTION>
T.J.T., INC.
BALANCE SHEETS
(Dollars in thousands)
June 30, Sept. 30,
1997 1996
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 975.2 $ 2,736.6
Accounts receivable and notes receivable 1,538.1 1,073.4
Inventories 3,052.8 1,662.0
Prepaid expenses and other current assets 184.3 118.6
---------- ----------
Total current assets 5,750.4 5,590.6
Property, plant and equipment, net of
accumulated depreciation 997.4 511.4
Notes receivable 441.6 402.3
Real estate held for investment 275.7 457.9
Deferred charges and other assets 791.6 36.2
Goodwill 971.2 -
---------- ----------
Total assets $ 9,227.9 $ 6,998.4
---------- ----------
---------- ----------
Current liabilities:
Accounts payable $ 613.6 $ 499.1
Accrued liabilities and deferred income 697.1 103.6
Income taxes payable 8.5 44.2
---------- ----------
Total current liabilities 1,319.2 646.9
Deferred credits and other noncurrent obligations 116.0 113.6
Deferred income taxes 34.2 13.6
---------- ----------
Total liabilities 1,469.4 774.1
---------- ----------
Shareholders' equity:
Common stock, $.001 par value; 10,000,000
shares authorized; 4,563,564 and 3,623,564
shares issued and outstanding 4.6 3.6
Common stock warrants 113.0 113.0
Capital surplus 5,627.3 4,320.0
Retained earnings 2,460.2 2,257.7
Treasury stock (6,409 shares at cost) (35.3) -
Stock subscriptions receivable (411.3) (470.0)
---------- ----------
Total shareholders' equity 7,758.5 6,224.3
---------- ----------
Total liabilities and shareholders' equity $ 9,227.9 $ 6,998.4
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
T.J.T., INC.
STATEMENTS OF INCOME
(Dollars in thousands except per share amounts)
Three Months Ended Nine Months Ended
June 30, June 30,
------------------------- --------------------------
1997 1996 1997 1996
---------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Sales (net of returns and allowances):
Axles and tires $ 4,918.4 $ 2,357.0 $ 11,968.9 $ 5,955.1
Accessories and siding 1,950.4 1,124.7 4,757.5 2,829.1
---------- ---------- ---------- ----------
Total sales 6,868.8 3,481.7 16,726.4 8,784.2
Cost of goods sold 5,513.4 2,883.1 13,880.0 7,225.9
---------- ---------- ---------- ----------
Gross profit 1,355.4 598.6 2,846.4 1,558.3
Selling, general and administrative expenses 980.7 495.1 2,640.1 1,417.7
---------- ---------- ---------- ----------
Operating income 374.7 103.5 206.3 140.6
Interest income 34.5 49.2 106.5 111.1
Interest expense (2.2) - (14.3) (1.3)
Income (loss) on investment property 24.9 (2.4) 78.0 (8.3)
Other income (expense) (1.1) (0.1) - 6.7
---------- ---------- ---------- ----------
Income before taxes 430.8 150.2 376.5 248.8
Income taxes 179.6 59.0 174.0 99.2
---------- ---------- ---------- ----------
Net income $ 251.2 $ 91.2 $ 202.5 $ 149.6
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income per common share $ .06 $ .03 $ .05 $ .05
Weighted average shares outstanding 4,557,155 3,623,564 4,405,181 3,238,163
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
T.J.T., INC.
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
For the nine months ended June 30, 1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 202.5 $ 149.6
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 231.5 94.3
Gain on sale of assets (50.9) (32.1)
Change in receivables 153.2 (139.9)
Change in inventories (388.0) (71.1)
Change in prepaid expenses and other current assets (62.5) (40.3)
Change in accounts payable (229.9) 52.4
Change in other assets and liabilities 25.4 (37.4)
---------- ----------
Net cash used by operating activities (118.7) (24.5)
---------- ----------
Cash flows from investing activities:
Additions to property, plant and equipment (121.3) (95.7)
Issuance of notes receivable (17.4) (76.1)
Payments on notes receivable 17.5 62.2
Proceeds from sale of assets 18.2 10.0
Land purchased for investment - (330.2)
Sale of land held for investment 238.0 6.0
Cash paid for acquisition net of cash acquired (879.2) -
---------- ----------
Net cash used by investing activities (744.2) (423.8)
---------- ----------
Cash flows from financing activities:
Issuance of common stock and warrants - 3,589.9
Payments on debt (907.6) (2,041.6)
Proceeds from debt - 1,401.9
Payments on stock subscription receivable 58.7
Treasury stock transactions (49.6) -
---------- ----------
Net cash (used) provided by financing activities (898.5) 2,950.2
---------- ----------
Net increase (decrease) in cash and cash equivalents (1,761.4) 2,501.9
Beginning cash and cash equivalents 2,736.6 .9
---------- ----------
Ending cash and cash equivalents $ 975.2 $ 2,502.8
---------- ----------
---------- ----------
Supplemental information:
Interest paid $ 10.2 $ 20.6
Income taxes paid 150.2 125.3
Noncash transactions:
Acquisition of land by assumption of debt or foreclosure $ - $ 221.9
Deferred gain on sale of land 2.6 43.2
Sale of assets by issuance of note receivable - 119.3
Issuance of stock for business combination 1,383.7 -
</TABLE>
See accompanying notes to financial statements.
5
<PAGE>
T.J.T., INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - UNAUDITED INTERIM FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited financial statements
contain all adjustments (consisting solely of normal recurring adjustments)
necessary to present fairly the financial position of T.J.T., Inc. (the
Company) and the results of operations and cash flows. Certain
reclassifications of 1996 amounts were made in order to conform with the 1997
presentation, none of which affect previously reported net income.
NOTE B - INVENTORIES
<TABLE>
<CAPTION>
Inventories are stated at the lower of cost (first-in, first-out and average
cost methods) or market.
(Dollars in thousands) June 30, Sept. 30,
1997 1996
----------- -----------
<S> <C> <C>
Raw materials $ 806.8 $ 397.7
Finished goods 2,246.0 1,264.3
----------- -----------
Total $ 3,052.8 $ 1,662.0
----------- -----------
----------- -----------
</TABLE>
NOTE C - PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
(Dollars in thousands) June 30, Sept. 30,
1997 1996
-------- ---------
<S> <C> <C>
Land and building $ 122.5 $ 119.5
Leasehold improvements 362.5 111.3
Furniture and equipment 599.7 375.2
Vehicles and trailers 588.3 434.1
-------- ---------
1,673.0 1,040.1
Less accumulated depreciation 675.6 528.7
-------- ---------
Net property, plant and equipment $ 997.4 $ 511.4
-------- ---------
-------- ---------
</TABLE>
NOTE D - DEFERRED CHARGES AND OTHER ASSETS
Deferred charges and other assets includes a payment in the amount of
$412,500 to the shareholder of Leg-it Tire Company, Inc. (Leg-it). The
payment is part of the consideration for the acquisition of Leg-it which was
effective July 3, 1997. Based on the effective date of the transaction,
Leg-it assets, liabilities and results of operations are not included in the
financial statements of the Company as of June 30, 1997. The payment is
included in the investing section of the statement of cash flows. The
remaining balance consists primarily of other direct acquisition costs
related to the acquisition of Leg-it and Bradley Enterprises, Inc.
NOTE E - SHAREHOLDERS' EQUITY
Authorized stock of the Company consists of 10,000,000 shares of $.001 par
value common stock and 5,000,000 shares of $.001 par value preferred stock.
No shares of preferred stock have been issued. On January 5, 1996, the
Company completed a public offering of 1,100,000 shares of common stock and
6
<PAGE>
1,265,000 warrants to purchase common stock. Each warrant entitles the holder
to purchase one share of common stock at $4.00 per share. The warrants are
exercisable beginning December 21, 1996 and expire December 21, 2000. The
warrants are redeemable by the Company with 30 days written notice at the
rate of $.10 per warrant after December 21, 1996 and only if the average
stock closing bid price equals or exceeds $7.50 per share for 10 consecutive
trading days.
The Company also completed a private placement of 323,564 common shares and
3,235,644 warrants in October 1995. The terms of the private placement
warrants are identical to the terms of the warrants issued in the public
offering.
On November 14, 1996, the Company issued 940,000 restricted shares of common
stock and paid $500,000 to acquire Bradley Enterprises, Inc. The Company
acquired accounts and notes receivable of $657,300, inventory of $1,002,800,
fixed assets of $577,600, and other assets of $118,400. The Company assumed
$575,300 of accounts payable and accrued expenses and $907,600 of
interest-bearing debt. Based on the purchase price of $1,883,700, goodwill
of $1,010,500 was recorded.
The Company has a stock option plan which allows officers, directors and key
employees of the Company to receive non-qualified and incentive stock
options. The Company awarded 100,000 non-qualified stock options to certain
officers and directors on October 1, 1994 with an exercise price of $4.00 per
share. These options became 100% vested and exercisable on September 30,
1996 and expire September 30, 1999. All non-qualified stock options were
outstanding at December 31, 1996. There were 85,000 incentive stock options
available for grant at June 30, 1997.
NOTE F - OTHER
During the quarter ended December 31, 1996, the Company reviewed its contract
with Toluca Pacific Securities Corporation (Toluca Pacific) and determined
that the nature of the $100,000 fee paid at closing was additional
compensation to the underwriters for the initial public offering rather than
fees for services to be provided at a later date. The contract was
originally recorded as a prepaid asset and was being amortized over three
years. The amount amortized prior to the Company's determination that the
payment was improperly classified as a prepaid asset is not material for
treatment as a prior period adjustment. The balance of the prepaid asset was
transferred to paid in capital as a reduction of proceeds for expenses
related to the issuance of equity securities.
The Company completed its acquisition of Leg-it effective July 3, 1997.
Merger consideration consisted of $412,500 and 291,176 shares of the
Company's common stock. The acquisition is expected to be accounted for as a
purchase. Leg-it had revenues of approximately $5 million for the year ended
June 30, 1997. At June 30, 1997, Leg-it had assets of approximately $.9
million and equity of $.4 million.
NOTE G - NEW PRONOUNCEMENTS
The Financial Accounting Standards Board recently issued Statement No. 128,
Earnings Per Share and Statement No. 129, Disclosure of Information About
Capital Structure effective for reported periods ending after December 15,
1997. These statements are not expected to have an impact on the Company.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
All quarter-to-date references are to the three-month periods ended June 30,
1997 and 1996. All year-to-date references are to the nine-month periods ended
June 30, 1997 and 1996. Quarterly financial results may not be indicative of
the financial results for any future period.
Net income for the quarter ended June 30, 1997 increased 175% over the same
period last year to $251,200 or $.06 per share on net sales of $6,868,800. For
the quarter ended June 30, 1996, net income was $91,200 or $.03 per share on net
sales of $3,481,700. Year-to-date net income for the period ended June 30, 1997
was $202,500 or $.05 per share on net sales of $16,726,400. Net income for the
nine months ended June 30, 1996 was $149,600 or $.05 per share.
Earnings per share for the three-month and nine-month periods were affected by
an increase in average shares outstanding compared to the same period in 1996.
Average shares outstanding for the 1997 quarter-to-date period were greater than
the 1996 quarter-to-date period due to 940,000 restricted shares issued for the
acquisition of Bradley Enterprises, Inc. in November 1996. Year-to-date shares
outstanding for 1997 were greater than 1996 due to the acquisition and the
Company's initial public offering completed in January 1996.
Effective November 14, 1996, the Company acquired Bradley Enterprises, Inc., an
axle and tire refurbisher headquartered in Centralia, Washington. The
acquisition was accounted for as a purchase and generated an intangible asset of
$1,010,500 with an estimated useful life of 15 years. Additional direct
acqusition costs were incurred to complete the transaction. These costs are
being amortized over five years.
The purchase of Leg-it Tire Co., Inc. (Leg-it), an axle and tire refurbisher
located near Sacramento, California, was completed in July 1997. Leg-it had
approximately $5 million in sales for the year ended June 30,1997. As of June
30, 1997 Leg-it had $.9 million in assets and $.4 million in equity. The
Company paid $412,500 and issued 291,176 shares of Company stock to the
shareholder of Leg-it, Ulysses Mori, as merger consideration. Mr. Mori will
remain with the Company as a Senior Vice President and has been appointed to the
Board of Directors. Management expects the acquisition to be accretive to
earnings during the fourth quarter of the 1997 fiscal year.
Management expects the combination of the three companies to result in
significant economies of scale and improved profit margins for the Company. The
Company is currently the largest axle and tire repair and reconditioning company
for the manufactured housing industry in the western United States.
<PAGE>
RESULTS OF OPERATIONS:
The following table sets forth the operating data of the Company as a
percentage of net sales for the periods indicated below:
<TABLE>
<CAPTION>
Three months ended Nine months ended
------------------- -----------------
June 30, June 30, June 30, June 30,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Axle and tire reconditioning 71.6% 67.7% 71.6% 67.8%
Manufactured housing accessories and siding 28.4 32.3 28.4 32.2
Gross margin 19.7 17.2 17.0 17.7
Selling expense 8.9 8.4 9.4 9.5
Administrative expense 5.1 3.5 5.8 5.3
Interest expense 0.0 0.1 0.1 0.1
Interst income 0.4 1.4 0.6 1.3
Investment property income 0.6 0.4 0.5 0.4
Other income 0.0 0.1 0.0 0.1
</TABLE>
Sales for the quarter ended June 30, 1997 were up 97% compared to the quarter
ended June 30, 1996. The increase is due to the acquisition of Bradley
Enterprises and growth in sales generated by the Idaho operations. Total
sales of $16,726,400 for the nine months ended June 30, 1997 were up 90% from
$8,784,200 for the nine months ended June 30, 1996, primarily due to the
acquisition. An increase in sales generated by Idaho operations for the nine
months ended June 30, 1997 of $511,400 also contributed to sales growth over
the same period last year.
As expected, sales and profitability improved significantly during the third
quarter as weather conditions improved from the second quarter. Net sales
increased 21% over the quarter ended March 31, 1997 as the Company's seasonal
business enters its peak period consisting of the third and fourth quarters.
The Company's gross profit for the quarter ended June 30, 1997 increased
$756,800 or 126% to $1,355,400 from the same period in 1996. The Company's
gross profit for the nine months ended June 30, 1997 was $2,846,400, up
$1,288,100 or 83% from the same period in 1996. Gross margin for the three
months ended June 30, 1997 was 19.73% compared to 17.19% for the three months
ended June 30, 1996. Gross margin for the nine months ended June 30, 1997
was 17.02% compared to 17.74% for the same period last year. The Company is
continuing the process of reducing its cost of goods sold by reducing price
and running more efficient routes to collect axles and tires. As these goods
pass through inventory and into cost of goods sold, gross margin should
continue to improve. This improvement is expected to be offset slightly by
the purchase of additional axles and tires from outside the Company's
existing market area to supplement existing supply.
Sales expense for the three months ended June 30, 1997 increased $318,200
over the quarter ended June 30, 1996 to $609,000 while administrative expenses
increased $230,500 over the same period a year ago to $352,600. Both increases
were primarily due to the merger with Bradley Enterprises. Operating expenses
for year-to-date 1997 were $2,640,100, an increase of $1,222,400 over the same
period a year ago. Expenses related to sales increased $739,600 or
9
<PAGE>
89% and administrative expenses increased $482,800 or 84%. Both increases
were primarily due to the merger.
As a result of the above factors, operating income for the quarter ended June
30, 1997 was $374,700 compared to operating income of $103,500 for the
quarter ended June 30, 1996. Operating income for the nine months ended June
30, 1997 was $206,300 compared to $140,600 of operating income for
year-to-date 1996.
Interest income for quarter ended June 30, 1997 was $34,500, a decrease of
$14,700 from the same period last year. Investment property income was
$24,900 for the current quarter compared to a loss of $(2,400) for the same
quarter a year ago. The increase is due to the sale of certain investment
properties. During the nine months ended June 30, 1997 the Company generated
interest income of $106,500 and income from investment property of $78,000
compared to interest income of $111,100 and investment property loss of
$(8,300) for the nine months ended June 30, 1996. The decrease in interest
income was due primarily to repayment of debt assumed in the Bradley
Enterprises acquisition. The increase in investment property income was due
primarily to the sale of land held for investment and the elimination of an
investment property management position in September 1996.
LIQUIDITY AND CAPITAL RESOURCES:
Historically, the Company's principal sources of liquidity have been retained
earnings from operations as well as borrowings under a revolving line of
credit with a bank.
The Company has a $2,000,000 maximum bank line of credit secured by
designated percentages of eligible accounts receivable and inventories. The
line has not been drawn on since January 1996 when it was paid off with
proceeds from the initial public offering. The outstanding balance on
December 31, 1995 was $546,204. The operating line remains open and
available, if necessary, at a rate of prime plus .5%, and matures January
1998.
In October 1995, the Company received net proceeds of $258,000 from the
private placement of 323,564 shares of its common stock and 3,235,644 private
placement warrants. The private placement warrants are exercisable at $4.00
per share (subject to adjustment pursuant to the anti-dilution provisions
thereof) until December 21, 2000, when the private placement warrants expire.
In January 1996, the Company received $3,233,000, net of expenses, from the
sale of 1,100,000 shares of common stock and 1,265,000 common stock purchase
warrants through an initial public offering. The shares of common stock were
sold at $4.00 per share and the common stock purchase warrants at $.10 each.
10
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS - No exhibits required to be filed.
(b) REPORTS ON FORM 8-K - No reports on Form 8-K were filed during the
quarter ended June 30, 1997.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
T.J.T., INC.
Registrant
Date: August 14, 1997 By: /S/ SCOTT BEECHIE
---- ------------------------------------
Scott Beechie, Vice President and
Chief Financial Officer
12
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET, STATEMENT OF INCOME AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001002577
<NAME> T.J.T., INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
<CASH> 975
<SECURITIES> 0
<RECEIVABLES> 1,538
<ALLOWANCES> 0
<INVENTORY> 3,053
<CURRENT-ASSETS> 5,750
<PP&E> 1,673
<DEPRECIATION> 676
<TOTAL-ASSETS> 9,228
<CURRENT-LIABILITIES> 1,319
<BONDS> 0
0
0
<COMMON> 5
<OTHER-SE> 7,754
<TOTAL-LIABILITY-AND-EQUITY> 9,228
<SALES> 16,726
<TOTAL-REVENUES> 16,911
<CGS> 13,880
<TOTAL-COSTS> 2,640
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14
<INCOME-PRETAX> 377
<INCOME-TAX> 174
<INCOME-CONTINUING> 203
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 203
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
