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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
DECEMBER 31, 1996
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)
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The registrant's common stock and warrants are registered on the
Nasdaq SmallCap Market
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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 [ ]
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At December 31, 1996, 4,563,564 shares of the registrant's
common stock were outstanding.
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T.J.T., INC.
FORM 10-QSB
DECEMBER 31, 1996
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
PAGE
Item 1. Financial Statements
Statements of Income for the Three Months
Ended December 31, 1996 and 1995 3
Balance Sheet at December 31, 1996 and
September 30, 1996 4
Statements of Cash Flows for the Three
Months Ended December 31, 1996 and 1995 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 11
2
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T.J.T., INC.
STATEMENTS OF INCOME
(Dollars in thousands except per share amounts)
For the three months ended December 31, 1996 1995
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Sales (net of returns and allowances):
Axles and tires $ 2,895.5 $ 1,809.6
Accessories and siding 1,281.6 952.3
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Total sales 4,177.1 2,761.9
Cost of goods sold 3,456.1 2,268.2
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Gross profit 721.0 493.7
Selling, general and administrative
expenses 711.2 467.0
Interest expense 1.3 9.7
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Operating income 8.5 17.0
Income on investment property 4.3 13.1
Other income (expense) 48.0 16.6
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Income before taxes 60.8 46.7
Income taxes 24.2 19.2
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Net income $ 36.6 $ 27.5
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Net income per common share $ .01 $ .01
Weighted average shares outstanding 4,105,982 2,523,564
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See accompanying notes to financial statements.
3
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T.J.T., INC.
BALANCE SHEETS
(Dollars in thousands)
Dec. 31 Sept. 30,
1996 1996
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Current assets:
Cash and cash equivalents $ 1,672.5 $ 2,736.6
Accounts receivable and notes receivable 943.9 1,073.4
Inventories 2,831.7 1,662.0
Prepaid expenses and other current assets 122.1 118.6
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Total current assets 5,570.2 5,590.6
Property, plant and equipment, net of
accumulated depreciation 1,071.5 511.4
Notes receivable 419.2 402.3
Real estate held for investment 457.4 457.9
Deferred charges and other assets 374.4 36.2
Goodwilll 1,004.9 -
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Total assets $ 8,897.6 $ 6,998.4
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Current liabilities:
Accounts payable $ 666.6 $ 499.1
Accrued liabilities and deferred income 523.6 103.6
Income taxes payable 32.8 44.2
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Total current liabilities 1,223.0 646.9
Long-term debt -
Deferred credits and other noncurrent
obligations 112.7 113.6
Deferred income taxes 34.2 13.6
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Total liabilities 1,369.9 774.1
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Shareholders' equity:
Common stock, $.001 par value; 10,000,000
shares authorized; 4,563,564 and
2,523,564 shares issued and
outstanding 4.6 3.6
Common stock warrants 113.0 113.0
Capital surplus 5,638.7 4,320.0
Retained earnings 2,294.3 2,257.7
Treasury stock (9,601 shares at cost) (52.9) -
Stock subscriptions receivable (470.0) (470.0)
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Total shareholders' equity 7,527.7 6,224.3
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Total liabilities and
shareholders' equity $ 8,897.6 $ 6,998.4
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See accompanying notes to financial statements.
4
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T.J.T., INC.
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
For the three months ended December 31, 1996 1995
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Cash flows from operating activities:
Net income $36.6 $ 27.5
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 61.9 31.3
Gain on sale of assets (3.6) (14.4)
Change in receivables 782.6 264.2
Change in inventory (167.0) (393.6)
Change in prepaid expenses and other
current assets (.2) (193.9)
Change in accounts payable (130.4) 23.6
Change in other assets and liabilities (172.2) (39.6)
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Net cash provided by operating
activities 407.7 (294.9)
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Cash flows from investing activities:
Additions to property, plant and
equipment (49.1) (39.8)
Issuance of notes receivable (33.6) (23.5)
Payments on notes receivable 25.7 25.6
Proceeds from sale of assets 14.6 -
Land purchased for investment .6 (85.8)
Cash paid for acquisition net of cash
acquired (466.7) -
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Net cash used by investing activities (508.5) (123.5)
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Cash flows from financing activities:
Issuance of common stock and warrants - 256.8
Payments on debt (907.6) (1,058.2)
Proceeds from debt - 1,220.0
Treasury stock transactions (55.7) -
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Net cash provided by financing
activities (963.3) 418.6
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Net increase (decrease) in cash and cash
equivalents (1,064.1) 0.2
Cash and cash equivalents at October 1 2,736.6 0.9
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Cash and cash equivalents at December 31 $1,672.5 $ 1.1
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Supplemental information:
Interest paid $ 1.3 $ 12.0
Income taxes paid 41.5 30.0
Noncash transactions:
Acquisition of land by assumption of debt $ - $ 47.0
Deferred gain on sale of land 2.6 11.9
Sale of equipment by issuance of note
receivable - 3.0
Issuance of stock for business combination 1,396.6 -
See accompanying notes to financial statements.
5
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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 the Company (the Company)
and the results of operations and cash flows.
NOTE B - INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out and average
cost methods) or market.
(Dollars in thousands) Dec. 31, Sept. 30,
1996 1996
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Raw materials $651.6 $397.7
Finished goods 2,180.1 1,264.3
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Total $2,831.7 $1,662.0
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NOTE C - PROPERTY, PLANT AND EQUIPMENT
Dec. 31, Sept. 30,
(Dollars in thousands) 1996 1996
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Land and building $122.5 $119.5
Leasehold improvements 399.1 111.3
Furniture and equipment 951.1 375.2
Vehicles and trailers 880.7 434.1
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2,353.4 1,040.1
Less accumulated depreciation 1,281.9 528.7
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Net property, plant and equipment $1,071.5 $511.4
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NOTE D - 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 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.
6
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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 December 31, 1996.
NOTE E - 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.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
All period references are to the three month periods ended December 31, 1996 and
1995, unless otherwise indicated. Quarterly financial results may not be
indicative of the financial results for any future period. All tabular dollar
amounts are stated in thousands.
Net income for the first three months of fiscal 1997 was $36,596 or $.01 per
weighted average share, on net sales of $4,177,118. For the first three months
of fiscal 1996, net income was $27,526, or $.01 per weighted average share, on
net sales of $2,761,888.
Earnings per share was affected by an increase in average shares outstanding to
4,105,982 from 2,523,564 for the same period in 1996. Share growth was a direct
result of the initial public offering which settled in January 1996 and 940,000
restricted shares issued for the purchase of Bradley Enterprises, Inc. in
November 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
$1.01 million with an estimated useful life of 15 years. An additional $201
thousand of direct acqusition costs were incurred to complete the transaction.
These costs are being amortized over five years.
The proposed purchase of Leg-it Tire Co., Inc., located near Sacramento,
California, with approximately $5 million in annual sales, is still pending.
The Company expects to complete the merger during the quarter ended June 30,
1997.
The combination of the three companies should result in significant economies of
scale and improved profit margins for the Company. It will make the Company
the largest axle and tire repair and reconditioning company for the manufactured
housing industry in the Western United States.
8
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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:
QUARTER ENDED QUARTER ENDED
DECEMBER 31, 1996 DECEMBER 31, 1995
----------------- -----------------
Axle and tire reconditioning 69.3% 65.5%
Manufactured housing accessories
and siding 30.7 34.5
Gross margin 17.3 17.9
Selling expense 9.6 10.0
Administrative expense 7.5 6.9
Interest expense - .4
Interest income 1.1 .5
Investment property income .1 .5
Other income .1 .1
Total sales of $4,177,118 for the three months ended December 31, 1996 were up
51% from $2,761,888 for the first quarter ended December 31, 1995. The increase
is primarily related to sales generated by the former Bradley Enterprises.
Without the merger, sales for the quarter ended December 31, 1996 would have
increased 6% from the quarter ended December 31, 1995. The company
experienced some extreme weather conditions in parts of its market area during
late December which had a negative impact on sales.
The Company's gross profit for the three months ended December 31, 1996 was
$720,985, up $227,281 or 46% from the same period in 1995. Overall gross margin
excluding the Bradley merger was 20.67%, up from 17.88% for the first three
months of fiscal 1996.
Operating expense for the first three months of fiscal 1996 increased
$235.722 to $712,500. Expenses related to sales increased $123,822 or 45%.
Administrative expense increased $120,308 or 63%, primarily due to the merger
with Bradley Enterprises. The investment property management
department was closed during the fourth quarter of fiscal 1996.
As a result of the above factors, operating income for the first three months of
fiscal 1997 was $8,485 compared to $16,926 for the first quarter of fiscal
1996.
During the first three months of fiscal 1997, the Company generated other income
of $52,273 compared to $29,752 for the first fiscal quarter of 1996.
All of the factors previously stated caused an increase in net income of 33% to
$36,596 for the first three months of fiscal 1997.
9
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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 $700,000 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 1%, and matures January 24, 1997.
In October 1995, the Company received an aggregate of $326,800 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 $3,437,709, 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. Toluca
Pacific Securities Corporation acted as underwriter for the offering.
10
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PART II. OTHER INFORMATION
ITEM 6. (a) Form 8-K announcing the merger of Bradley Enterprises, Inc. with
and into the company effective November 14, 1996.
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: February 14, By: /s/Andy C. Doll
------------------------------
Andy C. Doll, Vice President and Chief
Financial Officer
11
<TABLE> <S> <C>
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<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>
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<PERIOD-START> OCT-01-1996
<PERIOD-END> DEC-31-1996
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