<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
MARCH 31, 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 March 31, 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
MARCH 31, 1997
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
PAGE
Item 1. Financial Statements
Balance Sheet at March 31, 1997 and
September 30, 1996 3
Statements of Income for the Three Months
and Six Months Ended March 31, 1997 and 1996 4
Statements of Cash Flows for the Six
Months Ended March 31, 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 4. Submission of Matters to a Vote of Security Holders 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
2
<PAGE>
T.J.T., INC.
BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
Mar. 31 Sept. 30,
1997 1996
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,117.1 $ 2,736.6
Accounts receivable and notes receivable 1,403.2 1,073.4
Inventories 2,681.2 1,662.0
Prepaid expenses and other current assets 313.7 118.6
---------- ----------
Total current assets 5,515.2 5,590.6
Property, plant and equipment, net of
accumulated depreciation 1,037.7 511.4
Notes receivable 437.6 402.3
Real estate held for investment 306.7 457.9
Deferred charges and other assets 377.3 36.2
Goodwill 988.1 -
---------- ----------
Total assets $ 8,662.6 $ 6,998.4
---------- ----------
---------- ----------
Current liabilities:
Accounts payable $ 391.1 $ 499.1
Accrued liabilities and deferred income 608.9 103.6
Income taxes payable 5.1 44.2
---------- ----------
Total current liabilities 1,005.1 646.9
Deferred credits and other noncurrent obligations 116.0 113.6
Deferred income taxes 34.2 13.6
---------- ----------
Total liabilities 1,155.3 774.1
---------- ----------
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 2,209.0 2,257.7
Treasury stock (6,409 shares at cost) (35.3) -
Stock subscriptions receivable (411.3) (470.0)
---------- ----------
Total shareholders' equity 7,507.3 6,224.3
---------- ----------
Total liabilities and shareholders' equity $ 8,662.6 $ 6,998.4
---------- ----------
---------- ----------
</TABLE>
See accompanying notes to financial statements.
3
<PAGE>
T.J.T., INC.
STATEMENTS OF INCOME
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31, March 31,
------------------------------------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Sales (net of returns and allowances):
Axles and tires $ 4,155.0 $ 1,804.6 $ 7,050.5 $ 3,598.1
Accessories and siding 1,525.5 736.0 2,807.1 1,704.4
---------- ---------- ---------- ----------
Total sales 5,680.5 2,540.6 9,857.6 5,302.5
Cost of goods sold 4,910.5 2,074.6 8,366.6 4,342.8
---------- ---------- ---------- ----------
Gross profit 770.0 466.0 1,491.0 959.7
Selling, general and administrative expenses 948.2 478.1 1,659.4 945.2
---------- ---------- ---------- ----------
Operating income (loss) (178.2) (12.1) (168.4) 14.5
Interest income 27.9 47.8 72.0 61.9
Interest expense (2.5) (2.1) (12.1) (11.8)
Income on investment property 40.5 14.1 53.1 27.2
Other income (expense) (2.8) 4.3 1.1 6.8
---------- ---------- ---------- ----------
Income (loss) before taxes (115.1) 52.0 (54.3) 98.6
Income taxes (29.8) 21.1 (5.6) 40.2
---------- ---------- ---------- ----------
Net income (loss) $ (85.3) $ 30.9 $ (48.7) $ 58.4
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income (loss) per common share $ (.02) $ .01 $ (.01) $ .02
Weighted average shares outstanding 4,555,688 3,575,212 4,329,606 3,046,515
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</TABLE>
See accompanying notes to financial statements.
4
<PAGE>
T.J.T., INC.
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
For the six months ended March 31, 1997 1996
--------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (48.7) $ 58.4
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 151.7 62.1
Gain on sale of assets (37.6) (31.2)
Change in receivables 298.5 82.4
Change in inventories (16.5) (204.2)
Change in prepaid expenses and other current assets (191.9) (83.3)
Change in accounts payable (458.1) (74.3)
Change in other assets and liabilities (58.7) (59.5)
--------- --------
Net cash used by operating activities (361.3) (249.6)
--------- --------
Cash flows from investing activities:
Additions to property, plant and equipment (93.4) (36.4)
Issuance of notes receivable (17.4) (2.4)
Payments on notes receivable 16.2 -
Proceeds from sale of assets 17.6 -
Land purchased for investment - (326.9)
Sale of land held for investment 184.0 -
Cash paid for acquisition net of cash acquired (466.7) -
--------- --------
Net cash used by investing activities (359.7) (365.7)
--------- --------
Cash flows from financing activities:
Issuance of common stock and warrants - 3,675.3
Payments on debt (907.6) (1,895.7)
Proceeds from debt - 1,399.7
Payments on stock subscription receivable 58.7 -
Treasury stock transactions (49.6) -
--------- --------
Net cash (used) provided by financing activities (898.5) 3,179.3
--------- --------
Net increase (decrease) in cash and cash equivalents (1,619.5) 2,564.0
Beginning cash and cash equivalents 2,736.6 .9
--------- --------
Ending cash and cash equivalents $ 1,117.1 $ 2,564.9
--------- --------
--------- --------
Supplemental information:
Interest paid $ 10.2 $ 17.8
Income taxes paid 150.2 83.8
Noncash transactions:
Acquisition of land by assumption of debt $ - $ 186.5
Deferred gain on sale of land 2.6 25.0
Sale of assets by issuance of note receivable - 69.5
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
Inventories are stated at the lower of cost (first-in, first-out and average
cost methods) or market.
(Dollars in thousands) Mar. 31 Sept. 30,
1997 1996
-------- --------
Raw materials $486.7 $397.7
Finished goods 2,194.5 1,264.3
-------- --------
Total $2,681.2 $1,662.0
-------- --------
-------- --------
NOTE C-PROPERTY, PLANT AND EQUIPMENT
Mar. 31 Sept. 30,
(Dollars in thousands) 1997 1996
-------- --------
Land and building $122.5 $119.5
Leasehold improvements 401.6 111.3
Furniture and equipment 975.1 375.2
Vehicles and trailers 889.4 434.1
-------- --------
2,388.6 1,040.1
Less accumulated depreciation 1,350.9 528.7
-------- --------
Net property, plant and equipment $1,037.7 $511.4
-------- --------
-------- --------
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.
6
<PAGE>
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 March 31, 1997.
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
<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 March 31,
1997 and 1996. All year-to-date references are to the six-month periods ended
March 31, 1997 and 1996. Quarterly financial results may not be indicative of
the financial results for any future period.
Net loss for the quarter ended March 31, 1997 was $(86,600) or $(.02) per share
on net sales of $5,680,500. For the quarter ended March 31, 1996, net income
was $30,900 or $.01 per share on net sales of $2,540,600. Year-to-date net loss
for the period ended March 31, 1997 was $(48,700) or $(.01) per share on net
sales of $9,857,600. Net income for the six months ended March 31, 1996 was
$58,400 or $.02 per share.
Earnings per share for the three-month and six-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. An additional
$200,700 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 of the axle and tire refurbisher
during the quarter ended June 30, 1997.
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.
8
<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 Six months ended
------------------ ------------------
Mar. 31, Mar. 31, Mar. 31, Mar. 31,
1997 1996 1997 1996
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Axle and tire reconditioning 73.1% 71.0% 71.5% 67.9%
Manufactured housing accessories and siding 26.9 29.0 28.5 32.1
Gross margin 13.6 18.3 15.1 18.1
Selling expense 9.9 10.5 9.8 10.2
Administrative expense 5.5 6.6 6.3 6.6
Interest expense 0.0 0.1 0.1 0.2
Interest income 0.5 1.9 0.7 1.2
Investment property income 0.7 0.6 0.5 0.5
Other income 0.0 0.2 0.0 0.1
</TABLE>
Sales for the quarter ended March 31, 1997 were up 124% compared to the quarter
ended March 31, 1996. The increase is due to the acquisition of Bradley
Enterprises and growth in sales generated by the Idaho operations. Total sales
of $9,857,600 for the six months ended March 31, 1997 were up 86% from
$5,302,500 for the six months ended March 31, 1996, primarily due to the
acquisition. An increase in sales generated by Idaho operations for the six
months ended March 31, 1997 of $457,100 also contributed to sales growth over
the same period last year.
As expected, poor weather conditions during the winter months had a negative
impact on sales and profits, again demonstrating the seasonality of the
Company's business. The Company experienced net losses during the current
year for the months of November, December, January, and February. The
Company recorded net income in March as sales volumes increased. The state
of Oregon experienced particularly difficult conditions during the winter
months. Based on statistics from the Oregon Building Codes Agency,
production of manufactured homes decreased by over 500 units for the three
months ended March 31, 1997 as compared to the same period last year.
Production for the six months ended March 31, 1997 was down over 700 units
from the same period last year. April statistics show more favorable results
as production in the state of Oregon reached its highest level since
September 1996.
The Company's gross profit for the quarter ended March 31, 1997 increased
$304,000 or 65% to $770,000 from the same period in 1996. The Company's
gross profit for the six months ended March 31, 1997 was $1,491,000, up
$531,300 or 55% from the same period in 1996. Gross margin for the three
months ended March 31, 1997 was 13.55% compared to 18.34% for the three
months ended March 31, 1996. Gross margin for the six months ended March 31,
1997 was 15.13% compared to 18.10% for the same period last year. The Company
is in 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
improve. Gross margin for March 1997 was 16.61% as the increased sales
volume included some of the low cost goods and fixed manufacturing costs were
covered to a greater degree than in prior months.
9
<PAGE>
Sales expense for the three months ended March 31, 1997 increased $297,500 over
the quarter ended March 31, 1996 to $563,000 while administrative expenses
increased $161,400 over the same period a year ago to $385,200. Both increases
were primarily due to the merger with Bradley Enterprises. Operating expenses
for year-to-date 1997 were $1,659,400, an increase of $714,200 over the same
period a year ago. Expenses related to sales increased $421,400 or 78%.
Administrative expenses increased $292,800 or 72% primarily due to the merger.
As a result of the above factors, operating loss for the quarter ended March 31,
1997 was $(178,200) compared to an operating loss of $(12,100) for the quarter
ended March 31, 1996. Operating loss for the six-month period ended March 31,
1997 was $(168,400) compared to $14,500 of operating income for year-to-date
1996. Operating income was consistent with management's expectations at the
sales volume experienced during the first six months of fiscal 1997.
Interest income for quarter ended March 31, 1997 was $27,900, a decrease of
$19,900 from the same period last year. Investment property income was
$40,500 for the current quarter compared to $14,100 for the same quarter a
year ago. During the six months ended March 31, 1997 the Company generated
interest income of $72,000 and income from investment property of $53,100
compared to interest income of $61,900 and investment property income of
$27,200 for the six months ended March 31, 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 during the quarter ended
March 31, 1997.
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 $3,258,000, 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting February 18, 1997. The following matters
were voted upon by the shareholders:
Proposal No. 1: Election of Directors with votes cast as follows:
In Favor Against Abstain
-------- ------- -------
Scott Beechie 3,350,188 - 10,256
John W. Eames III 3,350,188 - 10,256
Patricia I. Bradley 3,350,188 - 10,256
Proposal No. 2: Ratification of Appointment of Auditors
In Favor Against Abstain
-------- ------- -------
3,351,992 4,456 3,996
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS - No exhibits required to be filed.
(b) REPORTS ON FORM 8-K - Form 8-K filed on January 22, 1997 disclosing
pro forma combined financial information related to the acquisition of
Bradley Enterprises, Inc. in November 1996 and audited financial
statements at and for the year ended September 30, 1996 for Bradley
Enterprises, Inc.
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: May 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> 6-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> MAR-31-1997
<CASH> 1,117
<SECURITIES> 0
<RECEIVABLES> 1,403
<ALLOWANCES> 0
<INVENTORY> 2,681
<CURRENT-ASSETS> 5,515
<PP&E> 2,389
<DEPRECIATION> 1,351
<TOTAL-ASSETS> 8,663
<CURRENT-LIABILITIES> 1,005
<BONDS> 0
0
0
<COMMON> 5
<OTHER-SE> 7,503
<TOTAL-LIABILITY-AND-EQUITY> 8,663
<SALES> 9,858
<TOTAL-REVENUES> 9,984
<CGS> 8,367
<TOTAL-COSTS> 1,659
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12
<INCOME-PRETAX> (54)
<INCOME-TAX> (5)
<INCOME-CONTINUING> (49)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (49)
<EPS-PRIMARY> (.01)
<EPS-DILUTED> (.01)
</TABLE>
