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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, 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)
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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, 1997, the registrant had 4,854,739 shares of common stock
outstanding.
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T.J.T., INC.
FORM 10-QSB
DECEMBER 31, 1997
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
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<CAPTION>
PAGE
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Item 1. Financial Statements
Statements of Operations for the Three Months
Ended December 31, 1997 and 1996 3
Balance Sheets at December 31, 1997 and
September 30, 1997 4
Statements of Cash Flows for the Three
Months Ended December 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 1. Legal Proceedings 10
Item 5. Other Events 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 10
</TABLE>
2
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T.J.T., INC.
BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
Dec. 31, Sept. 30,
1997 1997
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<S> <C> <C>
Current assets:
Cash and cash equivalents $ 662 $ 835
Accounts receivable and notes receivable 1,324 1,738
Inventories 3,981 3,480
Prepaid expenses and other current assets 228 253
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Total current assets 6,195 6,306
Property, plant and equipment, net of
accumulated depreciation 1,333 1,318
Notes receivable 426 434
Real estate held for investment 275 275
Deferred charges and other assets 404 411
Goodwilll 1,373 1,396
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Total assets $10,006 $10,140
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Current liabilities:
Accounts payable $ 391 $ 616
Accrued liabilities and deferred income 728 708
Income taxes payable 91 146
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Total current liabilities 1,210 1,470
Deferred credits and other noncurrent obligations 144 146
Deferred income taxes 53 53
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Total liabilities 1,407 1,669
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Shareholders' equity:
Common stock, $.001 par value; 10,000,000
shares authorized; 4,854,739 shares issued
and outstanding 5 5
Common stock warrants 113 113
Capital surplus 6,068 6,068
Retained earnings 2,868 2,735
Treasury stock (10,907 and 7,991 shares at cost) (44) (39)
Stock subscriptions receivable (411) (411)
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Total shareholders' equity 8,599 8,471
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Total liabilities and shareholders' equity $10,006 $10,140
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</TABLE>
See accompanying notes to financial statements.
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T.J.T., INC.
STATEMENTS OF INCOME
(Dollars in thousands except per share amounts)
<TABLE>
<CAPTION>
For the three months ended December 31, 1997 1996
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<S> <C> <C>
Sales (net of returns and allowances):
Axles and tires $ 6,198 $ 2,895
Accessories and siding 1,895 1,282
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Total sales 8,093 4,177
Cost of goods sold 6,548 3,456
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Gross profit 1,545 721
Selling, general and administrative expenses 1,332 711
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Operating income 213 10
Interest income 20 43
Income on investment property 1 4
Other income (expense) - 4
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Income before taxes 234 61
Income taxes 101 24
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Net income $ 133 $ 37
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Net income per common share $ .03 $ .01
Weighted average shares outstanding 4,846,420 4,105,982
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</TABLE>
See accompanying notes to financial statements.
4
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T.J.T., INC.
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
For the three months ended December 31, 1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 133 $ 37
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 141 62
Gain on sale of assets - (4)
Change in receivables 412 783
Change in inventory (501) (167)
Change in prepaid expenses and other current assets 25 -
Change in accounts payable (225) (131)
Change in other assets and liabilities (59) (172)
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Net cash provided (used) by operating activities (74) 408
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Cash flows from investing activities:
Additions to property, plant and equipment (104) (49)
Issuance of notes receivable (12) (8)
Payments on notes receivable 22 -
Proceeds from sale of assets - 14
Land purchased for investment - 1
Cash paid for acquisition net of cash acquired - (467)
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Net cash used by investing activities (94) (509)
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Cash flows from financing activities:
Payments on debt - (907)
Treasury stock transactions (5) (56)
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Net cash used by financing activities (5) (963)
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Net decrease in cash and cash equivalents (173) (1,064)
Cash and cash equivalents at October 1 835 2,737
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Cash and cash equivalents at December 31 $ 662 $ 1,673
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Supplemental information:
Interest paid $ 3 $ 1
Income taxes paid 156 42
Noncash transactions:
Deferred gain on sale of land $ - $ 3
Issuance of stock for business combination - 1,397
</TABLE>
See accompanying notes to financial statements.
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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 T.J.T., Inc. (the
company) and the results of operations and cash flows. Certain
reclassifications of prior quarter amounts were made to conform with current
quarter presentation, none of which affect previously recorded net income.
NOTE B - INVENTORIES
Inventories are stated at the lower of cost (first-in, first-out and average
cost methods) or market.
<TABLE>
<CAPTION>
(Dollars in thousands) Dec. 31, Sept. 30,
1997 1997
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<S> <C> <C>
Raw materials $1,239 $1,219
Finished goods 2,742 2,261
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Total $3,981 $3,480
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</TABLE>
NOTE C - PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
Dec. 31, Sept. 30,
(Dollars in thousands) 1997 1997
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<S> <C> <C>
Land and building $ 142 $ 122
Leasehold improvements 422 385
Furniture and equipment 735 689
Vehicles and trailers 886 884
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2,185 2,080
Less accumulated depreciation 852 762
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Net property, plant and equipment $1,333 $1,318
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</TABLE>
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. The company also has 4,500,644
outstanding 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 does not have the ability to the call
the warrants as of December 31, 1997 because it has not met the closing bid
requirements.
On July 3, 1997, the company issued 291,176 restricted shares of common stock
and paid $412,500 to acquire Leg-it Tire Co., Inc.
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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 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, 1997 and 1996. There were 85,000 incentive stock
options available for grant at December 31, 1997 and 1996.
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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, 1997
and 1996, 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 quarter ended December 31, 1997 was $133,000, a 259%
increase over net income of $37,000 from the first quarter last year.
Earnings per share were $.03 for the current quarter compared to $.01 per
share for the same quarter last year. The favorable results were due
primarily to the successful integration of acquisitions made during the 1997
fiscal year. Net sales increased 94% to $8,093,000 for the quarter ended
December 31, 1997 compared to $4,177,000 for the quarter ended December 31,
1996.
Earnings per share was affected by an 18% increase in average shares
outstanding to 4,846,420 from 4,105,982 for the same period in 1996. Share
growth was a direct result of the 940,000 restricted shares issued for the
purchase of Bradley Enterprises, Inc. (Bradley) in November 1996 and the
291,176 restricted shares issued in July 1997 for the acquisition of Leg-it
Tire Co., Inc. (Leg-it).
The recent acquisitions have created opportunities for improved efficiencies
resulting in larger profit margins. The company is now the largest supplier
of used axles and tires to the manufactured housing industry in the Western
United States.
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
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Dec. 31, Dec. 31,
1997 1996
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<S> <C> <C>
Axle and tire reconditioning 76.6 % 69.3 %
Manufactured housing accessories and siding 23.4 30.7
Gross margin 19.1 17.3
Selling expense 9.8 9.6
Administrative expense 6.6 7.5
Interest income 0.2 1.0
Investment property income 0.0 0.1
Other income 0.0 0.1
</TABLE>
Total sales of $8,093,000 for the three months ended December 31, 1997 were
up 94% from $4,177,000 for the first quarter ended December 31, 1996. The
increase is primarily due to the acquisitions. Comparatively mild weather
conditions also contributed to the sales increase. The
8
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increased percentage of sales from axles and tires compared to the prior year
is due mainly to the acquisitions. Both Bradley and Leg-it had historically
larger percentages of their revenues from axles and tires than from the sale
of manufactured housing accessories and siding.
The company's gross profit for the three months ended December 31, 1997 was
$1,545,000, up $824,000 or 114% from the same period in 1996. Overall gross
margin was 19.1%, up from 17.3% for the first three months of fiscal 1997.
Operating expense for the first three months of fiscal 1998 increased
$621,000 to $1,332,000. This increase of 87% compares favorably to the 94%
increase in sales. Selling expense remained relatively stable as a percent
of sales while administrative expense as a percent of sales decreased
compared to the same quarter last year.
As a result of the above factors, operating income for the first three months
of fiscal 1998 was $213,000 compared to $10,000 for the first quarter of
fiscal 1997.
During the first three months of fiscal 1998, the company generated other
income of $21,000 compared to $51,000 for the first fiscal quarter of 1997.
The decrease was due primarily to reduced interest income as proceeds from
the initial public offering were taken from interest bearing investments and
invested in Bradley and Leg-it.
All of the factors previously stated caused an increase in net income of 259%
to $133,000 for the first three months of fiscal 1998.
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 operating line remains open
and available, if necessary, at a rate of prime plus .5%, and matures
February 1998.
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. The company also has 4,500,644
outstanding 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 does not have the ability to the call
the warrants as of December 31, 1997 because it has not met the closing bid
requirements.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The company has been named as a defendant, along with other parties, in a
lawsuit seeking recovery for personal injuries arising out of an accident in
Northern Idaho in which a wheel supplied by the company came off a
manufactured home in transit and struck a vehicle being driven by the
claimant. The lawsuit has been tendered to the company's liability insurance
carrier and the carrier is providing a defense.
ITEM 5. OTHER EVENTS
The warrant exercise price is subject to adjustment under the terms of the
warrant agreement in the event stock is issued for a price less than $4.00
per share. The terms of the warrant agreement specify that an adjustment be
made to prevent dilution of the warrantholders' interest in a timely fashion
following the finalization of purchase accounting activity. Purchase
accounting activity for the acquisition of Bradley has been finalized and
management is reviewing the transaction to determine if adjustment is
necessary.
The board of directors adopted the 1997 Directors Stock Option Plan in
November 1997 subject to shareholder approval at the company's annual
shareholder meeting on February 24, 1998. The plan authorizes the issuance
of up to 50,000 options to non-employee directors for the purchase of company
common stock. The options shall have an exercise price equal to fair market
value on the last trading day prior to the date of grant.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No exhibits required to be filed.
(b) No reports on Form 8-K were filed by the registrant during the quarter
ended December 31, 1997.
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 13, 1998 By: /s/Scott Beechie
---------------------------------
Scott Beechie, Vice President and
Chief Financial Officer
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEET, INCOME STATEMENT AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<CIK> 0001002577
<NAME> T.J.T., INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 662
<SECURITIES> 0
<RECEIVABLES> 1,324
<ALLOWANCES> 0
<INVENTORY> 3,981
<CURRENT-ASSETS> 6,195
<PP&E> 2,185
<DEPRECIATION> 852
<TOTAL-ASSETS> 10,006
<CURRENT-LIABILITIES> 1,210
<BONDS> 0
0
0
<COMMON> 5
<OTHER-SE> 8,594
<TOTAL-LIABILITY-AND-EQUITY> 10,006
<SALES> 8,093
<TOTAL-REVENUES> 8,114
<CGS> 6,548
<TOTAL-COSTS> 1,332
<OTHER-EXPENSES> 0
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<INCOME-PRETAX> 234
<INCOME-TAX> 101
<INCOME-CONTINUING> 133
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</TABLE>
