<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, 1998
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, 1998, the registrant had 4,854,739 shares of common stock
outstanding.
_______________________________________________________________________________
1
<PAGE>
T.J.T., INC.
FORM 10-QSB
MARCH 31, 1998
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
Item 1. Financial Statements
Balance Sheets at March 31, 1998 and
September 30, 1997 3
Statements of Income for the Three Months
And Six Months Ended March 31, 1998 and 1997 4
Statements of Cash Flows for the Six
Months Ended March 31, 1998 and 1997 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 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Events 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
</TABLE>
2
<PAGE>
T.J.T., INC.
BALANCE SHEETS
(Dollars in thousands)
<TABLE>
March 31, Sept. 30,
1998 1997
--------- ---------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 583 $ 835
Accounts receivable and notes receivable 1,740 1,738
Inventories 4,050 3,480
Prepaid expenses and other current assets 261 253
--------- ---------
Total current assets 6,634 6,306
Property, plant and equipment, net of
accumulated depreciation 1,400 1,318
Notes receivable 404 434
Real estate held for investment 393 275
Deferred charges and other assets 383 411
Goodwill 1,348 1,396
--------- ---------
Total assets $ 10,562 $ 10,140
--------- ---------
--------- ---------
Current liabilities:
Accounts payable $ 766 $ 616
Accrued liabilities 809 708
Income taxes payable 20 146
--------- ---------
Total current liabilities 1,595 1,470
Deferred credits and other noncurrent obligations 178 146
Deferred income taxes 53 53
--------- ---------
Total liabilities 1,826 1,669
--------- ---------
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 2,988 2,735
Treasury stock (10,907 and 7,991 shares at cost) (44) (39)
Stock subscriptions receivable (394) (411)
--------- ---------
Total shareholders' equity 8,736 8,471
--------- ---------
Total liabilities and shareholders' equity $ 10,562 $ 10,140
--------- ---------
--------- ---------
</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,
---------------------- -----------------------
1998 1997 1998 1997
---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Sales (net of returns and allowances):
Axles and tires $ 5,163 $ 4,155 $ 11,361 $ 7,051
Accessories and siding 2,086 1,526 3,981 2,807
---------- ---------- ---------- ----------
Total sales 7,249 5,681 15,342 9,858
Cost of goods sold 5,822 4,911 12,370 8,367
---------- ---------- ---------- ----------
Gross profit 1,427 770 2,972 1,491
Selling, general and administrative
expenses 1,230 948 2,562 1,659
---------- ---------- ---------- ----------
Operating income (loss) 197 (178) 410 (168)
Interest income 17 25 37 60
Income on investment property 4 41 5 53
Other income (expense) - (3) - 1
---------- ---------- ---------- ----------
Income (loss) before taxes 218 (115) 452 (54)
Income tax expense (benefit) 98 (30) 199 (5)
---------- ---------- ---------- ----------
Net income (loss) $ 120 $ (85) $ 253 $ (49)
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
Net income (loss) per common share $ .02 $ (.02) $ .05 $ (.01)
Weighted average shares
outstanding 4,843,832 4,555,688 4,845,140 4,329,606
---------- ---------- ---------- ----------
---------- ---------- ---------- ----------
</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,
------------------------
1998 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 253 $ (49)
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 222 152
Gain on sale of assets - (38)
Change in receivables 27 299
Change in inventories (570) (17)
Change in prepaid expenses and other current assets (8) (192)
Change in accounts payable 150 (458)
Change in other assets and liabilities (16) (59)
------ ------
Net cash provided (used) by operating activities 58 (361)
------ ------
Cash flows from investing activities:
Additions to property, plant and equipment (205) (93)
Issuance of notes receivable (29) (17)
Payments on notes receivable 30 16
Proceeds from sale of assets - 18
Land purchased for investment (118) -
Sale of land held for investment - 184
Cash paid for acquisition net of cash acquired - (467)
------ ------
Net cash used by investing activities (322) (360)
------ ------
Cash flows from financing activities:
Payments on debt - (908)
Payments on stock subscription receivable 17 59
Treasury stock transactions (5) (50)
------ ------
Net cash provided (used) by financing activities 12 (899)
------ ------
Net decrease in cash and cash equivalents (252) (1,620)
Beginning cash and cash equivalents 835 2,737
------ ------
Ending cash and cash equivalents $ 583 $1,117
------ ------
------ ------
Supplemental information:
Interest paid $ 5 $ 10
Income taxes paid 316 150
Noncash transactions:
Deferred gain on sale of land $ - $ 3
Issuance of stock for business combination - 1,384
</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 1997
amounts were made in order to conform with the 1998 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.
<TABLE>
<CAPTION>
(Dollars in thousands) Mar. 31, Sept. 30,
1998 1997
------- -------
<S> <C> <C>
Raw materials $1,345 $1,219
Finished goods 2,705 2,261
------- -------
Total $4,050 $3,480
------- -------
------- -------
</TABLE>
NOTE C - PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
(Dollars in thousands) Mar. 31, Sept. 30,
1998 1997
------- -------
<S> <C> <C>
Land and building $ 142 $ 122
Leasehold improvements 372 385
Furniture and equipment 825 689
Vehicles and trailers 947 884
------- -------
2,286 2,080
Less accumulated depreciation 886 762
------- -------
Net property, plant and equipment $1,400 $1,318
------- -------
------- -------
</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 were 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 call the warrants as of March 31, 1998 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. (Leg-it).
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 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 March 31, 1998 and 1997. The exercise price
for the outstanding incentive stock options is $5.88 per share.
NOTE E - OTHER
A lawsuit alleging wrongful termination has been filed by a former employee
against Leg-it and Ulysses Mori, the former president of Leg-it and a current
director of the company. The litigation is in its preliminary stage and the
company has not had the opportunity to assess the likelihood of loss, if any.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
All period references are to the three or six month periods ended March 31, 1998
and 1997, unless otherwise indicated. Quarterly financial results may not be
indicative of the financial results for any future period.
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,
1998 1997 1998 1997
-------- ------- -------- --------
<S> <C> <C> <C> <C>
Axle and tire reconditioning 71.2% 73.1% 74.1% 71.5%
Manufactured housing accessories and
siding 28.8 26.8 25.9 28.5
Gross margin 19.7 13.6 19.4 15.1
Selling expense 9.4 9.9 9.6 9.8
Administrative expense 7.6 5.5 7.1 6.3
Interest income 0.2 0.4 0.2 0.6
Investment property income 0.1 0.7 0.0 0.5
Other income (expense) 0.0 -0.1 0.0 0.0
</TABLE>
Net sales of $7,249,000 for the three months ended March 31, 1998 were up 28%
from $5,681,000 for the quarter ended March 31, 1997. The increase is primarily
due to the acquisition of Leg-it Tire Co., Inc. (Leg-it). Comparatively mild
weather conditions in the Pacific Northwest also contributed to the sales
increase. Sales increased 56% to $15,342,000 for the six months ended March 31,
1998 compared to $9,858,000 for the six months ended March 31, 1997, primarily
due to the acquisitions of Bradley Enterprises, Inc. (Bradley) and Leg-it.
The company's gross profit for the three months ended March 31, 1998 was
$1,427,000, up $657,000 or 85% from the same period in 1997. Overall gross
margin was 19.7%, up from 13.6% for the quarter ended March 31, 1997.
Year-to-date gross profit through March 31, 1998 was $2,972,000, an increase
of $1,481,000 or 99% over the same period last year. Gross margin improved
to 19.4% from 15.1%. These improvements are the result of the successful
integration of the Bradley and Leg-it acquisitions made during fiscal 1997.
Selling, general and administrative expenses for the quarter ended March 31,
1998 increased $282,000 from the same quarter last year to $1,230,000. This
increase of 30% is relatively consistent with the percentage increase in
sales. Selling expense decreased slightly as a percent of sales for both the
three-month and six-month periods ended March 31, 1998 compared to those same
periods ended March 31, 1997. Administrative expense as a percent of sales
increased due primarily to wages, professional fees and bad debt charges
compared to last year's quarter and year-to-date amounts.
8
<PAGE>
Operating income for the second quarter of fiscal 1998 was $197,000 compared
to an operating loss of $(178,000) for the same quarter of fiscal 1997.
Year-to-date operating income for 1998 was $410,000 compared to an operating
loss of $(168,000) for year-to-date 1997.
During the second quarter of fiscal 1998, the company generated non-operating
income of $21,000 compared to $63,000 for the second quarter of 1997. The
decrease was due primarily to the gain on sale of investment property
recognized in last year's second quarter. Non-operating income for the six
months ended March 31, 1998 was also down due to last year's gain on sale of
investment property.
Net income for the quarter ended March 31, 1998 was $120,000, a $205,000
increase over net loss of $(85,000) from the same quarter last year.
Year-to-date net income for 1998 was $253,000 compared to a net loss of
$(49,000) for the six months ended March 31, 1997.
Earnings per share were $.02 for the current quarter compared to a loss per
share of $(.02) for the same quarter last year. Year-to-date earnings per
share for 1998 was $.05 compared to a loss per share of $(.01) for
year-to-date 1997. Earnings per share for the second quarter was affected by
a 6% increase in average shares outstanding to 4,843,832 from 4,555,688 for
the same period in 1997. Share growth was a direct result of the 291,176
restricted shares issued in July 1997 for the acquisition of Leg-it.
Year-to-date average shares outstanding increased 12% over the same period
last year due to the Leg-it acquisition and due to the 940,000 restricted
shares issued in November 1996 for the acquisition of Bradley.
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 and matures April 1999.
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 were 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 March 31, 1998 because
it has not met the closing bid requirements.
YEAR 2000 SYSTEM ISSUE
The company is reviewing its financial and operating systems with respect to
the Year 2000 issue. The company is in the process of obtaining assurance from
the vendors of its purchased software that the products are Year 2000
compliant. Based on the results of the preliminary review, the company does
not anticipate any material disruption in its operations related to the Year
2000 issue.
The company is also seeking assurance from its financial service provider,
major vendors and customers that the Year 2000 issue has been addressed. In
the event that the financial service provider or any of the major vendors or
customers does not achieve Year 2000 compliance, the company's business or
operations could be adversely affected.
9
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
A lawsuit alleging wrongful termination has been filed by a former employee
against Leg-it and Ulysses Mori, the former President of Leg-it and a current
director of the company. The litigation is in its preliminary stage and the
company has not had the opportunity to assess the likelihood of loss, if any.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The company held its annual meeting on February 24, 1998. A total of
4,854,739 shares of common stock were outstanding as of the record date and
entitled to vote at the meeting. Of the total outstanding shares, 3,524,235
were represented at the annual meeting and 1,330,504 were not voted. The
following matters were voted upon by the shareholders:
Proposal No. 1: Election of Class II Directors, whose term expires in 2001:
<TABLE>
<CAPTION>
In Favor Against Abstain
--------- ------- ---------
<S> <C> <C> <C>
Arthur J. Berry 3,508,085 - 16,150
B. Kelly Bradley 3,508,085 - 16,150
Scott M. Hayes 3,508,085 - 16,150
Ulysses B. Mori 3,508,085 - 16,150
Douglas A. Strunk 3,508,085 - 16,150
</TABLE>
Proposal No. 2: Ratification of Appointment of Balukoff Lindstrom & Co.,
P.A. as the company's auditors
<TABLE>
<CAPTION>
In Favor Against Abstain
--------- ------- ---------
<S> <C> <C> <C>
3,511,925 6,360 5,950
</TABLE>
Proposal No. 3: Approval of the 1997 Directors Stock Option Plan
<TABLE>
<CAPTION>
In Favor Against Abstain
--------- ------- ---------
<S> <C> <C> <C>
3,366,869 146,790 10,576
</TABLE>
ITEM 5. OTHER EVENTS
The company has entered into an agreement to purchase the assets of two firms,
one a supplier of metal hangers used to secure axles to manufactured homes and
the other a supplier of axles and tires, with combined annual revenues of
approximately $900,000. The company plans to pay $320,000 in cash to purchase
specified assets and assume certain liabilities of Hanger Enterprises and Ken's
Mobile Tire and Axle. The assets, located in Eugene, Oregon, are currently
owned and operated by Kenneth Lee who will remain with the company as manager of
these operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No exhibits required to be filed.
10
<PAGE>
(b) The company filed a report on Form 8-K on March 16, 1998 disclosing
the names of the board memebers elected at the Annual Shareholder
Meeting on February 24, 1998. It also disclosed the shareholder
approval of the 1997 Directors Stock Option Plan and included an
exhibit describing the plan.
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 15, 1998 By: /s/Scott Beechie
------------------------------
Scott Beechie, Vice President and
Chief Financial Officer
11
<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>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<CASH> 583
<SECURITIES> 0
<RECEIVABLES> 1,740
<ALLOWANCES> 0
<INVENTORY> 4,050
<CURRENT-ASSETS> 6,634
<PP&E> 2,286
<DEPRECIATION> 886
<TOTAL-ASSETS> 10,562
<CURRENT-LIABILITIES> 1,595
<BONDS> 0
0
0
<COMMON> 5
<OTHER-SE> 8,731
<TOTAL-LIABILITY-AND-EQUITY> 10,562
<SALES> 15,342
<TOTAL-REVENUES> 15,384
<CGS> 12,370
<TOTAL-COSTS> 2,562
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5
<INCOME-PRETAX> 452
<INCOME-TAX> 199
<INCOME-CONTINUING> 253
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 253
<EPS-PRIMARY> .05
<EPS-DILUTED> .05
</TABLE>
