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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the Quarter Ended
MARCH 31, 1999
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 March 31, 1999, the registrant had 4,854,739 shares of common stock
outstanding.
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T.J.T., INC.
FORM 10-Q
MARCH 31, 1999
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
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<CAPTION>
PAGE
<S> <C>
Item 1. Financial Statements
Balance Sheets at March 31, 1999 and
September 30, 1998 3
Statements of Income for the Three Months and Six Months
Ended March 31, 1999 and 1998 4
Statements of Cash Flows for the Six Months
Ended March 31, 1999 and 1998 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 2. Changes in Securities and Use of Proceeds 10
Item 3. Defaults Upon Securities 10
Item 4. Submission of Matter to a Vote of Security Holder 10
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 10
Signatures 11
</TABLE>
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T.J.T., INC.
BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31, Sept. 30,
1999 1998
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<S> <C> <C>
Current assets:
Cash and cash equivalents $ 74 $ 204
Accounts receivable and notes receivable
(net of allowances for doubtful accounts of $71 and $38 2,319 2,111
Inventories 3,951 3,774
Income taxes receivable 32 -
Prepaid expenses and other current assets 138 517
------------ ------------
Total current assets 6,514 6,606
Property, plant and equipment, net of
accumulated depreciation 2,003 1,944
Notes receivable 500 348
Real estate held for investment 675 390
Deferred charges and other assets 287 326
Goodwill 1,820 1,440
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Total assets $ 11,799 $ 11,054
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Current liabilities:
Line of credit $ 1,111 $ -
Accounts payable 828 1,117
Accrued liabilities 771 809
Income taxes payable - 3
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Total current liabilities 2,710 1,929
Deferred credits and other noncurrent obligations 192 136
Deferred income taxes 60 60
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Total liabilities 2,962 2,125
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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 3,109 3,181
Treasury stock (30,907 and 10,907 shares at cost) (64) (44)
Stock subscriptions receivable (394) (394)
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Total shareholders' equity 8,837 8,929
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Total liabilities and shareholders' equity $ 11,799 $ 11,054
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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>
Three Months Ended Six Months Ended
March 31, March 31,
----------------------------- ------------------------------
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
Sales (net of returns and allowances):
Axles and tires $ 6,894 $ 5,163 $ 13,092 $ 11,361
Accessories and siding 1,738 2,086 3,839 3,981
Investment Property Income 4 - 8 5
------------ ------------- ------------- -------------
Total sales 8,636 7,249 16,939 15,347
Cost of goods sold 7,186 5,822 14,030 12,370
------------ ------------- ------------- -------------
Gross profit 1,450 1,427 2,909 2,977
Selling, general and administrative expenses 1,612 1,230 2,973 2,562
------------ ------------- ------------- -------------
Operating income (loss) (162) 197 (64) 415
Interest income (expense) (3) 17 8 37
Other income (expense) (2) - (2) -
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Income (loss) before taxes (167) 214 (58) 452
Income taxes (benefit) (46) 98 14 199
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Net income (loss) $ (121) $ 116 $ (72) $ 253
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------------ ------------- ------------- -------------
Net income (loss) per common share $ (.03) $ .02 $ (.01) $ .05
Weighted average shares outstanding 4,836,943 4,843,832 4,840,425 4,845,140
------------ ------------- ------------- -------------
------------ ------------- ------------- -------------
</TABLE>
See accompanying notes to financial statements.
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T.J.T., INC.
STATEMENTS OF CASH FLOWS
(Dollars in thousands)
<TABLE>
<CAPTION>
For the six months ended
March 31,
------------------------------
1999 1998
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<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (72) $ 253
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 354 222
Loss on sale of assets 2 -
Change in receivables (129) 27
Change in inventories (24) (570)
Change in prepaid expenses and other current assets (91) (8)
Change in accounts payable (475) 150
Change in other assets and liabilities (81) (16)
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Net cash provided (used) by operating activities (516) 58
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Cash flows from investing activities:
Additions to property, plant and equipment (219) (205)
Issuance of notes receivable (6) (29)
Payments on notes receivable 17 30
Land purchased for investment (262) (118)
Direct aquisition costs (4) -
Cash paid for Ford acquisition (231) -
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Net cash used by investing activities (705) (322)
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Cash flows from financing activities:
Proceeds from debt 1,111 -
Payments on stock subscription receivable - 17
Treasury stock transactions (20) (5)
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Net cash provided by financing activities 1,091 12
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Net decrease in cash and cash equivalents (130) (252)
Beginning cash and cash equivalents 204 835
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Ending cash and cash equivalents $ 74 $ 583
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Supplemental information:
Interest paid $ 22 $ 5
Income taxes paid 49 316
Noncash transactions:
Acquisition of plant property and equipment by capital lease $ 22 $ -
Re-acquisition of investment property by cancellation
of notes receivable 38 -
Sale of Bend, Oregon facility by note receivable 196
</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 in order to conform with the current quarter
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,
1999 1998
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<S> <C> <C>
Raw materials $ 893 $ 1,490
Finished goods 3,058 2,284
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Total $ 3,951 $ 3,774
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</TABLE>
NOTE C - PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
(Dollars in thousands) Mar. 31, Sept. 30,
1999 1998
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<S> <C> <C>
Land and building $ 389 $ 389
Leasehold improvements 357 362
Furniture and equipment 1,266 1,092
Vehicles and trailers 1,333 1,220
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3,345 3,063
Less accumulated depreciation 1,342 1,119
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Net property, plant and equipment $ 2,003 $ 1,944
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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 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, 1999 because it
has not met the closing bid requirements.
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
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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 March 31, 1999 and 1998. There were 85,000
incentive stock options available for grant at March 31, 1999 and 1998.
As of March 31, 1999 the company had purchased 20,000 of its own shares of a
240,000 share buy back program authorized by the Board of Directors. (see
subsequent events)
NOTE E - OTHER
The company sold a retail distribution location in Bend, Oregon on January 11,
1999. The sale included fixed assets and inventory for $194,795 secured by
inventory and receivables with monthly payments of $2,650 over ten years with an
interest rate of prime plus 2 percent. For fiscal year 1998 the Bend location
had sales of $593,000 and an operating loss of $84,000.
On January 5, 1999 the company purchased Ford's Tires and Axles, located in
Phoenix, Arizona, for $275,000. The company acquired cash of $24,000, accounts
receivable of $84,000, inventory of $317,000, and equipment of $102,000. The
company assumed liabilities of $710,000. Based on the purchase price of $275,000
goodwill was recorded of $458,000.
A law suit alleging wrongful termination filed by a former employee against
Leg-it Tire Co., Inc. and Ulysses Mori, the former President of Leg-it Tire Co.,
Inc. and a current director was settled during the quarter ending March 31,
1999. The settlement had no material adverse impact on the current quarter.
NOTE F - SUBSEQUENT EVENTS
The company has purchased 79,000 of its own shares subsequent to March 31, 1999.
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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 or six month periods ended March
31, 1999 and 1998, unless otherwise indicated. Quarterly financial results may
not be indicative of the financial results for any future period. The following
discussion may contain forward-looking statements within the meaning of the
federal securities laws which involve risks and uncertainties. When used in this
discussion, the words "anticipate," "believe," "estimate," "expect" and similar
expressions as they relate to the Company or its management are intended to
identify such forward-looking statements. The Company's actual results,
performance or achievements could differ materially from the results expressed
in, or implied by, these forward-looking statements. Factors that could cause or
contribute to such differences include, among others, the following: general
economic and business conditions; competition; success of operating initiatives;
development and operating costs; the existence or absence of adverse publicity;
availability, locations and terms of sites for facility development; changes in
business strategy or development plans; quality of management; availability,
terms and deployment of capital; business abilities and judgment of personnel;
availability of qualified personnel; labor and employee benefit costs; and
construction costs.
The following table sets forth the operating data of the company as a percentage
of net sales for the periods listed below:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
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Mar. 31, Mar. 31, Mar. 31, Mar. 31,
1999 1998 1999 1998
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<S> <C> <C> <C> <C>
Axle and tire reconditioning 80.0 71.2 77.3 74.1%
Manufactured housing accessories and siding 20.0 28.8 22.7 25.9
Investment property income 0.0 0.0 0.0 0.0
Gross margin 16.8 19.7 17.2 19.4
Selling expense 13.4 9.4 12.0 9.6
Administrative expense 5.2 7.6 5.6 6.6
Interest income 0.0 0.2 0.0 0.2
Other income (expense) 0.0 0.0 0.0 0.0
</TABLE>
Net sales rose to $8,636,000 for the three months ended March 31, 1999 and were
up 19% from $7,249,000 for the quarter ended March 31, 1998.
The company's gross profit for the three months ended March 31, 1999 was
$1,450,000, up $23,000 or 2% from the same period in 1998. Overall gross margin
was 16.8%, down from 19.7% for the quarter ended March 31, 1998. Gross margin
for the quarter ended March 31, 1999 decreased 2.9% from same quarter last year
due to inclement weather conditions which slowed the setting of manufactered
homes, reducing the supply of used axles resulting in higher prices for raw
materials. Ford's Tires and Axles in Pheonix, Arizona was purchased on January
5, 1999 in an effort to gain access to used axles and tires in other market
areas. The integeration of new aquitions has been slower and more costly than
anticipated. Steps have been taken to upgrade financial controls to improve
overall profitability. Although the Colorado location has
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been improving month by month it has negatively impacted the quarter ending
March 31, 1999 by posting an operating loss of $240,000. The newly acquired
Ford's Tires and Axles also reported a $107,000 loss for the three months
ending March 31, 1999.
Selling, general and administrative expenses for the quarter ended March 31,
1999 increased $382,000 from the same quarter last year to $1,612,000. Selling
and administrative expense as a percent of sales increased 1.7% for the quarter
ended March 31, 1999 compared to the same quarter last year. Year-to-date
administrative expense as a percent of sales decreased 6% over last year and
sales expense increased 2% due to realignment of management responsibilities.
Operating loss for the second quarter of fiscal 1999 was $162,000 compared to an
operating income of $197,000 for the same quarter of fiscal 1998.
Net loss for the quarter ended March 31, 1999 was $121,000, a $237,000 decrease
from net income of $116,000 from the same quarter last year.
Net loss per share was $.03 for the current quarter compared to $.02 net income
per share for the same quarter last year. Year-to-date average shares
outstanding decreased 3,482 shares over the same period last year due to a
purchase of Treasury stock.
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. $1,111,000 of the
line has been drawn on as of March 31,1999. The $889,000 of operating line
remains open and available, if necessary, at a rate of prime and matures June
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, 1999 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 has obtained assurance from the vendors of its
major purchased software systems that the products are Year 2000 compliant. The
company has contracted the services of its outside auditors to obtain further
asssurance that internal systems and equipment are 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.
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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 do
not achieve Year 2000 compliance, the company's business or operations could be
adversely affected.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
A negotiated settlement was reached during the quarter and the loss has been
taken on a lawsuit alleging wrongful termination which was filed by a former
employee against Leg-it and Ulysses Mori, the former President of Leg-it and a
current director of the company.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Nothing to report
ITEM 3. DEFAULTS UPON SECURITIES
Nothing to report
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Nothing to report
ITEM 5. OTHER INFORMATION
The company sold a retail distribution location in Bend, Oregon on January 11,
1999. The sale included fixed assets and inventory for $194,795 secured by
inventory and receivables with monthly payments of $2,650 over ten years with an
interest rate of prime plus 2 percent. For fiscal year 1998 the Bend location
had sales of $593,000 and an operating loss of $84,000.
On January 5, 1999 the company purchased Ford's Tires and Axles, located in
Phoenix, Arizona, for $275,000. The company acquired cash of $24,000, accounts
receivable of $84,000, inventory of $317,000, and equipment of $102,000. The
company assumed liabilities of $710,000. Based on the purchase price of $275,000
goodwill was recorded of $458,000.
6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No exhibits required to be filed.
(b) No reports on Form 8-K were filed during the quarter ended
March 31, 1999.
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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: March 10, 1999 By: /s/ Larry B. Prescott
----------------------------------------
Larry B. Prescott, Senior Vice President and
Chief Financial Officer
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<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-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 74
<SECURITIES> 0
<RECEIVABLES> 2,390
<ALLOWANCES> 71
<INVENTORY> 3,951
<CURRENT-ASSETS> 6,514
<PP&E> 3,345
<DEPRECIATION> 1,342
<TOTAL-ASSETS> 11,799
<CURRENT-LIABILITIES> 2,710
<BONDS> 0
0
0
<COMMON> 5
<OTHER-SE> 8,832
<TOTAL-LIABILITY-AND-EQUITY> 11,799
<SALES> 16,939
<TOTAL-REVENUES> 16,947
<CGS> 14,030
<TOTAL-COSTS> 2,973
<OTHER-EXPENSES> 2
<LOSS-PROVISION> 33
<INTEREST-EXPENSE> 22
<INCOME-PRETAX> (58)
<INCOME-TAX> 14
<INCOME-CONTINUING> (72)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (72)
<EPS-PRIMARY> 0.01
<EPS-DILUTED> 0.01
</TABLE>
