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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
DECEMBER 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)
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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, 1998, the registrant had 4,854,739 shares of common stock
outstanding.
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T.J.T., INC.
FORM 10-Q
DECEMBER 31, 1998
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION PAGE
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Item 1. Financial Statements (unaudited)
Balance Sheets at December 31, 1998 and
September 30, 1998 3
Statements of Income for the Three Months
Ended December 31, 1998 and 1997 4
Statements of Cash Flows for the Three
Months Ended December 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 2. Changes in Securities and Use of Proceeds 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters 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 (unaudited)
(Dollars in thousands)
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<CAPTION>
Dec. 31 Sept. 30,
1998 1998
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Current assets:
Cash and cash equivalents $ - $ 204
Accounts receivable and notes receivable
(net of allowance for doubtful accounts of $50 and $38) 1,805 2,111
Inventories 3,980 3,774
Prepaid expenses and other current assets 656 517
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Total current assets 6,441 6,606
Property, plant and equipment, net of
accumulated depreciation 2,005 1,944
Notes receivable 311 348
Real estate held for investment 594 390
Deferred charges and other assets 305 326
Goodwill 1,413 1,440
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Total assets $ 11,069 $ 11,054
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Current liabilities:
Line of credit $ 237 $ -
Accounts payable 783 1,117
Accrued liabilities 789 809
Income taxes payable 64 3
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Total current liabilities 1,873 1,929
Deferred credits and other noncurrent obligations 158 136
Deferred income taxes 60 60
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Total liabilities 2,091 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 3,230 3,181
Treasury stock (10,907 shares at cost) (44) (44)
Stock subscriptions receivable (394) (394)
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Total shareholders' equity 8,978 8,929
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Total liabilities and shareholders' equity $ 11,069 $ 11,054
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</TABLE>
See accompanying notes to financial statements.
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T.J.T., INC.
STATEMENTS OF INCOME (unaudited)
(Dollars in thousands except per share amounts)
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<CAPTION>
For the three months ended December 31, 1998 1997
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Sales (net of returns and allowances):
Axles and tires $ 6,198 $ 6,198
Accessories and siding 2,101 1,895
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Total sales 8,299 8,093
Cost of goods sold 6,844 6,548
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Gross profit 1,455 1,545
Selling, general and administrative expenses 1,361 1,332
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Operating income 94 213
Interest income 11 20
Income on investment property 4 1
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Income before taxes 109 234
Income taxes 60 101
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Net income $ 49 $ 133
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Net income per common share $ .01 $ .03
Weighted average shares outstanding 4,843,832 4,846,420
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</TABLE>
See accompanying notes to financial statements.
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T.J.T., INC.
STATEMENTS OF CASH FLOWS (unaudited)
(Dollars in thousands)
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<CAPTION>
For the three months ended December 31, 1998 1997
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Cash flows from operating activities:
Net income $ 49 $ 133
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 168 141
Change in receivables 301 412
Change in inventory (206) (501)
Change in prepaid expenses and other current assets (139) 25
Change in accounts payable (334) (225)
Change in other assets and liabilities 53 (59)
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Net cash used by operating activities (108) (74)
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Cash flows from investing activities:
Additions to property, plant and equipment (157) (104)
Issuance of notes receivable (2) (12)
Payments on notes receivable 6 22
Land purchased for investment (180) -
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Net cash used by investing activities (333) (94)
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Cash flows from financing activities:
Net borrowing on line of credit 237 -
Treasury stock transactions - (5)
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Net cash provided by (used by) financing activities 237 (5)
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Net increase (decrease) in cash and cash equivalents (204) (173)
Cash and cash equivalents at October 1 204 835
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Cash and cash equivalents at December 31 $ - $ 662
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Supplemental information:
Interest paid $ 4 $ 3
Income taxes paid - 156
Noncash transactions:
Acquisition of plant property and equipment by capital lease $ 22 $ -
Re-acquisition of investment property by cancellation of
notes receivable 38 -
</TABLE>
See accompanying notes to financial statements.
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T.J.T., INC.
NOTES TO FINANCIAL STATEMENTS (unaudited)
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.
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<CAPTION>
(Dollars in thousands) Dec. 31, Sept. 30,
1998 1998
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Raw materials $1,347 $1,490
Finished goods 2,633 2,284
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Total $3,980 $3,774
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</TABLE>
NOTE C - PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
Dec. 31, Sept. 30,
(Dollars in thousands) 1998 1998
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<S> <C> <C>
Land and building $389 $389
Leasehold improvements 369 362
Furniture and equipment 1,161 1,092
Vehicles and trailers 1,323 1,220
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3,242 3,063
Less accumulated depreciation 1,237 1,119
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Net property, plant and equipment $2,005 $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
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, 1998 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 options to certain
officers and directors on October 1, 1994 with an exercise price of $4.00 per
share. These
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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, 1998.
NOTE E - SUBSEQUENT EVENTS
The company sold a retail distribution location in Bend, Oregon on January
11, 1999. The sale included fixed assets and inventory approximating $200,000
secured by inventory and receivables with monthly payments of $2,302 over ten
years with an interest rate of prime plus 2 percent. One of the buyer is
related to Patricia I. Bradley, a Director and executive officer of the
company.
On January 5, 1999 the company purchased Ford's Tires and Axles, located in
Pheonix, Arizona, for $275,000. The company acquired cash of $11,000,
accounts receivable of $140,000, inventory of $319,000, and equipment of
$135,000. The company assumed liabilities of $700,000. Based on the purchase
price of $275,000 goodwill was recorded of $370,000.
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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 period ended December 31, 1998
and 1997, 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:
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Three months ended
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Dec. 31, Dec. 31,
1998 1997
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Axle and tire reconditioning 74.7 % 76.6 %
Manufactured housing accessories and siding 25.3 23.4
Gross margin 17.5 19.1
Selling expense 10.5 9.8
Administrative expense 5.9 6.6
Interest income 0.1 0.2
Investment property income 0.0 0.0
Other income 0.0 0.0
</TABLE>
Net sales of $8,299,000 for the three months ended December 31, 1998 were up
3% from $8,093,000 for the quarter ended December 31, 1997.
The company's gross profit for the three months ended December 31, 1998 was
$1,455,000, down $90,000 or 6% from the same period in 1997. Overall gross
margin was 17.5%, down from 19.1% for the quarter ended December 31, 1998.
The decline of gross profit was a result of higher costs of procurement of
raw axles to meet increased volume demands and continued declining valuation
of seven inch tires which resulted in a $58,000 decline to gross profit.
In July 1998, the company entered into an agreement to purchase Ford's Tires
and Axles in Chandler, Arizona and the subsequent purchase January 11, 1999 in
an effort to gain access to
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used axles and tires in other market areas. Management expects that these
additional sources of used axles and tires may ease the pressure on gross
margin caused by increased competition in TJT's market area for used axles
and tires.
Selling, general and administrative expenses for the quarter ended December
31, 1998 increased $29,000 from the same quarter last year to $1,361,000.
Selling and administrative expense as a percent of sales for the quarter
ended December 31, 1998 remained unchanged compared to the same quarter last
year. Year-to-date administrative expense as a percent of sales decreased 1%
over last year and sales expense increased .7% due to realignment of
management responsibilities.
Operating income for the first quarter of fiscal 1999 was $94,000 compared to
an operating income of $213,000 for the same quarter of fiscal 1998.
Net income for the quarter ended December 31, 1998 was $49,000, a $84,000
decrease from net income of $133,000 from the same quarter last year.
Earnings per share were $.01 for the current quarter compared to $.03 per
share for the same quarter last year. Year-to-date average shares outstanding
decreased 2,588 shares over the same period last year due to purchases of
treasury stock from the 401k plan.
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.
$237,000 the line has been drawn on as of December 31,1998. The $1,763,000 of
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 December 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 has obtained assurance from the vendors of
its major purchased software systems that the products are Year 2000
compliant. Based on the results of the preliminary
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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.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Nothing to report
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
On January 11, 1999 the company sold its Bend, Oregon location which supplied
after market accessory products to manufactured housing dealers. The sale
included certain fixed assets and inventory approximating $200,000 secured by
inventory and receivables with monthly payments of $2,302 over ten years at
an interest rate of prime plus 2 percent. One of the buyers is a related to
Patricia I. Bradley a Director and executive officer of the company. This
transaction demonstrates the companies continued efforts of focusing on its
core business of tires and axles.
The company completed the cash purchase of Ford's Tires and Axles located in
Phoenix, Arizona on January 5, 1999 for $275,000. The company acquired cash
of $11,000, receivables of $140,000, inventory of $319,000, and equipment of
$135,000. The company assumed liabilities of $700,000. $370,000 was recorded
as goodwill. Ford's Tires and Axles has annual revenues of approximately $2.5
million. This acquisition opens the Arizona market for T.J.T. and promises to
be a source of lower cost used axles.
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 during December 31, 1998.
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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: February 12, 1999 By: /s/Larry B. Prescott
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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>
<CIK> 0001002577
<NAME> T.J.T., INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 1,855
<ALLOWANCES> 50
<INVENTORY> 3,980
<CURRENT-ASSETS> 6,441
<PP&E> 3,242
<DEPRECIATION> 1,237
<TOTAL-ASSETS> 11,069
<CURRENT-LIABILITIES> 1,873
<BONDS> 0
0
0
<COMMON> 5
<OTHER-SE> 8,973
<TOTAL-LIABILITY-AND-EQUITY> 11,069
<SALES> 8,299
<TOTAL-REVENUES> 8,314
<CGS> 6,844
<TOTAL-COSTS> 6,844
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 12
<INTEREST-EXPENSE> 4
<INCOME-PRETAX> 109
<INCOME-TAX> 60
<INCOME-CONTINUING> 49
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 49
<EPS-PRIMARY> .01
<EPS-DILUTED> .01
</TABLE>
