<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(X) Quarterly report under Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the quarterly period ended July 1, 2000
( ) Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from _____ to _____
Commission File Number 0-18707
TBM HOLDINGS, INC.
(Exact Name of Small Business Issuer as Specified in Its Charter)
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<S> <C>
FLORIDA 59-2824411
(State or Other Jurisdiction of Incorporation) (IRS Employer Identification No.)
</TABLE>
136 MAIN STREET
WESTPORT, CONNECTICUT 06880
(Address of Principal Executive Office)
(203) 227-6140
(Issuer's Telephone Number, Including Area Code)
------------------
(Former Name, Former Address and Former Fiscal Year,
If Changed Since Last Report)
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 for the past 90 days.
[X] Yes [ ] No
The number of shares outstanding of the issuer's Common Stock, $.001
par value per share, as of August 10, 2000, was 4,519,337, excluding 516
contingently issuable shares held by an escrow agent.
Transitional Small Business Disclosure Format (check one):
[ ] Yes [X] No
<PAGE> 2
INDEX
TBM HOLDINGS, INC.
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Part I: Financial Information
Item 1. Consolidated Financial Statements
Unaudited Condensed Consolidated Balance Sheets
at July 1, 2000 and January 1, 2000 (audited)........................3
Unaudited Condensed Consolidated Statements of Operations
for the three months and six months
ended July 1, 2000 and June 30, 1999.................................4
Unaudited Condensed Consolidated Statements of Cash Flows
for the six months ended July 1, 2000 and June 30, 1999..............5
Notes to Unaudited Condensed Consolidated Financial Statements.......6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.................................11
Part II: Other Information
Item 4. Submission of Matters to a Vote of Security Holders.......15
Item 6. Exhibits and Reports on Form 8-K .........................16
Signature....................................................................17
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2
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
TBM HOLDINGS, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
JANUARY 1,
JULY 1, 2000
2000 (audited)
-------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,902 $ 12,064
Trade accounts receivable, net 7,042 -
Inventories, net 8,763 -
Prepaid expenses and other receivables 391 11
-------- --------
Total current assets 22,098 12,075
Property, plant and equipment, net 7,479 -
Goodwill, net 11,935 -
Other assets 252 8
-------- --------
Total assets $ 41,764 $ 12,083
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 3,985 $ 67
Current portion of long-term debt 360 -
Legal settlement 80 80
Accrued expenses 2,423 -
Bank overdraft payable 317 -
-------- --------
Total current liabilities 7,165 147
-------- --------
Revolving credit loan 7,570 -
Long-term debt, excluding current portion 5,053 -
Other long-term liabilities 85 -
Stockholders' equity:
Common stock, $.001 par value. Authorized 10,000,000 shares;
4,519,337 and 2,601,000 shares issued and outstanding at
July 1, 2000 and January 1, 2000 respectively 5 3
Additional paid-in capital 35,262 24,264
Accumulated other comprehensive loss - foreign currency
translation adjustments (34) -
Accumulated deficit (13,342) (12,331)
-------- --------
Total stockholders' equity 21,891 11,936
-------- --------
Commitments and contingencies
Total liabilities and stockholders' equity $ 41,764 $ 12,083
======== ========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
3
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TBM HOLDINGS, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
----------------------------- -----------------------------
JULY 1, JUNE 30, JULY 1, JUNE 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $ 10,243 $ - $ 13,898 $ -
Cost of Sales 8,334 - 10,941 -
----------- ----------- ----------- -----------
Gross Profit 1,909 - 2,957 -
Selling, general and
administration expenses 2,734 9 3,785 9
----------- ----------- ----------- -----------
Operating loss (825) (9) (828) (9)
Interest expense 313 - 412 -
Other income, net (128) (37) (260) (37)
----------- ----------- ----------- -----------
Income (loss) before income taxes (1,010) 28 (980) 28
Income tax expense 9 - 31 -
----------- ----------- ----------- -----------
Income (loss) from continuing
operations (1,019) 28 (1,011) 28
Income (loss) from discontinued operations - 11 - (32)
----------- ----------- ----------- -----------
Net income (loss) $ (1,019) $ 39 $ (1,011) $ (4)
=========== =========== =========== ===========
Basic and diluted income (loss) per share:
Continuing operations $ (0.23) $ 0.06 $ (0.26) $ 0.12
Discontinued operations - 0.02 - (0.14)
----------- ----------- ----------- -----------
$ (0.23) $ 0.08 $ (0.26) $ (0.02)
=========== =========== =========== ===========
Weighted average shares outstanding 4,517,667 446,333 3,908,377 234,167
=========== =========== =========== ===========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
4
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TBM HOLDINGS, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
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<CAPTION>
SIX MONTHS ENDED
JULY 1, JUNE 30,
2000 1999
-------- --------
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Cash flows from operating activities:
Net loss $ (1,011) $ (4)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 379 2
Noncash interest expense 58 -
Gain on forgiveness of debt - (24)
Changes in working capital components (1,951) (67)
-------- --------
Net cash used in operating activities (2,525) (93)
-------- --------
Cash flows from investing activities:
Capital expenditures for property, plant and equipment, net (58) -
Payment for acquisition of businesses, net of cash acquired (13,285) -
-------- --------
Net cash used in investing activities (13,343) -
-------- --------
Cash flows from financing activities:
Change in bank overdraft payable (748) -
Net borrowings under revolving credit loan 2,488 -
Issuance of common stock 8,000 12,212
-------- --------
Net cash provided by financing activities 9,740 12,212
Effect of foreign currency translation on cash (34) -
-------- --------
Net increase (decrease) in cash (6,162) 12,119
Cash and cash equivalents, beginning of period 12,064 2
-------- --------
Cash and cash equivalents, end of period $ 5,902 $ 12,121
======== ========
Supplemental cash flow disclosure:
Cash paid for interest $ 387 $ -
Supplemental non cash disclosure:
Common stock issued for acquisition $ 3,000 $ -
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
5
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TBM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
(1) GENERAL; DESCRIPTION OF BUSINESS; SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL
The condensed consolidated financial statements included herein have been
prepared by TBM Holdings, Inc. (the "Company"), without audit, pursuant to rules
and regulations of the Securities and Exchange Commission. The financial
statements reflect all adjustments (consisting of normal recurring accruals)
which are, in the opinion of management, necessary to fairly present such
information. Although the Company believes that the disclosures are adequate to
make the information presented not misleading, certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted pursuant to such
rules and regulations. These interim financial statements should be read in
conjunction with the Company's most recently audited consolidated financial
statements included in the Company's Annual Report on Form 10-KSB for the fiscal
year ended January 1, 2000.
DESCRIPTION OF BUSINESS
The primary business of the Company, through the operations of its wholly-owned
subsidiary, Long Reach Holdings, Inc. ("Long Reach"), and Long Reach's
subsidiaries, Brudi Pacific Pty Ltd and Presto Lifts, Inc. ("Presto Lifts"), is
the manufacturing and marketing of hydraulically activated material handling and
ergonomic work positioning equipment in Houston ,Texas; Pawtucket, Rhode Island;
Little Rock, Arkansas; and Wingfield, South Australia. The Company markets the
majority of its products through numerous material handling dealers in the U.S.
and internationally. The Company's raw materials are readily available and the
Company is not dependent on a single supplier or only a few suppliers of
proprietary products and is not dependent on any one customer.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company and
Long Reach. All significant intercompany transactions have been eliminated in
consolidation.
USE OF ESTIMATES
Management of the Company has made a number of estimates and assumptions related
to the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these financial statements in
conformity with generally accepted accounting principles. Actual results could
differ from those estimates.
INVENTORY VALUATION
Inventories are stated at the lower of cost or market. Cost is determined using
the first-in, first-out (FIFO) method.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost. Equipment under capital leases
is stated at the present value of minimum lease payments at the inception of the
lease.
Depreciation of property, plant and equipment is calculated on the straight-line
method, based on the estimated useful lives of the various assets, as follows:
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LIFE
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<S> <C>
Buildings and improvements 20 - 30 years
Machinery and equipment 3 - 12 years
Furniture and fixtures 7 - 8 years
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6
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TBM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
Equipment held under capital leases is depreciated on a straight-line basis over
the shorter of the lease term or estimated useful life of the asset.
INCOME TAXES
Deferred tax assets and liabilities are recognized for the estimated future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases. Deferred tax assets and liabilities are measured using enacted tax rates
in effect for the year in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that includes the
enactment date.
GOODWILL AND DEBT ISSUANCE COSTS
Goodwill is amortized on a straight-line basis over 20 years. The Company
assesses the recoverability of this intangible asset by determining whether the
amortization of the goodwill balance over its remaining life can be recovered
through undiscounted future operating cash flows of the acquired operation. The
amount of impairment, if any, is measured based on projected discounted future
operating cash flows using a discount rate reflecting the Company's average cost
of funds. The assessment of the recoverability of this intangible asset will be
impacted if estimated future operating cash flows are not achieved.
Debt issuance costs are being amortized over the life of the related debt and
are included as a component of interest expense.
REVENUE RECOGNITION
Revenue is recognized at the time the product is shipped and ownership transfers
to the customer.
FOREIGN CURRENCY TRANSLATION
Assets and liabilities of the foreign subsidiary have been translated into
United States dollars at the applicable rates of exchange in effect at the end
of the period reported. Revenues and expenses have been translated at the
applicable weighted average rates of exchange in effect during the period
reported. Translation adjustments are excluded from the statements of operations
and are reported as accumulated other comprehensive loss, as a separate
component of stockholders' equity, until realized. Comprehensive income (loss)
consists of net income (loss) and foreign currency translation adjustments. Any
transaction gains and losses are included in the determination of net income
(loss).
FAIR VALUE OF FINANCIAL INSTRUMENTS
Fair value estimates are made at discrete points in time based on relevant
market information. These estimates may be subjective and involve uncertainties
and matters of significant judgment and therefore cannot be determined with
precision. The Company believes that the carrying amounts of its current assets,
current liabilities, revolving credit loan and long-term debt approximate the
fair value of such items at July 1, 2000.
(2) ACQUISITION
On February 23, 2000, the Company acquired Long Reach in a merger transaction
pursuant to which Long Reach merged into a wholly-owned subsidiary of the
Company (the "Surviving Corporation"). The aggregate consideration in respect of
the acquisition was (1) $1,500 of cash, (2) the issuance of 500,000 shares of
the Company's common stock valued at $6 per share, (3) the Surviving
Corporation's issuance of $3,000 of new subordinated notes to refinance a
portion of existing subordinated notes with certain shareholders of Long Reach
and (4) the assumption by the Surviving Corporation of $10,921 of outstanding
bank debt at the date of the acquisition. Additionally, new contingent
subordinated notes will be issued to certain shareholders of Long Reach in an
aggregate amount not to exceed $2,000 in the event that certain net sales
7
<PAGE> 8
TBM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
targets are achieved in calendar year 2000. The subordinated notes are and, if
issued, the contingent subordinated notes will be, guaranteed by the Company.
The Company also incurred approximately $936 of costs directly attributable to
the acquisition, of which $874 had been paid as of July 1, 2000. The acquisition
has been accounted for using the purchase method of accounting, effective at the
date of acquisition. Assets acquired and liabilities assumed consist primarily
of accounts receivable, inventory, fixed assets, accounts payable and long-term
debt.
On May 16, 2000, the Company, through its wholly-owned subsidiary, Long Reach,
acquired Lee Engineering Company, Inc. ("Lee") pursuant to a stock purchase
agreement. The acquisition was effected by Long Reach's purchase of all of the
outstanding common stock of Lee from United Dominion Industries, Inc. for $7,383
of cash. The Company also incurred approximately $310 of costs directly
attributable to the acquisition, all of which had been paid as of July 1, 2000.
The acquisition has been accounted for using the purchase method of accounting,
effective at the date of acquisition. Assets acquired and liabilities assumed
consist primarily of accounts receivable, inventory, fixed assets, accounts
payable and accrued expenses. Lee's name was changed to Presto Lifts, Inc. on
May 22, 2000.
Results for the six months ended July 1, 2000 include the operating results of
Long Reach for the period February 24, 2000 through July 1, 2000, and the
operating results of Presto Lifts for the period May 16, 2000 through July 1,
2000, consolidated with the expenses incurred by the Company associated with
maintaining a business office and complying with its reporting obligations as a
public company.
Set forth below is certain unaudited summary pro forma combined financial data
of the Company for the six months ended July 1, 2000, and for the year ended
January 1, 2000, respectively, based upon historical information that has been
adjusted to reflect the Company's acquisitions of Long Reach and Presto Lifts as
if such transactions occurred at January 1, 1999. The unaudited summary pro
forma combined financial data is based upon certain assumptions and estimates,
and therefore does not purport to be indicative of the results that would
actually have been obtained had the transaction been completed as of such date
or indicative of future results of operations and financial position.
Unaudited Summary Pro Forma Combined Financial Data
<TABLE>
<CAPTION>
Six months ended Six Months Ended
July 1, 2000 June 30, 1999
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<S> <C> <C>
Net sales $ 25,214 $ 28,726
Loss from continuing operations (2,549) (743)
Net loss $ (2,549) $ (775)
=========== ===========
Basic and diluted income (loss) per share:
From continuing operations $ (0.65) $ (1.01)
From discontinued operations -- (.04)
----------- -----------
Net $ (0.65) (1.06)
=========== ===========
Basic and diluted weighted average shares
outstanding 3,908,377 734,167
=========== ===========
</TABLE>
8
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TBM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
(3) INVENTORIES
Inventory costs at July 1, 2000 are summarized as follows:
<TABLE>
<S> <C>
Raw materials $3,962
Work in process 1,749
Finished goods 3,052
------
Total inventories $8,763
======
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(4) LONG-TERM DEBT AND REVOLVING CREDIT LOAN
Long-term debt at July 1, 2000 is summarized as follows:
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Note payable to bank, interest at the lender's prime rate plus 1.0%, due
in monthly principal installments of $50 or $60 beginning January 1, 2001,
with final payment due March 31, 2003 $ 2,500
Notes payable to stockholders, interest at 0% through December 31, 2000,
6% beginning January 1, 2001 through February 23, 2004, and Senior Debt
Rate plus 2% thereafter until maturity on February 23, 2005 2,913
-------
Total long-term debt $ 5,413
Less current portion 360
-------
Long-term debt, excluding current portion $ 5,053
=======
</TABLE>
In connection with the acquisitions of Long Reach and Presto Lifts (see note 2),
the Company amended Long Reach's revolving credit agreement and term loan with a
bank. The amended credit agreement includes a revolving credit loan with a
maximum commitment of $10,000, subject to borrowing base availability and other
items, and a term loan of $2,500. Borrowings under the amended credit agreement
accrue interest at the bank's prime rate (9 1/2% at July 1, 2000) plus 0.25% to
1% under differing circumstances. Subject to borrowing base limitations
calculated on eligible inventory and accounts receivable, the revolving credit
loan is due and payable on March 31, 2003. Additionally, a one-quarter percent
fee per annum is paid to the bank for the unused portion of the revolving loan
commitment. A closing fee of $125 was payable to the bank at the time of
entering into the credit agreement in connection with the Long Reach
acquisition. At July 1, 2000, the borrowing base availability for the revolving
credit loan was determined to be $8,743, of which the Company had utilized
$7,570.
The credit agreement, as amended, also provides that the term loan be repaid in
principal installments of $60, payable on the first day of each month beginning
January 1, 2001, and continuing through and including December 1, 2001, and $50,
payable on the first day of each month beginning January 1, 2002, and continuing
through March 31, 2003. The Company is required to meet certain financial
covenants as defined in the credit agreement, as amended.
The $3,000 notes payable to stockholders were recorded at a discount at
acquisition date and interest is being imputed at 6% using the interest method
to reflect an effective interest rate over the life of the notes.
The notes payable to stockholders, the term loan and the revolving credit loan
are secured by liens on substantially all of Long Reach's and Presto Lifts'
assets. In addition, the amended credit agreement contains various restrictions,
including restrictions relating to entering into certain activities, payment of
dividends, investments, capital leases and purchases and sales of assets, and
also requires compliance with certain financial ratios and minimum levels of
working capital.
9
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TBM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
(5) STOCKHOLDERS' EQUITY
On February 23, 2000, the Company completed a private placement of its common
stock, $.001 par value per share, pursuant to which it issued and sold an
aggregate of 916,667 restricted shares at $6.00 per share, for aggregate
proceeds to the Company of $5,500. In addition, a shareholder exercised an
option to purchase 500,000 restricted shares of Common Stock at $5.00 per share,
for aggregate proceeds to the Company of $2,500.
(6) EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share is computed by dividing net earnings (loss) by
the weighted average number of shares outstanding during the period. If
applicable, diluted earnings per common share is determined on the assumption
that outstanding dilutive stock options and warrants have been exercised and the
aggregate proceeds as defined were used to reacquire Company common stock using
the average price of such common stock for the period. Because the Company
reported a net loss for the six month periods ended July 1, 2000 and June 30,
1999, basic and diluted loss per common share are the same.
At July 1, 2000, there were 5,630 shares of common stock subject to stock
options that were not included in the calculation of diluted loss per common
share, because to do so would have been antidilutive.
On June 15, 1999, the Company effected a 1 for 412.92 reverse stock split. All
shares and earnings (loss) per share data have been adjusted to reflect this
reverse stock split.
(7) CONTINGENCIES
The Company is involved in claims and legal actions arising in the ordinary
course of business. In the opinion of management, the ultimate disposition of
these matters will not have a material adverse effect on the Company's
consolidated financial position.
10
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ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The dollar amounts reported in this Part I, Item 2 are reported in
thousands.
On June 15, 1999, the Company completed a private placement in which it
raised $12,730 from investors. Upon the closing of the private placement, the
Company changed its name from Specialty Retail Group, Inc. to TBM Holdings, Inc.
Prior to and after the private placement, the Company had no operating business.
The Company planned to use the proceeds of the private placement to purchase an
operating company within a manufacturing industry. The Company intended to
implement the Toyota Production System using the Kaizen Growth Strategy to
improve the results of an under-performing manufacturing company once acquired.
On February 23, 2000, the Company completed the acquisition of Long
Reach through the merger of Long Reach into a wholly-owned subsidiary of the
Company. In operation since 1930, Long Reach is a manufacturer of hydraulic
material handling equipment, including lift truck attachments, pallet trucks,
pallet stackers and industrial lift tables. This acquisition was the result of a
lengthy search process culminating in the selection of the material handling
equipment industry as the target industry for the Company's implementation of
the Kaizen Growth Strategy.
On May 16, 2000, the Company completed the acquisition of Lee from
United Dominion Industries, Inc. Since 1944, Lee has been manufacturing material
handling equipment including pallet stackers, scissor lifts and dock lifts under
the Presto Lifts and Regal brand names. Subsequent to the acquisition, the
Company changed the name of the acquired company to Presto Lifts, Inc. Presto
Lifts is a wholly-owned subsidiary of Long Reach.
Long Reach and Presto Lifts are the first of several potential
acquisitions by the Company in the material handling and ergonomic work
positioning equipment industry. The Company is engaged in preliminary
discussions with several additional acquisition candidates. Negotiations are
ongoing; however, no assurance of success with respect to these negotiations, or
the Company's efforts to identify and acquire any additional manufacturing
companies, can be made.
RESULTS OF OPERATIONS
Operating results through February 23, 2000, the date of the
acquisition of Long Reach, reflect interest income generated through the
investment of the proceeds of the 1999 private placement in short-term
government securities. Operating expenses during such period were costs
associated with search activities required to identify a manufacturing company
acquisition, maintaining a business office and complying with the Company's
reporting obligations as a public company.
Results for the six months ended July 1, 2000 include the operating
results of Long Reach for the period February 24, 2000 through July 1, 2000, and
the operating results of Presto Lifts for the period May 16, 2000 through July
1, 2000, consolidated with the expenses incurred by the Company associated with
maintaining a business office and complying with its reporting obligations as a
public company.
11
<PAGE> 12
The Company generated net sales of $10,243 and a net loss of $(1,019)
for the three months ended July 1, 2000 compared with no sales and net income of
$39 for the comparable period in 1999. For the three months ended July 1, 2000,
gross profit represented 18.6% of net sales, and selling, general and
administrative expenses represented 26.7% of net sales. During the three months
ended June 30, 1999, the Company had no ongoing operations and, accordingly, no
sales. The net income for this period reflected the cost of maintaining a
business office and the cost of compliance with the Company's reporting
obligations as a public company, offset by other income which generated net
income for the period.
During the three and six months ended July 1, 2000, the increase in net
sales, cost of sales and selling, general and administrative expenses over the
corresponding period of the prior year is the result of the acquisitions by the
Company of Long Reach on February 23, 2000, and Presto Lifts on May 16, 2000.
Interest expense for the three and six months ended July 1, 2000 was
$313 and $412, respectively. This reflects the interest expense for the period
February 24, 2000 through July 1, 2000 under Long Reach's revolving line of
credit and term loan, each as amended. Other income, net was $128 and $260 for
the three and six months ended July 1, 2000, as compared to $37 for the
corresponding periods of the prior year. This represents income from investment
of excess cash on hand.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operating activities was $2,525 for the six months
ended July 1, 2000, compared with $93 for the six months ended June 30, 1999.
This change reflects the net loss for the six months ended July 1, 2000 of
$1,011 combined with the negative changes in working capital components for such
period of $1,951 following the consolidation of the Company with Long Reach on
February 23, 2000, and Presto Lifts on May 16, 2000. The most significant change
in the working capital components of the Company was a reduction in payables
resulting from the Company's efforts to bring Long Reach's payables to suppliers
current.
Net cash used in investing activities was $13,343 for the six months
ended July 1, 2000, compared with $0 for the corresponding six months in 1999.
This investment reflects the acquisition of Long Reach on February 23, 2000, and
the acquisition of Presto Lifts on May 16, 2000.
Net cash provided by financing activities was $9,740 for the six months
ended July 1, 2000, as compared to $12,212 for the six months ended June 30,
1999. Net cash provided by financing activities for the six months ended July 1,
2000 reflects the issuance of common stock of $8,000 and an increase in
borrowings of $1,740 under Long Reach's revolving credit agreement to fund
changes in working capital during the period, after giving effect to the change
in bank overdraft payable for the period. Net cash provided by financing
activities for the six months ended June 30, 1999 reflects the issuance of
common stock of $12,212 in connection with the Company's private placement on
June 15, 1999.
12
<PAGE> 13
At July 1, 2000, the Company owed $7,570 under its revolving credit
facility. Long term debt outstanding at July 1, 2000 consisted of a $2,500 note
payable to the bank and $2,913 of notes payable to stockholders.
Issuance of common stock was $8,000 and $12,212 for the six months
ended July 1, 2000 and June 30, 1999, respectively. Issuance of common stock for
the six months ended July 1, 2000 reflects the Company's private placement of
its common stock on February 23, 2000 and the exercise of an option. Common
stock issued for acquisition for the six months ended July 1, 2000 represents
the Company's issuance of 500,000 shares of its common stock, valued at $6.00
per share, in connection with its acquisition of Long Reach on February 23,
2000. Issuance of common stock of $12,212 for the six months ended June 30, 1999
reflects the Company's private placement of its common stock on June 15, 1999.
Capital expenditures for property, plant and equipment totaled $58 for
the first six months of fiscal 2000. Total capital expenditures for the Long
Reach and Presto Lifts operations are currently expected to aggregate $450 for
fiscal 2000. The Company believes that the combination of its existing working
capital, current cash balances and access to other financing sources will be
adequate to meet its anticipated capital and liquidity requirements with respect
to the operations of the Company for fiscal year 2000. See however
"Forward-Looking Statements" below.
QUANTITATIVE AND QUALITATIVE DISCLOSURES
The Company is exposed to market risks. Market risk is the potential
loss arising from adverse changes in market prices and rates. The Company does
not enter into derivative or other financial instruments for trading or
speculative purposes. The Company's market risks could arise from changes in
interest rates and foreign currency exchange rates.
Interest rate risk. The Company is subject to market risk exposure
related to changes in interest rates. Accordingly, the Company's net income is
affected by changes in interest rates. Assuming the Company's current level of
borrowings, a 100 basis point increase in interest rates under these borrowings
would increase the Company's net loss for the second quarter and six months
ended July 1, 2000 by approximately $25 and $33, respectively. In the event of
an adverse change in interest rates, the Company could take action to mitigate
its exposure; however, due to the uncertainty of the actions that would be taken
and their possible effects, this analysis assumes no such actions. Furthermore,
this analysis does not consider the effects of the change in the level of
overall economic activity that could exist in such an environment.
Foreign exchange currency risk. The Company's earnings are affected by
foreign exchange rate fluctuations. The Company currently has foreign operations
in Australia. The translation adjustment during the six months ended July 1,
2000 was a loss of $34, which was recognized in accumulated other comprehensive
loss in the unaudited condensed consolidated financial statements included
herein.
ADDITIONAL INFORMATION
The Company has begun implementing the Kaizen Growth Strategy and
restructuring operations at Long Reach and Presto Lifts. The Company's goal is
to reduce product costs by improving
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manufacturing methods and processes to improve productivity. As this process
continues, the Company expects Long Reach and Presto Lifts to have marginally
profitable or unprofitable results through December 31, 2000. The Company's goal
is to complete a majority of this restructuring during 2000 and to achieve
improved profitability during 2001. However, there can be no assurance that this
restructuring will be completed within this timeframe or that improved financial
results will be achieved.
RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities ("SFAS 133"), as amended by SFAS
No. 137 and SFAS No. 138, was issued by the Financial Accounting Standards Board
in June 1998. SFAS 133 standardizes the accounting for derivative instruments,
including certain derivative instruments embedded in other contracts. Under the
standard, entities are required to carry all derivative instruments in the
statement of financial position at fair value. The Company will adopt SFAS 133
beginning in fiscal year 2001. The Company does not expect the adoption of SFAS
133 will have a material effect on its financial condition or results of
operation because the Company historically has not entered into derivative or
other financial instruments for trading or speculative purposes nor does the
Company use or intend to use derivative financial instruments or derivative
commodity instruments.
In December 1999, the Securities and Exchange Commission ("SEC") issued
Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements
("SAB No. 101"). SAB No. 101 summarizes the SEC staff's views in applying
generally accepted accounting principles to selected revenue recognition issues.
The Company understands that the SEC staff is preparing a document to address
significant implementation issues related to SAB No. 101. To the extent that SAB
No. 101 ultimately changes the Company's revenue recognition practices, it is
required to adopt SAB No. 101 no later than the quarter beginning October 1,
2000. The Company cannot determine the potential impact that SAB No. 101 may
have on its consolidated financial position or results of operations at this
time. Additionally, the Company has not determined if it will adopt SAB No. 101
early.
In March 2000, the FASB issued Interpretation No. 44, Accounting for
Certain Transactions Involving Stock Compensation; an Interpretation of APB
Opinion No. 25. Among other issues, Interpretation No. 44 clarifies the
application of Accounting Principles Board Opinion No. 25 (APB No. 25) regarding
(a) the definition of employee for purposes of applying APB No. 25, (b) the
criteria for determining whether a plan qualifies as a non-compensatory plan,
(c) the accounting consequence of various modifications to the terms of a
previously fixed stock option or award, and (d) the accounting for an exchange
of stock options in a business combination. The provisions of Interpretation No.
44 affecting the Company are to be applied on a prospective basis effective July
1, 2000.
FORWARD-LOOKING STATEMENTS
Statements contained in this Form 10-QSB that are not purely historical
are forward-looking statements and are being provided in reliance upon the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements may be identified, without limitation, by use of the
words "expects," "anticipates," "believes," "estimates," "intends" and similar
expressions. All forward-looking statements are made as of the date hereof and
are based on current management expectations and information available to the
Company as of such date. The Company assumes no obligation to update any
forward-looking statement. It is important to note that actual results could
differ materially from historical results or those contemplated in the
forward-looking statements. Forward-looking statements involve a number of risks
and uncertainties and may include trend information. Readers are cautioned not
to place undue reliance on any such forward-looking statements.
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PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its annual meeting of shareholders on April 28, 2000.
The following seven directors were elected to serve until the next annual
meeting of shareholders and until their respective successors are duly elected
and qualified: Anand Sharma, William A. Schwartz, Amy Ludwig Weisman, Rainer H.
Bosselmann, Daniel A. Levinson, Herbert E. Brown and Michael B. DeFlorio.
The number of shares voted in favor of each of the nominees for
director was 3,247,445, which represented a majority of the outstanding voting
stock of the Company. Fourteen (14) shares were voted to withhold approval of
each nominee for director.
The shareholders also voted to ratify the selection of KPMG LLP as
independent accountants of the Company for the fiscal year ending December 30,
2000. 3,247,440 shares were voted in favor of such proposal, representing a
majority of the outstanding voting stock of the Company. Four (4) votes were
cast against this proposal; fifteen (15) votes were cast to abstain.
The shareholders voted to approve the Company's adoption of its 1999
Stock Option Plan. 3,187,422 shares were voted in favor of such proposal,
representing a majority of the outstanding voting stock of the Company. 60,031
votes were cast against this proposal; six (6) votes were cast to abstain.
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ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Description
---------- -----------
<S> <C>
10.1 1999 Stock Option Plan.
10.2 First Amendment to Employment Agreement, dated as of May 1, 2000, between
TBM Holdings, Inc. and William Schwartz.
10.3 Employment Agreement, dated as of April 3, 2000, between Long Reach Holdings,
Inc. and William Sample.
27 Financial Data Schedule for the six months ended July 1, 2000.
</TABLE>
(b) REPORTS ON FORM 8-K
During the three months ended July 1, 2000, the Company filed
one Current Report on Form 8-K and one Amendment to Current
Report on Form 8-K, each as described below. Reference is made
to such Current Report or Amendment to Current Report for a
complete description of the disclosures contained therein.
Amendment No. 1 to Current Report on Form 8-K (Form 8-K/A)
dated February 23, 2000, filed with the Commission on May 5,
2000, containing disclosure under Item 7. Such Amendment No. 1
to Current Report on Form 8-K (Form 8-K/A) included the
financial statements of the business acquired and pro forma
financial information required by Items 310(c) and 310(d) of
Regulation S-B under Item 7 of Form 8-K.
Current Report on Form 8-K dated May 16, 2000, filed with the
Commission on May 24, 2000, containing disclosure under Item
2, Item 4 and Item 7. Such Current Report on Form 8-K (i)
reported the acquisition of Lee Engineering Company, Inc. and
related transactions, (ii) reported the change in the
Company's certifying accountant from Richard A. Eisner &
Company LLP to KPMG LLP, and (iii) in connection with the
Company's acquisition of Long Reach Holdings, Inc., reported
that the financial statements and pro forma financial
information required by Items 310(c) and 310(d) of Regulation
S-B under Item 7 of Form 8-K would be provided by amendment to
Form 8-K no later than July 31, 2000.
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SIGNATURE
In accordance with the requirements of the Securities Exchange Act of
1934, as amended, the Company has caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized.
TBM HOLDINGS, INC.
Date: August 15, 2000 By: /s/ William A. Schwartz
----------------------------------
William A. Schwartz, President and
Principal Financial Officer
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