<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 April 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)
Florida 59-2824411
(State or Other Jurisdiction (IRS Employer
of Incorporation) Identification No.)
136 Main Street, Westport, Connecticut 06880
(Address of Principal Executive Office) (Zip Code)
(203) 227-6140
Issuer's telephone number, including area code
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. Yes X No
The number of shares outstanding of the issuer's Common Stock, $.001
par value per share, as of May 10, 2000, was 4,519,337, excluding 516
contingently issuable shares held by an escrow agent.
Transitional Small Business Disclosure Format (check one): Yes No X
<PAGE> 2
INDEX
TBM HOLDINGS, INC.
<TABLE>
<CAPTION>
<S> <C>
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets
as of April 1, 2000, and January 1, 2000....................................... 3
Condensed Consolidated Statements of Operations for the three months
ended April 1, 2000, and March 31, 1999........................................ 4
Condensed Consolidated Statements of Cash Flows
for the three months ended April 1, 2000, and March 31, 1999.................... 5
Notes to Condensed Consolidated Financial Statements........................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.......................... 14
Part II. Other Information
Item 2. Changes in Securities........................................ 18
Item 6. Exhibits and Reports on Form 8-K............................. 19
Signature............................................................................... 20
</TABLE>
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<PAGE> 3
PART I -- FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited).
TBM HOLDINGS, INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
APRIL 1, JANUARY 1,
2000 2000
---- ----
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 12,520 $ 12,064
Trade accounts receivable, net 4,875 --
Inventories, net 7,165 --
Prepaid expenses and other receivables 150 11
-------- --------
Total current assets 24,710 12,075
Property, plant and equipment, net 6,947 --
Goodwill, net 7,300 --
Other assets 261 8
-------- --------
Total assets $ 39,218 $ 12,083
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 2,456 $ 67
Current portion of long-term debt 180 --
Legal settlement 80 80
Accrued expenses 2,599 --
Bank overdraft payable 590 --
-------- --------
Total current liabilities 5,905 147
Revolving credit loan 5,080 --
Long-term debt, excluding current portion 5,189 --
Other long-term liabilities 109 --
Stockholders' equity:
Common stock, $.001 par value. Authorized
10,000,000 shares; 4,519,337 shares issued and outstanding 5 3
Additional paid-in capital 35,262 24,264
Accumulated other comprehensive loss - foreign currency
translation adjustments (10) --
Accumulated deficit (12,323) (12,331)
-------- --------
Total stockholders' equity 22,934 11,936
Commitments and contingencies
-------- --------
Total liabilities and stockholders' equity $ 39,218 $ 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)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
APRIL 1, MARCH 31,
2000 1999
---- ----
<S> <C> <C>
Net Sales $ 3,655 $ --
Cost of Sales 2,607 --
------- -------
Gross Profit 1,048 --
Selling, general and administrative expenses 1,051 32
------- -------
Operating loss (3) (32)
Interest expense 99 10
Other income, net (132) --
------- -------
Income (loss) before income taxes 30 (42)
------- -------
Income tax expense 22 --
------- -------
Net income (loss) $ 8 $ (42)
======= =======
</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)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
APRIL 1, MARCH 31,
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 8 $ (42)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 89 2
Noncash interest expense 14 --
Changes in working capital components (2,048) 28
-------- --------
Net cash used in operating activities (1,937) (12)
Cash flows from investing activities:
Capital expenditures for property, plant and equipment, net (10) --
Payment for acquisition of business, net of cash acquired (7,400) --
-------- --------
Net cash used in investing activities (7,410) --
-------- --------
Cash flows from financing activities:
Change in bank overdraft payable (184) --
Net borrowings under revolving credit loan 1,998 --
Borrowings under long-term debt -- 10
Issuance of common stock 8,000 --
-------- --------
Net cash provided by financing activities 9,814 10
-------- --------
Effect of foreign currency translation on cash (11) --
-------- --------
Net increase (decrease) in cash 456 (2)
-------- --------
Cash and cash equivalents, beginning of period 12,064 2
-------- --------
Cash and cash equivalents, end of period $ 12,520 $ --
======== ========
Supplemental cash flow disclosure:
Cash paid for interest $ 85 $ 8
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 CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
(Unaudited)
(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"), is the manufacturing and
marketing of hydraulically activated material handling equipment in Houston,
Texas; 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
6
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TBM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
(Unaudited)
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:
<TABLE>
<CAPTION>
LIFE
----
<S> <C>
Buildings and improvements 20 - 30 years
Machinery and equipment 3 - 12 years
Furniture and fixtures 7 - 8 years
</TABLE>
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.
7
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TBM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
(Unaudited)
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 net income.
8
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TBM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
(Unaudited)
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 April 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
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 $788 of costs directly attributable to
the acquisition, of which $727 had been paid as of April 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
consists primarily of accounts receivable, inventory, fixed assets, accounts
payable and long-term debt.
Set forth below is certain unaudited summary pro forma combined financial data
of the Company for the three months ended April 1, 2000, and for the year ended
January 1, 2000, respectively, based
9
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TBM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
(Unaudited)
upon historical information that has been adjusted to reflect the Company's
acquisition of Long Reach as if such transaction 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>
Three months ended Year ended
April 1, 2000 January 1, 2000
------------- ---------------
<S> <C> <C>
Net sales $ 8,269 $ 39,229
Loss from continuing operations (718) (2,198)
Net loss $ (835) $ (2,183)
=========== ===========
Basic and diluted loss per share:
From continuing operations $ (0.25) $ (1.16)
From discontinued operations -- .01
----------- -----------
Net $ (0.25) (1.15)
=========== ===========
Basic and diluted weighted average shares
outstanding 3,292,392 1,901,000
=========== ===========
</TABLE>
(3) INVENTORIES
Inventory costs at April 1, 2000 are summarized as follows:
<TABLE>
<S> <C>
Raw materials $2,858
Work in process 1,040
Finished goods 3,267
------
Total inventories $7,165
======
</TABLE>
10
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TBM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
(Unaudited)
(4) LONG-TERM DEBT AND REVOLVING CREDIT LOAN
Long-term debt at April 1, 2000 is summarized as follows:
<TABLE>
<CAPTION>
<S> <C>
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 2,869
-------
Total long-term debt $ 5,369
Less current portion 180
-------
Long-term debt, excluding current portion $ 5,189
=======
</TABLE>
In connection with the acquisition of Long Reach (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% at April 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
amended credit agreement. At April 1, 2000, the borrowing base availability for
the revolving credit loan was determined to be $6,234, of which the Company had
utilized $5,080.
The amendment 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 amendment.
The $3,000 notes payable to stockholders were recorded at a discount at
acquisition date and interest is being imputed using the interest method to
reflect an effective interest rate over the life of the notes.
11
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TBM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
(Unaudited)
The notes payable to stockholders, the term loan and the revolving credit loan
are secured by liens on substantially all of the Company's 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.
(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 to existing shareholders of the Company
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 for the three
months ended March 31, 1999, the Company reported a net loss, basic and diluted
loss per common share are the same.
At April 1, 2000, there were 1,630 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.
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TBM HOLDINGS, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
(Unaudited)
The following is the reconciliation of the numerators and denominators of the
basic and diluted earnings (loss) per share:
<TABLE>
<CAPTION>
Three months ended
April 1, March 31,
2000 1999
---- ----
<S> <C> <C>
Numerator:
Net income (loss) $ 8 $ (42)
---------- ----------
Denominator:
Computation of basic earnings (loss) per share:
Weighted average shares outstanding 3,292,392 21,530
---------- ----------
Basic earnings (loss) per share $ -- $ (1.95)
========== ==========
Computation of diluted earnings (loss) per share:
Weighted average shares outstanding 3,292,392 21,530
Potentially dilutive shares:
Incremental shares issuable under warrants 149,806 --
---------- ----------
Weighted average shares outstanding and available 3,442,198 21,530
---------- ----------
Diluted earnings (loss) per share $ -- $ (1.95)
========== ==========
</TABLE>
(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.
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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.
Long Reach is the first of several potential acquisitions by the
Company in the material handling equipment industry. Reference is made to the
Company's Current Report on Form 8-K dated March 29, 2000, and filed with the
Commission on March 30, 2000, which disclosed the Company's engagement in
preliminary discussions with an additional acquisition candidate. 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.
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<PAGE> 15
THREE MONTHS ENDED APRIL 1, 2000, COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
Results for the three months ended April 1, 2000, include the operating
results of Long Reach for the period February 23, 2000, through April 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.
The Company generated net sales of $3,655 and net income of $8 for the
three months ended April 1, 2000, compared with no sales and net loss of $42 for
the comparable period in 1999. For the three months ended April 1, 2000, gross
profit and selling, general and administrative expenses each represented
approximately 29% of net sales. During the three months ended March 31, 1999,
the Company had no ongoing operations and, accordingly, no sales. The net loss
for this period reflected the cost of maintaining a business office, the cost of
compliance with the Company's reporting obligations as a public company and
interest expense. During the three months ended April 1, 2000, the increase in
net sales, cost of sales and selling, general and administrative expenses is the
result of the acquisition by the Company of Long Reach on February 23, 2000.
Interest expense for the three months ended April 1, 2000, was $99.
This expense reflects interest expense for the period February 23, 2000, through
April 1, 2000, under Long Reach's revolving line of credit and term loan in
place at the time of acquisition. Other income, net, was $(132) for the three
months ended April 1, 2000, as compared to $0 for the corresponding period 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 $(1,937) for the three months
ended April 1, 2000, compared with $(12) for the three months ended March 31,
1999. This change reflects the acquisition of Long Reach on February 23, 2000,
and the changes in working capital components resulting from the consolidation
of the operating company with the Company. The three significant changes in
working capital components are (i) a reduction in payables of $1,111 resulting
from the Company's efforts to bring Long Reach's payables to suppliers current,
(ii) a reduction in accrued expenses of $249, and (iii) an increase in
receivables of $553 resulting from an increase in sales.
Net cash used in investing activities was $(7,410) for the three months
ended April 1, 2000, compared with $0 for the corresponding three months in
1999. This increase reflects the acquisition of Long Reach on February 23, 2000.
15
<PAGE> 16
Net cash provided by financing activities was $9,814 for the three
months ended April 1, 2000, as compared to $10 for the three months ended March
31, 1999. Net cash provided by financing activities for the three months ended
April 1, 2000 reflects issuance of common stock of $8,000 and an increase in
borrowings of $1,998 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.
At April 1, 2000, the Company owed $5,080 and had borrowing capacity
in the amount of $1,154 under its revolving credit facility. Long-term debt
outstanding at April 1, 2000 consisted of a $2,500 note payable to bank, and
$2,869 of notes payable to stockholders.
Issuance of common stock was $8,000 and $0 for the three months ended
April 1, 2000 and March 31, 1999, respectively. Issuance of common stock for the
three months ended April 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 three months ended April 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.
At April 1, 2000, the Company was engaged in preliminary discussions
with an additional material handling equipment company. Negotiations for the
acquisition of such company are ongoing. If the acquisition is consummated, the
Company anticipates that a portion of the purchase price for such acquisition
will be financed with borrowings under the revolving credit agreement, and the
balance will be paid out of the Company's cash reserves. There can be no
assurance that a definitive agreement for the acquisition can be reached or
that, if it is, the acquisition will be consummated.
Capital expenditures for property, plant and equipment totaled $10 for
the first three months of fiscal 2000. Total capital expenditures are currently
expected to aggregate $229 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".
ADDITIONAL INFORMATION
The Company has begun implementing the Kaizen Growth Strategy and
restructuring operations at Long Reach. The Company's goal is to reduce product
costs by improving manufacturing methods and processes to improve productivity.
As this process continues, the Company expects Long Reach 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.
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RECENT ACCOUNTING PRONOUNCEMENTS
Statement of Financial Accounting Standards No. 133, Accounting for
Derivative Instruments and Hedging Activities ("SFAS 133"), 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 to have a material effect on
its financial condition or results of operation because the Company does not
enter 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 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 noncompensatory
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 compensation awards 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.
17
<PAGE> 18
PART II -- OTHER INFORMATION
Item 2. Changes in Securities.
On February 23, 2000, the Company completed a private placement of its
common stock, par value $.001 per share, pursuant to which it issued and sold an
aggregate of 916,667 restricted shares to existing shareholders of the Company
at $6.00 per share. J.H. Whitney IV, L.P. purchased 416,667 shares and LEG
Partners III SBIC, L.P. purchased 500,000 of the Company's common stock. In
addition, J.H. Whitney IV, L.P. exercised an option to purchase 500,000
restricted shares of Common Stock at $5.00 per share. Also on February 23, 2000,
the Company issued 500,000 restricted shares of its Common Stock at $6.00 per
share to certain shareholders of Long Reach as partial consideration for the
Company's acquisition of Long Reach. In addition, in November and December of
1999, the Company sold 33,000 restricted shares of its Common Stock at $.10 per
share pursuant to the exercise of options held by transferees of certain
creditors who had provided legal services to the Company. The shares described
above were issued or sold in reliance on the exemption provided by Section 4(2)
of the Securities Act of 1933. There were no underwriters involved in these
transactions.
18
<PAGE> 19
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<S> <C>
10 Voting Agreement, dated as of March 13, 2000, between LEG Partners III SBIC,
L.P., Anand Sharma and William A. Schwartz.
27 Financial Data Schedule for the three months ended April 1, 2000.
</TABLE>
(b) Reports on Form 8-K
During the three months ended April 1, 2000, the Company
filed four Current Reports on Form 8-K, as described below.
Reference is made to such Current Reports for a complete
description of the disclosures contained therein.
Current Report on Form 8-K dated January 12, 2000,
filed with the Commission on January 24, 2000,
containing disclosure under Item 5 and Item 7. Such
Current Report on Form 8-K reported the execution by
the Company and a subsidiary of a merger agreement
with Long Reach Holdings, Inc. and certain of its
shareholders.
Current Report on Form 8-K dated February 4, 2000,
filed with the Commission on February 15, 2000,
containing disclosure under Item 5 and Item 7. Such
Current Report on Form 8-K reported the execution by
the Company and a subsidiary of an amendment and
restatement of the merger agreement with Long Reach
Holdings, Inc. and certain of its shareholders.
Current Report on Form 8-K dated February 23, 2000,
filed with the Commission on March 9, 2000,
containing disclosure under Item 2, Item 5 and Item
7. Such Current Report on Form 8-K reported (i)
consummation of the merger with Long Reach Holdings,
Inc. and related transactions, (ii) completion of a
private placement of 916,667 restricted shares of the
Company's Common Stock, and (iii) exercise of an
option to purchase 500,000 restricted shares of the
Company's Common Stock by an existing shareholder.
Current Report on Form 8-K dated March 29, 2000,
filed with the Commission on March 30, 2000,
containing disclosure under Item 5. Such Current
Report on Form 8-K reported the engagement of
the Company in preliminary discussions to acquire Lee
Engineering, Inc.
19
<PAGE> 20
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: May 15, 2000 By: /s/ William A. Schwartz
----------------------------------
William A. Schwartz, President and
Principal Financial Officer
20
<PAGE> 1
Exhibit 10
Voting Agreement
<PAGE> 2
EXHIBIT 10
VOTING AGREEMENT
AGREEMENT (this "Agreement") dated as of the 13th day of March, 2000,
between LEG PARTNERS III SBIC, L.P. ("LEG"), ANAND SHARMA ("Sharma") and WILLIAM
A. SCHWARTZ ("Schwartz").
PRELIMINARY STATEMENT. On the date hereof, LEG is purchasing 500,000
shares of common stock, par value $.001 per share (the "Common Stock"), of TBM
Holdings, Inc., a Florida corporation (the "Company"), pursuant to that certain
Subscription and Investment Representation Agreement, dated February 23, 2000
(the "Subscription Agreement"). Pursuant to the terms of the Subscription
Agreement, LEG desires to give Sharma or, in the event of the death or
incapacity of Sharma, Schwartz, with full power of substitution, the right to
vote, or to execute and deliver written consents or otherwise act in respect of,
such 500,000 shares of Common Stock and any other shares of Common Stock or
capital stock of the Company which may be issued to or acquired by LEG from time
to time in respect of such 500,000 shares of Common Stock, whether by exchange,
conversion of securities, stock split, dividend, combination of shares or any
similar capital adjustment, or through any corporate reorganization or
otherwise, so long as such shares remain subject to this Agreement (the
"Shares"), all in accordance with the terms and conditions set forth in this
Agreement. Sharma or, in the event of the death or incapacity of Sharma,
Schwartz is sometimes referred to herein as the "Proxyholder."
In consideration of the foregoing premises and the mutual covenants and
agreements set forth herein, LEG, Sharma and Schwartz hereby agree as follows:
1. Voting Agreement. On and after the date hereof, LEG agrees to vote
the Shares at all meetings of the shareholders of the Company, to execute and
deliver written consents as permitted pursuant to the Florida Business
Corporation Act, or the comparable laws of any state to which the Company
changes its state of incorporation, or to otherwise act with respect to the
Shares in the same manner as the Proxyholder is required pursuant to Section 3
below to vote the Shares, give his written consent or otherwise act with respect
to the Shares from time to time, including without limitation, refraining from
voting the Shares or giving a consent or otherwise acting in respect thereof.
2. Irrevocable Proxy. To ensure compliance with Section 1, LEG hereby
agrees to grant to the Proxyholder an irrevocable proxy in the form of Exhibit A
annexed hereto, pursuant to the provisions of Section 607.0722 of the Florida
Business Corporation Act (or, in the event the Company changes its state of
incorporation, pursuant to any comparable law of the Company's state of
incorporation), to vote, or to execute and deliver written consents or otherwise
act in respect of the Shares in the manner required by Section 3 below, as
fully, to the same extent and with the same effect as LEG might or could do
under applicable laws or regulations governing the rights and powers of
shareholders of a corporation incorporated under the laws of the Company's state
of incorporation. LEG hereby affirms that the proxy granted hereunder is given
as a condition of the voting agreement provided in Section 1 and as such is
<PAGE> 3
coupled with an interest and is irrevocable. LEG agrees from time to time to
take such further action and to execute and deliver such further agreements,
proxies and other instruments as may be necessary to carry out the intent of
this Agreement, including, without limitation, this Section 2.
3. Duties of the Proxyholder; Manner of Voting Shares. In consideration
of LEG's entering into this Agreement and granting the irrevocable proxy
provided under Section 2, the Proxyholder hereby covenants and agrees to vote
the Shares, execute and deliver written consents or otherwise act in the same
manner and in the same proportion (for or against or abstain with respect to any
proposition or not voted in respect of such proposition) that all shares of
Common Stock beneficially owned (within the meaning of Rule 13d-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act") by
Colt Capital, LLC, Colt Services, Inc., TBM Capital II, LLC, Sharma and Schwartz
(the "Voting Group") are voted for or against or abstain with respect to such
proposition or are not voted. By way of illustration, pursuant to this Section 3
the Shares will be voted in accordance with a fraction, (x) the numerator of
which is the number of shares of Common Stock beneficially owned by the Voting
Group that is voted for or against or that abstain with respect to or that do
not vote with respect to a proposition and (y) in each case, the denominator of
which is the total number of shares of Common Stock beneficially owned by the
Voting Group.
4. Termination. This Agreement shall terminate on the earlier to occur
of (a) the mutual agreement of the parties hereto to the Agreement's termination
or (b) the death or permanent disability of Sharma and Schwartz. This Agreement
and the irrevocable proxy provided under Section 2 shall also terminate as to
any Shares sold, transferred or assigned to any person who is not (i) an
affiliate (as defined in the Securities Act of 1933 and the rules and
regulations thereunder (the "Securities Act")) of LEG or (ii) after giving
effect to such sale, transfer or assignment, the beneficial owner (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of ten percent or more
of the Common Stock.
5. Legend. As long as this Agreement shall remain in effect with
respect to any Shares, each and every certificate or other instrument
representing the Shares shall bear on the face or the reverse side thereof a
legend in substantially the following form, in addition to such other
restrictive legends as may be required by law or pursuant to any other
agreement:
The securities represented by this certificate are subject to
the terms and conditions of a Voting Agreement between the
registered owner hereof and certain holders of securities of
the Corporation, and to the irrevocable proxy granted
thereunder, a copy of which Agreement has been deposited with
the Corporation at its principal business office.
Upon the written request of LEG, the Company shall promptly cause the removal of
the foregoing legend on any certificate representing any shares of Common Stock
as to which this
-2-
<PAGE> 4
Agreement and the irrevocable proxy provided under Section 2 are no longer
applicable in accordance with the terms of this Agreement.
6. Miscellaneous Provisions.
(a) Entire Agreement; Termination. This Agreement constitutes the
entire agreement among the parties with respect to the subject matter hereof and
unless terminated as provided herein, shall be irrevocable and specifically
enforceable in accordance with its terms as between the parties hereto and their
transferees.
(b) Notices and Communications. All notices and other communications to
be given to a party under this Agreement shall either be hand delivered, sent by
facsimile transmission or by overnight national delivery service or by certified
or registered mail to the following:
in the case of LEG: c/o Golub Associates Incorporated
555 Madison Avenue, 30th Floor
New York, New York 10022
Facsimile No.: (212) 750-5505
in the case of Sharma: c/o TBM Holdings, Inc.
136 Main Street, Suite 203
Westport, Connecticut 06880
Facsimile No.: (203) 227-1050
in the case of Schwartz: c/o TBM Holdings, Inc.
136 Main Street, Suite 203
Westport, Connecticut 06880
Facsimile No.: (203) 227-1050
or to such other address as may be designated by either party hereto in a
writing delivered to the other party in the manner set forth in this Section.
Notices sent by certified or registered mail shall be deemed received three
business days after being mailed; all other notices shall be deemed received on
the date delivered.
(c) Binding Effect. This Agreement and the irrevocable proxy provided
under Section 2 shall be binding upon and enforceable by each of the parties
hereto and their respective heirs, executors, administrators or other legal
representatives and assigns, and shall be binding upon all transferees of LEG;
provided, however, that this Agreement and the irrevocable proxy provided under
Section 2 shall not apply as to any Shares sold, transferred or assigned to any
person who is not (i) an affiliate (as defined in the Securities Act) of LEG or
(ii) after giving
-3-
<PAGE> 5
effect to such sale, transfer or assignment, the beneficial owner (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of ten percent or more
of the Common Stock.
(d) Governing Law. This Agreement and the irrevocable proxy provided
under Section 2 shall be governed by, and interpreted and enforced in accordance
with, the laws of the Company's state of incorporation. LEG agrees to execute
any amendment or supplement to this Agreement or the irrevocable proxy provided
under Section 2 necessary to conform the terms of this Agreement to the laws of
any state to which the Company changes its state of incorporation.
(e) Severability. If any provision of this Agreement is declared void
by a court, governmental agency or other entity of competent jurisdiction, the
remaining provisions of this Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, LEG, Sharma and Schwartz have executed this
Agreement as of the date first above written.
LEG PARTNERS III SBIC, L.P.
By: Golub PS-GP, LLC
By: /s/ Lawrence E. Golub
------------------------------
Lawrence E. Golub, Manager
/s/ Anand Sharma
-----------------------------------
Anand Sharma
/s/ William A. Schwartz
-----------------------------------
William A. Schwartz
The Company hereby agrees to the last sentence in Section 5 of this Agreement.
TBM HOLDINGS, INC.
By: /s/ William A. Schwartz
----------------------------------
William A. Schwartz, President
-4-
<PAGE> 6
EXHIBIT A
IRREVOCABLE PROXY
The undersigned, as holder of 500,000 shares of common stock, par value
$.001 per share (the "Common Stock"), of TBM Holdings, Inc., a Florida
corporation (the "Company"), hereby grants to Anand Sharma or, in the event of
his death or incapacity, William A. Schwartz, or any substitute appointed by
such proxy to act in his place, an irrevocable proxy pursuant to the provisions
of Section 607.0722 of the Florida Business Corporation Act to vote, or to
execute and deliver written consents or otherwise act in respect of, such
500,000 shares of Common Stock and any other shares of Common Stock or capital
stock of the Company which may be issued to or acquired by it from time to time
in respect of such 500,000 shares of Common Stock, whether by exchange,
conversion of securities, stock split, dividend, combination of shares or any
similar capital adjustment, or through any corporate reorganization or
otherwise, so long as such shares remain subject to the Voting Agreement
referred to below (the "Shares"), in the same manner and in the same proportion
(for or against any proposition or not voted in respect of such proposition)
that all shares of Common Stock beneficially owned (within the meaning of Rule
13d-3 promulgated under the Securities Exchange Act of 1934, as amended) by Colt
Capital, LLC, Colt Services, Inc., TBM Capital II, LLC, Anand Sharma and William
A. Schwartz are voted for or against such proposition or are not voted, in
accordance with Section 3 of the Voting Agreement referred to below, as fully,
to the same extent and with the same effect as the undersigned might or could do
under any applicable laws or regulations governing the rights and powers of
shareholders of a Florida corporation. Without limiting the generality of the
foregoing, this irrevocable proxy authorizes the proxyholder to vote or
otherwise act in accordance with the preceding sentence on all matters that may
be submitted for a vote to the shareholders of the Company at any meeting of the
shareholders of the Company, and any adjournment thereof, to the fullest extent
permitted under the Florida Business Corporation Act, as amended from time to
time, and with all powers the undersigned would possess as shareholder
thereunder.
The undersigned hereby affirms that this irrevocable proxy is given
pursuant to that certain Voting Agreement, dated as of March 13, 2000, among the
undersigned, Anand Sharma and William A. Schwartz (the "Voting Agreement"), and
as such is irrevocable and coupled with an interest. This proxy may be exercised
by the undersigned for the period beginning on the date hereof and shall remain
in full force and effect with respect to Shares until terminated in accordance
with the provisions of the Voting Agreement.
The undersigned hereby consents to and waives notice of the time and
place of any meeting of shareholders, and any adjournment thereof, and hereby
ratifies and confirms all that this proxy may do and cause to be done by virtue
hereof in accordance with the provisions hereof and of the Voting Agreement.
This proxy shall remain in full force and effect and shall be
enforceable against any
1
<PAGE> 7
transferee, assignee or donee of Shares that is (i) an affiliate (as defined in
the Securities Act of 1933 and the rules and regulations thereunder) of the
undersigned or (ii) after giving effect to such sale, transfer or assignment,
the beneficial owner (within the meaning of Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended) of ten percent or more of the
Common Stock.
Dated this 13th day of March, 2000.
LEG Partners III SBIC, L.P.
By: Golub PS-GP, LLC
---------------------------
Lawrence E. Golub, Manager
2
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BALANCE
SHEETS AND STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-2000
<PERIOD-START> JAN-02-2000
<PERIOD-END> APR-01-2000
<CASH> 12,520
<SECURITIES> 0
<RECEIVABLES> 5,098
<ALLOWANCES> (223)
<INVENTORY> 7,165
<CURRENT-ASSETS> 24,710
<PP&E> 6,996
<DEPRECIATION> (49)
<TOTAL-ASSETS> 39,218
<CURRENT-LIABILITIES> 5,905
<BONDS> 0
0
0
<COMMON> 5
<OTHER-SE> 22,929
<TOTAL-LIABILITY-AND-EQUITY> 39,218
<SALES> 3,655
<TOTAL-REVENUES> 3,655
<CGS> 2,607
<TOTAL-COSTS> 3,658
<OTHER-EXPENSES> (132)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 99
<INCOME-PRETAX> 30
<INCOME-TAX> 22
<INCOME-CONTINUING> 8
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
