<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 September 30,
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 of (IRS Employer Identification No.)
Incorporation)
136 MAIN STREET
WESTPORT, CONNECTICUT 06880
(Address of Principal Executive Office)
(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.
[ X ] Yes [ ] No
The number of shares outstanding of the issuer's Common Stock, $.001 par
value per share, as of November 13, 2000, was 5,442,413, excluding 517
contingently issuable shares held by an escrow agent.
Transitional Small Business Disclosure Format (check one):
[ ] Yes [ X ] No
<PAGE> 2
INDEX
TBM HOLDINGS INC.
<TABLE>
<S> <C>
Part I: Financial Information
Item 1. Consolidated Financial Statements
Unaudited Condensed Consolidated Balance Sheets
at September 30, 2000 and January 1, 2000 (audited)................... 3
Unaudited Condensed Consolidated Statements of Operations
for the three months and nine months
ended September 30, 2000 and September 30, 1999....................... 4
Unaudited Condensed Consolidated Statements of Cash Flows for the nine
months ended September 30, 2000 and September 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 6. Exhibits and Reports on Form 8-K ............................. 16
Signature................................................................... 17
</TABLE>
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,
SEPTEMBER 30, 2000
2000 (audited)
-------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,458 $ 12,064
Trade accounts receivable, net 6,730 --
Inventories, net 8,614 --
Prepaid expenses and other receivables 355 11
-------- --------
Total current assets 20,157 12,075
Property, plant and equipment, net 7,459 --
Goodwill, net 11,914 --
Other assets 230 8
-------- --------
Total assets $ 39,760 $ 12,083
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $ 3,955 $ 67
Current portion of long-term debt 540 --
Legal settlement 80 80
Accrued expenses 2,484 --
Bank overdraft payable 546 --
-------- --------
Total current liabilities 7,605 147
Revolving credit loan 7,278 --
Long-term debt, excluding current portion 4,916 --
Other long-term liabilities 62 --
Stockholders' equity:
Common stock, $.001 par value. Authorized
10,000,000 shares; 4,519,337 and 2,601,000 shares issued and
outstanding at September 30, 2000 and January 1, 2000
respectively 5 3
Additional paid-in capital 35,262 24,264
Accumulated other comprehensive loss - foreign currency
translation adjustments (109) --
Accumulated deficit (15,259) (12,331)
-------- --------
Total stockholders' equity 19,899 11,936
-------- --------
Commitments and contingencies
-------- --------
Total liabilities and stockholders' equity $ 39,760 $ 12,083
======== ========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
3
<PAGE> 4
TBM HOLDINGS INC. AND SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except share and per share data)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
-------------------------------- ---------------------------------
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Sales $ 11,941 $ -- $ 25,839 $ --
Cost of Sales 10,240 -- 21,181 --
----------- ----------- ----------- -----------
Gross Profit 1,701 -- 4,658 --
Selling, general and
administrative expenses 3,312 180 7,097 189
----------- ----------- ----------- -----------
Operating loss (1,611) (180) (2,439) (189)
Interest expense 330 -- 742 --
Other income, net (37) (149) (297) (186)
----------- ----------- ----------- -----------
Loss before income taxes (1,904) (31) (2,884) (3)
----------- ----------- ----------- -----------
Income tax expense 13 -- 44 --
----------- ----------- ----------- -----------
Loss from continuing
operations (1,917) (31) (2,928) (3)
Loss from discontinued operations -- -- -- (32)
----------- ----------- ----------- -----------
Net loss $ (1,917) $ (31) $ (2,928) $ (35)
=========== =========== =========== ===========
Basic and diluted loss per share:
Continuing operations $ (0.42) $ (0.01) $ (0.71) $ --
Discontinued operations -- -- -- (0.03)
----------- ----------- ----------- -----------
$ (0.42) $ (0.01) $ (0.71) $ (0.03)
=========== =========== =========== ===========
Weighted average shares outstanding 4,517,667 2,568,000 4,110,733 1,012,111
=========== =========== =========== ===========
</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>
NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (2,928) $ (35)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 765 2
Noncash interest expense 102 --
Gain on forgiveness of debt -- (24)
Changes in working capital components (1,560) (108)
-------- --------
Net cash used in operating activities (3,621) (165)
-------- --------
Cash flows from investing activities:
Capital expenditures for property, plant and equipment, net (247) (6)
Payment for acquisition of businesses, net of cash acquired (13,394) --
-------- --------
Net cash used in investing activities (13,641) (6)
-------- --------
Cash flows from financing activities:
Change in bank overdraft payable (519) --
Net borrowings under revolving credit loan 2,196 --
Issuance of common stock 8,000 12,212
-------- --------
Net cash provided by financing activities 9,677 12,212
Effect of foreign currency translation on cash (21) --
-------- --------
Net increase (decrease) in cash (7,606) 12,041
Cash and cash equivalents, beginning of period 12,064 2
-------- --------
Cash and cash equivalents, end of period $ 4,458 $ 12,043
======== ========
Supplemental cash flow disclosure:
Cash paid for interest $ 736 $ --
Cash paid for income taxes $ 106 $ --
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
equipment in Houston, Texas; Pawtucket, Rhode Island; Little Rock, Arkansas;
and Adelaide, 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 common 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.
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TBM HOLDINGS INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
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:
<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
7
<PAGE> 8
TBM HOLDINGS INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
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 net income.
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)
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 September 30, 2000.
(2) ACQUISITIONS
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. Upon closing, the Company paid down
$5,338 of the debt assumed. 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 $951 of costs directly attributable to the acquisition, of which
$889 had been paid as of September 30, 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
cash. The Company also incurred approximately $391 of costs directly
attributable to the acquisition, all of which had been paid as of September 30,
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,
9
<PAGE> 10
TBM HOLDINGS INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
accounts payable and accrued expenses. Lee's name was changed to Presto Lifts,
Inc. on May 22, 2000.
Results for the nine months ended September 30, 2000 include the operating
results of Long Reach for the period February 24, 2000 through September 30,
2000, and the operating results of Presto Lifts for the period May 16, 2000
through September 30, 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 nine months ended September 30, 2000 and September 30,
1999, respectively, based upon historical information that has been adjusted to
reflect the Company's acquisitions of Long Reach and Lee 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>
Nine months ended Nine months ended
September 30, 2000 September 30, 1999
------------------ ------------------
<S> <C> <C>
Net sales $ 37,156 $ 41,342
Loss from continuing operations (4,320) (2,710)
Net loss $ (4,320) $ (2,742)
=========== ===========
Basic and diluted loss per share:
From continuing operations $ (1.02) $ (1.79)
From discontinued operations -- (0.02)
----------- -----------
Net $ (1.02) $ (0.81)
=========== ===========
Basic and diluted weighted average shares
outstanding 4,238,470 1,512,111
=========== ===========
</TABLE>
10
<PAGE> 11
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 September 30, 2000 are summarized as follows:
<TABLE>
<S> <C>
Raw materials $3,859
Work in process 1,432
Finished goods 3,323
------
Total inventories $8,614
======
</TABLE>
(4) LONG-TERM DEBT AND REVOLVING CREDIT LOAN
Long-term debt at September 30, 2000 is summarized as follows:
<TABLE>
<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 2,956
-------
Total long-term debt $ 5,456
Less current portion 540
-------
Long-term debt, excluding current portion $ 4,916
=======
</TABLE>
In connection with the acquisitions of Long Reach and Lee (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
11
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TBM HOLDINGS INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
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 (9.5% at September 30, 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 in connection with the Long Reach acquisition. At
September 30, 2000, the borrowing base availability for the revolving credit
loan was determined to be $8,323, of which the Company had utilized $7,278.
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.
(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.
12
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TBM HOLDINGS INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
(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 three and nine month periods ended September 30,
2000 and September 30, 1999, basic and diluted loss per common share are the
same.
At September 30, 2000, there were 59,630 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.
(8) SUBSEQUENT EVENTS
On October 2, 2000, the Company announced that its Little Rock, Arkansas
facility will be closed by December 31, 2000. This action will result in the
involuntary termination of substantially all of the 82 employees at Little Rock.
Product lines currently located in Little Rock will be transferred to other
locations. The Company will record an estimated fourth quarter charge of $861
for exit costs including involuntary termination benefits of $693. In addition,
the Company anticipates that the closure will generate additional losses in the
amount of $610, to be recognized in the fourth quarter, 2000.
13
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TBM HOLDINGS INC. AND SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(In thousands, except share and per share data)
On October 19, 2000, a wholly owned subsidiary of the Company executed an
agreement to purchase substantially all of the assets and specific liabilities
of Blue Giant Limited ("Blue Giant"), a wholly owned subsidiary of CLARK
Material Handling Company ("Clark"), and certain intellectual property of Blue
Giant Corporation, also a subsidiary of Clark, for an aggregate purchase price
of $11,000, subject to closing adjustments. Based in Ontario, Canada, Blue Giant
is a manufacturer of loading dock equipment; the intellectual property acquired
from Blue Giant Corporation will allow Blue Giant to manufacture wheeled
products. This acquisition closed on November 10, 2000. The Company funded the
acquisition through a combination of debt and additional equity investment by
certain existing stockholders.
On November 2, 2000 Long Reach Holdings, Inc. changed its name to Long Reach,
Inc.
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<PAGE> 15
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.
On October 19, 2000, a wholly owned subsidiary of the Company executed an
agreement to purchase substantially all of the property and assets, and assume
specified liabilities, of Blue Giant Limited ("Blue Giant"), a wholly owned
subsidiary of CLARK Material Handling Company ("Clark"), and certain
intellectual property of Blue Giant Corporation, also a subsidiary of Clark,
for an aggregate purchase price of $11,000, subject to closing adjustments.
Based in Ontario, Canada, Blue Giant is a manufacturer of loading dock
equipment, including dock levelers, elevating docks, edge of dock levers, truck
restraints, hydraulic lift tables and related parts and accessories. The
intellectual property acquired from Blue Giant Corporation will allow Blue
Giant to manufacture wheeled products, including powered stackers, and powered
and manual pallet trucks. This acquisition closed on November 10, 2000. The
Company funded the acquisiton through a combination of debt and additional
equity investment by certain existing stockholders.
Long Reach, Presto Lifts and Blue Giant are the first of several potential
acquisitions by the Company in the material handling 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.
15
<PAGE> 16
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 nine months ended September 30, 2000 include the operating
results of Long Reach for the period February 24, 2000 through September 30,
2000, and the operating results of Presto Lifts for the period May 16, 2000
through September 30, 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 $11,941 and a net loss of $1,917 for
the three months ended September 30, 2000 compared with no sales and net loss of
$31 for the comparable period in 1999. For the three months ended September
30, 2000, gross profit represented 14.2% of net sales, and selling, general and
administrative expenses represented 27.7% of net sales. During the three months
ended September 30, 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 and the cost of compliance with the Company's
reporting obligations as a public company, offset by other income.
During the three and nine months ended September 30, 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 nine months ended September 30, 2000
was $330 and $742, respectively. This reflects the interest expense for the
period February 24, 2000 through September 30, 2000 under Long Reach's revolving
line of credit and term loan, each as amended. Other income, net was $37 and
$297 for the three and nine months ended September 30, 2000, as compared to $149
and $186 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 $3,621 for the nine months ended
September 30, 2000, compared with $165 for the nine months ended September 30,
1999. This change reflects the net loss for the nine months ended September 30,
2000 of $2,928 combined with the negative changes in working capital components
for such period of $1,560 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.
16
<PAGE> 17
Net cash used in investing activities was $13,641 for the nine months
ended September 30, 2000, compared with $6 for the corresponding nine 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 $9,677 for the nine months
ended September 30, 2000, as compared to $12,212 for the nine months ended
September 30, 1999. Net cash provided by financing activities for the nine
months ended September 30, 2000 reflects the issuance of common stock of $8,000
and a net increase in borrowings of $1,677 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 nine months ended September 30, 1999 reflects
the issuance of common stock of $12,212 in connection with the Company's private
placement on June 15, 1999.
At September 30, 2000, the Company owed $7,278 under its revolving credit
facility. Long term debt outstanding at September 30, 2000 consisted of a $2,500
note payable to the bank and $2,956 of notes payable to stockholders.
Issuance of common stock was $8,000 and $12,212 for the nine months ended
September 30, 2000 and 1999, respectively. Issuance of common stock for the nine
months ended September 30, 2000 reflects the Company's private placement of its
common stock and the exercise of an option on February 23, 2000. Issuance of
common stock of $12,212 for the nine months ended September 30, 1999 reflects
the Company's private placement of its common stock on June 15, 1999. Common
stock issued for acquisition for the nine months ended September 30, 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.
Capital expenditures for property, plant and equipment totaled $247 for
the first nine 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
Market Risk. 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
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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 third
quarter and nine months ended September 30, 2000 by approximately $27 and $60,
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. As of September 30, 2000, the Company
had foreign operations in Australia. The translation adjustment
during the nine months ended September 30, 2000 was a loss of $109, 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 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.
The Company has announced the consolidation of its operations in Little
Rock, Arkansas into its manufacturing locations in Houston, Texas and Pawtucket,
Rhode Island. The Little Rock facility has a small administrative staff
including engineering, customer service, purchasing, and manufacturing
management. The Company has announced its plans for Long Reach to transfer its
fork attachment production lines to the Company's Long Reach plant in
Houston, Texas, and its Rol-lift material handling equipment production lines
to the Company's Presto Lifts plant in Pawtucket, Rhode Island. The Company
plans to complete this consolidation by the end of 2000.
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
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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 SEC staff has issued 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 is currently
evaluating the impact that SAB No. 101 may have on its consolidated financial
position and results of operations.
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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ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K.
(a) EXHIBITS
Exhibit No. Description
----------- -----------
27 Financial Data Schedule for the nine months ended
September 30, 2000.
(b) REPORTS ON FORM 8-K
During the three months ended September 30, 2000, the Company filed
one Current Report on Form 8-K and one Amendment to Current Report
on Form 8-K, each described below. Reference is made to such
Current Report or Amendment to Current Report for a complete
description of the disclosures contained therein.
Current Report on Form 8-K dated September 8, 2000, filed with the
Commission on September 22, 2000, containing disclosure under Item
5. Such Current Report on Form 8-K reported the signing of a
non-binding letter of intent to acquire the assets and certain
liabilities of Blue Giant Limited, a subsidiary of CLARK Material
Handling Company ("Clark"), and certain intellectual property of
Blue Giant Corporation, also a subsidiary of Clark.
Amendment No. 1 to Current Report on Form 8-K (Form 8-K/A) dated
May 16, 2000, filed with the Commission on July 31, 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.
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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: November 14, 2000 By: /s/ William A. Schwartz
----------------------------------
William A. Schwartz, President and
Principal Financial Officer
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