UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter period ended September 30, 1997
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT
For the transition period from _____ to _____
Commission File No. 33-47921-A
Texas Equipment Corporation
- -------------------------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
Nevada 62-1459870
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1305 Hobbs Highway, Seminole, Texas 79360
- -------------------------------------------------------------------------------
(Address of principal executive offices)
(915) 759-3643
- -------------------------------------------------------------------------------
(Issuer's Telephone number)
- -------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange (Former 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
|_| No |_|
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity as of the latest practicable date: 24,454,886
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
TEXAS EQUIPMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
------------- ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and Temporary Cash Investments $ 725,928 $ 2,661,058
Accounts Receivable
Trade 2,241,395 872,815
Employees and Other 247,451 204,649
Prepaid Expenses 0 12,500
Inventories 21,431,951 5,380,188
------------ -----------
TOTAL CURRENT ASSETS 24,646,725 9,131,210
------------ -----------
LAND, BUILDINGS AND EQUIPMENT, at cost 4,578,160 2,111,369
Less Accumulated Depreciation (1,059,735) (866,927)
NET LAND, BUILDINGS AND EQUIPMENT 3,518,425 1,244,442
------------- -----------
OTHER ASSETS
Finance Receivables 800,899 731,028
Cash Surrender Value of Life Insurance 137,351 129,156
Other Assets 13,681 23,945
Goodwill 127,133 136,667
Related Party Receivables 19,573 215,810
------------ -----------
TOTAL OTHER ASSETS 1,098,637 1,236,606
------------- -----------
TOTAL ASSETS $ 29,263,787 $11,612,258
============ ===========
</TABLE>
(Continued)
F-1
<PAGE>
TEXAS EQUIPMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(CONTINUED)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
--------------- -------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Notes Payable $ 1,386,779 $ 300,000
Current Maturities of Long-Term Debt 394,487 396,022
Accounts Payable Trade
John Deere Company 12,655,321 2,190,355
Other 3,220,579 437,564
Accrued Expenses 1,569,047 753,271
Customer Deposits 30,124 79,500
Deferred Tax Liability 125,874 159,800
------------ -----------
TOTAL CURRENT LIABILITIES 19,382,211 4,316,512
LONG-TERM DEBT - net of current maturities 3,307,455 1,005,763
DEFERRED TAX LIABILITY 107,200 107,200
------------ -----------
TOTAL LIABILITIES 22,796,866 5,429,475
------------- -----------
STOCKHOLDERS' EQUITY
Common Stock, $.001 Par Value, Authorized
25,000,000; Issued and Outstanding
24,704,865 24,705 24,705
Paid In Capital 2,534,951 2,534,951
Retained Earnings 3,907,265 3,623,127
------------ -----------
6,466,921 6,182,783
Less Treasury Shares, at cost - -
--------------- ---------------
TOTAL STOCKHOLDERS' EQUITY 6,466,921 6,182,783
--------- -----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $29,263,787 $11,612,258
=========== ===========
</TABLE>
See notes to financial statements.
F-2
<PAGE>
TEXAS EQUIPMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Sept 30, Nine Months Ended Sept 30,
------------------------------ ----------------------------
1997 1996 1997 1996
------------- ----------- ------------ -----------
<S> <C> <C> <C> <C>
REVENUES $18,779,201 $5,754,814 $40,524,688 $19,507,714
COST OF REVENUES (16,096,991) (5,235,072) (34,713,952) (16,949,797)
------------ ----------- ------------ ------------
GROSS PROFIT 2,682,210 519,742 5,810,736 2,557,917
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES
Commissions, Salaries, and
Employee Benefits 755,003 374,220 1,975,233 1,080,664
Amortization and Depreciation 88,445 39,108 253,029 114,651
Collection and Bad Debt Expenses 47,506 22,134 148,178 70,696
Other Operating Expenses 631,334 194,003 1,786,781 679,771
--------- -------- ---------- ---------
Total Selling, General and
Administrative Expenses 1,522,288 629,465 4,163,221 1,945,782
OTHER INCOME (EXPENSE)
Interest Income 15,125 27,770 141.237 110,974
Interest Expense (32,252) (39,587) (142,221) (75,792)
Other Income (Expense) 18,121 (14,937) 85,621 15,566
---------- ------------ ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES 1,160,916 (136,477) 1,732,152 662,883
INCOME TAX (EXPENSE) BENEFIT (555,388) 43,600 (605,628) (231,097)
----------- ---------- ---------- -----------
INCOME (LOSS) FROM
CONTINUING OPERATIONS $605,528 $(92,877) $ 1,126,524 $ 431,786
=========== ======== =========== =========
DISCONTINUED OPERATIONS
Income (Loss) From Operations of
Discontinued Subsidiary (net of tax benefit) 304,605 0 (591,292) 0
------------ ------------ ------------ ------------
NET INCOME (LOSS) $ 910,133 ($92,877) $ 535,232 $ 431,786
============ ========= ========== =========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 24,704,886 16,850,000 24,704,886 16,850,000
========== =========== ========== ==========
INCOME (LOSS) PER SHARE
Continuing Operations 0.037 (0.006) 0.046 0.026
Discontinued Operations 0.000 0.000 (0.024) 0.000
============ ============ ============ ===========
</TABLE>
See notes to financial statements.
F-3
<PAGE>
TEXAS EQUIPMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
SEPTEMBER 30, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
TOTAL
COMMON STOCK STOCK-
------------------- PAID IN RETAINED HOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
------ ------ ------- -------- --------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1995 100,000 $100,000 ($96,477) $2,886,776 $3,486,604
Acquisition of Parent
September 17, 1996 24,604,886 (75,295) 2,631,428 0 1,959,828
Net Income 0 0 0 736,351 736,351
--------------- ------------ ------------- ----------- ----------
Balance, December 31,1996 24,704,886 24,705 2,534,951 3,623,127 6,182,783
---------
Net Income (Unaudited) 0 0 0 535,232 535,232
ESOP Redemptions 0 0 0 (7,019) (7,019)
Prior Period Adjustments 0 0 0 (244,075) (244,075)
-------------- ------------ --------------- ------------ -----------
Balance, September 30, 1997 24,704,886 $24,705 $2,534,951 $3,907.265 $6,466,921
========== ========= ========== ========== ==========
</TABLE>
F-4
<PAGE>
TEXAS EQUIPMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended September 30 Nine Months Ended September 30,
------------------------------- -------------------------------
1997 1996 1997 1996
--------------- -------- ------------ ------------
<S> <C> <C> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net(Income $910,133 ($92,877) $535,232 $431,786
Adjustments to Reconcile Net Income (Loss)
to Net Cash from Operating Activities
Amortization and Depreciation 88,445 39,108 253,028 114,651
Loss on Disposal of Assets 0 3,502 0 3,502
Prior Period Adjustments 0 0 (244,075) 0
(Increase) Decrease in Finance Receivable (83,256) (123,116) (69,871) (146,020)
Changes in Current Assets and Liabilities
(Increase) Decrease in Accounts Receivable (1,125,234) 31,945 (1,411,362) (531,420)
(Increase) Decrease in Inventories (6,024,628) (28,434) (16,051,763) (832,838)
(Increase) Decrease in Prepaid Expenses 0 0 12,500 0
Increase (Decrease) in Accounts Payable 4,638,762 534,346 13,247,961 1,089,905
Increase (Decrease) in Accrued Liabilities 724,701 (117,897) 815,776 113,831
Increase (Decrease) in Customer Deposits 19,610 54,504 (49,376) 72,035
Increase (Decrease) in Deferred Tax Liability (33,925) 0 (33,925) 0
(Increase) Decrease in Other Assets 250 7,660 10,264 (35,720)
------------ ----------- ------------- --------------
NET CASH FLOW (USED) PROVIDED BY
OPERATING ACTIVITIES (885,142) 308,741 (2,985,611) 279,712
----------- --------- ------------- ----------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Lands, Buildings and Equipment (708,207) (11,625) (2,545,476) (30,336)
Proceeds from Sale of Equipment 0 (337) 28,000 46,170
Increase in Cash Surrender Value of Insurance (8,195) (12,389) (8,195) (12,389)
(Increase) Decrease in Related Party Receivables 0 (54,250) 196,237 (14,476)
------------ -------- ----------- -----------
NET CASH FLOWS (USED) BY
INVESTING ACTIVITIES (716,402) (78,801) (2,329,436) (11,031)
--------- -------- ---------- ---------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from Note Borrows 3,317,407 75,490 5,368,419 410,279
Repayment of Note Borrows (1,358,359) (319,301) (1,981,483) (635,544)
Capital Contributions 0 927,613 0 927,613
Redemption of ESOP interest (7,019) 0 (7,019) 0
------------- ----------- ------------ -----------
NET CASH FLOW PROVIDED (USED)
BY FINANCING ACTIVITIES 1,952,029 683,802 3,379,917 702,348
---------- -------- ---------- ---------
NET INCREASE (DECREASE) IN CASH 350,485 913,742 (1,935,130) 971,029
CASH AT THE BEGINNING OF THE PERIOD 375,443 307,318 2,661,058 250,031
----------- -------- ---------- ---------
CASH AT THE END OF THE PERIOD $725,928 $1,221,060 $725,928 $1,221,060
========== ========== ========== ==========
SUPPLEMENTAL DISCLOSURES:
Cash Paid During the Period For:
Interest Expense $9,018 $51,279 $154,712 $87,484
======= ======= ======== ==========
Income Taxes $91,666 $203,699 $141,686 $203,699
======= ======== ======== =========
</TABLE>
F-5
<PAGE>
TEXAS EQUIPMENT CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note 1: Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10-01 of
Regulation S-X. They do not include all information and footnotes required by
generally accepted accounting principles. However, except as disclosed herein,
there has been no material change in the information disclosed in the notes to
financial statements included in the Annual Report on Form 10-K of Texas
Equipment Corporation and Subsidiaries (formerly Marinex Multimedia Corporation)
(the "Company") for the year ended December 31, 1996. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for the fair presentation have been included. Operating results for
the nine month period ended September 30, 1997, are not necessarily indicative
of the results that may be expected for the year ending December 31, 1997.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and results
of Operations.
The Company's revenues increased more than 107%, to $40,524,688 from
$19,507,714, for the nine month period ended September 30, 1997, compared to the
same period in 1996. The increase in revenues primarily reflects the additional
revenues derived from three John Deere dealerships in the panhandle of Texas and
a John Deere dealership operated in Artesia, New Mexico which the Company
acquired in 1997.
Revenues for the three month period ended September 30, 1997, increased more
than 225%, to $18,779,201 from $5,754,814, when compared to the same quarter in
1996. The greater percentage increase in the third quarter of 1997 compared to
the percentage increase in the nine month period of 1997 when compared to the
same period in 1996 reflects, in part, the acquisition of the Artesia, New
Mexico dealership which was acquired in early July, 1997. The revenues from this
dealership more than offset the revenues from the store previously operated in
Pecos, Texas, which the Company began to close in the third quarter of 1997
because of insufficient revenues and poor operating results.
Although much of the increase in revenues has come from the acquisition of
additional dealerships, all of the Company's dealerships, with the exception of
the Pecos operation, have grown when compared to the previous year. This
increase reflects a sound farm economy in West Texas and Eastern New Mexico with
favorable weather conditions. Furthermore, the timing of harvesting and planting
differs from store to store and this difference in timing decreases seasonal
variations in revenues.
Gross margins for the nine month period increased to 14.3% for the same period
in 1996. The Company believes that it is gaining some efficiencies from the
larger number of dealerships owned in 1997. In addition, although Selling,
general and administrative costs were larger as a percentage of revenues in 1997
when compared to the same period in 1996, 10.3% compared to 9.8%, respectively,
this difference narrowed in the third quarter of 1997. The Company believes it
is getting some benefit in management efficiencies because of the larger number
of stores. Also, litigation expenses began to decline in the third quarter
because the Company settled a portion of a large law suit.
The effect of increasing revenues and better margins resulted in an increase of
net profits from continuing operations of almost 161%, to $1,126,524 from
$431,786, in the nine month period ended September 30, 1997, when compared to
the nine month period ended September 30, 1996.
Liquidity and Capital Resources
The Company's operating capital is principally provided by inventory financing
through John Deere as well as its operating profit. The Company's long-term debt
has increased because a portion of the Company's acquisitions have been financed
through bank debt and notes.
<PAGE>
PART II - OTHER INFORMATION
None
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: November 12, 1997
/s/ Paul Condit
------------------------------------
Paul Condit, President and principal
financial officer
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> Dec-31-1997
<PERIOD-START> Jan-01-1997
<PERIOD-END> Sep-30-1997
<CASH> 726
<SECURITIES> 0
<RECEIVABLES> 2,489
<ALLOWANCES> 0
<INVENTORY> 21,432
<CURRENT-ASSETS> 8,052
<PP&E> 4,578
<DEPRECIATION> (1,060)
<TOTAL-ASSETS> 29,264
<CURRENT-LIABILITIES> 19,382
<BONDS> 0
0
0
<COMMON> 25
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 29,264
<SALES> 40,525
<TOTAL-REVENUES> 40,525
<CGS> 34,714
<TOTAL-COSTS> 4,163
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 141
<INCOME-PRETAX> 1,732
<INCOME-TAX> 606
<INCOME-CONTINUING> 1,127
<DISCONTINUED> (591)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 535
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
