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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended JANUARY 31, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission File Number: 0-13011
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TNR TECHNICAL, INC.
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(Exact name of Registrant as specified in its charter)
New York 11-2565202
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(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
301 Central Park Drive
Sanford, Florida 32771
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (407) 321-3011
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None
(Former name, former address and former fiscal year if changed
since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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
--- ---
268,743 Common Shares, $.02 par value were issued and outstanding at January 31,
2003.
TNR TECHNICAL, INC.
Index
Page
Number
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets
January 31, 2003 (Unaudited)
and July 31, 2002 3
Statements of Operations
Three and six months ended
January 31, 2003 (Unaudited) and
January 31, 2002 (Unaudited) 4
Statements of Cash Flows
Six months ended
January 31, 2003 (Unaudited) and
January 31, 2002 (Unaudited) 5
Notes to Financial Statements (Unaudited) 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7-9
PART II. OTHER INFORMATION 10-11
2
TNR TECHNICAL, INC.
Balance Sheets
Assets
January 31, 2003
July 31, 2002 (Unaudited)
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Current assets:
Cash and cash equivalents $ 854,729 440,294
Investments 1,750,819 2,371,684
Accounts receivable - trade, less allowance for doubtful
accounts of $18,733 and $20,863 577,050 726,187
Inventories 1,092,552 1,155,791
Prepaid expenses and other current assets 16,844 22,987
Income taxes receivable 23,000 --
Deferred income taxes 46,000 47,000
----------- -----------
Total current assets 4,360,994 4,763,943
Property and equipment, at cost, net of accumulated
depreciation and amortization 115,202 113,610
Deposits 15,457 15,457
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Total assets $ 4,491,653 4,893,010
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 121,563 209,305
Accrued expenses 229,932 140,760
Income taxes payable -- 52,668
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Total current liabilities 351,495 402,733
----------- -----------
Shareholders' equity:
Common stock - $0.02 par value, authorized 500,000
shares; issued 313,581 shares 6,272 6,272
Additional paid-in capital 2,698,261 2,698,261
Retained earnings 1,664,535 2,019,796
Treasury stock - 44,352 and 44,838 shares (228,910) (234,052)
----------- -----------
Total shareholders' equity 4,140,158 4,490,277
----------- -----------
$ 4,491,653 4,893,010
=========== ===========
See accompanying notes to financial statements.
3
TNR TECHNICAL, INC.
Statements of Operations
Three Months Ended Six Months Ended
January 31, January 31,
2003 2002 2003 2002
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- -----------
Revenue:
Net sales $ 2,002,166 1,874,603 3,999,435 3,905,310
----------- ----------- ----------- -----------
Cost and expenses:
Cost of goods sold 1,417,308 1,464,409 2,838,022 2,809,921
Selling, general and administrative 344,641 322,219 681,652 657,818
----------- ----------- ----------- -----------
1,761,949 1,786,628 3,519,674 3,467,739
----------- ----------- ----------- -----------
Operating income 240,217 87,975 479,761 437,571
Non-operating revenue:
Interest income 7,571 8,508 29,463 22,702
Investment income (11,908) -- 32,247 --
----------- ----------- ----------- -----------
Income before income taxes 235,880 96,483 541,471 460,273
Provision for income taxes 87,000 39,000 186,210 175,718
----------- ----------- ----------- -----------
Net income $ 148,880 57,483 355,261 284,555
=========== =========== =========== ===========
Basic earnings per share $ 0.55 0.22 1.32 1.10
=========== =========== =========== ===========
Diluted earnings per share $ 0.52 0.20 1.25 1.00
=========== =========== =========== ===========
Weighted average number of shares outstanding - basic 268,961 258,306 269,091 258,527
=========== =========== =========== ===========
Weighted average number of shares outstanding - diluted 284,961 283,918 285,091 284,139
=========== =========== =========== ===========
See accompanying notes to financial statements
4
TNR TECHNICAL, INC.
Statements of Cash Flows
Six months ended
January 31,
2003 2002
(Unaudited) (Unaudited)
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Cash flows from operating activities:
Net income $ 355,261 284,555
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 18,335 20,424
Deferred income taxes (1,000) 2,000
Net investment income (32,247) --
Changes in operating assets and liabilities:
Accounts receivable (149,137) (28,777)
Income taxes payable 75,668 (34,000)
Inventories (63,239) 64,665
Prepaid expenses and other assets (6,143) 1,142
Deposits -- --
Accounts payable and accrued expenses (1,430) (113,954)
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Net cash provided by operating activities 196,068 196,055
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Cash flows from investing activities:
Purchase of property and equipment (16,743) (2,465)
Purchase of investments and accrued interest (588,618) --
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Net cash used in investing activities (605,361) (2,465)
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Cash flows from financing activities:
Purchase of treasury stock (5,142) (10,271)
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Net cash used in financing activities (5,142) (10,271)
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(Decrease) increase in cash and cash equivalents (414,435) 183,319
Cash and cash equivalents - beginning of period 854,729 1,871,854
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Cash and cash equivalents - end of period $ 440,294 2,055,173
========== ==========
See accompanying notes to financial statements
5
TNR TECHNICAL, INC.
Notes to Financial Statements
(1) Presentation of Unaudited Financial Statements
The unaudited financial statements have been prepared in accordance
with rules of the Securities and Exchange Commission and, therefore, do
not include all information and footnotes necessary for a fair
presentation of financial position, results of operations and cash
flows, in conformity with generally accepted accounting principles. The
information furnished, in the opinion of management, reflects all
adjustments (consisting only of normal recurring accruals) necessary to
present fairly the financial position as of January 31, 2003, and
results of operations and cash flows for the three and six month
periods ended January 31, 2003 and 2002. The results of operations are
not necessarily indicative of results which may be expected for any
other interim period, or for the year as a whole.
(2) Sales to Major Customers
During the six months ended January 31, 2003 and 2002, no customer
accounted for more than 10% of total revenue.
(3) Inventories
Inventories consist of the following:
July 31, 2002 January 31, 2003
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(Unaudited)
Finished goods $1,058,683 1,121,117
Purchased parts and materials 33,869 34,674
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$1,092,552 1,155,791
=============== ================
6
Management's Discussion and Analysis of Financial Condition and Results of
Operations.
Forward Looking Statements
The information contained in this Form 10-Q are intended to update the
information contained in the Company's Annual Report on Form 10-K for the year
ended July 31, 2002 and such information presumes that readers have access to,
and will have read the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and other information contained in such
form 10-K and other Company filings with the Securities and Exchange Commission
("SEC").
This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended, and
Section 21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements involve risks and uncertainties, and actual results
could be significantly different that those discussed in this Quarterly Report
on Form 10-Q. Certain statements contained herein are forward-looking
statements. These statements discuss among other things expected growth, future
revenues and/or performance. Although we believe the expectations expressed in
such forward-looking statements are based on reasonable assumptions within the
bounds of our knowledge of our business, a number of factors could cause actual
results to differ materially from those expressed in any forward-looking
statements, whether oral or written, made by us or on our behalf. The
forward-looking statements are subject to risks and uncertainties including,
without limitation, the following: (a) changes in levels of competition from
current competitors and potential new competition and (b) costs of acquiring
inventory. The foregoing should not be construed as an exhaustive list of all
factors that could cause results to differ materially from those expressed in
forward-looking statements made by us. All forward-looking statements included
in this document are made as of the date hereof, based on information available
to the Company on the date thereof, and the Company assumes no obligation to
update any forward-looking statements.
Liquidity and Capital Resources
Working capital amounted to $4,361,210 at January 31, 2003 as compared to
$4,009,499 at July 31, 2002. Cash and short-term investments amounted to
$2,811,978 at January 31, 2003 as compared to $2,605,548 at July 31, 2002. As
more fully described in the statement of cash flows included in the Company's
financial statements elsewhere herein, net cash provided by operating activities
for the six months ended was $196,068.
During the six months ended January 31, 2003, cash flow from operating
activities was provided primarily by the Company's net income of $355,261 and
investment income of $32,427. Sales activity during the period resulted in
increased accounts receivable balances ($149,137). Inventory levels were
increased ($63,239) in order to meet customer demand for product. Increases in
obligations for income taxes result from the Company's profitability during the
six months ended January 31, 2003. Net cash was used in investing activities to
purchase treasury bills ($588,618) and equipment ($16,473) and in financing
activities to purchase treasury stock.
7
During the six months ended January 31, 2002, cash flow from operating
activities was provided primarily by the Company's net income of $284,555. Sales
activity during the period resulted in increased accounts receivable balances
and reduced inventory levels. Accounts payable and accrued expenses were reduced
during the first half of the year primarily as a result of bonus payments and
the completion of computer hardware and software upgrades. In addition, net cash
was used in investing activities to purchase equipment and in financing
activities to purchase treasury stock.
The Company's short term and long term liquidity needs have been satisfied from
internal sources including cash from operations and amounts available from the
Company's working capital. During the balance of fiscal 2003 and on a long-term
basis, management expects this trend to continue. There are no material
commitments for capital expenditures or any long-term credit arrangements as of
January 31, 2003.
Results of Operations
Sales for the three months ended January 31, 2003 increased $127,563 over sales
for the comparable period of the prior year. Cost of goods sold for the three
months ended January 31, 2003 decreased $47,101 or 3.2% as compared to the three
months ended January 31, 2002 primarily as a result of a more aggressive
purchasing strategy, and a reduction in shop labor costs. Accordingly, for the
three months ended January 31, 2003, gross margins increased 7.3% over the same
period of the prior year.
Sales for the six months ended January 31, 2003 increased $94,125 over sales for
the comparable period of the prior year. Labor cost savings during the second
quarter ended January 31, 2003 were offset by increases in cost of goods sold
during the first quarter ended October 31, 2002 resulting in an overall increase
in cost of goods sold ($28,101) for the six months ended January 31, 2003.
Therefore, gross profit increases of $66,024 resulted primarily from increased
sales.
Operating (selling, general and administrative) expenses increased $22,422 for
the three months ended January 31, 2003 as compared to the second quarter ended
January 31, 2002 primarily as a result of increased payroll costs. Operating
expenses when expressed as a percentage of sales was approximately 17% for both
the three months ended January 31, 2003 and the three months ended January 31,
2002.
Operating (selling, general and administrative) expenses increased from $657,818
for the six months ended January 31, 2002 to $681,652 for the six months ended
January 31, 2003, again primarily as a result of increased payroll costs.
Operating expenses when expressed as a percentage of sales was approximately 17%
for both the six months ended January 31, 2003 and the six months ended January
31, 2002.
The Company did not charge its operations with any research and development
costs during the six months ended January 31, 2003. Interest and investment
income increased from $22,702 for the six months ended January 31, 2002 to
$61,710 for the six months ended January 31, 2003 primarily as a result of the
Company's investments in U.S. Treasury bills during fiscal 2003.
8
Net income for the three months ended January 31, 2003 was $148,880 as compared
to $57,483 for the three months ended January 31, 2002 as a result of factors
previously discussed herein. Net income for the six months ended January 31,
2003 was $355,261 as compared to $284,555 for the six months ended January 31,
2002. Basic earnings per share were .55 and .22 in 2003 and 2002 respectively.
Management of TNR Technical, Inc. has received a number of comments from its odd
lot stockholders regarding the costs associated with the sale of their odd lots.
Further, management would like to reduce TNR's expense of maintaining mailings
to odd lot holders (i.e., 99 shares or less) from its stockholders of record on
December 15, 1995, so long as such purchases would not have the effect of
reducing TNR's record holders to 500 or less. The purchase price to be paid will
be based upon the closing asked price on the NASD electronic bulletin board of
TNR's common stock for the preceding trading day. Stockholders will not be
permitted to break up their stockholdings into odd lots, and stockholders or
their legal representatives must affirm to TNR that the odd lot shares submitted
for payment represent the stockholder's entire holdings and that such holdings
do not exceed 99 shares. (This offer shall be open to all odd lot beneficial
holders, even those held in street or nominee name, so long as the proper
representations can be obtained satisfactory to TNR that the shares are odd lot
shares, were owned by the beneficial stockholder as of December 15, 1995, and
represent such stockholder's entire holdings of TNR.) This offer will not be
valid in those states or jurisdictions where such offer or sale would be
unlawful.
Item 3. Controls and Procedures
The Company maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in the Company's
Exchange Act reports is recorded, processed, summarized and reported within the
time periods specified in the SEC's rules and forms, and that such information
is accumulated and communicated to the Company's management, including its Chief
Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required disclosure based closely on the definition of
"disclosure controls and procedures" in Rule 13a-14(c). In designing and
evaluating the disclosure controls and procedures, management recognized that
any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives,
and management necessarily was required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures. Within 90 days
prior to the date of this report, the Company carried out an evaluation, under
the supervision and with the participation of the Company's management,
including the Company's Chief Executive Officer and the Company's Chief
Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based on the foregoing, the
Company's Chief Executive Officer and Chief Financial Officer concluded that the
Company's disclosure controls and procedures were effective. There have been no
significant changes in the Company's internal controls or in other factors that
could significantly affect the internal controls subsequent to the date the
Company completed its evaluation. Therefore, no corrective actions were taken.
9
PART II - OTHER INFORMATION
Item 1. Legal Proceedings: None
Item 2. Changes in Securities: None
Item 3. Defaults Upon Senior Securities: None
Item 4. Submission of Matters to a Vote of Security Holders: On December 6,
2002, the Company held its annual meeting. At that time, each current director,
namely, Wayne Thaw, Kathie Thaw, Mitchell Thaw, Norman Thaw, Patrick Hoscoe and
Jerrold Lazarus were nominated and re-elected for a period of one year and until
their successor is elected and shall qualify. Each director received 243,628
shares voted in favor of their re-election and 1,878 shares voted against their
re-election.
Item 5. Other Information: None
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits
3 Certificate of Incorporation and Amendments thereto. (1)
3(A) By-Laws. (1)
3(B) February 1992 Certificate of Amendment to Certificate of
Incorporation (2)
10 Lease Agreement dated January 17, 1996 by and between RKW
Holding Ltd. and the Registrant (3)
11 Earnings per share. See Financial Statements
99 1998 Incentive and Non-Statutory Stock Option Plan (4)
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(1) Exhibits 3 and 3(A) are incorporated by reference from Registration No.
2-85110 which were filed in a Registration Statement on Form S-18.
(2) Incorporated by reference to Form 10-K for the fiscal year ended July 31,
1992.
(3) Incorporated by reference to Form 10-K for the fiscal year ended July 31,
1996.
(4) Incorporated by reference to Form 10-K for the fiscal year ended July 31,
1999.
(b) During the quarter ended January 31, 2003, no report on
Form 8-K was filed or required to be filed, other than a
Form 8-K which was filed on December 6, 2002.
10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
TNR TECHNICAL, INC.
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(Registrant)
Dated: March 12, 2003
By: /s/ Wayne Thaw
--------------------------------------
Wayne thaw, President, Chief Executive
Executive Officer and Chief Financial
Officer
11
CERTIFICATION
I, Wayne Thaw, Chief Executive Officer and Chief Financial Officer of the
Registrant, certify that:
1. I have reviewed this quarterly report on Form 10-Q of TNR Technical, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report; 3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report; 4.
The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure control and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:
a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entitles, particularly
during the period in which this quarterly report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date; 5. The registrant's other certifying officers and I
have disclosed, based on our most recent evaluation, to the registrant's
auditors and the audit committee of registrant's board of directors (or persons
performing the equivalent functions):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether or not material, that involves management or
other employees who have a significant role in the registrant's internal
controls; and 6. The registrant's other certifying officers and I have indicated
in this quarterly report whether there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.
Date: March 12, 2003 /s/ Wayne Thaw
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Wayne Thaw, Chief
Executive Officer and
Chief Financial Officer