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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 April 30, 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
--------------
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 .
--- ---
268,292 Common Shares, $.02 par value were issued and outstanding at April 30,
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2003.
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TNR TECHNICAL, INC.
Index
Page
Number
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets
April 30, 2003 (Unaudited)
and July 31, 2002 3-4
Statements of Operations
Three and nine months ended
April 30, 2003 (Unaudited) and
April 30, 2002 (Unaudited) 5
Statements of Cash Flows
Nine months ended
April 30, 2003 (Unaudited) and
April 30, 2002 (Unaudited) 6
Notes to Financial Statements (Unaudited) 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-10
PART II. OTHER INFORMATION 11
TNR TECHNICAL, INC.
Balance Sheets
Assets
April 30, 2003
July 31, 2002 (Unaudited)
-------------- --------------
Current assets:
Cash and cash equivalents $ 854,729 840,640
Investments 1,750,819 1,978,027
Accounts receivable - trade, less allowance for doubtful
accounts of $18,733 and $17,857 577,050 732,589
Inventories 1,092,552 1,466,259
Prepaid expenses and other current assets 16,844 17,494
Income taxes receivable 23,000 --
Deferred income taxes 46,000 55,000
-------------- --------------
Total current assets 4,360,994 5,090,009
Property and equipment, at cost, net of accumulated
depreciation and amortization 115,202 118,249
Deposits 15,457 15,457
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Total assets $ 4,491,653 5,223,715
============== ==============
See accompanying notes to financial statements.
3
TNR TECHNICAL, INC.
Balance Sheets
Liabilities and Shareholders' Equity
April 30, 2003
July 31, 2002 (Unaudited)
-------------- --------------
Current liabilities:
Accounts payable $ 121,563 228,041
Accrued expenses 229,932 179,056
Income taxes payable -- 123,668
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Total current liabilities 351,495 530,765
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Shareholders' equity:
Common stock - $.02 par value, authorized 500,000
shares; issued 313,581 shares 6,272 6,272
Additional paid-in capital 2,698,261 2,698,261
Retained earnings 1,664,535 2,222,711
Treasury stock - 44,352 and 44,860 shares (228,910) (234,294)
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Total shareholders' equity 4,140,158 4,692,950
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$ 4,491,653 5,223,715
============== ==============
See accompanying notes to financial statements.
4
TNR TECHNICAL, INC.
Statements of Operations
Three Months Ended Nine Months Ended
April 30, April 30,
2003 2002 2003 2002
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
-------------- -------------- -------------- --------------
Revenue:
Net sales $ 2,003,275 1,930,847 6,002,710 5,836,157
-------------- -------------- -------------- --------------
Cost and expenses:
Cost of goods sold 1,362,495 1,402,691 4,200,517 4,212,612
Selling, general and administrative 332,623 333,074 1,014,275 990,892
-------------- -------------- -------------- --------------
1,695,118 1,735,765 5,214,792 5,203,504
-------------- -------------- -------------- --------------
Operating income 308,157 195,082 787,918 632,653
Non-operating revenue:
Interest income 14,460 9,196 43,923 31,898
Invetsment income 11,298 1,652 43,545 1,652
-------------- -------------- -------------- --------------
Income before income taxes 333,915 205,930 875,386 666,203
Provision for income taxes 131,000 73,000 317,210 248,718
-------------- -------------- -------------- --------------
Net income $ 202,915 $ 132,930 558,176 417,485
============== ============== ============== ==============
Basic earnings per share $ 0.76 $ 0.52 2.08 1.62
============== ============== ============== ==============
Diluted earnings per share $ 0.71 $ 0.47 1.95 1.47
============== ============== ============== ==============
Weighted average number of shares
outstanding - basic 268,735 257,421 268,972 258,176
============== ============== ============== ==============
Weighted average number of shares
outstanding - diluted 285,553 283,033 285,790 283,788
============== ============== ============== ==============
See accompanying notes to financial statements
5
TNR TECHNICAL, INC.
Statements of Cash Flows
Nine Months Ended
April 30,
2003 2002
(Unaudited) (Unaudited)
-------------- --------------
Cash flows from operating activities:
Net income $ 558,176 417,485
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 28,990 30,974
Deferred income taxes (9,000) (4,000)
Net investment income (43,545) --
Changes in operating assets and liabilities:
Accounts receivable (155,539) 6,455
Deposits -- --
Inventories (373,707) (100,940)
Prepaid expenses and other assets (650) 2,813
Accounts payable and accrued expenses 55,602 140,707
Income taxes receivable/payable 146,668 (41,000)
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Net cash provided by operating activities 206,995 452,494
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Cash flows from investing activities:
Purchase of treasury stock (5,384) (13,685)
Purchase of property and equipment (32,037) (5,619)
Proceeds from sale of investments 596,716 --
Purchase of investments and acrued interest (780,379) --
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Net cash used in investing activities (221,084) (19,304)
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Increase (decrease) in cash and cash equivalents (14,089) 433,190
Cash and cash equivalents - beginning of period 854,729 1,871,854
-------------- --------------
Cash and cash equivalents - end of period $ 840,640 2,305,044
============== ==============
See accompanying notes to financial statements
6
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 April 30, 2003, and results
of operations and cash flows for the three and nine month periods ended
April 30, 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 nine months ended April 30, 2003 and 2002, no customer
accounted for more than 10% of total revenue.
(3) Inventories
Inventories consist of the following:
April 30, 2003
July 31, 2002 (Unaudited)
-------------- --------------
Finished goods $ 1,058,683 1,407,609
Purchased parts and materials 33,869 58,650
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$ 1,092,552 1,466,259
============== ==============
7
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Forward Looking Statements
The information contained in this Form 10-Q is 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 risk and uncertainties, and actual results
could be significantly different than 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 actual 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 $4,559,244 at April 30, 2003 as compared to
$4,009,499 at July 31, 2002. Cash and investments amounted to $2,818,667 at
April 30, 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
nine months ended April 30, 2003, was $206,995.
During the nine months ended April 30, 2003, increases in accounts receivable
balances ($155,539) were a result of increased sales during the period.
Increases in accounts payable ($106,478) as a result of increased levels of
inventory ($373,707) were offset by reductions in accrued expenses ($50,876)
resulting from decreases in payroll related accruals. Increases in income taxes
payable ($146,668) are related to year-end tax obligations and estimated tax
payments. Increases in net investment income ($43,545) are the result of
anticipated returns on investments. In addition, net cash was used in investing
activities to purchase equipment, treasury stock, and treasury bills.
8
During the nine months ended April 30, 2002, increases in the balance of
accounts payable ($194,545) are related to the timing of vendor payments beyond
quarter end and product purchases in anticipation of fourth quarter sales
activity resulting also in increased inventory levels ($100,940). Accrued
expenses decreased primarily as a result of the completion of hardware and
software upgrades ($14,000), and net changes in payroll and bonus accruals
($35,000). Accounts receivable balances fell $6,455 as a result of decreased
sales. Other reductions in cash include a $41,000 decrease in income taxes
payable resulting from year-end tax obligations and estimated tax payments. In
addition, net cash was used in investing activities to purchase equipment and
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
April 30, 2003.
Results of Operations
Sales for the three months ended April 30, 2003 increased 3.75% or $72,428 as
compared to the three months ended April 30, 2002. Purchasing from overseas
markets and U.S. manufacturers' response to that competition has generated
better pricing of product and reduced cost of goods sold for the three months
ended April 30, 2003, 2.9% or $40,196. As a result, gross profit increased from
27% for the three months ended April 30, 2002 to 32% for the three months ended
April 30, 2003.
Sales for the nine months ended April 30, 2003 increased 2.9% or $166,553 from
the nine months ended April 30, 2002. Cost of goods sold for the nine months
ended April 30, 2003 decreased $12,095 as compared with the nine months ended
April 30, 2002, primarily as a result of a reduction in labor costs. Gross
profit rose from 28% for the nine months ended April 30, 2002 to 30% for the
nine months ended April 30, 2003.
Operating (selling, general and administrative) expenses stayed relatively
stable for the three months ended April 30, 2003. Operating expenses when
expressed as a percentage of net sales for the three months ended April 30, 2003
were 16.6% as compared to 17.3% for the comparable period of the prior year.
Operating (selling, general and administrative) expenses increased 2% or $23,383
for the nine months ended April 30, 2003 as compared to the third quarter ended
April 30, 2002 as a result of an increase in the cost of employee benefits and
payroll. Operating expenses when expressed as a percentage of net sales for the
nine months ended April 30, 2003 were approximately 16.9% as compared to 17% for
the comparable period of the prior year.
The Company did not charge its operations with any research and development
costs during the nine months ended April 30, 2003. Interest and investment
income increased from $33,550 for the nine months ended April 30, 2002 to
$87,468 for the nine months ended April 30, 2003.
9
Net income for the three months ended April 30, 2003 was $202,915 as compared to
$132,930 for the three months ended April 30, 2002. Net income for the nine
months ended April 30, 2003 was $558,176 as compared to $417,485 for the nine
months ended April 30, 2002. Basic earnings per share were $2.08 and $1.62 in
the nine months ended April 30, 2003 and April 30, 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 purchase price 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.
10
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: None
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)
99.1 Certification of Chief Executive Officer and Chief Financial
Officer (5)
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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.
(5) Filed herewith.
(b) During the quarter ended April 30, 2003, no report on Form 8-K was
filed or required to be filed.
11
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.
(Registrant)
Dated: June 4, 2003
By: /s/ Wayne Thaw
--------------------------------------
Wayne thaw, President, Chief Executive
Executive Officer and Chief Financial
Officer
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: June 4, 2003 /s/ Wayne Thaw
-------------------------
Wayne Thaw,Chief Executive Officer and
Chief Financial Officer
13