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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 October 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
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
of incorporation or organization) Identification No.)
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
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(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 .
--- ---
267,528 Common Shares, $.02 par value were issued and outstanding at October 31,
2003.
TNR TECHNICAL, INC.
Index
Page
Number
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets
October 31, 2003 (Unaudited) and July 31, 2003 1
Statements of Operations
Three months ended October 31, 2003 (Unaudited) and
October 31, 2002 (Unaudited) 2
Statements of Cash Flows
Three months ended October 31, 2003 (Unaudited) and
October 31, 2002 (Unaudited) 3
Notes to Financial Statements (Unaudited) 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 5-7
PART II. OTHER INFORMATION 8
TNR TECHNICAL, INC.
Balance Sheets
Assets
October 31,
July 31, 2003
2003 (Unaudited)
----------- -----------
Current assets:
Cash and cash equivalents $ 833,901 358,935
Investments 1,990,059 2,675,748
Accounts receivable - trade, less allowance for doubtful
accounts of $16,871 and $18,769 739,281 777,070
Inventories 1,284,797 1,247,072
Prepaid expenses and other current assets 26,600 27,165
Deferred income taxes 49,000 49,000
----------- -----------
Total current assets 4,923,638 5,134,990
Property and equipment, at cost, net of accumulated
depreciation and amortization 153,398 142,956
Deposits 16,191 16,191
----------- -----------
Total assets $ 5,093,227 5,294,137
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 132,163 207,750
Accrued expenses 193,151 174,742
Income taxes payable 58,026 86,833
----------- -----------
Total current liabilities 383,340 469,325
----------- -----------
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 2,249,465 2,384,430
Treasury stock - 45,660 and 46,990 shares (244,111) (264,151)
----------- -----------
Total shareholders' equity 4,709,887 4,824,812
----------- -----------
$ 5,093,227 5,294,137
=========== ===========
See accompanying notes to financial statements
1
TNR TECHNICAL, INC.
Statements of Operations
Three Months Ended
October 31,
2003 2002
(Unaudited) (Unaudited)
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Revenues:
Net sales $2,108,438 1,997,269
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Cost and expenses:
Cost of goods sold 1,540,749 1,420,714
Selling, general and administrative 367,720 337,011
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1,908,469 1,757,725
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Operating income 199,969 239,544
Non-operating revenue:
Interest income 596 21,892
Investment income 22,207 46,155
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Income before income taxes 222,772 307,591
Provision for income taxes 87,807 99,210
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Net income $ 134,965 208,381
========== ==========
Basic earnings per share $ 0.51 0.77
========== ==========
Diluted earnings per share $ 0.45 0.73
========== ==========
Weighted average number of shares outstanding - basic 267,003 269,221
========== ==========
Weighted average number of shares outstanding - diluted 298,576 258,221
========== ==========
See accompanying notes to financial statements
2
TNR TECHNICAL, INC.
Statements of Cash Flows
Three months ended
October 31,
2003 2002
(Unaudited) (Unaudited)
---------- ----------
Cash flows from operating activities:
Net income $ 134,965 208,381
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 10,442 7,903
Deferred income taxes -- 4,000
Provision for bad debt 2,100 2,100
Net investment income (22,207) (46,155)
Changes in operating assets and liabilities:
Accounts receivable (39,889) (91,778)
Inventories 37,725 121,604
Prepaid expenses and other assets (565) (1,574)
Income taxes payable 28,807 81,000
Accounts payable and accrued expenses 57,178 158,884
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Net cash provided by operating activities 208,556 444,365
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Cash flows from investing activities:
Purchase of property and equipment -- (5,590)
Purchase of investments and accrued interest (663,482) (121,397)
---------- ----------
Net cash used in investing activities (663,482) (126,987)
---------- ----------
Cash flows from financing activities:
Purchase of treasury stock (20,040) (296)
---------- ----------
Net cash used in financing activities (20,040) (296)
---------- ----------
(Decrease) increase in cash and cash equivalents (474,966) 317,082
Cash and cash equivalents - beginning of period 833,901 854,729
---------- ----------
Cash and cash equivalents - end of period $ 358,935 1,171,811
========== ==========
See accompanying notes to financial statements
3
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 October 31, 2003, and
results of operations and cash flows for the three month periods ended
October 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 three months ended October 31, 2003 and 2002, no customer
accounted for more than 10% of total revenue.
(3) Inventories
Inventories consist of the following:
October 31, 2003
July 31, 2003 (Unaudited)
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Finished goods $1,246,254 1,209,661
Work-in-progress 38,543 37,411
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$1,284,797 1,247,072
========== ==========
4
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Forward Looking Statements
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 $4,665,665 at October 31, 2003 as compared to
$4,540,298 at July 31, 2003. Cash and investments amounted to $3,034,683 at
October 31, 2003 as compared to $2,823,960 at July 31, 2003. 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
quarter ended was $208,556.
During the three months ended October 31, 2003, cash flow from operating
activities was provided primarily by the Company's net income of $134,965. Sales
activity during the first quarter resulted in increased accounts receivable
balances ($39,889) and reduced inventory levels ($37,725). Increases in accounts
payable ($75,587), offset by reductions in accrued expenses ($18,409) resulted
in an overall increase in cash of $57,178. Changes in accrued expenses are
primarily the result of the payout of accrued bonuses. Accounts payable
increases are mainly due to the timing of vendor payments made beyond the
quarter end. Income taxes payable increased $28,807, primarily as a result of
recording the first quarter income tax provision. Cash was used in investing
activities to purchase additional investments and in financing activities to
purchase treasury stock.
During the quarter ended October 31, 2002, cash flow from operating activities
was provided primarily by the Company's net income of $208,381. Sales activity
during the first quarter resulted in increased accounts receivable balances
while reducing inventory levels. Increases in accounts payable, offset by
reductions in accrued expenses resulted in an overall increase of $158,884.
Changes in accrued expenses are primarily the result of the payout of accrued
bonuses. Accounts payable increases are mainly due to the timing of vendor
payments made beyond the quarter end. Income taxes payable increased $81,000. In
addition, cash was used in investing activities to purchase property and
equipment and additional investments. Cash was also used in financing activities
to purchase treasury stock.
5
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 2004 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
October 31, 2003.
Results of Operations
Sales for the first quarter ended October 31, 2003 increased 6% or $111,169 over
the three months ended October 31, 2002; however, gross profit decreased $8,866
as a result of decreased margins from 29% during the first quarter ended 2002 to
27% during the first quarter ended 2003. Increased cost of goods sold and the
subsequent decrease in gross profit are related to higher product cost,
increased payroll expense for shop personnel, and the implementation of a
commission incentive for sales personnel.
Operating (selling, general and administrative) expenses increased from $337,011
for the three months ended October 31, 2002 to $367,720 for the three months
ended October 31, 2003 primarily due to salary and other employee related
expenses ($33,566). Operating expense when expressed as a percentage of net
sales for the three months ended October 31, 2003 was approximately 18% 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 first quarter ended October 31, 2003. Interest and investment
income decreased from $68,047 in the first quarter ended October 31, 2002 to
$22,803 for the first quarter ended October 31, 2003 due to lower interest rates
and decreasing market values of certain investments (U.S. Treasury bills).
Net income for the first quarter ended October 31, 2003 was $134,965 as compared
to $208,381 for the first quarter ended October 31, 2002. The Company's net
income decreased for the first quarter of 2003 as compared to the comparable
period of the prior year due to the decrease in gross profits and increased
operating expenses for the reasons described above. Basic earnings per share
were $.51 and $.77 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 records 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.
6
During the quarter ended October 31, 2003, the Company repurchased
1,330 shares of its Common Stock from 28 stockholders at a cost of approximately
$21,800.
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.
7
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 and Notes thereto.
31.1 Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to Rule 13a-14(a) under the Securities
Exchange Act of 1934, as adopted pursuant to Section
302 of the Sarbanes-Oxley Act of 2002 (5)
32.1 Certification of Chief Executive Officer and Chief Financial
Officer Pursuant to 18U.S.C. Section 1350, as adopted pursuant to
Section 906 Of the Sarbanes-Oxley Act of 2002 (5)
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.
(5) Filed herewith.
(b) During the quarter ended October 31, 2003, no report on
Form 8-K was filed or required to be filed.
8
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: December 9, 2003
By: /s/ Wayne Thaw
-----------------------------------
Wayne thaw, President, Chief Executive
Executive Officer and Chief Financial
Officer
9