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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, 2004
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
- --------------------------------- ------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
301 Central Park Drive
Sanford, Florida 32771
- ---------------------------------------- -----------
(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 .
--- ---
266,363 Common Shares, $.02 par value were issued and outstanding at January 31,
2004.
TNR TECHNICAL, INC.
Index
Page
Number
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets
January 31, 2004 (Unaudited)
and July 31, 2003 3
Statements of Operations
Three months and six months ended
January 31, 2004 and
January 31, 2003 (Unaudited) 4
Statements of Cash Flows
six months ended
January 31, 2004 and
January 31, 2003 (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
TNR TECHNICAL, INC.
Balance Sheets
Assets
January 31, 2004
July 31, 2003 (Unaudited)
------------- ----------------
Current assets:
Cash and cash equivalents $ 833,901 233,983
Investments 1,990,059 2,682,872
Accounts receivable - trade, less allowance for doubtful
accounts of $16,871 and $18,606 739,281 678,834
Inventories 1,284,797 1,317,623
Prepaid expenses and other current assets 26,600 32,014
Income taxes receivable - 31,825
Deferred income taxes 49,000 52,000
----------- ---------
Total current assets 4,923,638 5,029,151
Property and equipment, at cost, net of accumulated
depreciation and amortization 153,398 156,748
Deposits 16,191 24,191
----------- ---------
Total assets $ 5,093,227 5,210,090
=========== =========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 132,163 129,066
Accrued expenses 193,151 146,451
Income taxes payable 58,026 -
----------- ---------
Total current liabilities 383,340 275,517
----------- ---------
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 2,497,875
Treasury stock - 45,660 and 47,218 shares (244,111) (267,835)
----------- ---------
Total shareholders' equity 4,709,887 4,934,573
----------- ---------
$ 5,093,227 5,210,090
=========== =========
See accompanying notes to financial statements.
TNR TECHNICAL, INC.
Statements of Operations
Three Months Ended Six Months Ended
January 31, January 31,
----------------------------- ------------------------------
2003 2004 2003 2004
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- -----------
Revenue:
Net sales $2,002,166 1,893,663 3,999,435 4,002,101
---------- --------- ---------- ---------
Cost and expenses:
Cost of goods sold 1,417,308 1,376,701 2,838,022 2,917,450
Selling, general and administrative 344,641 362,231 681,652 729,951
---------- --------- --------- ---------
1,761,949 1,738,932 3,519,674 3,647,401
---------- --------- --------- ---------
Operating income 240,217 154,731 479,761 354,700
Non-operating revenue:
Interest income 7,571 113 29,463 709
Investment income (11,908) 32,627 32,247 54,834
---------- --------- --------- ---------
Income before income taxes 235,880 187,471 541,471 410,243
Provision for income taxes 87,000 74,026 186,210 161,833
---------- --------- --------- ---------
Net income $ 148,880 113,445 355,261 248,410
========== ========= ========= =========
Basic earnings per share $ 0.55 0.43 1.32 0.93
========== ========= ========= =========
Diluted earnings per share $ 0.52 0.38 1.25 0.83
========== ========= ========= =========
Weighted average number of shares outstanding - basic 268,961 266,461 269,091 266,752
========== ========= ========= =========
Weighted average number of shares outstanding - diluted 284,961 298,034 285,091 298,325
========== ========= ========= =========
See accompanying notes to financial statements
TNR TECHNICAL, INC.
Statements of Cash Flows
Six months ended
January 31,
---------------------------------
2003 2004
(Unaudited) (Unaudited)
----------- -----------
Cash flows from operating activities:
Net income $ 355,261 248,410
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 18,335 25,283
Deferred income taxes (1,000) (3,000)
Net investment income (32,247) (54,834)
Changes in operating assets and liabilities:
Accounts receivable (149,137) 60,447
Income taxes payable/receivable 75,668 (89,851)
Inventories (63,239) (32,826)
Prepaid expenses and other assets (6,143) (5,414)
Deposits - (8,000)
Accounts payable and accrued expenses (1,430) (49,797)
--------- --------
Net cash provided by operating activities 196,068 90,418
--------- --------
Cash flows from investing activities:
Purchase of property and equipment (16,743) (28,633)
Purchase of investments and accrued interest (588,618) (637,979)
--------- --------
Net cash used in investing activities (605,361) (666,612)
--------- --------
Cash flows from financing activities:
Purchase of treasury stock (5,142) (23,724)
--------- --------
Net cash used in financing activities (5,142) (23,724)
--------- --------
Decrease in cash and cash equivalents (414,435) (599,918)
Cash and cash equivalents - beginning of period 854,729 833,901
--------- --------
Cash and cash equivalents - end of period $ 440,294 233,983
========= ========
See accompanying notes to financial statements
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, 2004, and results of
operations and cash flows for the three and six month periods ended
January 31, 2004 and 2003. 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, 2004 and 2003, no customer
accounted for more than 10% of total revenue.
(3) Inventories
Inventories consist of the following:
January 31, 2004
July 31, 2003 (Unaudited)
------------- ----------------
Finished goods $1,246,254 1,271,506
Purchased parts and materials 38,543 46,117
---------- ---------
$1,284,797 1,317,623
========== =========
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, 2003 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 $4,753,634 at January 31, 2004 as compared to
$4,540,298 at July 31, 2003. Cash and investments amounted to $2,916,855 at
January 31, 2004 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
six months ended January 31, 2004 was $90,418.
During the six months ended January 31, 2004, cash flow from operating
activities was provided primarily by the Company's net income of $248,410,
partially offset by income tax payments and increases in inventory. Reduced
sales activity during the second quarter resulted in decreased accounts
receivable balances ($60,447) and increased inventory levels ($32,826). Changes
in accounts payable and accrued expenses ($49,797) are primarily comprised of
bonus payouts during the first quarter. Net cash was used in investing
activities to purchase treasury securities ($637,979) and equipment ($28,633)
and in financing activities to purchase treasury stock.
7
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,
partially offset by increases in accounts receivable balances resulting from
increased sales during the period. Correspondingly, inventory levels were
increased in order to meet customer demand for product. Obligations for income
taxes increased as a result of profitability during the six months ended January
31, 2003. Net cash was used in investing activities to purchase treasury
securities and 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 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
January 31, 2004.
Results of Operations
Sales for the three months ended January 31, 2004 decreased $108,503 (5%) over
sales for the comparable period of the prior year as offshore competition
continues to erode the market. Cost of goods sold for the three months ended
January 31, 2004 decreased $40,607 (3%) as compared to the three months ended
January 31, 2003 primarily as a result of decreased sales. However, for the
three months ended January 31, 2004, gross profit decreased 2% over the same
period of the prior year as a result of increased payroll expense for shop
personnel, the implementation of a commission incentive for the sales staff
combined with the need to charge reduced prices in order to remain competitive
in the current market.
Sales for the six months ended January 31, 2004 decreased $2,666 over sales for
the comparable period of the prior year. Cost of goods sold increased $79,428
(2%) for the six months ended January 31, 2004 primarily as a result of
increases in commission expense and shop labor costs as discussed above.
Accordingly, gross profit decreased 2% for the six-month period ended January
31, 2004.
Operating (selling, general and administrative) expenses increased $17,590 for
the three months ended January 31, 2004 as compared to the second quarter ended
January 31, 2003 primarily as a result of increases in administrative payroll
and related expenditures. Operating expenses when expressed as a percentage of
sales increased 2% for the three months ended January 31, 2004 as compared to
the three months ended January 31, 2003 as a result of these factors and
decreased sales volume.
Operating (selling, general and administrative) expenses increased $48,299 for
the six months ended January 31, 2004 as compared to the same period of the
prior year primarily as a result of increases in salary and other employee
related expenditures. Operating expenses when expressed as a percentage of sales
was approximately 18% for the six months ended January 31, 2004 as compared to
17% for the six months ended January 31, 2003.
8
The Company did not charge its operations with any research and development
costs during the six months ended January 31, 2004. Interest and investment
income decreased from $61,710 for the six months ended January 31, 2003 to
$55,543 for the six months ended January 31, 2004 due to lower interest rates
and fluctuating market values of certain investments (U.S. Treasury securities).
Net income for the three months ended January 31, 2004 was $113,445 as compared
to $148,880 for the three months ended January 31, 2003 as a result of factors
previously discussed herein. Net income for the six months ended January 31,
2004 was $248,410 as compared to $355,261 for the six months ended January 31,
2003. Basic earnings per share were .43 and .55 in 2004 and 2003 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.
During fiscal 2004, 2003, 2002, and 2001, the Company redeemed a total of 1,558
shares from 35 persons, 608 shares from 29 persons, 1,600 shares from 68 persons
and 729 shares from 22 persons, respectively, pursuant to the Company's program
to repurchase odd lots. In June 2003, the Company also repurchased a total of
691 shares held by a director and the Company's former chief executive officer
at a purchase price of $12.00 per share.
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 disclosure controls and procedures or in
other factors that could significantly affect the disclosure 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: 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)
10
- ---------
(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 January 31, 2004, no report on Form 8-K was
filed or required to be filed.
11
(c)
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: March 13, 2004
By: /s/ Wayne Thaw
---------------------------------------
Wayne thaw, President, Chief Executive
Executive Officer and Chief Financial
Officer
12