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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, 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 ___.
---
266,263 Common Shares, $.02 par value were issued and outstanding at April 30,
2004.
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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, 2004 (Unaudited)
and July 31, 2003 3
Statements of Operations
Three months and Nine months ended
April 30, 2004 and
April 30, 2003 (Unaudited) 4
Statements of Cash Flows
Nine months ended April 30, 2004 and
April 30, 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
Item 3. Controls and Procedures 10
PART II. OTHER INFORMATION 10
TNR TECHNICAL, INC.
BALANCE SHEETS
ASSETS
APRIL 30, 2004
JULY 31, 2003 (UNAUDITED)
------------------ ----------------
Current assets:
Cash and cash equivalents $ 833,901 443,372
Investments 1,990,059 2,629,151
Accounts receivable - trade, less allowance for doubtful
accounts of $16,871 and $17,279 739,281 715,584
Inventories 1,284,797 1,182,505
Prepaid expenses and other current assets 26,600 36,686
Income taxes receivable -- 84,458
Deferred income taxes 49,000 48,000
--------------- ----------------
Total current assets 4,923,638 5,139,756
Property and equipment, at cost, net of accumulated
depreciation and amortization 153,398 161,097
Deposits 16,191 16,191
--------------- ----------------
Total assets $ 5,093,227 5,317,044
=============== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 132,163 107,741
Accrued expenses 193,151 196,673
Income taxes payable 58,026 --
--------------- ----------------
Total current liabilities 383,340 304,414
--------------- ----------------
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 2,577,633
Treasury stock - 45,660 and 47,318 shares (244,111) (269,536)
--------------- ----------------
Total shareholders' equity 4,709,887 5,012,630
--------------- ----------------
$ 5,093,227 5,317,044
=============== ================
See accompanying notes to financial statements.
3
TNR TECHNICAL, INC.
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED NINE MONTHS ENDED
APRIL 30, APRIL 30,
2004 2003 2004 2003
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
----------------- ----------------- ----------------- --------------
Revenue:
Net sales $ 2,044,975 2,003,275 6,047,076 6,002,710
----------------- ----------------- ----------------- --------------
Cost and expenses:
Cost of goods sold 1,493,313 1,362,495 4,410,763 4,200,517
Selling, general and administrative 396,201 332,623 1,126,152 1,014,275
----------------- ----------------- ----------------- --------------
1,889,514 1,695,118 5,536,915 5,214,792
----------------- ----------------- ----------------- --------------
Operating income 155,461 308,157 510,161 787,918
Non-operating revenue:
Interest income 164 14,460 873 43,923
Investment income (loss) (25,700) 11,298 29,134 43,545
----------------- ----------------- ----------------- --------------
Income before income taxes 129,925 333,915 540,168 875,386
Provision for income taxes 50,167 131,000 212,000 317,210
----------------- ----------------- ----------------- --------------
Net income $ 79,758 202,915 328,168 558,176
================= ================= ================= ==============
Basic earnings per share $ 0.30 0.76 1.23 2.08
================= ================= ================= ==============
Diluted earnings per share $ 0.27 0.71 1.10 1.95
================= ================= ================= ==============
Weighted average number of shares
outstanding - basic 266,313 268,735 266,615 268,972
================= ================= ================= ==============
Weighted average number of shares
outstanding - diluted 297,886 285,553 298,188 285,790
================= ================= ================= ==============
See accompanying notes to financial statements.
4
TNR TECHNICAL, INC.
STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED
APRIL 30,
2004 2003
(UNAUDITED) (UNAUDITED)
----------------- ----------------
Cash flows from operating activities:
Net income $ 328,168 558,176
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 32,251 28,990
Deferred income taxes 1,000 (9,000)
Net investment income (29,134) (43,545)
Changes in operating assets and liabilities:
Accounts receivable 23,697 (155,539)
Deposits -- --
Inventories 102,292 (373,707)
Prepaid expenses and other assets (10,086) (650)
Accounts payable and accrued expenses (20,900) 55,602
Income taxes receivable/payable (142,484) 146,668
----------------- -----------------
Net cash provided by operating activities 284,804 206,995
----------------- -----------------
Cash flows from investing activities:
Purchase of treasury stock (25,425) (5,384)
Purchase of property and equipment (39,950) (32,037)
Purchase of investments and accrued interest (609,958) (183,663)
----------------- -----------------
Net cash used in investing activities (675,333) (221,084)
----------------- -----------------
Decrease in cash and cash equivalents (390,529) (14,089)
Cash and cash equivalents - beginning of period 833,901 854,729
----------------- -----------------
Cash and cash equivalents - end of period $ 443,372 840,640
================= =================
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 April 30, 2004, and results
of operations and cash flows for the three and nine month periods ended
April 30, 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 nine months ended April 30, 2004 and 2003, no customer
accounted for more than 10% of total revenue.
(3) INVENTORIES
Inventories consist of the following:
July 31, 2003 April 30, 2004
------------- --------------
(UNAUDITED)
Finished goods $ 1,246,254 1,147,030
Purchased parts and materials 38,543 35,475
------------- --------------
$ 1,284,797 1,182,505
============= ==============
6
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, 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 $4,835,342 at April 30, 2004 as compared to
$4,540,298 at July 31, 2003. Cash and investments amounted to $3,072,523 at
April 30, 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
nine months ended April 30, 2004 was $284,804.
During the nine months ended April 30, 2004, cash flow from operating activities
was provided primarily by the Company's net income of $328,168 and decreases of
inventory amounting to $102,292, partially offset by income tax payments.
Increased sales activity during the third quarter resulted in slightly increased
accounts receivable balances ($23,697). Changes in accounts payable ($20,900)
are primarily related to the timing of vendor payouts. Net cash was used in
investing activities to purchase treasury securities ($609,958), equipment
($39,950) and treasury stock ($25,425).
7
During the nine months ended April 30, 2003, increases in accounts receivable
balances ($155,539) were a result of increased sales during that period.
Increases in accounts payable ($106,478) resulting from increased levels of
inventory ($373,707) were offset by reductions in accrued expenses ($50,876)
primarily resulting from decreases in payroll related accruals. Increases in
income taxes payable ($146,668) were related to year-end tax obligations and
estimated tax payments. Increases in net investment income ($43,545) were the
result of anticipated returns on investments. In addition, net cash was used in
investing activities to purchase equipment, treasury stock, and treasury bills.
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
April 30, 2004.
Results of Operations
Sales for the three months ended April 30, 2004 increased $41,700 (2%) over
sales for the comparable period of the prior year. Cost of goods sold for the
three months ended April 30, 2004 increased $130,818 (9.6%) as compared to the
three months ended April 30, 2003 primarily as a result of increased commission
expense combined with increased product costs. Accordingly, gross margin as a
percentage of sales fell from 32% for the three months ended April 30, 2003 to
27% for the three months ended April 30, 2004.
Sales for the nine months ended April 30, 2004 increased $44,366 over sales for
the comparable period of the prior year. Cost of goods sold increased $210,246
(5%) for the nine months ended April 30, 2004 primarily as a result of increases
in commission expense as discussed above. Accordingly, gross profit decreased 3%
for the nine-month period ended April 30, 2004.
Operating (selling, general and administrative) expenses increased $63,578 for
the three months ended April 30, 2004 as compared to the third quarter ended
April 30, 2003 primarily as a result of increases in administrative payroll and
related expenditures ($36,000), as well as increases in general insurance
expense ($9,800), advertising ($5,700), rent ($2,000), and merchant fees
($2,500). Operating expenses when expressed as a percentage of sales increased
approximately 2.5% for the three months ended April 30, 2004 as compared to the
three months ended April 30, 2003 as a result of these factors.
Operating (selling, general and administrative) expenses increased $111,877 for
the nine months ended April 30, 2004 as compared to the same period of the prior
year primarily as a result of increases in salary and other employee related
expenditures ($85,000) as well as increases in general insurance expense
($6,000), advertising ($12,500), rent ($4,000), and merchant fees ($6,000).
Operating expenses when expressed as a percentage of sales was approximately 19%
for the nine months ended April 30, 2004 as compared to 17% for the comparable
period of the prior year.
8
The Company did not charge its operations with any research and development
costs during the nine months ended April 30, 2004. Interest and investment
income decreased from $87,468 for the nine months ended April 30, 2003 to
$30,007 for the nine months ended April 30, 2004 due to lower interest rates and
fluctuating market values of certain investments (U.S. Treasury securities).
Net income for the three months ended April 30, 2004 was $79,758 as compared to
$202,915 for the three months ended April 30, 2003 as a result of factors
previously discussed herein. Net income for the nine months ended April 30, 2004
was $328,168 as compared to $558,176 for the nine months ended April 30, 2003.
Basic earnings per share were $1.23 and $2.08 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 the first nine months of fiscal 2004 and for the years ended July 31,
2003, 2002, and 2001, the Company redeemed a total of 1,658 shares from 36
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. The following table illustrates the stock repurchases
in the first three quarters of 2004:
- ------------------------------ -------------- ----------------- ----------------- ----------------- -----------------
2003 - 2004 QTR 1 QTR 2 QTR 3 QTR 4 TOTAL
- ------------------------------ -------------- ----------------- ----------------- ----------------- -----------------
# SHARES REPURCHASED 1,330 228 100 1,658
- ------------------------------ -------------- ----------------- ----------------- ----------------- -----------------
# SHAREHOLDERS 28 7 1 36
- ------------------------------ -------------- ----------------- ----------------- ----------------- -----------------
AVG SHARE PRICE $15.09 $16.16 $17 $15.33
- ------------------------------ -------------- ----------------- ----------------- ----------------- -----------------
9
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.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings: None
Item 2. Changes in Securities; Use of Proceeds and Issuer Repurchases
of Equity Securities:
(a) Not applicable.
(b) Not applicable.
(c) None.
(d) Not applicable.
(e) TNR's Stock Repurchase Plan of odd lots began in December 1995 as
described under "Management's Discussion and Analysis of Financial Condition and
Results of Operations." There is no announced expiration date of this Stock
Repurchase Plan. The following table provides information as to the number of
shares repurchased by TNR in the third quarter of 2004, the average price paid
per share and the historical number of shares repurchased under the Plan as of
the last day of each of the months shown in the table below. Also shown as of
the last day of each month in the last column to the right is the number of odd
lot shares that may be repurchased under the Plan. ISSUER PURCHASES OF EQUITY
SECURITIES - THIRD QUARTER 2004
10
- -------------------- --------------------- ---------------------- ------------------------- --------------------------
PERIOD (A) TOTAL NUMBER (B) AVERAGE PRICE (C) TOTAL NUMBER OF (D) MAXIMUM NUMBER
OF SHARES PAID PER SHARE SHARES (OR UNITS) (OR APPROXIMATE
(OR UNITS) (OR UNIT) PURCHASED AS PART DOLLAR VALUE) OF
PURCHASED OF PUBLICLY SHARES (OR UNITS) THAT
ANNOUNCED PLANS MAY YET BE
OR PROGRAMS PURCHASED UNDER THE
PLANS OR PROGRAMS
- -------------------- --------------------- ---------------------- ------------------------- --------------------------
Feb. 1 - 29,
2004 -0- -0- -0- 11,498 shs.
- -------------------- --------------------- ---------------------- ------------------------- --------------------------
March 1-31,
2004 100 $17.00 100 11,398 shs.
- -------------------- --------------------- ---------------------- ------------------------- --------------------------
April 1-30,
2004 -0- -0- -0- 11,398 shs.
- -------------------- --------------------- ---------------------- ------------------------- --------------------------
Total 100 $17.00 100 11,398 shs.
- -------------------- --------------------- ---------------------- ------------------------- --------------------------
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)
- ----------
(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, 2004, 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 10, 2004
By: /s/ Wayne Thaw
-----------------------------------
Wayne thaw, President, Chief Executive
Executive Officer and Chief Financial
Officer
12