Back to GetFilings.com
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, 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
-------------------------------
TNR TECHNICAL, INC.
------------------------------------------------------
(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 ___.
---
266,150 Common Shares, $.02 par value were issued and outstanding at October 31,
2004.
TNR TECHNICAL, INC.
INDEX
Page
Number
------
PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets
October 31, 2004 (Unaudited) and
and July 31, 2004 1
Statements of Operations
Three months ended
October 31, 2004 (Unaudited) and
October 31, 2003 (Unaudited) 2
Statements of Cash Flows
Three months ended
October 31, 2004 (Unaudited) and
October 31, 2003 (Unaudited) 3
Notes to Financial Statements (Unaudited) 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 5
PART II. OTHER INFORMATION 8
SIGNATURES
TNR TECHNICAL, INC.
BALANCE SHEETS
ASSETS
OCTOBER 31, 2004
JULY 31, 2004 (UNAUDITED)
------------------ -----------------------
Current assets:
Cash and cash equivalents $ 710,636 1,036,309
Investments 2,608,710 2,637,880
Accounts receivable - trade, less allowance for doubtful
accounts of $19,652 and $21,300 649,018 626,893
Inventories 1,127,143 1,072,774
Income taxes receivable 70,258 -
Prepaid expenses and other current assets 32,742 19,928
Deferred income taxes 102,000 98,000
------------------ -----------------------
Total current assets 5,300,507 5,491,784
Property and equipment, at cost, net of accumulated
depreciation and amortization 140,886 146,084
Deposits 16,191 16,191
------------------ -----------------------
Total assets $ 5,457,584 5,654,059
================== =======================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 124,280 157,774
Accrued expenses 176,575 128,109
Income taxes payable - 37,872
------------------ -----------------------
Total current liabilities 300,855 323,755
Deferred tax liability 19,000 15,000
------------------ -----------------------
Total liabilities 319,855 338,755
------------------ -----------------------
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 2,703,667 2,882,146
Treasury stock - 47,373 and 47,431 shares (270,471) (271,375)
------------------ -----------------------
Total shareholders' equity 5,137,729 5,315,304
------------------ -----------------------
$ 5,457,584 5,654,059
================== =======================
See accompanying notes to financial statements.
1
TNR TECHNICAL, INC.
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED
OCTOBER 31,
2004 2003
(UNAUDITED) (UNAUDITED)
----------------- ---------------
Revenues:
Net sales $1,965,739 2,108,438
----------------- ---------------
Cost and expenses:
Cost of goods sold 1,366,289 1,540,749
Selling, general and administrative 370,903 367,720
----------------- ---------------
1,737,192 1,908,469
----------------- ---------------
Operating income 228,547 199,969
Non-operating revenue:
Interest income 875 596
Investment income 57,191 22,207
----------------- ---------------
Income before income taxes 286,613 222,772
Provision for income taxes 108,134 87,807
----------------- ---------------
Net income $ 178,479 134,965
================= ===============
Basic earnings per share $ 0.67 0.51
================= ===============
Diluted earnings per share $ 0.60 0.45
================= ===============
Weighted average number of shares outstanding - basic 266,181 267,003
================= ===============
Weighted average number of shares outstanding - diluted 298,386 298,576
================= ===============
See accompanying notes to financial statements
2
TNR TECHNICAL, INC.
STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED
OCTOBER 31,
2004 2003
(UNAUDITED) (UNAUDITED)
----------------- ----------------
Cash flows from operating activities:
Net income $ 178,479 134,965
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 13,213 10,442
Provision for bad debt 2,100 2,100
Unrealized gain on investments (29,170) (22,207)
Changes in operating assets and liabilities:
Accounts receivable 20,025 (39,889)
Inventories 54,369 37,725
Prepaid expenses and other assets 12,814 (565)
Income taxes receivable/payable 108,130 28,807
Accounts payable and accrued expenses (14,972) 57,178
----------------- ----------------
Net cash provided by operating activities 344,988 208,556
----------------- ----------------
Cash flows from investing activities:
Purchase of property and equipment (18,411) -
Purchase of investments and accrued interest - (663,482)
----------------- ----------------
Net cash used in investing activities (18,411) (663,482)
----------------- ----------------
Cash flows from financing activities:
Purchase of treasury stock (904) (20,040)
----------------- ----------------
Net cash used in financing activities (904) (20,040)
----------------- ----------------
(Decrease) increase in cash and cash equivalents 325,673 (474,966)
Cash and cash equivalents - beginning of period 710,636 833,901
----------------- ----------------
Cash and cash equivalents - end of period $ 1,036,309 358,935
================= ================
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, 2004, and results of operations and cash flows for the three
month periods ended October 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 three months ended October 31, 2004 and 2003, no customer
accounted for more than 10% of total revenue.
(3) INVENTORIES
Inventories consist of the following:
October 31, 2004
July 31, 2004 (UNAUDITED)
------------------ -------------------
Finished goods $ 1,093,329 1,040,591
Work-in-progress 33,814 32,183
------------------ ------------------
$ 1,127,143 1,072,774
================== ==================
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 $5,168,029 at October 31, 2004 as compared to
$4,999,652 at July 31, 2004. Cash and investments amounted to $3,674,189 at
October 31, 2004 as compared to $3,319,346 at July 31, 2004. 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 October 31, 2004, was $344,988.
During the three months ended October 31, 2004, cash flow from operating
activities was provided primarily by the Company's net income of $178,479.
Continued sales declines resulted in decreases in accounts receivable ($20,025)
and prompted management to continue efforts to reduce the level of inventory on
hand ($54,369). Accounts payable and accrued expenses decreased primarily as a
result of reduced inventory levels. The increase in income taxes payable and the
corresponding decrease in income taxes receivable are a reflection of recording
the first quarter tax provision. Cash was used in investing activities to
purchase equipment and in financing activities to purchase treasury stock.
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), were offset by reductions in accrued expenses ($18,409),
which resulted in an overall increase in cash of $57,178. Changes in accrued
expenses are primarily the result of the payout of accrued bonuses in the first
quarter. 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.
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 2005 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, 2004.
Results of Operations
Sales for the first quarter ended October 31, 2004 decreased 6.7% or $142,699
over the three months ended October 31, 2003, as our customers continue to move
to the offshore market. However, gross profit increased $31,761 as a result of
increased margins from 27% during the first quarter ended October 31, 2003 to
30% during the first quarter ended October 31, 2004. Gross margin increased
primarily as a result of decreases in product cost and lower payroll expense for
shop personnel.
Operating (selling, general and administrative) expenses increased from $367,720
for the three months ended October 31, 2003 to $370,903 for the three months
ended October 31, 2004 primarily due to salary expenses ($3,021). Operating
expense when expressed as a percentage of net sales for the three months ended
October 31, 2004 was approximately 19% as compared to 17% for the comparable
period of the prior year primarily as a result of the decreased sales volume in
the first quarter of 2004.
The Company did not charge its operations with any research and development
costs during the first quarter ended October 31, 2004. Interest and investment
income increased from $22,803 in the first quarter ended October 31, 2003 to
$58,066 for the first quarter ended October 31, 2004 due to the increasing
market values of certain investments (U.S. Treasury bills).
Net income for the first quarter ended October 31, 2004 was $178,479 as compared
to $134,965 for the first quarter ended October 31, 2003. Basic earnings per
share were $.67 and $.51 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 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 fiscal 2005, 2004, 2003, 2002, and 2001, the Company redeemed a total of
58 shares from 2 persons, 1,713 shares from 37 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.
- ------------------------------- --------------- ----------------- ----------------- ---------------- -----------------
2004 - 2005 QTR 1 QTR 2 QTR 3 QTR 4 YTD
- ------------------------------- --------------- ----------------- ----------------- ---------------- -----------------
# SHARES REPURCHASED 58 58
- ------------------------------- --------------- ----------------- ----------------- ---------------- -----------------
# SHAREHOLDERS 2 2
- ------------------------------- --------------- ----------------- ----------------- ---------------- -----------------
AVG SHARE PRICE $15.60 $15.60
- ------------------------------- --------------- ----------------- ----------------- ---------------- -----------------
7
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. Unregistered Sale of Equity Securities and Use of Proceeds:
(a) None.
(b) Not applicable.
(c) 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 first quarter of 2005, 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.
8
ISSUER PURCHASES OF EQUITY SECURITIES - FIRST QUARTER 2005
- -------------------- --------------------- ---------------------- ------------------------- --------------------------
(A) TOTAL NUMBER OF (B) AVERAGE PRICE (C) TOTAL NUMBER OF (D) MAXIMUM NUMBER (OR
PERIOD SHARES PAID PER SHARE SHARES (OR UNITS) APPROXIMATE DOLLAR
(OR UNITS) (OR UNIT) PURCHASED AS PART OF VALUE) OF SHARES (OR
PURCHASED PUBLICLY ANNOUNCED UNITS) THAT MAY YET BE
PLANS OR PROGRAMS PURCHASED UNDER THE
PLANS OR PROGRAMS
- -------------------- --------------------- ---------------------- ------------------------- --------------------------
Aug. 1 - 31,
2004 -0- $-0- -0- 11,443 shs.
- -------------------- --------------------- ---------------------- ------------------------- --------------------------
Sept. 1-30,
2004 50 15.60 50 11,393 shs.
- -------------------- --------------------- ---------------------- ------------------------- --------------------------
Oct. 1-31,
2004 8 15.60 8 11,385 shs.
- -------------------- --------------------- ---------------------- ------------------------- --------------------------
Total 58 $15.60 58 11,385 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:
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.
9
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 13, 2004
By: /s/ Wayne Thaw
----------------------------------------
Wayne Thaw, President, Chief Executive
Executive Officer and Chief Financial
Officer
10