**UNITED STATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C.  20549**

 

**FORM10Q**

** **

**QUARTERLYREPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For the Quarter Ended**

 

**June 30, 2004**

 

**Commission File Number 33-98404**

 

**T.J.T.,INC.**

(Exact name of registrant as specified in its charter)

 

| **WASHINGTON**                                                  | ** ** | **82-0333246**                     |
|-----------------------------------------------------------------|------------|------------------------------------|
| (State or other jurisdiction of  incorporation or organization) |       | (IRS Employer  Identification No.) |

 

**843 North Washington, P.O. Box 278, Emmett, Idaho  83617**

(Address of principal executive offices)

 

**(208) 365-5321**

(Issuer’s telephone number)

 

Indicate by check mark whetherthe registrant (1) has filed all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act during the preceding 12 months (or forsuch shorter period that the registrant was required to file such reports), and(2) has been subject to such filing requirements the past 90 days.  Yes   ý   No   o

 

Indicate by check mark whetherthe registrant is an accelerated filer (as defined in the Exchange Act Rule12d-2).  Yes   o No   ý

 

At June 30, 2004, theregistrant had 4,504,939 shares of common stock outstanding.

 

 

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**T.J.T., INC.**

**Form 10-Q**

 

**June 30, 2004**

 

**TABLE OF CONTENTS**

 
| **PART I.   FINANCIAL INFORMATION** |
|------------------------------------------|
|                                     |   |   |
| Item 1.                                  | Financial  Statements (Unaudited) |   |
|                                     |   |   |
|                                     |   | Balance  Sheets at June 30, 2004 and September 30, 2003 |   |
|                                     |   |   |   |
|                                     |   | Statements of Operation for the Three Months and Nine Months Ended  June 30, 2004 and 2003 |   |
|                                     |   |   |   |
|                                     |   | Statements of Cash Flows for the Nine Months Ended June 30, 2004 and  2003 |   |
|                                     |   |   |   |
|                                     |   | Notes to Financial Statements |   |
|                                     |   |   |
| Item 2.                                  | Management’s Discussion and Analysis of  Financial Condition and Results of Operations |   |
|                                     |   |   |
| Item 3.                                  | Quantitative and Qualitative Disclosure  about Market Risk |   |
|                                     |   |   |
| Item 4.                                  | Controls and Procedures |   |
|                                     |   |   |
| **PART II.  OTHER INFORMATION**     |
|                                     |   |   |
| Item 1.                                  | Legal Proceedings |   |
|                                     |   |   |
| Item 2.                                  | Changes in Securities and Use of Proceeds |   |
|                                     |   |   |
| Item 3.                                  | Defaults Upon Senior Securities |   |
|                                     |   |   |
| Item 4.                                  | Submission of Matters to a Vote of Security  Holders |   |
|                                     |   |   |
| Item 5.                                  | Other Information |   |
|                                     |   |   |
| Item 6.                                  | Exhibits and Reports on Form 8-K |   |
|                                     |   |   |
| Signatures                               |   |
|                                     |   |
| Sections 302  and 906 Certifications     |   |

 

2

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**T.J.T., INC.**

**BALANCE SHEETS**

**(Dollars in thousands)**

 
| ** **                                                                                                   | ** ** | **June 30  2004** | ** ** | **Sept. 30  2003** | ** ** |
|--------------------------------------------------------------------------------------------------------------|------------|-------------------|------------|--------------------|------------|
| Current assets:                                                                                              |       |              |       |               |       |
| Cash and cash equivalents                                                                                    |       | $                 | 525        |               | $          | 1,072 |   |
| Accounts receivable (net of allowance for  doubtful accounts of $16 and $68)                                 |       | 1,507             |       | 1,336              |       |
| Notes receivable                                                                                             |       | 60                |       | 38                 |       |
| Inventories                                                                                                  |       | 2,799             |       | 2,566              |       |
| Prepaid expenses and other current assets                                                                    |       | 119               |       | 107                |       |
| Total current assets                                                                                         |       | 5,010             |       | 5,119              |       |
|                                                                                                         |       |              |       |               |       |
| Property, plant and equipment, net of  accumulated depreciation                                              |       | 747               |       | 594                |       |
|                                                                                                         |       |              |       |               |       |
| Notes receivable                                                                                             |       | 228               |       | 323                |       |
| Notes receivable from related parties                                                                        |       | 4                 |       | 89                 |       |
| Real estate held for investment                                                                              |       | 317               |       | 341                |       |
| Investment in joint venture                                                                                  |       | 613               |       | 452                |       |
| Other assets                                                                                                 |       | 243               |       | 174                |       |
| Deferred tax asset                                                                                           |       | 297               |       | 450                |       |
| Total assets                                                                                                 |       | $                 | 7,459      |               | $          | 7,542 |   |
|                                                                                                         |       |              |       |               |       |
| Current liabilities:                                                                                         |       |              |       |               |       |
| Accounts payable                                                                                             |       | $                 | 740        |               | $          | 864 |   |
| Accrued liabilities                                                                                          |       | 385               |       | 549                |       |
| Total current liabilities                                                                                    |       | 1,125             |       | 1,413              |       |
|                                                                                                         |       |              |       |               |       |
| Deferred income and other noncurrent  obligations                                                            |       | 53                |       | 79                 |       |
| Total liabilities                                                                                            |       | 1,178             |       | 1,492              |       |
|                                                                                                         |       |              |       |               |       |
| Shareholders’ equity:                                                                                   |       |              |       |               |       |
| Preferred stock, $.001 par value; 5,000,000  shares authorized; 0 shares issued and outstanding              |       | —            |       | —             |       |
| Common stock, $.001 par value; 10,000,000  shares authorized;  4,504,939 shares  issued and outstanding |       | 5                 |       | 5                  |       |
| Capital surplus                                                                                              |       | 5,790             |       | 5,788              |       |
| Retained earnings                                                                                            |       | 486               |       | 257                |       |
| Total shareholders’ equity                                                                              |       | 6,281             |       | 6,050              |       |
| Total liabilities and shareholders’ equity                                                              |       | $                 | 7,459      |               | $          | 7,542 |   |

 

See accompanying notes to financialstatements.

 

3

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**T.J.T., INC.**

**STATEMENTS OF OPERATION**

**(Dollars in thousands except per share amounts)**

 
| ** **                                             | ** ** | **Three Months Ended  June 30** | ** ** | **Nine Months Ended  June 30** | ** ** |
|--------------------------------------------------------|------------|---------------------------------|------------|--------------------------------|------------|
| ** **                                             | ** ** | **2004**                        | ** ** | **2003**                       | ** ** | **2004** | ** ** | **2003** | ** ** |
|                                                   |       |                            |       |                           |       |   |   |   |   |
| Sales (net of returns and allowances):                 |       |                            |       |                           |       |   |   |   |   |
| Axles and tires                                        |       | $                               | 3,706      |                           | $          | 3,980 |   | $ | 10,446 |   | $ | 11,405 |   |
| Accessories and siding                                 |       | 1,524                           |       | 1,147                          |       | 3,498 |   | 3,211 |   |
| Total sales                                            |       | 5,230                           |       | 5,127                          |       | 13,944 |   | 14,616 |   |
|                                                   |       |                            |       |                           |       |   |   |   |   |
| Cost of goods sold                                     |       |                            |       |                           |       |   |   |   |   |
| Axles and tires                                        |       | 2,889                           |       | 3,232                          |       | 8,117 |   | 9,412 |   |
| Accessories and siding                                 |       | 1,080                           |       | 795                            |       | 2,419 |   | 2,219 |   |
| Total cost of goods sold                               |       | 3,969                           |       | 4,027                          |       | 10,536 |   | 11,631 |   |
|                                                   |       |                            |       |                           |       |   |   |   |   |
| Gross profit                                           |       | 1,261                           |       | 1,100                          |       | 3,408 |   | 2,985 |   |
|                                                   |       |                            |       |                           |       |   |   |   |   |
| Selling, general and administrative  expenses          |       | 1,204                           |       | 1,019                          |       | 3,326 |   | 3,198 |   |
|                                                   |       |                            |       |                           |       |   |   |   |   |
| Operating income (loss)                                |       | 57                              |       | 81                             |       | 82 |   | (213 | ) |
|                                                   |       |                            |       |                           |       |   |   |   |   |
| Interest income                                        |       | 23                              |       | 12                             |       | 48 |   | 37 |   |
| Investment property income (expense)                   |       | 8                               |       | (1                             | )          | 37 |   | 28 |   |
| Undistributed equity interest in joint  venture income |       | 83                              |       | 12                             |       | 161 |   | 12 |   |
| Rental income                                          |       | 8                               |       | 9                              |       | 41 |   | 14 |   |
| Other income                                           |       | 3                               |       | 9                              |       | 13 |   | 17 |   |
|                                                   |       |                            |       |                           |       |   |   |   |   |
| Income (loss) before taxes                             |       | 182                             |       | 122                            |       | 382 |   | (105 | ) |
|                                                   |       |                            |       |                           |       |   |   |   |   |
| Income taxes (benefit)                                 |       | 72                              |       | 50                             |       | 153 |   | (33 | ) |
|                                                   |       |                            |       |                           |       |   |   |   |   |
| Net income (loss)                                      |       | $                               | 110        |                           | $          | 72 |   | $ | 229 |   | $ | (72 | ) |
|                                                   |       |                            |       |                           |       |   |   |   |   |
| Net income (loss) per common share                     |       |                            |       |                           |       |   |   |   |   |
| Basic and fully diluted:                               |       |                            |       |                           |       |   |   |   |   |
| Continuing operations                                  |       | $                               | .02        |                           | $          | .02 |   | $ | .05 |   | $ | (.02 | ) |
| Net income (loss)                                      |       | $                               | .02        |                           | $          | .02 |   | $ | .05 |   | $ | (.02 | ) |
|                                                   |       |                            |       |                           |       |   |   |   |   |
| Weighted average shares outstanding                    |       | 4,504,939                       |       | 4,504,939                      |       | 4,504,939 |   | 4,504,939 |   |

 

See accompanying notes to financialstatements.

 

4

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**T.J.T., INC.**

**STATEMENTS OF CASH FLOWS**

**(Dollars in thousands)**

 
| ** **                                                                     | ** ** | **For the nine months ended  June 30,** | ** ** |
|--------------------------------------------------------------------------------|------------|-----------------------------------------|------------|
| ** **                                                                     | ** ** | **2004**                                | ** ** | **2003** | ** ** |
| Cash flows from operating activities:                                          |       |                                    |       |   |   |
| Net income                                                                     |       | $                                       | 229        |   | $ | (72 | ) |
| Adjustments to reconcile net income to net  cash used by operating activities: |       |                                    |       |   |   |
| Depreciation and amortization                                                  |       | 131                                     |       | 174 |   |
| Change in deferred income taxes                                                |       | 153                                     |       | 16 |   |
| Gain on sale of assets                                                         |       | (13                                     | )          | (41 | ) |
| Gain on sale of investment property                                            |       | (29                                     | )          |   |   |
| Equity earnings in joint venture                                               |       | (161                                    | )          | (12 | ) |
| Stock compensation                                                             |       | 2                                       |       | — |   |
| Change in receivables                                                          |       | (161                                    | )          | (40 | ) |
| Change in inventories                                                          |       | (233                                    | )          | (382 | ) |
| Change in prepaid expenses and other  current assets                           |       | (12                                     | )          | (13 | ) |
| Change in accounts payable                                                     |       | (124                                    | )          | 257 |   |
| Change in other assets and liabilities                                         |       | (239                                    | )          | (26 | ) |
| Net cash used by operating activities                                          |       | (457                                    | )          | (139 | ) |
|                                                                           |       |                                    |       |   |   |
| Cash flows from investing activities:                                          |       |                                    |       |   |   |
| Additions to property, plant and equipment                                     |       | (284                                    | )          | (74 | ) |
| Proceeds from sale of assets                                                   |       | 13                                      |       | 17 |   |
| Issuance of notes receivable                                                   |       | (10                                     | )          | — |   |
| Payments on notes receivable                                                   |       | 180                                     |       | 60 |   |
| Investment in joint venture                                                    |       | —                                  |       | (120 | ) |
| Land purchased for investment                                                  |       | (25                                     | )          | 0 |   |
| Sale of land purchased for investment                                          |       | 36                                      |       | 99 |   |
| Net cash used by investing activities                                          |       | (90                                     | )          | (18 | ) |
|                                                                           |       |                                    |       |   |   |
| Net decrease in cash and cash equivalents                                      |       | (547                                    | )          | (157 | ) |
| Beginning cash and cash equivalents                                            |       | 1072                                    |       | 767 |   |
|                                                                           |       |                                    |       |   |   |
| Ending cash and cash equivalents                                               |       | $                                       | 525        |   | $ | 610 |   |
|                                                                           |       |                                    |       |   |   |
| Supplemental information:                                                      |       |                                    |       |   |   |
| Interest paid                                                                  |       | $                                       | 1          |   | $ | 1 |   |
| Income taxes paid, net of refunds                                              |       | 11                                      |       | — |   |
| Noncash transactions:                                                          |       |                                    |       |   |   |
| Sale of land by issuance of note receivable                                    |       | 41                                      |       | 120 |   |
| Inventory invested in joint venture                                            |       | —                                  |       | 259 |   |
| Discount on investment property payoff                                         |       | 19                                      |       | — |   |

 

See accompanying notes tofinancial statements.

 

5

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T.J.T., INC.

NOTES TO FINANCIAL STATEMENTS (unaudited)

 

 

NOTE A – BASIS OF PRESENTATION

 

*UnauditedFinancial Statements*

 

In the opinion of management,the accompanying unaudited financial statements contain all adjustments(consisting solely of normal recurring adjustments) necessary to present fairlythe financial position of T.J.T., Inc. (the “Company”) and the results ofoperations and cash flows.  Certainreclassifications of prior quarter amounts were made to conform with currentquarter presentation, none of which affect previously recorded net income.

 

*StockOptions*

 

The Company has a stock optionplan which allows officers, directors and key employees to receivenon-qualified and incentive stock options. During the three month period ending June 30, 2004, the Company awarded5,000 stock options to a director with an exercise price of $.70 and retired35,000 stock options previously issued to directors with exercise pricesranging between $.39 and $2.00 per share. The Company awarded 20,000 stock options to directors during the quarterended March 31, 2004 with exercise prices ranging from $.70 to $.80.  No options were granted during the quarterended December 31, 2003.  All optionsgranted will become vested at a rate of 20 percent each year for a period offive years from the grant date.  As ofJune 30, 2004, 380,000 shares of stock were available for future option grants.

 

As of October 1, 2003, theCompany adopted the fair value method of accounting for stock options containedin Statement of Financial Standards (“SFAS”) No. 123, *Accountingfor Stock-Based Compensation.* During the transition period, the Company will be utilizing theprospective method under SFAS No. 148 *Accounting for Stock-BasedCompensation – Transition and Disclosures. *Stock options granted subsequent to October 1, 2003 will beexpensed over the stock option vesting period based on fair value which will bedetermined using the Black-Scholes option-pricing method at the date theoptions are granted.  Stock-basedcompensation for the quarters ending June 30 and March 31 of fiscal 2004 was$792 and $634, respectively.  The net oftax impact on the financial statements in the nine month period ended June 30,2004 was $856.  The net of tax impact forthe three months ending June 30, 2004 was $475, which is not included in thetable below due to rounding.

 

The following table illustratesthe effect on net income (loss) and net income (loss) per common share as ifthe fair value method had been applied to all outstanding and unvested awardsin each period:

 
| ** **                                                                                                     | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|----------------------------------------------------------------------------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| **(Dollars  in thousands, except per share amounts)**                                                          | ** ** | **June 30,  2004**     | ** ** | **June 30,  2003**    | ** ** | **June 30,  2004** | ** ** | **June 30,  2003** | ** ** |
| Net income (loss), as reported                                                                                 |       | $                      | 110        |                  | $          | 72 |   | $ | 229 |   | $ | (72 | ) |
| Add:   stock-based employee compensation expense included in net income, net  of tax                      |       | —                 |       | —                |       | 1 |   | — |   |
| Deduct:   stock-based compensation expense determined under fair value method  for all awards, net of tax |       | 2                      |       | 2                     |       | 6 |   | 6 |   |
| Pro forma net income (loss)                                                                                    |       | $                      | 108        |                  | $          | 70 |   | $ | 224 |   | $ | (78 | ) |
|                                                                                                           |       |                   |       |                  |       |   |   |   |   |
| Earnings per share:                                                                                            |       |                   |       |                  |       |   |   |   |   |
| Basic – as reported                                                                                       |       | $                      | .02        |                  | $          | .02 |   | $ | .05 |   | $ | (.02 | ) |
| Basic – pro forma                                                                                         |       | $                      | .02        |                  | $          | .02 |   | $ | .05 |   | $ | (.02 | ) |

 

6

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NOTE B - INVENTORIES

 

Inventories are stated at thelower of cost (first-in, first-out and average cost methods) or market.

 
| **(Dollars  in thousands)** | ** ** | **June 30,  2004** | ** ** | **Sept. 30,  2003** | ** ** |
|-----------------------------|------------|--------------------|------------|---------------------|------------|
| Raw materials               |       | $                  | 1,249      |                | $          | 1,284 |   |
| Finished goods              |       | 1,550              |       | 1,282               |       |
| Total                       |       | $                  | 2,799      |                | $          | 2,566 |   |

 

NOTE C – PROPERTY, PLANT ANDEQUIPMENT

 
| **(Dollars  in thousands)**       | ** ** | **June 30,  2004** | ** ** | **Sept. 30,  2003** | ** ** |
|-----------------------------------|------------|--------------------|------------|---------------------|------------|
| Land and building                 |       | $                  | 393        |                | $          | 386 |   |
| Leasehold improvements            |       | 285                |       | 399                 |       |
| Furniture and equipment           |       | 1,222              |       | 1,153               |       |
| Vehicles and trailers             |       | 1,095              |       | 1,060               |       |
|                              |       | 2,995              |       | 2,998               |       |
| Less accumulated depreciation     |       | 2,248              |       | 2,404               |       |
| Net property, plant and equipment |       | $                  | 747        |                | $          | 594 |   |

 

NOTE D - SHAREHOLDERS’ EQUITY

 

Authorized stock of the Companyconsists of 10,000,000 shares of $.001 par value common stock and 5,000,000shares of $.001 par value preferred stock. No shares of preferred stock have been issued.

 

7

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NOTE E – SEGMENT DISCLOSURE

 

The Company operates in two businesssegments: Axles and Tire Reconditioning and Housing Accessories. These segmentshave been determined by evaluating the Company’s internal reporting structureand nature of products offered.

 

Axles and Tire Reconditioning: The Companyprovides reconditioned axles and tires to manufactured housing factories.

 

Housing Accessories: The Company providesskirting, siding, and other aftermarket accessories to manufactured housingdealers and contractors.

 
| **(Dollars  in thousands)**      | ** ** | **Axle & Tire  Reconditioning** | ** ** | **Housing  Accessories** | ** ** | **Total** | ** ** |
|----------------------------------|------------|-------------------------------------|------------|--------------------------|------------|-----------|------------|
| Three months ended June 30, 2004 |       |                                |       |                     |       |      |       |
|                             |       |                                |       |                     |       |      |       |
| Operating revenue                |       | 3,706                               |       | 1,524                    |       | 5,230     |       |
| Operating income (loss)          |       | 97                                  |       | (40                      | )          | 57        |       |
| Depreciation                     |       | 27                                  |       | 14                       |       | 41        |       |
|                             |       |                                |       |                     |       |      |       |
| Three months ended June 30, 2003 |       |                                |       |                     |       |      |       |
|                             |       |                                |       |                     |       |      |       |
| Operating revenue                |       | 3,980                               |       | 1,147                    |       | 5,127     |       |
| Operating income (loss)          |       | 72                                  |       | 9                        |       | 81        |       |
| Depreciation                     |       | 39                                  |       | 15                       |       | 54        |       |
|                             |       |                                |       |                     |       |      |       |
| Nine months ended June 30, 2004  |       |                                |       |                     |       |      |       |
|                             |       |                                |       |                     |       |      |       |
| Operating revenue                |       | 10,446                              |       | 3,498                    |       | 13,944    |       |
| Operating income (loss)          |       | 224                                 |       | (143                     | )          | 81        |       |
| Depreciation                     |       | 98                                  |       | 33                       |       | 131       |       |
|                             |       |                                |       |                     |       |      |       |
| Nine months ended June 30, 2003  |       |                                |       |                     |       |      |       |
|                             |       |                                |       |                     |       |      |       |
| Operating revenue                |       | 11,405                              |       | 3,211                    |       | 14,616    |       |
| Operating income (loss)          |       | (127                                | )          | (86                      | )          | (213      | )          |
| Depreciation                     |       | 139                                 |       | 35                       |       | 174       |       |

 

The Company does not assign interest income,interest expense, other expenses or income taxes to operating segments.Identifiable assets and related capital expenditures are assigned to operatinglocations rather than operating segments, with depreciation allocated to thesegments based upon usage.

 

The Arizona facility, which was closed inJune of 2003, primarily reconditioned axles and tires.

 

NOTE F - CREDIT AGREEMENTS

 

The Company renewed a $350,000 revolvingcredit facility that matures on March 31, 2005 and is secured by receivablesand inventory.  The interest rate on thecredit line is the prime rate plus one percent. As of June 30, 2004, the Company has not borrowed on the line and is incompliance with the covenants.

 

NOTE G - RELATED PARTY

 

The Company has 50 percent ownership interestin NewCo Axle & Tire, L.L.C., a joint venture with West States Recycling,Inc., and will receive 40 percent of the future net profits.  The Company accounts for its investment inNewCo under the equity method and recognized $161,000 of income related to thejoint venture during the nine month period ended June 30, 2004.  The Company also received rental income fromNewCo for equipment leased to the joint venture of approximately $21,000.  During the nine month period ended June 30,2004, the Company recorded sales of $92,000 to NewCo and purchases of $8,000from NewCo.  On June 30, 2004, the NewCoreceivable was $48,000.  The majority ofthe receivable is a result of sales that occurred in June of 2004.

 

8

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**Item 2.Management’s Discussion and Analysis of Financial Condition and Results ofOperations**

 

This Form 10-Q contains certainforward-looking statements which are based on management’s currentexpectations.  These forward-lookingstatements are subject to certain risks and uncertainties. The words “believe,”“expect,” “anticipate,” “intend,” “estimate,” “will,” “should,” “could,” andother expressions that indicate future events and trends identifyforward-looking statements.  The Companyhas identified risk factors which could cause actual results to differsubstantially from the forward-looking statements.  These risk factors include, but are notlimited to, general economic conditions, changes in interest rates,availability of financing for both manufactured home buyers and suppliers, realestate values, adverse weather conditions, the economic viability of our customersand vendors, and availability of qualified employees.  In addition, industry conditions that mayhave an adverse impact on future results include, but are not limited to, lowbarriers of entry, changes and/or enforcement in legislation or regulations, andcompetitive pressure on both the purchasing of used axles and tires frommanufactured housing dealers and the selling of refurbished axles and tires tomanufactured housing factories.

 

T.J.T., Inc. has twobusiness lines: repairing and reconditioning axles and tires for themanufactured housing industry, and distribution of after-market accessoryproducts to manufactured housing dealers and set-up contractors, as well assiding to site builders.

 

The Company has recyclingand distribution locations in Emmett, Idaho; Woodland, California; Platteville,Colorado; and Chehalis, Washington.  TheCompany also manufactures hanger parts in Eugene, Oregon which are used by themanufactured housing producers to attach axles to homes.  The Oregon facility also sells housing andaccessory products.  The Company operatesin Arizona and New Mexico through NewCo Axle & Tire, L.L.C. (“NewCo”), ajoint venture limited liability corporation.

 

**Results ofOperations**

 

Nationally, the manufacturedhousing industry continues to experience modest declines in production levelsas a result of more restrictive credit standards and excessiverepossessions.  In the Company’s marketarea, manufactured housing shipments increased three percent in the quarterended June 30, 2004 as compared to the quarter ended June 30, 2003 according tostatistics from the National Conference of States on Building Codes andStandards.  Company net sales increasedtwo percent during that same period; however, net sales for the 2003 quarterincluded sales from the Company’s Arizona facility, which was closed in June of2003.  Excluding the April, May and June2003 Arizona sales, net sales for the Company increased 14 percent during thethree month period ending June 30, 2004.

 

The following table sets forththe operating data of the Company as a percentage of net sales for the periodslisted below:

 
| ** **                                  | ** ** | **Three Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|---------------------------------------------|------------|------------------------|------------|-----------------------|------------|
| ** **                                  | ** ** | **June 30,  2004**     | ** ** | **June 30,  2003**    | ** ** | **June 30,  2004** | ** ** | **June 30,  2003** | ** ** |
| Axle and tire reconditioning                |       | 70.9                   | %          | 77.6                  | %          | 74.9 | % | 78.0 | % |
| Manufactured housing accessories and siding |       | 29.1                   |       | 22.4                  |       | 25.1 |   | 22.0 |   |
| Gross margin                                |       | 24.1                   |       | 21.5                  |       | 24.4 |   | 20.4 |   |
| Selling expense                             |       | 14.4                   |       | 13.7                  |       | 15.4 |   | 15.2 |   |
| Administrative expense                      |       | 8.6                    |       | 6.2                   |       | 8.4 |   | 6.7 |   |

 

9

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***Net Sales***

 

Net sales increased two percentor $103,000 for the three months ending June 30, 2004 compared to the sameperiod a year ago.  The Company closedits Arizona location in June of 2003, which contributed sales of $531,000 inthe 2003 quarter.  The three monthcomparison for sales from the remaining locations shows an increase of $634,000or 14 percent.

 

Sales for the nine monthsending June 30, 2004 decreased $72,000, or five percent, as compared to thesame period in 2003. The Arizona location contributed $1,921,000 of salesduring the first six months of fiscal year 2003 prior to being closed.  Excluding the 2003 sales from Arizona, netsales increased 10 percent or $1,245,000. This increase in net sales of the remaining locations was primarily dueto a higher volume of sales in both segments of business;  during the nine month period ending June 30,2004, axle and tire sales increased 10 percent while dealer and accessoriessales increased 9 percent from the same period last year.

 

***Gross Profit***

 

The Company’s gross profitincreased $160,000 or 16 percent during the three months ended June 30, 2004compared to the same period a year ago. The Arizona location contributed negative gross profit in the 2003 threemonth period of $19,000.

 

Gross profit for the Companyduring the nine month period ending June 30, 2004 increased to $423,000 or 14percent as compared to the same period in 2003. The negative gross profitgenerated by the Arizona facility during the nine month period in 2003 was $82,000.

 

Gross profit margin increasedto 24 percent for both the three and nine month periods in fiscal period endedJune 30, 2004 compared to 22 percent and 20 percent in the same 2003 periodsdue to increases in sales volumes of the higher margin dealer accessoriesproducts.

 

***Selling, General andAdministrative***

 

Selling, general andadministrative expense increased 18 percent, or $185,000, during the threemonth period ending June 30, 2004 compared to the same period in 2003.  The increase for the nine month period endingJune 30, 2004 compared to the same period a year ago was four percent, or$128,000. The increases in both period comparisons were partially a result ofwage changes as well as bonus accruals during the 2004 period that had not beenaccrued in June of 2003 due to the net loss. Other factors contributing to the increases include costs related toupdating the Company’s information systems and accounting software, as well ashigher selling expenses at the corporate level and at the Idaho and Californialocations attributable to efforts associated with improving the dealeraccessories segment sales.

 

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***Net income***

 

Net income for the quarterending June 30, 2004 was $110,000, a 53 percent increase compared to the samethree month period in 2003.  The jointventure, NewCo, began operating in June of 2003 generating only $12,000 of netincome versus the $83,000 contributed to net income during the three months ofoperation in the 2004 quarter ended June 30.

 

Net income for the nine monthperiod ended June 30, 2004 increased $301,000, or $.07 per share, compared tothe same period a year ago due to increased sales of higher margin accessoryproducts, nonoperating income from the joint venture, interest related to notesreceivable, and rental income.  TheCompany’s Arizona location had incurred losses of $77,000 prior to closing inJune 2003, which also contributed to the increase in net income for the ninemonth 2004 period.

 

**Liquidityand Capital Resources**

 

The Company’s decrease in net cash for the nine months ended June 30,2004 was $547,000.  Operating activitiesfor the period used cash flow of $457,000 compared to $139,000 of cash used foroperations in the same nine month period a year ago.  The change from period to period is primarilydue to increases in the housing and accessories inventory levels as a result ofadding new product lines and changing suppliers of certain tie downaccessories.

 

Net cash used by investing activities was $90,000 during the ninemonths ended June 30, 2004 while investing activities during the same period in2003 used cash of $18,000.  During thefirst and second quarters of 2004, the Company invested approximately $122,000in leasehold improvements made to the Chehalis, Washington site and the Eugene,Oregon facility.  The Company alsoinvested approximately $103,000 during the nine month period in trucks,trailers and equipment primarily to assist with increasing sales volumes.  The Company also invested $27,000 in necessaryupgrades to the information system and accounting software during June of2004.  The additions to property, plantand equipment were offset by amounts received as pay off of notes receivables.

 

The Company expects thatcash flow from operations combined with the line of credit will be a sufficientsource of liquidity to fund operations. The Company has a $350,000 revolving credit facility with a financialinstitution secured by receivables and inventory.  The interest rate on the credit line is theprime rate plus one percent. As of June 30, 2004, the Company has not borrowedon the line and is in compliance with all loan covenants.

 

**Item3.  Quantitative and QualitativeDisclosures about Market Risk**

 

The Company is not required toprovide this information pursuant to Item 305(e) of Regulation S-K.

 

**Item4.  Controls and Procedures**

 

The Company maintainsdisclosure controls and procedures that are designed to ensure that informationrequired to be disclosed in the Company’s Securities Exchange Act reports isrecorded, processed, summarized and reported within the time periods specifiedin the SEC’s rules and forms, and that such information is accumulated andcommunicated to the Company’s management, including its Chief Executive Officerand Chief Financial Officer, as appropriate,

 

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to allow timely decisionsregarding required disclosure. Management recognizes that any controls and procedures, no matter howwell designed and operated, can provide only reasonable assurance of achievingthe desired control objectives, as ours are designed to do, and managementnecessarily is required to apply its judgement in evaluating the cost-benefitrelationship of possible controls and procedures.

 

During the 90-day period priorto the date of this report, an evaluation was performed under the supervisionand with the participation of our Company’s management, including the ChiefExecutive Officer and the Chief Financial Officer, of the effectiveness of thedesign and operation of our disclosure controls and procedures.  The Chief Executive Officer and the ChiefFinancial Officer concluded that, based upon the evaluation of management, theCompany’s disclosure controls and procedures were effective.  Subsequent to the date of this evaluation,there have been no significant changes in the Company’s internal controls or inother factors that could significantly affect these controls, and no correctiveactions have been needed or taken with regard to significant deficiencies ormaterial weaknesses in such controls.

 

**PART II. OTHER INFORMATION**

 

**Item 1. Legal Proceedings**

 

Nothing to report.

 

**Item 2.Changes in Securities**

** **

Nothing to report

 

**Item 3.Defaults Upon Senior Securities**

** **

Nothing to report

 

**Item 4.Submission of Matters to a Vote of Security Holders**

** **

Nothing to report

 

**Item 5. Other Information**

 

On November 11, 2003, the Company adopted anExecutive Officers’ Code of Ethics pursuant to Item 406 of RegulationsS-K.  The Code of Ethics is availablefree of charge by calling 1-800-458-3555.

 

**Item6.  Exhibits and Reports on Form 8-K**

 

(a)                                  Exhibit 31.1Certification Pursuant to 18 U.S.C Section 1350.

Exhibit 31.2Certification Pursuant to 18 U.S.C. Section 1350.

Exhibit 32.1Certification Pursuant to 18 U.S.C. Section 1350.

(b)                                 On May 17,2004, the Company filed Form 8-K for Item 4, Changes in Registrant’s CertifyingAccountant, to announce that the Company’s Audit Committee engaged Moss

 

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AdamsLLP as independent auditor, replacing Balukoff Lindstrom & Co., effectiveMay 11, 2004.

 

 

**SIGNATURES**

** **

Pursuant to the requirements ofthe Securities Exchange Act of 1934, the registrant has caused this report tobe signed on its behalf by the undersigned hereunto duly authorized.

 
|                                          | T.J.T., INC.                                                          |
|-----------------------------------------------|-----------------------------------------------------------------------|
|                                          | Registrant                                                            |
|                                          |                                                                  |
| Date:    August  16, 2004 | By:                                                                   | /s/Larry B.  Prescott |   |
|                                          | Larry B. Prescott, Senior Vice President and  Chief Financial Officer |

 

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