**Exhibit 99.1**

 

**NewCo Tire & Axle L.L.C.**

 

**FINANCIAL STATEMENTS**

 

# **For the period ending October 31, 2004**

 

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**REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**

 

Tothe Shareholders and Board of Directors

NewCoTire & Axle L.L.C.

Orange,California

 

Wehave audited the accompanying balance sheet of NewCo Tire & Axle L.L.C. asof October 31, 2004, and the related statements of operations, shareholders’equity and cash flows for the year then ended.  These financial statementsare the responsibility of the Company’s management.  Our responsibility isto express an opinion on these financial statements based on our audit.

 

Weconducted our audit in accordance with the standards of the Public CompanyAccounting Oversight Board (United States).  Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether thefinancial statements are free of material misstatement.  An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures inthe financial statements.  An audit alsoincludes assessing the accounting principles used and significant estimatesmade by management, as well as evaluating the overall financial statementpresentation. We believe that our audit provides a reasonable basis for ouropinion.

 

Inour opinion, the financial statements referred to above present fairly, in allmaterial respects, the financial position of NewCo Tire & Axle L.L.C. atOctober 31, 2004, and the results of its operations and its cash flows for theyear then ended, in conformity with accounting principles generally accepted inthe United States.

 

MossAdams LLP

Seattle,Washington

December17, 2004

 

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**NewCo Tire & Axle L.L.C.**

**BALANCE SHEET**

**For the period ending October 31, 2004**

**(Dollars in thousands)**

 
| Current assets:                           |   |   |   |
|-------------------------------------------|--------|--------|--------|
|                                      |   |   |   |
| Cash and cash equivalents                 |   | $      | 180    |   |
| Accounts receivable                       |   | 694    |   |
| Inventories                               |   | 720    |   |
| Prepaid expenses and other current assets |   | 92     |   |
|                                      |   |   |   |
| Total current assets                      |   | 1,686  |   |
|                                      |   |   |   |
| Equipment, net                            |   | 20     |   |
|                                      |   |   |   |
| Total assets                              |   | $      | 1,706  |   |
|                                      |   |   |   |
| Current liabilities:                      |   |   |   |
|                                      |   |   |   |
| Accounts payable                          |   | $      | 168    |   |
| Accrued liabilities                       |   | 72     |   |
|                                      |   |   |   |
| Total current liabilities                 |   | 240    |   |
|                                      |   |   |   |
| Members' capital                          |   | 1,466  |   |
|                                      |   |   |   |
| Total liabilities and members' capital    |   | $      | 1,706  |   |

 

See accompanying notes to financial statements.

 

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**NewCo Tire & Axle L.L.C.**

**STATEMENT OF OPERATION**

**For the period ending October 31, 2004**

**(Dollars in thousands)**

 
| Sales, net                  |   |   |   | $      | 9,364  |   |
|-----------------------------|--------|--------|--------|--------|--------|--------|
|                        |   |   |   |   |   |
| Cost of goods sold          |   |   |   | 7,952  |   |
|                        |   |   |   |   |   |
| Gross profit                |   |   |   | 1,412  |   |
|                        |   |   |   |   |   |
| Operating Expenses          |   |   |   |   |   |
| Selling expenses            |   | $      | 126    |   |   |   |
| Rent expense                |   | 110    |   |   |   |
| Insurance                   |   | 129    |   |   |   |
| Equipment rental and repair |   | 191    |   |   |   |
| Depreciation                |   | 3      |   |   |   |
| Administrative expenses     |   | 279    |   |   |   |
|                        |   |   |   |   |   |
| Total operating expenses    |   |   |   | 838    |   |
|                        |   |   |   |   |   |
| Net income                  |   |   |   | $      | 574    |   |
|                             |        |        |        |        |        |        |  |

 

See accompanying notes to financial statements.

 

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**NewCo Tire & Axle, L.L.C.**

**STATEMENTS OF CASH FLOWS**

**For the period ending October 31, 2004**

**(Dollars in thousands)**

 
| Cash flows from operating activities:                                              |   |   |   |
|------------------------------------------------------------------------------------|--------|--------|--------|
|                                                                               |   |   |   |
| Net income from operations                                                         |   | $      | 574    |   |
|                                                                               |   |   |   |
| Adjustments to reconcile net income to net  cash provided by operating activities: |   |   |   |
| Depreciation                                                                       |   | 3      |   |
| Change in accounts receivables                                                     |   | (222   | )      |
| Change in inventories                                                              |   | (190   | )      |
| Change in prepaid expenses and other  current assets                               |   | (45    | )      |
| Change in accounts payable                                                         |   | 7      |   |
| Change in other assets and liabilities                                             |   | 19     |   |
|                                                                               |   |   |   |
| Net cash provided by operating activities                                          |   | 146    |   |
|                                                                               |   |   |   |
| Cash flows from investing activities:                                              |   |   |   |
|                                                                               |   |   |   |
| Purchases of equipment                                                             |   | (16    | )      |
|                                                                               |   |   |   |
| Net cash used by investing activities                                              |   | (16    | )      |
|                                                                               |   |   |   |
| Net change in cash and cash equivalents                                            |   | 130    |   |
| Cash and cash equivalents at November 1                                            |   | 50     |   |
|                                                                               |   |   |   |
| Cash and cash equivalents at October 31                                            |   | $      | 180    |   |

 

Seeaccompanying notes to financial statements.

 

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**NewCo Axle & Tire L.L.C.**

**STATEMENT OF PARTNERS' CAPITAL**

**For the period ended October 31, 2004**

**(Dollars in thousands)**

 
| ** **                  | ** ** | **Members' Capital**       | ** ** |
|-----------------------------|------------|----------------------------|------------|
| ** **                  | ** ** | **West States  Recycling** | ** ** | **TJT, Inc.** | ** ** | **Total** | ** ** |
|                        |       |                       |       |   |   |   |   |
| Balance at October 31, 2003 |       | $                          | 458        |   | $ | 434 |   | $ | 892 |   |
|                        |       |                       |       |   |   |   |   |
| Net income                  |       | 345                        |       | 229 |   | 574 |   |
|                        |       |                       |       |   |   |   |   |
| Balance at October 31, 2004 |       | $                          | 803        |   | $ | 663 |   | $ | 1,466 |   |

 

See the accompanying notesto the financial statements.

 

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#### ** **

#### **NEWCOAXLE & TIRE, L.L.C.**

#### **NOTESTO FINANCIAL STATEMENTS**

October 31, 2004

 

### **NOTEA - SIGNIFICANT ACCOUNTING POLICIES**

 

### **BusinessActivity**

 

NewCo Tire & Axle L.L.C., (the “Company”) is a joint venture,formed on June 9, 2003 as a limited liability company, engaged in the businessof repairing and reconditioning axles and tires for the manufactured housingbusiness.  The Company services marketsin Arizona, New Mexico, Kansas and parts of southern California.

 

The Company has two equal 50 percent members consisting of West StatesRecycling and T.J.T., Inc.   Initialcapital contributions consisted of cash and inventories by each member.  Under the terms of the joint ventureagreement, the net earnings and losses of the Company are allocated to themembers’ capital accounts disproportionately with West States Recyclingreceiving 60 percent and T.J.T. Inc. receiving 40 percent of the Company’s netearnings and losses.

 

Future capital contributions are limited to an additional $20,000 inaggregate unless both parties agree to the additional contributions and arewilling to contribute 50 percent of the required capital.  In addition, each member has committed toproviding a maximum future capital contribution on an as needed basis of up to$100,000.

 

### **MajorSuppliers and Customers**

### ** **

The Company had three suppliers of axles and tires that represented 10percent or more of total purchases during the fiscal period October 31,2004.  Purchases from West StatesRecycling and West States Tire & Axle, both related parties, comprised 38percent and 21 percent, respectively, of total purchases during 2004 (see NoteE).  An additional supplier represented15 percent of total purchases during 2004.

 

The Company has certain major customers for reconditioned tires andaxles.  Six companies derive 86 percentof total net sales during 2004, including West States Recycling:

 
| Company A             |   | 21 |   |
|-----------------------|--------|----|--------|
| Company B             |   | 19 |   |
| Company C             |   | 14 |   |
| Company D             |   | 12 |   |
| Company E             |   | 10 |   |
| West States Recycling |   | 10 |   |

 

### **Cashand Cash Equivalents**

 

The Company considers allhighly liquid investments purchased with a maturity of three months or less tobe cash equivalents.  Cash balances areinvested in highly rated financial institutions and may at times exceed FDICinsured limits.

 

**Receivables**

 

The Company performs credit history checks before credit terms areoffered to customers.  Accountsreceivable are generally unsecured.  Baddebts are accounted for using the allowance method.

 

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Expense is recognized based on an estimate of uncollectibleaccounts.  Trade receivables aregenerally reported in the balance sheet net of any chargeoffs and the allowancefor doubtful accounts.   As of October31, 2004, all receivables were determined to be fully collectible and noallowance for doubtful accounts was recorded.

 

### **Equipment**

 

Equipment is stated atcost.  Depreciation is calculated usingthe straight-line method over the estimated useful lives for financialreporting purposes.   Estimated usefullives for equipment range between 3 and 5 years.

 

Repairs and maintenance costs which do not extend the estimated usefullives of equipment are charged to expense in the period incurred.

 

**Revenue Recognition**

 

The Company recognizes revenue at the time delivery is made to thecustomer.  No agreements exist requiringany performance by the Company subsequent to the sale.  The Company has not historically had significantreturns or warranty provisions, as such no allowances are included in thefinancial statements.

 

**Income Taxes**

 

The members of the Company have elected to be taxed as a limitedliability company for federal and state income tax purposes.  As a limited liability company, theproportionate share of taxable earnings and losses of the Company are includedon the tax returns of the members.  As aresult, no provision for income taxes has been included in the financialstatements.

 

**Concentration of Credit Risk**

 

All trade receivables are due from entities involved in the housingindustry and are unsecured.  Theaccounting loss incurred if all parties failed entirely to perform on theirobligation is equal to the balance outstanding for trade accounts receivable.

 

### **FairValue of Financial Instruments**

### ** **

The Company’s financial instruments consist of cash and cashequivalents, accounts receivable, short-term borrowings, accounts payable andaccrued liabilities which as presented in the financial statements approximatefair value due to the short-term nature of these instruments.  The recorded amount of short and long-termborrowings approximates fair value as the interest rates approximate currentcompetitive rates.  The estimated fairvalues have been determined by the Company using available market informationand appropriate valuation methodologies. Judgment is required in interpreting market data to develop theestimates of fair value and the estimates are not necessarily indicative ofamounts the Company could realize in a current market exchange.

 

### **SignificantEstimates**

### ** **

The presentation offinancial statements in conformity with the accounting principles generallyaccepted in the United States of America requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities andthe disclosure of contingent assets and liabilities at the date of thefinancial statements, as well as the reported amounts of revenue and expensesduring the reporting period.  Listedbelow are the estimates and assumptions that management considers to besignificant in the preparation of its financial statements.  Significant estimates used in preparing thesefinancial statements are as follows:

 

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Allowance for DoubtfulAccounts — The Company estimates losses for uncollectibleaccounts based on the aging of the accounts receivable and an evaluation of thelikelihood of success in collecting the receivable.

 

InventoryLower-of-Cost-or-Market – The Company assesses the estimated netrealizable value of inventory on hand for the purposes of costing at the lowerof cost or market.

 

Inventory ObsolescenceAllowance – The Company evaluates the expected salability andusefulness of inventory on hand for purposes of determining the presence ofobsolescence for old, defective, or outdated inventory.

 

It is reasonably possiblethat the significant estimates may change within the next year.

 

### **NOTEB - INVENTORIES**

 

Inventories are stated atthe lower of cost (average cost methods) or market.

 
| Raw materials  |   | $  | 657    |   |
|----------------|--------|----|--------|--------|
| Finished goods |   | 63 |   |
| Total          |   | $  | 720    |   |

 

**NOTE C - EQUIPMENT**

 
| Equipment                     |   | $ | 23     |   |
|-------------------------------|--------|---|--------|--------|
| Less accumulated depreciation |   | 3 |   |
| Total equipment               |   | $ | 20     |   |

 

Depreciation expense was $3,000 for 2004.

 

### **NOTED - LEASES**

 

The Company leasesadministrative office space, manufacturing facilities, building and warehousespace, and storage yard space from the majority shareholders of West StatesRecycling (see Note E).  The Company alsoleases vehicles and trailers from West States Recycling and T.J.T., Inc., both50 percent members.  The leases, whichexpire between February 2005 and August 2010, are classified as operatingleases.

 

The future minimum paymentsby fiscal year under non-cancelable operating lease agreements for years endingOctober 31 are as follows:

 
| 2005       |   | $   | 196    |   |
|------------|--------|-----|--------|--------|
| 2006       |   | 161 |   |
| 2007       |   | 158 |   |
| 2008       |   | 101 |   |
| 2009       |   | 49  |   |
| Thereafter |   | 17  |   |
| Total      |   | $   | 682    |   |

 

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Rental expense under all operating leases during 2004 were as follows:

 
| Facilities:                                     |   |   |   |
|-------------------------------------------------|--------|--------|--------|
| Majority shareholders of West States  Recycling |   | $      | 110    |   |
| Equipment:                                      |   |   |   |
| West States Recycling                           |   | 67     |   |
| T.J.T, Inc.                                     |   | 22     |   |
| Personnel:                                      |   |   |   |
| West States Recycling                           |   | 561    |   |
| Total                                           |   | $      | 760    |   |

 

### **NOTEE - RELATED PARTY TRANSACTIONS**

 

The Company has two equal 50 percent members consisting of West StatesRecycling and T.J.T., Inc.   Initialcapital contributions consisted of cash and inventories by each member.  Under the terms of the joint ventureagreement, the net earnings and losses of the Company are allocated to themembers’ capital accounts disproportionately with West States Recyclingreceiving 60 percent and T.J.T. Inc. receiving 40 percent of the Company’s netearnings and losses.

 

During 2004, the Company purchased tires andaxles from West States Recycling to service customers in the southernCalifornia market.  Total purchases oftires and axles from West States Recycling during the period were$2,864,714.  Total sales made to WestStates Recycling during the period were $895,606.

 

In addition, the Company paid $94,174 to WestStates Recycling in administration fees. Through September 2004, the Company leased substantially all of itsemployees from West States Recycling. Payments to West States Recycling for leased employees wereapproximately $561,385 during 2004 and are included in cost of goods sold andadministrative expenses, including $17,700 in employer contributions to theWest States Recycling employee benefit plan on behalf of the leasedemployees.  Expenses associated withrenting equipment from West States Recycling during the fiscal period were$66,798.  As of October 31, 2004, amountsdue to and due from West States Recycling were $26,297 and $149,101,respectively.

 

The Company rents facilities from the majority shareholders of West StatesRecycling.  Expenses related to rentingthe facilities from the related parties during 2004 were approximately$110,000.

 

The Company also purchased tires and axlesfrom T.J.T., Inc. during 2004 of approximately $118,000 and sold inventory toT.J.T., Inc in the amount of $2,450. During 2004, the Company also incurredexpenses of approximately $22,436 for equipment rented from T.J.T., Inc.  As of October 31, 2004, no amounts were dueto or due from T.J.T., Inc.

 

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The Company purchased tiresand axles of approximately $1,583,853 from West States Tire & Axle, whichis owned by a 25 percent shareholder of West States Recycling.

 

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**SIGNATURES**

 

In accordance with Section 13 or 15(d) of the Exchange Act, theRegistrant caused this report to be signed on its behalf by the undersigned,thereunto duly authorized.

 
|   |             |   | T.J.T., INC.                                        |
|--------|------------------|--------|-----------------------------------------------------|
|   |             |   | **Registrant**                                      |
|   |             |   |
| Date:  | January 31, 2005 | By:    | /s/ Terrence J. Sheldon                             |   |
|   |             |   | Terrence J. Sheldon, President and                  |
|   |             |   | Chief Executive Officer                             |
|   |             |   |
| Date:  | January 31, 2005 | By:    | /s/ Larry B. Prescott                               |   |
|   |             |   | Larry B. Prescott, Senior Vice President, Treasurer |
|   |             |   | and Chief Financial Officer                         |
|   |             |   |
| Date:  | January 31, 2005 | By:    | /s/ Cindy M. Truchot                                |   |
|   |             |   | Cindy M. Truchot, Vice President and Controller     |
|        |                  |        |                                                     |  |  |  |

 

In accordance with the Exchange Act, this report has been signed belowby the following persons on behalf of the Registrant and in the capacities andon the dates indicated.

 
| Date:  | January 31, 2005 | By:    | /s/ Terrence J. Sheldon                         |   |
|--------|------------------|--------|-------------------------------------------------|--------|
|   |             |   | Terrence J. Sheldon, President, Chief Executive |
|   |             |   | Officer, and Chairman of the Board of Directors |
|        |                  |        |                                                 |        |  |

 
| Date:  | January 31, 2005 | By:    | /s/Ulysses B. Mori                         |   |
|--------|------------------|--------|--------------------------------------------|--------|
|   |             |   | Ulysses B. Mori, Senior Vice President and |
|   |             |   | Corporate Sales Manager and Director       |
|        |                  |        |                                            |        |  |

 
| Date:  | January 31, 2005 | By:    | /s/Larry B. Prescott                                 |   |
|--------|------------------|--------|------------------------------------------------------|--------|
|   |             |   | Larry B. Prescott, Senior Vice President, Treasurer, |
|   |             |   | Chief Financial Officer and Director                 |
|        |                  |        |                                                      |        |  |

 
| Date:  | January 31, 2005 | By:    | /s/Arthur J. Berry        |   |
|--------|------------------|--------|---------------------------|--------|
|   |             |   | Arthur J. Berry, Director |
|        |                  |        |                           |        |  |

 
| Date:  | January 31, 2005 | By:    | /s/Jerome B. Light        |   |
|--------|------------------|--------|---------------------------|--------|
|   |             |   | Jerome B. Light, Director |
|        |                  |        |                           |        |  |

 
| Date:  | January 31, 2005 | By:    | /s/Larry E. Kling        |   |
|--------|------------------|--------|--------------------------|--------|
|   |             |   | Larry E. Kling, Director |
|        |                  |        |                          |        |  |

 
| Date:  | January 31, 2005 | By:    | /s/Susan M. Allison        |   |
|--------|------------------|--------|----------------------------|--------|
|   |             |   | Susan M. Allison, Director |
|        |                  |        |                            |        |  |

 
| Date:  | January 31, 2005 | By:    | /s/Robert B. Siegel        |   |
|--------|------------------|--------|----------------------------|--------|
|   |             |   | Robert B. Siegel, Director |
|        |                  |        |                            |        |  |

 

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