UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
|X| QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarter period ended: June 30, 1997
|_| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT
For the transition period from _____ to _____
Commission File No. 33-47921-A
Texas Equipment Corp.
(Exact name of small business issuer as specified in its charter)
Nevada 62-1459870
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1305 Hobbs Hwy. Seminole, TX 79360
(Address of principal executive offices)
(915) 758-3643
(Issuer's Telephone number)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) has filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 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 |_|
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity as of the latest practicable date: 24,454,886
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
TEXAS EQUIPMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
ASSETS
June 30, December 31,
1997 1996
------------ -----------
(Unaudited)
CURRENT ASSETS:
Cash and Temporary Cash Investments $ 347,443 $ 2,661,058
Accounts Receivable-
Trade 1,243,973 872,815
Employees and Other 119,639 204,649
Prepaid Expense 0 12,500
Inventories, at the lower of cost (principally specific
identification and average cost) or market value 15,407,323 5,380,188
------------ -----------
TOTAL CURRENT ASSETS 17,118,378 9,131,210
LAND, BUILDINGS AND EQUIPMENT, at cost 3,882,502 2,111,369
Less Accumulated Depreciation (987,017) (866,927)
------------ -----------
NET LAND, BUILDINGS AND EQUIPMENT 2,895,485 1,244,442
OTHER ASSETS:
Finance Receivables 717,643 731,028
Cash Surrender Value of Life Insurance 129,156 129,156
Other Assets 13,931 23,945
Goodwill, net of accumulated amortization of $60,387 130,311 136,667
Stockholders' Receivables 19,573 215,810
------------ -----------
TOTAL OTHER ASSETS 1,010,914 1,236,606
------------ -----------
TOTAL ASSETS $21,052,477 $11,612,258
============ ===========
TEXAS EQUIPMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
LIABILITIES AND STOCKHOLDERS' EQUITY
June 30, December 31,
1997 1996
----------- -----------
(Unaudited)
CURRENT LIABILITIES:
Notes Payable $ 433,321 $ 300,000
Current Maturities of Long-Term Debt 310,433 396,022
Accounts Payable Trade -
John Deere Company 9,561,751 2,190,355
Other 1,675,387 437,564
Accrued Expenses 844,345 753,271
Customer Deposits 10,514 79,500
Deferred Tax Liability 159,800 159,800
----------- -----------
TOTAL CURRENT LIABILITIES 12,995,551 4,316,512
LONG TERM DEBT, net or current maturities 2,385,919 1,005,763
DEFERRED TAX LIABILITY 107,200 107,200
----------- -----------
TOTAL LIABILITIES 15,488,807 5,429,475
STOCKHOLDERS' EQUITY
Common Stock, $.001 Par Value, Authorized 25,000,000;
Issued and Outstanding 24,704,856 24,705 24,705
Paid in Capital 2,534,951 2,534,951
Retained Earnings 3,004,151 3,623,127
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 5,563,807 6,182,783
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $21,052,477 $11,612,258
=========== ===========
TEXAS EQUIPMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
Three Months Ended June 30, Six Months Ended June 30,
--------------------------- ----------------------------
1997 1996 1997 1996
---------- ---------- ---------- ----------
REVENUES $11,860,401 $ 6,918,284 $21,745,487 $13,752,900
COST OF REVENUES (10,120,210) (5,638,613) (18,616,961) (11,714,725)
---------- ---------- ---------- ----------
GROSS PROFITS 1,740,191 1,279,671 3,128,525 2,038,175
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES:
Commissions, Salaries, and
Employee Benefits 704,693 379,064 1,220,230 706,444
Amortization and Depreciation 88,102 36 967 164,584 75,543
Collection and Bad Debt Expenses 86,467 36,453 100,672 48,562
Other Operating Expenses 736,247 319,607 1,155,447 485,768
---------- ---------- ---------- ----------
Total Selling, General and
Administrative Expenses 1,615,509 772,091 2,640,993 1,316,317
OTHER INCOME (EXPENSE):
Interest Income 72,419 42,664 126,112 83,204
Interest Expense (56,398) 0 (109,969) (36,205)
Other Income 54,950 70,071 67,500 30,503
---------- ---------- ---------- ----------
INCOME BEFORE TAXES 195,653 620,895 571,236 799,360
INCOME TAXES 0 213,827 50,240 274,697
---------- ---------- ---------- ----------
INCOME FROM CONTINUING
OPERATIONS 195,653 406,505 520,996 524,663
DISCONTINUED OPERATIONS:
Income (Loss) From Operations of
Discontinued Subsidiary (667,735) - (894,897) -
---------- ---------- ---------- ----------
NET INCOME (LOSS) ($472,082) $ 406,505 ($ 373,901) $ 524,663
========== ========== ========== ==========
INCOME (LOSS) PER SHARE
Continuing Operations $ 0.008 $ 0.024 $ 0.021 $ 0.031
Discontinued Operations (0.027) - (0.036) -
---------- ---------- ---------- ----------
($ 0.019) $ 0.024 ($ 0.015) $ 0.031
========== ========== ========== ==========
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING 24,704,886 16,850,000 24,704,886 16,850,000
========== ========== ========== ==========
TEXAS EQUIPMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
Three Months Ended June 30, Six Months Ended June 30,
------------------------------ ----------------------------
1997 1996 1997 1996
------------ ----------- ------------ -----------
CASH FLOW FROM OPERATING ACTIVITIES
Net Income ($ 472,082) $ 406,508 ($ 374,901) $ 524,663
Adjustments to Reconcile Net Income
to Net Cash Operating Activities
Amortization and Depreciation 85,502 36,967 164,584 75,543
Prior Period Adjustments (244,075) 0 (244,075) 0
(Increase) Decrease in Financial Receivables 73,557 (24,696) 13,365 (22,904)
Changes in Current Assets and Liabilities
(Increase) Decrease in Accounts Receivable 289,295 (47,424) (286,148) (563,365)
(Increase) Decrease in Inventories (3,834,148) (438,611) (10,027,135) (804,405)
(Increase) Decrease in Prepaid Expenses 12,500 0 12,500 0
(Increase) Decrease in Accounts Payable 3,243,284 (268,680) 8,609,219 555,560
(Increase) Decrease in Accrued Liabilities 95,253 184,704 91,074 231,728
(Increase) Decrease in Customer Deposits (274,801) 17,531 (68,986) 17,531
(Increase) Decrease in Other Assets 9,014 (6,763) 10,014 (43,380)
------------ ----------- ------------ -----------
NET CASH FLOW (USED) PROVIDED
BY OPERATING ACTIVITIES (1,016,701) (140,464) (2,100,469) (29,029)
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Land, Buildings and Equipment (2,650) (16,510) (1,837,271) (18,511)
Proceeds from Sale of Equipment 0 0 28,000 46,507
(Increase) Decrease in Stockholders' Receivables 117,542 47,326 196,237 39,774
------------ ----------- ------------ -----------
NET CASH FLOW (USED) PROVIDED
BY INVESTING ACTIVITIES 114,892 30,816 (1,613,034) 67,770
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from Note Borrowings 808,911 218,557 2,051,012 334,789
Repayments of Note Borrowings (198,315) (105,237) (623,124) (316,243)
------------ ----------- ------------ -----------
NET CASH FLOW (USED) PROVIDED
BY FINANCING ACTIVITIES 610,596 113,320 1,427,888 18,546
------------ ----------- ------------ -----------
NET (DECREASE) INCREASE IN CASH (291,213) 3,672 (2,285,615) 57,287
CASH AT BEGINNING OF THE PERIOD 666,656 303,646 2,661,058 250,031
------------ ----------- ------------ -----------
CASH AT END OF THE PERIOD $ 375,443 $ 307,318 $ 375,443 $ 307,318
============ =========== ============ ===========
SUPPLEMENTAL DISCLOSURES:
Cash Paid During the Period For:
Interest Expense $ 55,000 $ 11,954 $ 145,694 $ 36,205
============ =========== ============ ===========
Income Taxes $ 0 $ 0 $ 50,000 $ 0
============ =========== ============ ===========
TEXAS EQUIPMENT CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
JUNE 30, 1997
(UNAUDITED)
TOTAL
COMMON STOCK STOCK-
----------------------- PAID IN RETAINED HOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
---------- ---------- --------- ----------- ----------
Balance, December 31, 1995 100,000 $ 100,000 ($96,477) $2,886,776 $3,485,604
Acquisition of Parent
September 17, 1996 24,604,886 (75,295) 2,631,428 1,959,828
Net Income 736,351 736,351
---------- ---------- --------- ----------- ----------
Balance, December 31, 1996 24,704,886 24,705 2,534,951 3,623,127 6,182,789
Net Income (Unaudited) (374,901) (374,901)
Prior Period Adjustments (244,075) (244,075)
---------- ---------- --------- ----------- ----------
Balance, June 30, 1997 24,704,886 $ 24,705 $2,34,951 $3,004,151 $5,563,807
========== ========== ========= ========== ==========
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1997 AND 1996
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principals
for interim financial information and with the instructions to Form
10-Q and Rule 10-01 of Regulations S-X. They do not include all
information and notes required by generally accepted accounting
principals for complete financial statements. However, except as
disclosed, there has been no material change in the information
disclosed in the notes to consolidated financial statements included in
the Annual Report on Form 10-K of Texas Equipment Corporation and
Subsidiaries for the year ended December 31, 1996. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Operating results for the three month period ended June 30, 1997, are
not necessarily indicative of the results that may be expected for the
year ending December 31, 1997.
Item 2. Management's Discussion and Analysis of Financial Condition and results
of Operations.
Revenues increased approximately 58% to $21,745,487 from $13,752,900, in the
first six months of 1997 compared to the first six months of 1996. The increase
in revenues is principally attributable to the acquisition by the Company of
three additional stores.
All operating margins of the agricultural business were essentially unchanged
from the earlier period compared to the six month period ended June 30, 1997,
with the exception of other operating expenses which increase from $485,768, or
approximately 3.5% of revenues for the six months ended June 30, 1996, compared
to $1,155,447, or approximately 5.3% of revenues for the six months ended June
30, 1997. The increase is principally attributable to the cost of litigation
with former principals of the Company which was settled in August of 1997.
The Company's profit from continuing operations for the six month period ended
June 30, 1997, was $520,996 compared to $524,663 for the same period in 1996.
The most significant cause of the lack of growth in the 1997 period was the
litigation expense mentioned above. The Company's net loss of $374,901 for the
1997 period reflects a charge of $894,897 taken by the Company because of the
Company's settlement of litigation related to Marinex and the consequent closing
of those operations by the Company.
Liquidity and Capital Resources
Texas Equipment Co., Inc., the Company's subsidiary selling John Deere
agricultural equipment, continues to expand its operations on a profitable
basis. This expansion, however, was inhibited by the cost of litigation
described above. In the opinion of management of the Company, the Company's
operations are sufficient to fund its continuing business activities.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit 24 - Financial Data Schedule
(b) Form 8-K dated August 11, 1997, Items 2 and 5
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
Date: August 29, 1997
/s/ Paul Condit
------------------------------------
Paul Condit, President and principal
financial officer