T.J.T., Inc. Reports Results for Third Quarter of Fiscal 2010

T.J.T., Inc. (the Company) (Pink Sheets: AXLE), T.J.T., Inc., a major supplier of axles, tires, and set-up supplies to the manufactured housing industry, announced a net loss of $299,000 for its third quarter of fiscal 2010.

Net sales decreased 17 percent in the three and nine month periods ending June 30, 2010 as compared to the same periods a year ago. Net sales of axles and tires decreased 27 percent quarter over quarter, and 20 percent in the first nine months of 2010 compared to 2009. According to statistics from the Manufactured Housing Institute, shipments in the Company’s market area during the first nine months of fiscal 2010 are estimated to have declined approximately 17 percent as compared to fiscal 2009. Prior to its closing in October 2009, the Arizona facility contributed sales of $234,000 and $343,000 in the three and nine month periods of 2009, respectively. The Company has had minimal sales of unprocessed inventory at wholesale prices outside of its market area in 2010 compared to 2009. Excluding wholesale sales, net sales declined 9 percent and 10 percent in the three and nine month periods, respectively. Accessories and siding net sales increased 8 percent in the 2010 third quarter compared to 2009, but decreased 10 percent in the first nine months of 2010 compared to 2009.

The axle and tire segment includes sales associated with utilizing the Company’s freight trucks to provide motor carrier services to outside customers. Sales associated with motor carrier services were $35,000 and $214,000 in the three and nine month periods ended June 30, 2010, respectively. Motor carrier services were discontinued on February 15, 2010. Management has transferred $45,000 of trucks and trailers into property held for sale in anticipation of reducing the fleet of the Company.

The Company’s gross margin increased to 20 percent in the third quarter of 2010 compared to 15 percent in 2009. Gross margin declined to 18 percent in the nine month period ending June 30, 2010 compared to 19 percent in the same 2009 period. The axle and tire segment gained 8 percentage points quarter over quarter primarily due to lower margins in the 2009 quarter resulting from lower sales volumes combined with a higher volume of wholesale sales, and an inventory write-down associated with inventory held in Arizona. Gross margin in the axle and tire segment decreased 2 points in the nine month period of 2010 compared to 2009 primarily as a result of costs associated with utilizing the idle freight trucks for motor carrier services being absorbed into cost of goods sold in the 2010 period. These costs more than offset the positive impact of no longer operating the Arizona facility in the 2010 period.

The accessories segment gross margin decreased 3 percentage points quarter over quarter, and declined 1 point in the nine month period of 2010 compared to 2009. Improvements in the accessories segment gross margin resulting from increased sales prices were more than offset in both periods as a result of inventory write downs in the third quarter of 2010 related to obsolete or slow moving inventory.

Consolidated selling, general, and administrative (SG&A) expense decreased $139,000, or 17 percent, and $709,000, or 26 percent, during the three and nine month periods, respectively, when compared to the same 2009 periods. SG&A declined in all categories for both periods as a result of the cost cutting measures implemented by management. SG&A declined by $46,000 and $116,000 as a result of closing the Arizona facility. Overall reductions in wages and employee related benefits, professional fees, travel, and bad debt were approximately $109,000 and $545,000 in the three and nine month periods ended June 30, 2010 as compared to the same periods in 2009, respectively. Insurance proceeds in excess of expenses related to flooding in Chehalis, Washington offset SG&A during the nine months ended June 30, 2009 by approximately $68,000.

The Company’s net loss for the third quarter of 2010 was $299,000 compared to a net loss of $261,000 in the same 2009 quarter. The net loss for the first nine months of 2010 was $1,031,000 compared to a net loss of $868,000 in 2009. The net loss in both periods is primarily due to lower sales volumes associated with the deteriorating market conditions. Property held for sale was written down $65,000 in the current 2010 quarter. The Company’s before tax loss in the 2010 three and nine month periods was $283,000 and $1,015,000 compared to $417,000 and $1,397,000 in the same 2009 periods, respectively. The Company has not recorded a tax benefit in 2010 because there are no carryback provisions available. A valuation allowance has been recorded in 2010 to reduce the carrying amounts of deferred tax assets at June 30, 2010 to zero. Income tax expense incurred in the 2010 third quarter is a result of a difference in the estimated net operating loss carryback receivable in fiscal 2009 and the actual refund received in April 2010.

As of June 30, 2010, the Company’s cash and cash equivalents was $1,803,000. Management expects competition to increase considerably as the volume of manufactured home shipments continues to decline in the Company’s market area. Meanwhile, the Company will continue to attempt to drive down inventory levels and reduce costs where appropriate.

Established in 1977, T.J.T., Inc. is a major provider of recycled axles and tires to the manufactured housing industry. It operates recycling facilities in Idaho, Washington, California, and Colorado, and serves 14 western states. In addition to the recycling business, T.J.T. also sells aftermarket products to manufactured housing and residential markets.

This release contains certain forward-looking statements, which are based on management’s current expectations including, but not limited to, general economic conditions, changes in interest rates, deposit flows, real estate values, competition, and changes in legislation or regulations, and other economic, competitive, governmental, regulatory, and technological factors affecting the company’s operations, pricing, products, and services. Any forward-looking statement speaks only as of the date on which the statement is made, and the Company undertakes no obligation to update any forward-looking statement.

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