<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
--------------------------------------
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number O-11365
-----------------
THT Inc.
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(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
Delaware 73-1284563
- - -------------------------------------- --------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
33 Riverside Avenue, Westport, CT 06880
- - ---------------------------------------- --------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 226-6408
--------------
</TABLE>
N/A
- - --------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirement for the past 90 days. Yes x No
------- -------
As of July 25, 1996, the Registrant had 3,982,605 shares of Common Stock,
par value $.01 per share, outstanding.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
THT Inc.
Condensed Consolidated Balance Sheet
<TABLE>
<CAPTION>
June 30, 1996 September 30, 1995
------------- ------------------
(Unaudited)
Assets:
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 410,013 $ 458,824
Trade Accounts Receivable (net of allowances
of $25,643 at June 30, 1996, and $25,000
at September 30, 1995) 1,749,054 1,755,727
Inventories 1,711,240 2,009,346
Deferred Income Taxes 277,000 277,000
Other Current Assets 182,759 150,385
----------- -----------
Total Current Assets 4,330,066 4,651,282
Net Property, Plant & Equipment 2,962,355 2,854,266
Net Intangible Assets, Primarily Goodwill 3,252,510 3,295,907
Other Assets 279,737 236,572
----------- -----------
Total Assets $10,824,668 $11,038,027
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-2-
<PAGE>
THT Inc.
Condensed Consolidated Balance Sheet (Continued)
<TABLE>
<CAPTION>
June 30, 1996 September 30, 1995
-------------- -------------------
(Unaudited)
<S> <C> <C>
Liabilities and Stockholders' Equity
- - ------------------------------------------
Current Liabilities:
Accounts Payable & Accrued Liabilities $ 862,342 $ 1,266,089
Due to Former Shareholders - Current 37,999 31,980
Note to Related Party - Current 850,000 1,332,500
Current Portion of Long-Term Debt 53,420 17,034
Income Taxes Payable 73,082 14,050
----------- -----------
Total Current Liabilities 1,876,843 2,661,653
Long-Term Liabilities
Due to Former Shareholders - Jackburn 604,000 604,000
Notes to Related Party 430,012 1,430,012
Deferred Income Taxes 371,000 371,000
Long-Term Debt 133,152 24,135
Other Long-Term Liabilities 371,255 303,807
----------- -----------
Total Liabilities 3,786,262 5,394,607
Stockholders' Equity:
Cumulative 14% nonvoting Preferred
Stock,
$.01 par value; 5,000 shares authorized,
2,000 shares outstanding 2,000,000 2,000,000
Common Stock, $.01 par value; 25,000,000 shares
authorized, 3,982,605 shares issued at
June 30, 1996, and at September 30, 1995 39,826 39,826
Additional Paid-In Capital 13,055,280 13,055,280
Accumulated Deficit (8,056,700) (9,451,686)
----------- -----------
Total Stockholders' Equity 7,038,406 5,643,420
----------- -----------
Total Liabilities & Stockholders' Equity $10,824,668 $11,038,027
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
-3-
<PAGE>
THT Inc.
Condensed Consolidated Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Sales $ 5,125,803 $ 4,890,230 $14,426,127 $ 13,988,009
Costs and Expenses:
Cost of Sales 3,425,083 3,382,151 9,891,240 9,749,723
Selling, General & Administrative Expenses 949,883 660,250 2,411,141 1,917,869
----------- ------------ ----------- ------------
4,374,966 4,042,401 12,302,381 11,667,592
----------- ------------ ----------- ------------
Income from Operations 750,837 847,829 2,123,746 2,320,417
Other income (expense):
Interest Expense (65,134) (112,036) (230,207) (343,221)
Interest Income 6,552 5,431 21,230 25,378
Other (55,378) (64,896) (94,783) (176,000)
----------- ------------ ----------- ------------
Income Before Income Taxes 636,877 676,328 1,819,986 1,826,574
Income Taxes:
Federal (21,000) (21,000) (55,000) (62,000)
State (46,000) (78,000) (160,000) (212,000)
----------- ------------ ----------- ------------
(67,000) (99,000) (215,000) (274,000)
----------- ------------ ----------- ------------
Net Income 569,877 577,328 1,604,986 1,552,574
Dividend on Preferred Stock (70,000) (70,000) (210,000) (210,000)
----------- ------------ ----------- ------------
Net Income Available to
Common Stockholders $ 499,877 $ 507,328 $ 1,394,986 $ 1,342,574
=========== ============ =========== ============
Accumulated Deficit - Beginning of Period (8,556,577) (10,151,920) (9,451,686) (10,987,166)
Accumulated Deficit - End of Period $(8,056,700) $ (9,644,592) $(8,056,700) $ (9,644,592)
=========== ============ =========== ============
Primary and Fully Diluted
Net Income per Common Share
(After Preferred Stock Dividend) $.13 $.13 $.35 $.31
=========== ============ =========== ============
Primary weighted average number
of shares outstanding 3,982,605 3,982,605 3,982,605 4,345,544
=========== ============ =========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
-4-
<PAGE>
THT Inc.
Condensed Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $1,604,986 $1,552,574
---------- ----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 413,389 493,234
Deferred compensation 67,448 26,219
Accounts receivable write-off 280,111
Loss on disposal of property 35,553
Changes in assets and liabilities:
Accounts receivable, net (273,438) (285,513)
Inventories 298,106 178,377
Other current assets (32,374) 81,689
Other assets (43,165) (40,317)
Accounts payable and accrued liabilities (403,747) (416,210)
Due to former shareholders - current (30,004) (349,428)
Income taxes payable 59,032 131,050
---------- ----------
Net cash provided by operating activities 1,975,897 1,371,675
Cash flows from investing activities:
Purchase of property and equipment (net) (477,532) (162,234)
---------- ----------
Net cash used in investing activities (477,532) (162,234)
</TABLE>
The accompanying notes are an integral part of these financial statements.
-5-
<PAGE>
THT Inc.
Condensed Consolidated Statement of Cash Flows (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from financing activities:
Common Stock repurchased (817,045)
Repayment of debt (1,513,041) (552,727)
Repayment of credit line (451,000)
Cash dividends paid (210,000) (70,000)
Current portion of long-term debt 36,386
Long-term debt - Proceeds 139,479
-----------
Net cash used in financing activities (1,547,176) (1,890,772)
----------- -----------
Net decrease in cash and
cash equivalents (48,811) (681,331)
Cash and cash equivalents at beginning
of period 458,824 1,149,467
----------- -----------
Cash and cash equivalents at end of period $ 410,013 $ 468,136
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 164,096 $ 304,436
========== ===========
Taxes $ 156,185 $ 348,293
========== ===========
</TABLE>
Intangible Assets increased by $37,999 and $244,151 for the periods ended June
30,1996 and 1995, respectively, as a result of amounts accrued for payment to
the former Jackburn Mfg., Inc. shareholders under the terms of an earnout.
The accompanying notes are an integral part of these financial statements.
-6-
<PAGE>
THT Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
Note 1 - General
The accompanying interim condensed consolidated financial statements should
be read in conjunction with the financial statements and notes thereto included
in the September 30, 1995 Annual Report included on Form 10-K.
Certain reclassifications have been made to the September 30, 1995 financial
statements to conform to the June 30, 1996 presentation.
The condensed consolidated financial statements for the three-month and
nine-month periods ended June 30, 1996 and 1995 are unaudited but, in the
opinion of Management, include all adjustments, consisting only of normal
recurring accruals, necessary for a fair statement of the results of such
interim periods. Interim results are not necessarily indicative of results for
a full year.
Note 2 - Subsequent Event
On July 17, 1996, Setterstix's second largest customer filed for Chapter 11
bankruptcy protection in the United States Bankruptcy Court, District of
Delaware. As a result of this action, the Company wrote off $280,111 of
accounts receivable with this customer at June 30, 1996. For the nine months
ended June 30, 1996, this customer accounted for 21% of the sales of Setterstix
and 13% of the Company's total sales for the period. Although this customer is
continuing its operations, the effect of this action on future sales is
uncertain at this time. However, the Company believes that the loss of future
sales of this customer will not have a material adverse effect on the financial
condition of the Company.
Note 3 - Common Stock Repurchase
On March 10, 1995, the Company repurchased 544,402 shares of its Common
Stock for $817,045.
Note 4 - Inventories
Inventories of Jackburn Mfg., Inc. ("Jackburn"), a wholly-owned subsidiary
of the Company, are valued at the lower of cost or market on a last-in, first-
out (LIFO) basis for generally all raw materials including the raw material
content of work in process and finished goods. Labor and manufacturing overhead
are valued at cost on a first-in, first-out (FIFO) basis. Inventories of the
Company's other wholly-owned subsidiary, Setterstix Corp. ("Setterstix"), are
stated at the lower of cost or market. Cost is determined using the first-in,
first-out (FIFO) method.
-7-
<PAGE>
Inventories consist of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
June 30, September 30,
1996 1995
---- ----
Raw materials $ 574,472 $ 1,034,081
Work in process 244,743 267,003
Finished goods 838,717 645,788
Packaging and supplies 53,308 62,474
Total inventories -------------- ---------------
$ 1,711,240 $ 2,009,346
============== ===============
Note 5 - Property, Plant and Equipment
Property, plant and equipment consist of:
June 30, September 30,
1996 1995
---- ----
Land $ 62,000 $ 67,000
Buildings and improvements 1,686,838 1,378,465
Machinery and equipment 3,398,062 3,299,387
Furniture, fixtures & autos 111,812 87,765
------- -------
5,258,712 4,832,617
Less accumulated depreciation 2,296,357 1,978,351
-------------- --------------
Total property, plant and equipment $ 2,962,355 $ 2,854,266
============== ===============
</TABLE>
Note 6 - Income Taxes
The Company accounts for income taxes in accordance with Statement of
Financial Accounting Standards Number 109 "Accounting for Income Taxes" (FAS No.
109"). The Company anticipates utilizing its deferred tax assets primarily to
the extent of its deferred tax liabilities. As of June 30, 1996, the Company
had available net operating loss carry-forwards for tax purposes of
approximately $2,675,000 which expire in varying amounts from 1999 through 2004.
-8-
<PAGE>
Note 7 - Net Income per Common Share
Net income per Common Share is calculated by dividing net income after
reduction for dividends on Preferred Stock, by the weighted average number of
shares of Common Stock outstanding during the three and nine months ended June
30, 1996 and 1995.
Note 8 - Preferred Stock
For each of the three quarters ended December 31, 1995, March 31, 1996,
and June 30, 1996, the Company has declared and paid cash dividends on its
outstanding Preferred Stock in the amount of $70,000 per quarter.
Note 9 - Employee Stock Options
The Financial Accounting Standards Board has issued Financial Accounting
Standard No. 123 ("SFAS 123"). SFAS 123 allows companies to record compensation
cost based on fair value of stock options, or to continue to record compensation
cost under APB 25, "Accounting for Stock Issued to Employees" (compensation cost
measured as the excess of fair value of the stock over the options price). For
companies using APB 25, the notes to the financial statements must disclose pro
forma net income and earnings per share as if it had used the fair value of
stock options (SFAS 123). The Company does not believe that the requirements of
SFAS 123 would have a material impact on the Company's financial position or
results of operations.
-9-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Except for the historical information contained herein, the matters
discussed in this Quarterly Report on Form 10-Q are forward-looking statements
which involve risks and uncertainties, including, but not limited to, economic,
competitive, governmental and technological factors affecting the Company's
operations, markets, products, services and prices, and other factors discussed
in the Company's other filings with the Securities and Exchange Commission.
Liquidity and Capital Resources
- - -------------------------------
The Company had working capital of $2,453,223 as of June 30, 1996, as
compared to working capital of $1,989,629 as of September 30, 1995. The
increase in the Company's working capital was due primarily to the Company's
profits, partially offset by certain loans which have become due in the next 12
months and have been reclassified as current liabilities. The Company also had
cash on hand as of June 30, 1996 of $410,013, as compared to $458,824 as of
September 30, 1995.
In accordance with the terms of an agreement with the former shareholders
(the "Former Jackburn Shareholders") of Jackburn Mfg., Inc. ("Jackburn"), the
Company paid the Former Jackburn Shareholders $30,004 in January, 1996 and
$349,428 in January, 1995. Such payments represented Jackburn's excess cash
flow, as defined under such agreement, for the years ended September 30, 1995
and 1994, respectively. At June 30, 1996, the Company had accrued $37,999
toward September 30, 1996's excess cash flow liability. Payment of any excess
cash flow will be made in January, 1997.
On June 5, 1992, the Company issued a promissory note to PH II Holdings,
Inc., a principal stockholder of the Company ("PH II Holdings") in the principal
amount of $430,012. Such note currently bears interest at the higher of 10% or
2% over the Prime Rate, as reported in The Wall Street Journal from time to time
-----------------------
(the "Prime Rate") and will mature on May 31, 2002. Such rate is currently at
10.25%
As a consequence of the Jackburn acquisition in September, 1990, there
remains outstanding a 9% Mortgage Note (the "Mortgage Note") in the principal
amount of $604,000, due October, 2000. Pursuant to the terms of the Mortgage
Note, principal is payable in four equal annual installments of $151,000
commencing October 1, 1997, and interest is payable monthly. Such principal
payments are deferred if certain cash flow requirements are not met by Jackburn.
The Mortgage Note is guaranteed by the Company, Jackburn, and AJH Corp., and is
secured by a lien on three parcels of real property located in Girard,
Pennsylvania, owned by Jackburn.
-10-
<PAGE>
The Company maintains a revolving credit loan of $1,000,000 with Fleet Bank,
of which there was no outstanding balance at June 30, 1996. The revolving
credit loan is payable on May 1, 1997 and bears interest at the rate of 1/2%
above the bank's peg rate, as announced from time to time for short-term
commercial loans. Interest on the revolving credit loan is payable monthly in
arrears on the last business day of each month and at maturity. In addition,
the Company entered into a $1,000,000 note with PH II Holdings, which funding
was used, in part, to finance the Setterstix Corp. acquisition in April, 1990.
Pursuant to the terms of this note, the Company agreed to pay PH II Holdings the
principal amount, currently at $850,000, on April 30, 1997. Such note bears
interest at the higher of 10% or 2% over the Prime Rate. The rate on such note
is currently 10.25%.
On December 31, 1993, the Company declared and paid all accrued and unpaid
dividends on its Preferred Stock through that date. Payment in the amount of
$1,116,710 was in the form of a secured promissory note to PH II Holdings due on
March 31, 1996. The Company had previously repaid $516,710 of such promissory
note by the date due. The remaining balance of $600,000 had been rolled forward
on a month-to-month basis and was repaid in full on May 31, 1996.
The Company intends to fund its operations in the near term from cash on
hand and from cash flow generated from operations, and from the existing, unused
line of credit from Fleet Bank, as described above (which unused line of credit
equalled $1,000,000 at June 30, 1996). Depending upon the amount of revenues
generated from Setterstix and Jackburn, the Company may require additional
financing. Except as described herein, the Company is unaware of any other
material commitments which may adversely affect its liquidity in the near term.
-11-
<PAGE>
Results of Operations
- - ---------------------
Nine Months Ended June 30, 1996, as compared to the Nine Months Ended June 30,
- - ------------------------------------------------------------------------------
1995
- - ----
The Company, on a consolidated basis, generated net sales of $14,426,127 for
the nine-month period ended June 30, 1996, as compared to net sales of
$13,988,009 for the same period of the prior year.
The overall 3% increase in sales over the prior year was due to a 7%
increase in sales at the Company's Setterstix subsidiary, offset by a 4%
decrease at its Jackburn subsidiary The increase in sales at Setterstix was due
to increases in both price and volume. The decrease in sales at Jackburn was
due to volume decreases.
Gross profit was $4,534,887 (31% gross profit margin) for the six months
ended June 30, 1996, as compared to $4,238,286 (30% gross profit margin) for the
same period of the previous year. The increase in gross profit was due directly
to the increase in revenues. The increase in gross profit margin was due to
higher selling prices and lower direct labor and material costs.
Selling, general and administrative expenses were $2,411,141 and $1,917,869
for the nine months ended June 30, 1996 and 1995, respectively. The 26%
increase in selling, general and administrative expenses was the result of the
significant write-off of accounts receivable (see Note 2) and accrued incentives
due to higher earnings.
Interest expense was $230,207 versus $343,221 for the nine months ended June
30, 1996 and 1995, respectively. The decrease is the result of reduced debt
principal levels and lower interest rates from the prior year.
The Company generated net income of $1,604,986 for the nine months ended
June 30, 1996, as compared to net income of $1,552,574 for the same period of
the prior year.
The increase in net income was the result of the increase in sales and gross
profits, plus the reduction in interest and amortization expenses, partially
offset by higher selling, general and administrative expenses.
Three Months Ended June 30, 1996, as compared to the Three Months Ended June 30,
- - --------------------------------------------------------------------------------
1995
- - ----
The Company, on a consolidated basis, generated net sales of $5,125,803 for
the three-month period ended June 30, 1996, as compared to net sales of
$4,890,230 for the same period of the prior year.
The overall 5% increase in sales over the prior year was due to a 16%
increase in sales at the Company's Setterstix subsidiary, offset by an 11%
decrease at its Jackburn subsidiary. The increase in sales at the Setterstix
subsidiary was due mainly to volume increases, while the decrease in sales at
Jackburn was due mainly to reduced volume.
-12-
<PAGE>
Gross profit was $1,700,720 (33% gross profit margin) for the three months
ended June 30, 1996, as compared to $1,508,079 (31% gross profit margin) for the
same period of the previous year. The increase in gross profit was due mainly
to the increase in revenues. The increase in gross profit margin was due to
lower direct labor and material costs.
Selling, general and administrative expenses were $949,883 and $660,250 for
the three months ended June 30, 1996 and 1995, respectively. The 44% increase
was due to higher selling, general and administrative expenses due to the
significant write-off of accounts receivable (see Note 2).
Interest expense was $65,134 versus $112,036 for the three months ended June
30, 1996 and 1995, respectively. The decrease is the result of reduced debt
principal levels and lower interest rates from the prior year.
The Company generated net income of $569,877 for the three months ended June
30, 1996, as compared to net income of $577,328 for the same period of the prior
year.
The decrease in net income was the result of the increase in sales and gross
profits plus the reduction in interest and amortization expenses, offset by
higher selling, general and administrative expenses during the period.
-13-
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None.
(b) Reports on Form 8-K.
No reports were filed on Form 8-K during the three months ended June
30, 1996.
-14-
<PAGE>
SIGNATURES
----------
Pursuant to the requirement of the Securities Act of 1934, the Registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
Dated: July 25, 1996 By: /s/ Frederick A. Rossetti
----------------------------
Frederick A. Rossetti, President,
Principal Executive Officer,
and Principal Accounting Officer
-15-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000721602
<NAME> THT INC.
<MULTIPLIER> 1
<CURRENCY> U. S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 410,013
<SECURITIES> 0
<RECEIVABLES> 1,749,054
<ALLOWANCES> 25,643
<INVENTORY> 1,711,240
<CURRENT-ASSETS> 4,330,066
<PP&E> 5,258,712
<DEPRECIATION> 2,296,357
<TOTAL-ASSETS> 10,824,668
<CURRENT-LIABILITIES> 1,876,843
<BONDS> 604,000
0
2,000,000
<COMMON> 39,826
<OTHER-SE> 13,055,280
<TOTAL-LIABILITY-AND-EQUITY> 10,824,668
<SALES> 14,426,127
<TOTAL-REVENUES> 14,426,127
<CGS> 9,891,240
<TOTAL-COSTS> 12,302,381
<OTHER-EXPENSES> 324,990
<LOSS-PROVISION> 25,643
<INTEREST-EXPENSE> 875,560
<INCOME-PRETAX> 1,819,986
<INCOME-TAX> 215,000
<INCOME-CONTINUING> 1,604,986
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,604,986
<EPS-PRIMARY> .35
<EPS-DILUTED> .35
</TABLE>
