<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 December 31, 1995
--------------------------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to _________
Commission file number O-11365
-----------------
THT Inc.
---------------------------------------
(Exact name of registrant as specified in its charter)
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
------------------
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 February 5, 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>
December 31, 1995 September 30, 1995
----------------- ------------------
(Unaudited)
Assets:
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 587,998 $ 458,824
Trade Accounts Receivable (net of allowances
of $12,696 at December 31, 1995, and $25,000
at September 30, 1995) 1,355,908 1,755,727
Inventories 1,980,780 2,009,346
Deferred Income Taxes 277,000 277,000
Other Current Assets 122,589 150,385
---------- ----------
Total Current Assets 4,324,275 4,651,282
Net Property, Plant & Equipment 2,904,099 2,854,266
Net Intangible Assets, Primarily Goodwill 3,269,434 3,295,907
Other Assets 253,627 236,572
---------- ----------
Total Assets $10,751,435 $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>
December 31, 1995 September 30, 1995
----------------- ------------------
(Unaudited)
Liabilities and Stockholders' Equity
- - ------------------------------------
<S> <C> <C>
Current Liabilities:
Accounts Payable & Accrued Liabilities 981,944 1,266,089
Due to Former Shareholders - Current 31,980 31,980
Note to Related Party - Current 790,000 1,332,500
Current Portion of Long-Term Debt 53,420 17,034
Income Taxes Payable 27,055 14,050
----------- -----------
Total Current Liabilities 1,884,399 2,661,653
Long-Term Liabilities
Due to Former Shareholders - Jackburn 604,000 604,000
Notes to Related Party 1,430,012 1,430,012
Deferred Income Taxes 371,000 371,000
Long-Term Debt 159,355 24,135
Other Long-Term Liabilities 326,290 303,807
----------- -----------
Total Liabilities 4,775,056 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
December 31, 1995, and at September 30, 1995 39,826 39,826
Additional Paid-In Capital 13,055,280 13,055,280
Deficit (9,118,727) (9,451,686)
----------- -----------
Total Stockholders' Equity 5,976,379 5,643,420
----------- -----------
Total Liabilities & Stockholders' Equity $ 10,751,435 $ 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
December 31,
1995 1994
---------------------------------------------
<S> <C> <C>
Net Sales $ 4,241,249 $ 4,139,549
Costs and Expenses:
Cost of Sales 3,035,321 2,949,853
Selling, General and Administrative Expenses 650,325 597,460
---------------- ----------------
3,685,646 3,547,313
---------------- ----------------
Income from Operations 555,603 592,236
---------------- ----------------
Other income (expense):
Interest Expense (88,400) (119,930)
Interest Income 10,301 11,473
Other (21,545) (58,676)
---------------- ----------------
Income Before Income Taxes 455,959 425,103
---------------- ----------------
Income Taxes:
Federal (9,000) (7,000)
State (44,000) (51,000)
---------------- ----------------
(53,000) (58,000)
---------------- ----------------
Net Income 402,959 367,103
Dividend on Preferred Stock (70,000) (70,000)
---------------- ----------------
Net Income Available to Common Stockholders $ 332,959 $ 297,103
=============== ===============
Accumulated Deficit - Beginning of Period (9,451,686) (10,987,166)
---------------- ----------------
Accumulated Deficit - End of Period $ (9,118,727) $ (10,690,063)
=============== ===============
Net Income per Common Share
(After Preferred Stock Dividend) $ .08 $ .07
=============== ===============
Primary weighted average number of
shares outstanding 3,982,605 4,527,007
=============== ===============
</TABLE>
Fully diluted earnings per share are not presented, in that the effect in each
period is not material.
The accompanying notes are an integral part of these financial statements.
- 4 -
<PAGE>
THT Inc.
Condensed Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
December 31,
1995 1994
-------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 402,959 $ 367,103
---------- ----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 137,862 178,525
Deferred compensation 22,483 8,740
Changes in assets and liabilities:
Accounts receivable, net 399,819 198,121
Inventories 28,566 (68,683)
Other current assets 27,796 170,637
Other assets (17,055) (17,054)
Accounts payable and accrued liabilities (284,145) (447,478)
Income taxes payable 13,005 (5,956)
---------- ----------
Net cash provided by operating activities 731,290 383,955
Cash flows from investing activities:
Purchase of property and equipment (161,223) (31,227)
---------- ----------
Net cash used in investing activities (161,223) (31,227)
</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>
Three Months Ended
December 31,
1995 1994
-------------------------------
<S> <C> <C>
Cash flows from financing activities:
Repayment of debt (546,758) (263,471)
Repayment of credit line (326,000)
Cash dividends paid (70,000) (70,000)
Current portion of long-term debt 36,386
Long-term debt - Proceeds 139,479
--------- ---------
Net cash used in financing activities (440,893) ( 659,471)
--------- ----------
Net increase (decrease) in cash and
cash equivalents 129,174 (306,743)
Cash and cash equivalents at beginning
of period 458,824 1,149,467
--------- ----------
Cash and cash equivalents at end of period $ 587,998 $ 842,724
========= ==========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 70,990 $ 106,340
========= ==========
Taxes $ 39,995 $ 76,693
========= ==========
</TABLE>
Intangible Assets increased by $73,297 for the period ended December 31, 1994,
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 December 31, 1995 presentation.
The condensed consolidated financial statements for the three-month
period ended December 31, 1995 and 1994 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 - Common Stock Repurchase
On March 10, 1995, the Company effectuated a repurchase of shares of its
Common Stock. In accordance with the terms of the self-tender offer, the Company
repurchased 544,402 shares of its Common Stock for $817,045. The shares tendered
were cancelled, and payment for such shares was made on April 1, 1995, from cash
on hand.
Note 3 - 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>
December 31, September 30,
1995 1995
---- ----
<S> <C> <C>
Raw materials $ 560,194 $ 1,034,081
Work in process 222,174 267,003
Finished goods 1,126,497 645,788
Packaging and supplies 71,915 62,474
Total inventories --------------- ---------------
$ 1,980,780 $ 2,009,346
============== ==============
</TABLE>
Note 4 - Property, Plant and Equipment
Property, plant and equipment consist of:
<TABLE>
<CAPTION>
December 31, September 30,
1995 1995
---- ----
<S> <C> <C>
Land $ 67,000 $ 67,000
Buildings and improvements 1,482,853 1,378,465
Machinery and equipment 3,351,448 3,299,387
Furniture, fixtures & autos 92,538 87,765
--------------- ---------------
4,993,839 4,832,617
Less accumulated depreciation 2,089,740 1,978,351
--------------- ---------------
Total property, plant and equipment $ 2,904,099 $ 2,854,266
============== ==============
</TABLE>
Note 5 - Income Taxes
On October 1, 1993, the Company adopted 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 December 31, 1995, the Company had
available net operating loss carry-forwards for tax purposes of approximately
$3,940,000 which expire in varying amounts from 1999 through 2004.
- 8 -
<PAGE>
Note 6 - 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 months ended December 31,
1995 and 1994.
Note 7 - Related Party Transactions
Preferred Stock
- - ---------------
In December, 1995, the Company declared and paid in cash the quarterly
dividend on its outstanding Preferred Stock in the amount of $70,000.
Note 8 - 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.
Liquidity and Capital Resources
- - -------------------------------
The Company had working capital of $2,439,876 as of December 31, 1995,
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 partial
repayment of a loan due to a related party and the Company's profits. The
Company also had cash on hand as of December 31, 1995 of $587,998, 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 December 31, 1995, the
Company had not accrued any amount toward September 30, 1996's excess cash flow
liability. Payment of excess cash flow, if any, will be made in January, 1997.
As of December 31, 1995, Jackburn owed PH II Holdings, Inc., a
principal stockholder of the Company ("PH II Holdings"), the aggregate principal
sum of $190,000 with respect to the senior collateralized promissory note (the
"Senior Collateralized Note"), originally issued in the principal amount of
$2,280,000. Such note bears interest at a rate equal to the higher of 12% or 2%
over the prime rate, as reported in The Wall Street Journal from time to time
-----------------------
(the "Prime Rate"). The rate on such note is currently 12%. The principal
payments under such Senior Collateralized Note are payable in 48 equal monthly
installments of $47,500, through April 30, 1996. The Senior Collateralized Note
is guaranteed by the Company and collateralized by the assets and the capital
stock of Jackburn, and sets forth certain affirmative and negative covenants
required to be adhered to by Jackburn and the Company.
In addition, on June 5, 1992, the Company issued a promissory note to
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 and will mature on May
31, 2002. Such rate is currently at 10.75%
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. 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>
In addition, the Company maintains a revolving credit loan of
$1,000,000 with Fleet Bank, of which there was no outstanding balance at
December 31, 1995. 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 of $1,000,000 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 10.75%.
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 December 31, 1995. The Company has repaid $516,710 of such
promissory note by the date due. The remaining balance due of $600,000 has been
rolled forward on a month-to-month basis and is payable upon demand. The
interest rate on the remaining balance is at the higher of 10% or 2% over the
Prime Rate. Currently, this note is classified as a current liability and bears
interest at 10.75%.
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 December 31, 1995). Depending upon the amount of
revenues generated from Setterstix and Jackburn, the Company may require
additional financing. As a consequence of the aforementioned loan transactions,
the Company is currently operating under the following additional restrictions.
The Company's wholly-owned subsidiary, Jackburn, has agreed with PH II Holdings
not to, among other things, repay the Company for indebtedness owing in an
amount to exceed $350,000 in principal, to declare any dividends on its capital
stock, or to make loans or convey assets to the Company or pay the Company any
fees in excess of $250,000 in the aggregate during any fiscal year of Jackburn,
as long as certain indebtedness is outstanding. 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
- - ---------------------
Three Months Ended December 31, 1995, as compared to the Three Months Ended
- - ---------------------------------------------------------------------------
December 31, 1994
- - -----------------
The Company, on a consolidated basis, generated net sales of
$4,241,249 for the three- month period ended December 31, 1995, as compared to
net sales of $4,139,549 for the same period of the prior year.
The overall 2.5% increase in sales over the prior year was due to an
increase in sales (20%) at the Company's Setterstix subsidiary, offset by lower
sales (17.5%) at Jackburn. The increase in sales at Setterstix was due to
increases in prices over the prior period.
Gross profit was $1,205,928 (28% gross profit margin) for the three
months ended December 31, 1995, as compared to $1,189,696 (29% gross profit
margin) for the same period of the previous year. The increase in gross profit
was due to the increase in revenues. The decrease in gross profit margin was
due to higher cost of materials at Setterstix and a change in certain product
mix among customers at Jackburn.
Selling, general and administrative expenses were $650,325 and
$597,460 for the three months ended December 31, 1995 and 1994, respectively.
The increase was due to higher administrative expenses at Setterstix and at the
corporate level.
Interest expense was $88,400 versus $119,930 for the three months
ended December 31, 1995 and 1994. The decrease is the result of reduced debt
principal levels.
The Company generated net income of $402,959 for the three months
ended December 31, 1995, as compared to net income of $367,103 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 of interest and amortization expenses,
partially offset by higher selling, general and administrative expenses.
- 12 -
<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
December 31, 1995.
- 13 -
<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: February 7, 1996 By: /s/ Frederick A. Rossetti
----------------------------
Frederick A. Rossetti, President,
Principal Executive Officer,
and Principal Accounting Officer
- 14 -
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000721602
<NAME> THT INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 587,988
<SECURITIES> 0
<RECEIVABLES> 1,368,604
<ALLOWANCES> 12,696
<INVENTORY> 1,980,780
<CURRENT-ASSETS> 4,324,275
<PP&E> 4,993,839
<DEPRECIATION> 2,089,740
<TOTAL-ASSETS> 10,751,435
<CURRENT-LIABILITIES> 1,884,399
<BONDS> 604,000
0
2,000,000
<COMMON> 39,826
<OTHER-SE> 13,055,280
<TOTAL-LIABILITY-AND-EQUITY> 10,751,435
<SALES> 4,241,249
<TOTAL-REVENUES> 4,241,249
<CGS> 3,035,321
<TOTAL-COSTS> 3,685,646
<OTHER-EXPENSES> 109,945
<LOSS-PROVISION> 12,696
<INTEREST-EXPENSE> 635,158
<INCOME-PRETAX> 455,959
<INCOME-TAX> 53,000
<INCOME-CONTINUING> 402,959
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 402,959
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
