<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 March 31, 1996
---------------------------
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)
<TABLE>
<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 May 8, 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>
March 31, 1996 September 30, 1995
-------------- ------------------
(Unaudited)
<S> <C> <C>
Assets:
Current Assets:
Cash and Cash Equivalents $ 376,256 $ 458,824
Trade Accounts Receivable (net of allowances
of $19,001 at March 31, 1996, and $25,000
at September 30, 1995) 1,837,020 1,755,727
Inventories 1,910,362 2,009,346
Deferred Income Taxes 277,000 277,000
Other Current Assets 88,059 150,385
----------- -----------
Total Current Assets 4,488,697 4,651,282
Net Property, Plant & Equipment 2,988,537 2,854,266
Net Intangible Assets, Primarily Goodwill 3,242,961 3,295,907
Other Assets 271,291 236,572
----------- -----------
Total Assets $10,991,486 $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>
March 31, 1996 September 30, 1995
-------------- -------------------
(Unaudited)
<S> <C> <C>
Liabilities and Stockholders' Equity
- - ------------------------------------
Current Liabilities:
Accounts Payable & Accrued Liabilities $ 788,096 $ 1,266,089
Due to Former Shareholders - Current 1,976 31,980
Note to Related Party - Current 647,500 1,332,500
Current Portion of Long-Term Debt 53,420 17,034
Income Taxes Payable 62,181 14,050
----------- -----------
Total Current Liabilities 1,553,173 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 146,000 24,135
Other Long-Term Liabilities 348,772 303,807
----------- -----------
Total Liabilities 4,452,957 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
March 31, 1996, and at September 30, 1995 39,826 39,826
Additional Paid-In Capital 13,055,280 13,055,280
Accumulated Deficit (8,556,577) (9,451,686)
----------- -----------
Total Stockholders' Equity 6,538,529 5,643,420
----------- -----------
Total Liabilities & Stockholders' Equity $10,991,486 $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 Six Months Ended
March 31, March 31,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $ 5,059,075 $ 4,958,230 $ 9,300,324 $ 9,097,779
Costs and Expenses:
Cost of Sales 3,430,836 3,417,719 6,466,157 6,367,572
Selling, General & Administrative Expenses 810,933 660,159 1,461,258 1,257,619
----------- ------------ ----------- ------------
4,241,769 4,077,878 7,927,415 7,625,191
----------- ------------ ----------- ------------
Income from Operations 817,306 880,352 1,372,909 1,472,588
Other income (expense):
Interest Expense (76,673) (111,255) (165,073) (231,185)
Interest Income 4,377 8,474 14,678 19,947
Other (17,860) (52,428) (39,405) (111,104)
----------- ------------ ----------- ------------
Income Before Income Taxes 727,150 725,143 1,183,109 1,150,246
Income Taxes:
Federal (25,000) (34,000) (34,000) (41,000)
State (70,000) (83,000) (114,000) (134,000)
----------- ------------ ----------- ------------
(95,000) (117,000) (148,000) (175,000)
----------- ------------ ----------- ------------
Net Income 632,150 608,143 1,035,109 975,246
Dividend on Preferred Stock (70,000) (70,000) (140,000) (140,000)
----------- ------------ ----------- ------------
Net Income Available to
Common Stockholders $ 562,150 $ 538,143 $ 895,109 $ 835,246
=========== ============ =========== ============
Accumulated Deficit - Beginning of Period (9,118,727) (10,690,063) (9,451,686) (10,987,166)
Accumulated Deficit - End of Period $(8,556,577) $(10,151,920) $(8,556,577) $(10,151,290)
=========== ============ =========== ============
Net Income per Common Share
(After Preferred Stock Dividend) $ .14 $ .11 $ .22 $ .18
=========== ============ =========== ============
Primary weighted average number
of shares outstanding 3,982,605 4,527,014 3,982,605 4,527,014
=========== ============ =========== ============
</TABLE>
Fully diluted earnings per share is 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>
Six Months Ended
March 31,
1996 1995
----------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $1,035,109 $ 975,246
---------- ---------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 275,727 304,621
Deferred compensation 44,966 17,480
Changes in assets and liabilities:
Accounts receivable, net (81,293) (375,275)
Inventories 98,984 (156,824)
Other current assets 62,326 179,801
Other assets (34,719) (14,943)
Accounts payable and accrued liabilities (477,993) 8,028
Due to former shareholders - current (30,004) (349,428)
Income taxes payable 48,131 77,387
---------- ---------
Net cash provided by operating activities 941,234 666,093
Cash flows from investing activities:
Purchase of property and equipment (357,052) (106,380)
---------- ---------
Net cash used in investing activities (357,052) (106,380)
</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>
Six Months Ended
March 31,
1996 1995
-------------------------
<S> <C> <C>
Cash flows from financing activities:
Repayment of debt (702,615) (410,227)
Repayment of credit line (1,000)
Cash dividends paid (140,000) (70,000)
Current portion of long-term debt 36,386
Long-term debt - Proceeds 139,479
--------- ---------
Net cash used in financing activities (666,750) (481,227)
--------- -------
Net (decrease) increase in cash and
cash equivalents (82,568) 78,486
Cash and cash equivalents at beginning
of period 458,824 1,149,467
--------- ----------
Cash and cash equivalents at end of period $ 376,256 $1,227,953
========= ==========
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest $ 129,222 $ 205,990
========== ==========
Taxes $ 103,085 $ 124,768
========== ==========
</TABLE>
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 March 31, 1996 presentation.
The condensed consolidated financial statements for the three-month and six
month periods ended March 31, 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 - 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.
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>
March 31, September 30,
1996 1995
---- ----
<S> <C> <C>
Raw materials $ 552,418 $ 1,034,081
Work in process 215,364 267,003
Finished goods 1,068,866 645,788
Packaging and supplies 73,714 62,474
-------------- --------------
Total inventories $ 1,910,362 $ 2,009,346
============= =============
</TABLE>
Note 4 - Property, Plant and Equipment
Property, plant and equipment consist of:
<TABLE>
<CAPTION>
March 31, September 30,
1996 1995
---- ----
<S> <C> <C>
Land $ 67,000 $ 67,000
Buildings and improvements 1,640,130 1,378,465
Machinery and equipment 3,389,999 3,299,387
Furniture, fixtures & autos 92,538 87,765
-------------- ---------------
5,189,667 4,832,617
Less accumulated depreciation 2,201,130 1,978,351
-------------- ---------------
Total property, plant and equipment $ 2,988,537 $ 2,854,266
============= ==============
</TABLE>
Note 5 - 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 March 31, 1996, the Company
had available net operating loss carry-forwards for tax purposes of
approximately $3,310,000 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 and six months ended March
31, 1996 and 1995.
Note 7 - Preferred Stock
For the first and second quarters ended December 31, 1995 and March 31,
1996, the Company has declared and paid cash dividends on its outstanding
Preferred Stock in the amount of $70,000 per quarter.
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.
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 $2,935,524 as of March 31, 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 partial
repayment of a loan due to a related party and the Company's profits. The
Company also had cash on hand as of March 31, 1996 of $376,256, 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 March 31, 1996, the Company had not accrued any new
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 March 31, 1996, Jackburn owed PH II Holdings, Inc., a principal
stockholder of the Company ("PH II Holdings"), the aggregate principal sum of
$47,500 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 were payable in 48 equal monthly installments of
$47,500, with the final principal payment made on April 30, 1996.
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 10.25%
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. 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 March 31, 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 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 10.25%.
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 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 10.25%.
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 March 31, 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
- - ---------------------
Six Months Ended March 31, 1996, as compared to the Six Months Ended March 31,
- - ------------------------------------------------------------------------------
1995
- - ----
The Company, on a consolidated basis, generated net sales of $9,300,324 for
the six-month period ended March 31, 1996, as compared to net sales of
$9,097,779 for the same period of the prior year.
The overall 2% increase in sales over the prior year was due to a 17%
increase in sales at the Company's Setterstix subsidiary, offset by a 15%
decrease at its Jackburn subsidiary The increase in sales at Setterstix was due
primarily to an increase in prices, offset by a decrease in volume. The
decrease in sales at Jackburn was due to volume decreases.
Gross profit was $2,834,167 (30% gross profit margin) for the six months
ended March 31, 1996, as compared to $2,730,207 (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.
Selling, general and administrative expenses were $1,461,258 and $1,257,619
for the six months ended March 31, 1996 and 1995, respectively. The 16%
increase was due to higher selling expenses needed to support the increased
sales volume, and higher general and administrative expenses as a result of
accrued incentives due to higher earnings.
Interest expense was $165,073 versus $231,185 for the six months ended
March 31, 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 $1,035,109 for the six months ended
March 31, 1996, as compared to net income of $975,246 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 March 31, 1996, as compared to the Three Months Ended March
- - ------------------------------------------------------------------------------
31, 1995
- - --------
The Company, on a consolidated basis, generated net sales of $5,059,075 for
the three-month period ended March 31, 1996, as compared to net sales of
$4,958,230 for the same period of the prior year.
The overall 2% increase in sales over the prior year was due to an 18%
increase in sales at the Company's Setterstix subsidiary, offset by a 16%
decrease at its Jackburn subsidiary. The increase in sales at the Setterstix
subsidiary was due mainly to price increases, while the decrease in sales at
Jackburn was due mainly to reduced volume.
-12-
<PAGE>
Gross profit was $1,628,239 (32% gross profit margin) for the three months
ended March 31, 1996, as compared to $1,540,511 (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 the sale of certain inventory items previously manufactured at lower prices
and lower costs of packaging materials.
Selling, general and administrative expenses were $810,933 and $660,159 for
the three months ended March 31, 1996 and 1995, respectively. The 23% increase
was due to higher selling expenses needed to support the increased sales volume,
and higher general and administrative expenses due to accrued incentives due to
higher earnings.
Interest expense was $76,673 versus $111,255 for the three months ended
March 31, 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 $632,150 for the three months ended
March 31, 1996, as compared to net income of $608,143 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 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
March 31, 1996.
-14-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000721602
<NAME> THT INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 376,256
<SECURITIES> 0
<RECEIVABLES> 1,856,021
<ALLOWANCES> 19,001
<INVENTORY> 1,910,362
<CURRENT-ASSETS> 4,488,697
<PP&E> 5,189,667
<DEPRECIATION> 2,201,130
<TOTAL-ASSETS> 10,991,486
<CURRENT-LIABILITIES> 1,553,173
<BONDS> 604,000
0
2,000,000
<COMMON> 39,826
<OTHER-SE> 13,055,280
<TOTAL-LIABILITY-AND-EQUITY> 10,991,486
<SALES> 9,300,324
<TOTAL-REVENUES> 9,300,324
<CGS> 6,466,157
<TOTAL-COSTS> 7,927,415
<OTHER-EXPENSES> 204,478
<LOSS-PROVISION> 19,001
<INTEREST-EXPENSE> 218,020
<INCOME-PRETAX> 1,183,109
<INCOME-TAX> 148,000
<INCOME-CONTINUING> 1,035,109
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,035,109
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
