<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, 1997
-----------------------------------------
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
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THT Inc.
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(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
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N/A
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(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
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As of January 21, 1998, 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, 1997 September 30, 1997
----------------- ------------------
(Unaudited)
<S> <C> <C>
Assets:
Current Assets:
Cash and Cash Equivalents $ 1,108,839 $ 1,659,062
Trade Accounts Receivable (net of reserves
of $28,000 at December 31, 1997 and $25,000
at September 30, 1997) 1,308,078 1,408,616
Inventories 2,550,972 2,162,236
Deferred Income Taxes 316,000 316,000
Other Current Assets 125,670 143,355
----------- -----------
Total Current Assets 5,409,559 5,689,269
Property, Plant & Equipment, net 3,559,265 3,568,707
Intangible Assets, net 3,392,250 3,400,069
Other Assets 441,623 437,362
----------- -----------
Total Assets $12,802,697 $13,095,407
=========== ===========
</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, 1997 September 30, 1997
------------------ -------------------
(Unaudited)
<S> <C> <C>
Liabilities and Stockholders' Equity
- ------------------------------------
Current Liabilities:
Accounts Payable & Accrued Liabilities $ 1,253,864 $ 1,705,972
Current Portion - Long-Term Debt 400,000 400,000
Note Payable - Bank 800,000
Income Taxes Payable 163,333 69,783
----------- -----------
Total Current Liabilities 2,617,197 2,175,755
Long-Term Liabilities
Long-Term Debt 1,300,000 1,400,000
Deferred Income Taxes 276,000 276,000
Other Long-Term Liabilities 685,827 645,764
----------- -----------
Total Liabilities 4,879,024 4,497,519
Stockholders' Equity:
Cumulative 14% nonvoting Preferred Stock,
$.01 par value; 5,000 shares authorized,
0 and 1,000 shares outstanding at December 31, 1997
and September 30, 1997, respectively 1,000,000
Common Stock, $.01 par value; 25,000,000 shares
authorized, 3,982,605 shares issued at
December 31, 1997 and September 30, 1997 39,826 39,826
Additional Paid-In Capital 13,055,280 13,055,280
Accumulated Deficit (5,171,433) (5,497,218)
----------- -----------
Total Stockholders' Equity 7,923,673 8,597,888
----------- -----------
Total Liabilities & Stockholders' Equity $12,802,697 $13,095,407
=========== ===========
</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,
1997 1996
----------- -----------
<S> <C> <C>
Net Sales $ 4,505,528 $ 3,793,817
Costs and Expenses:
Cost of Sales 2,900,608 2,503,799
Selling, General and Administrative Expenses 935,906 755,959
----------- -----------
3,836,514 3,259,758
----------- -----------
Income from Operations 669,014 534,059
----------- -----------
Other income (expense):
Interest Expense (38,924) (24,609)
Interest Income 17,505 8,787
Other (28,810) (10,406)
----------- -----------
Income Before Income Taxes 618,785 507,831
----------- -----------
Income Taxes:
Federal (201,000) (21,000)
State (57,000) (37,000)
----------- -----------
(258,000) (58,000)
----------- -----------
Net Income 360,785 449,831
Dividend on Preferred Stock (35,000) (70,000)
----------- -----------
Net Income Available to Common Stockholders $ 325,785 $ 379,831
=========== ===========
Accumulated Deficit - Beginning of Period (5,497,218) (7,678,850)
----------- -----------
Accumulated Deficit - End of Period $(5,171,433) $(7,299,019)
=========== ===========
Basic and Diluted Net Income per Common Share
(After Preferred Stock Dividend) $ .08 $ .10
=========== ===========
Weighted average number of
shares outstanding 3,982,605 3,982,605
=========== ===========
</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>
Three Months Ended
December 31,
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 360,785 $ 449,831
--------- ---------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 149,885 144,716
Deferred compensation 40,066 24,098
Changes in assets and liabilities:
Accounts receivable, net 100,538 383,783
Inventories (388,736) (143)
Other current assets 17,685 43,738
Other assets (25,745) (27,399)
Accounts payable and accrued liabilities (452,108) (888,482)
Income taxes payable 93,550 15,504
--------- ---------
Net cash (used) provided by operating activities (104,080) 145,646
Cash flows from investing activities:
Purchase of property and equipment - net (111,143) (235,073)
--------- ---------
Net cash used in investing activities (111,143) (235,073)
</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,
1997 1996
------------ ----------
<S> <C> <C>
Cash flows from financing activities:
Repayment of debt (100,000)
Cash dividends paid (35,000) (70,000)
Note payable 800,000
Preferred Stock repurchased (1,000,000)
----------- ---------
Net cash used in financing activities (335,000) (70,000)
----------- ---------
Net decrease in cash and cash equivalents (550,223) (159,427)
Cash and cash equivalents at beginning
of period 1,659,062 914,325
----------- ---------
Cash and cash equivalents at end of period $ 1,108,839 $ 754,898
=========== =========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 27,092 $ 24,609
=========== =========
Taxes $ 162,500 $ 36,232
=========== =========
</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, 1997 Annual Report included on Form 10-K.
The condensed consolidated financial statements for the three-month period
ended December 31, 1997 is 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 - Preferred Stock
On December 31, 1997, the Company redeemed the remaining 1,000 shares of its
outstanding Preferred Stock owned of record by PH II Holdings, Inc. ("PH II"),
an affiliate of the Company. The redemption price of the Preferred Stock was
$1,000,000, the face value of such stock. The Company borrowed $800,000 under
its line of credit with Fleet Bank, N.A., in order to fund a portion of the
Preferred Stock redemption. Interest on this borrowing under the line of credit
is currently at 7.906 per annum%. For the quarter ended December 31, 1997, the
Company declared and paid a final cash dividend on its outstanding Preferred
Stock in the amount of $35,000.
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 on a first-in, first-out (FIFO) method.
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<PAGE>
Inventories consist of the following:
<TABLE>
<CAPTION>
December 31, September 30,
1997 1997
------------ -------------
(Unaudited)
<S> <C> <C>
Raw materials $1,132,916 $1,063,862
Work in process 327,832 355,413
Finished goods 1,035,266 678,236
Packaging and supplies 54,958 64,725
Total inventories ---------- ----------
$2,550,972 $2,162,236
========== ==========
</TABLE>
Note 4 - Property, Plant and Equipment
Property, plant and equipment consist of:
<TABLE>
<CAPTION>
December 31, September 30,
1997 1997
------------ -------------
(Unaudited)
<S> <C> <C>
Land $ 114,522 $ 114,522
Buildings and improvements 2,427,654 2,352,067
Machinery and equipment on 3,834,586 3,800,873
Furniture, fixtures & autos 89,197 87,353
---------- ----------
6,465,959 6,354,815
Less accumulated depreciation 2,906,694 2,786,108
---------- ----------
Total property, plant and equipment $3,559,265 $3,568,707
========== ==========
</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" ("SFAS
No. 109"). The Company anticipates utilizing its deferred tax assets primarily
to the extent of its deferred tax liabilities. As of October 1, 1997, the
Company had extinguished all of its remaining net operating loss carryforward
for tax purposes. As a result, the Company has begun providing for federal
income taxes at statutory rates.
-8-
<PAGE>
Note 6 - Net Income per Common Share
The Company accounts for earnings per share in accordance with Statement of
Financial Accounting Standards Number 128 "Earnings Per Share" ("SFAS No. 128").
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-month period ended December
31, 1997.
Note 7 - 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 has elected to adopt the disclosure
requirements of SFAS 123.
Note 8 - New Accounting Pronouncements
The Financial Accounting Standards Board released Statement of Financial
Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"),
governing the reporting and display of comprehensive income and its components,
and Statement of Financial Accounting Standards No. 131, "Disclosures About
Segments of an Enterprise and Related Information" ("SFAS No. 131"), requiring
that all public businesses report financial and descriptive information about
their reportable operating segments. Both Statements are applicable to
reporting periods beginning after December 15, 1997. The impact of adopting
SFAS Nos. 130 and 131 is not expected to be material to the consolidated
financial statements or notes to consolidated financial statements.
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<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 $2,792,362 as of December 31, 1997, as
compared to working capital of $3,513,514 as of September 30, 1997. The
decrease in the Company's working capital was due primarily to the Company's
retirement of the outstanding Preferred Stock of $1,000,000 and the
corresponding note payable to a bank for $800,000 recorded as a current
liability. The proceeds of this loan were used towards the Preferred Stock
redemption. The Company had cash on hand as of December 31, 1997 of $1,108,839,
as compared to $1,659,062 as of September 30, 1997.
On March 27, 1997, the Company entered into a Credit Agreement (the
"Agreement") with Fleet Bank, N.A. ("Fleet"). The Credit Agreement provides for
a $2,000,000 term loan ("Term Loan") to the Company and for a $2,000,000
revolving line of credit ("Line of Credit") to the Company. The Term Loan is
for a term of five years and provides for quarterly principal payments of
$100,000, which commenced on June 30, 1997, with interest payable monthly in
arrears. The Line of Credit is for a period of two years, and upon the
expiration thereof, unless such Line of Credit is extended, the outstanding
principal amount then outstanding, if any, is due and payable. Interest on the
Line of Credit is payable monthly in arrears.
Interest on the outstanding principal amount of the Term Loan and on the
outstanding principal amount of the Line of Credit will accrue, at the Company's
option, at Fleet's prime rate, as announced from time to time, or the London
Interbank Offer Rate ("LIBOR") plus 2%. Both the Term Loan and the Line of
Credit are secured by all of the Company's assets, pursuant to the terms of
certain security agreements, dated as of March 27, 1997.
On March 31, 1997, the Company borrowed $2,000,000 under the Term Loan. The
current outstanding principal amount of $1,700,000 thereof bears interest at a
current rate of 7.858%. On December 31, 1997, the Company borrowed $800,000 on
the Line of Credit at a current rate of 7.906% per annum. The proceeds from
such borrowing were used to redeem the remaining 1,000 outstanding shares of
Preferred Stock. The redemption price of the Preferred Stock was $1,000,000,
the face value of such stock. To the extent the Line of Credit is not utilized
by the Company, the Company is obligated to pay an annual commitment fee of
.1875% for the average unused portion of the Line of Credit.
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<PAGE>
The Company is required under the Agreement to adhere to certain affirmative
and negative covenants, and borrowings under the Line of Credit is limited to
80% of eligible accounts receivables and 50% of the inventory of the Company, as
set forth in the Agreement.
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, as described above (which unused line of credit
equalled $1,200,000 at December 31, 1997). Except as described herein, the
Company is unaware of any other material commitments which may adversely affect
its liquidity in the near term.
Results of Operations
- ---------------------
Three Months Ended December 31, 1997, as compared to the Three Months Ended
- ---------------------------------------------------------------------------
December 31, 1996
- -----------------
The Company, on a consolidated basis, generated net sales of $4,505,528 for
the three-month period ended December 31, 1997, as compared to net sales of
$3,793,817 for the same period of the prior year.
The overall approximate 19% increase in sales over the prior year's quarter
was due to an approximate 12% increase in sales at the Company's Setterstix
subsidiary and an approximate 35% increase at its Jackburn subsidiary. The
increase in sales at both the Setterstix and Jackburn subsidiaries were due
mainly to increases in volume due to higher customer demand for product.
Gross profit was $1,604,920 (approximate 36% gross profit margin) for the
three months ended December 31, 1997, as compared to $1,290,018 (approximate 34%
gross profit margin) for the same period of the previous year. The increase in
gross profit was due to the increase in sales, and higher operating
efficiencies. In addition, the increase in gross profit margin was due to
manufacturing improvements due to the Company's recent investment in capital
expenditures and higher volume which helped reduce fixed overhead applied to
product costs.
Selling, general and administrative expenses were $935,906 and $755,959 for
the three months ended December 31, 1997 and 1996, respectively. The increase
of $179,947 (28%) was due to the fact that the prior years figure was lower due
to the positive effect of a bad debt recovery of $110,000. The balance of the
increase was due to higher selling expenses as a result of higher sales.
Interest expense was $38,925 and $24,609 for the three months ended December
31, 1997 and 1996, respectively. The increase is the result of higher debt
principal levels from the prior year as a result of the increased borrowings the
Company has made to redeem its outstanding Preferred Stock.
The Company generated net income of $360,785 for the three months ended
December 31, 1997, as compared to net income of $449,831 for the same period of
the prior year.
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<PAGE>
The approximate 20% decrease in net income was the result of the increase in
sales and gross profit offset by higher selling and interest expenses. In
addition, during the prior year the Company utilized the remainder of its
Federal net tax loss carryforward. Therefore Federal tax expenses at December
31, 1997 were $201,000 versus $21,000 during the same period of the prior year.
Management Information Systems
- ------------------------------
The Company is conducting a review of its computer systems to identify the
systems that could be affected by the Year 2000 Issue and, if necessary, will
develop an implementation plan to resolve the Issue. The Company believes, at
this time, that the Issue will not pose significant operational problems.
-12-
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None
(b) Reports on Form 8-K.
None.
-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: January 23, 1998 By: /s/ Frederick A. Rossetti
---------------------------
Frederick A. Rossetti, President,
Principal Executive Officer,
and Principal Accounting Officer
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<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0000721602
<NAME> THT INC.
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 1,108,839
<SECURITIES> 0
<RECEIVABLES> 1,336,078
<ALLOWANCES> 28,000
<INVENTORY> 2,550,972
<CURRENT-ASSETS> 5,409,559
<PP&E> 6,465,959
<DEPRECIATION> 2,906,694
<TOTAL-ASSETS> 12,802,697
<CURRENT-LIABILITIES> 2,617,197
<BONDS> 0
0
0
<COMMON> 39,826
<OTHER-SE> 13,055,280
<TOTAL-LIABILITY-AND-EQUITY> 12,802,697
<SALES> 4,505,528
<TOTAL-REVENUES> 4,505,528
<CGS> 2,900,608
<TOTAL-COSTS> 3,836,514
<OTHER-EXPENSES> 67,734
<LOSS-PROVISION> 28,000
<INTEREST-EXPENSE> 127,092
<INCOME-PRETAX> 618,785
<INCOME-TAX> 258,000
<INCOME-CONTINUING> 360,785
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 360,785
<EPS-PRIMARY> .08
<EPS-DILUTED> .08
</TABLE>
