<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, 1998
----------------------------
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 0-11365
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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
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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 July 20, 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>
June 30, 1998 September 30, 1997
------------- ------------------
(Unaudited)
<S> <C> <C>
Assets:
Current Assets:
Cash and Cash Equivalents $ 816,605 $ 1,659,062
Trade Accounts Receivable (net of reserves
of $33,000 at June 30, 1998 and $25,000
at September 30, 1997) 1,603,145 1,408,616
Inventories 2,264,759 2,162,236
Prepaid Income Taxes 59,713
Deferred Income Taxes 316,000 316,000
Other Current Assets 102,421 143,355
----------- -----------
Total Current Assets 5,162,643 5,689,269
Property, Plant & Equipment, net 3,543,126 3,568,707
Intangible Assets, net 3,320,314 3,400,069
Other Assets 479,832 437,362
----------- -----------
Total Assets $12,505,915 $13,095,407
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
THT Inc.
Condensed Consolidated Balance Sheet (continued)
<TABLE>
<CAPTION>
June 30, 1998 September 30, 1997
------------- ------------------
(Unaudited)
<S> <C> <C>
Liabilities and Stockholders' Equity
- ------------------------------------
Current Liabilities:
Accounts Payable & Accrued Liabilities $ 1,516,239 $ 1,705,972
Current Portion - Long-Term Debt 400,000 400,000
Income Taxes Payable 69,783
----------- -----------
Total Current Liabilities 1,916,239 2,175,755
Long-Term Liabilities
Long-Term Debt 800,000 1,400,000
Deferred Income Taxes 276,000 276,000
Other Long-Term Liabilities 765,958 645,764
----------- -----------
Total Liabilities 3,758,197 4,497,519
Stockholders' Equity:
Cumulative 14% nonvoting Preferred Stock,
$.01 par value; 5,000 shares authorized,
0 and 1,000 shares outstanding at June 30, 1998
and September 30, 1997, respectively 1,000,000
Common Stock, $.01 par value; 25,000,000 shares
authorized, 3,982,605 shares issued and outstanding
at June 30, 1998 and September 30, 1997 39,826 39,826
Additional Paid-In Capital 13,055,280 13,055,280
Accumulated Deficit (4,347,388) (5,497,218)
----------- -----------
Total Stockholders' Equity 8,747,718 8,597,888
----------- -----------
Total Liabilities & Stockholders' Equity $12,505,915 $13,095,407
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
THT Inc.
Condensed Consolidated Statement of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30, June 30,
1998 1997 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net Sales $ 5,130,957 $ 4,953,988 $14,564,800 $13,575,066
Cost and Expenses
Cost of Sales 3,404,874 3,264,623 9,657,305 9,012,356
Selling, General & Administrative Expenses 982,258 965,409 2,768,551 2,437,536
------------ ----------- ----------- -----------
4,387,132 4,230,032 12,425,856 11,449,892
------------ ----------- ----------- -----------
Income from Operations 743,825 723,956 2,138,944 2,125,174
Other income (expense):
Interest Expense (42,184) (41,077) (128,825) (90,540)
Interest Income 15,092 13,342 45,906 29,490
Other (39,386) (19,911) (100,195) (57,867)
------------ ----------- ----------- -----------
Income Before Income Taxes 677,347 676,310 1,955,830 2,006,257
Income Taxes:
Federal (204,000) (21,000) (601,000) (96,000)
State (61,000) (51,000) (170,000) (145,000)
------------ ----------- ----------- -----------
(265,000) (72,000) (771,000) (241,000)
------------ ----------- ----------- -----------
Net Income 412,347 604,310 1,184,830 1,765,257
Dividend on Preferred Stock (35,000) (35,000) (175,000)
------------ ----------- ----------- -----------
Net Income Available to
Common Stockholders $ 412,347 $ 569,310 $ 1,149,830 $ 1,590,257
============ =========== =========== ===========
Accumulated Deficit - Beginning of Period (4,759,735) (6,657,903) (5,497,218) (7,678,850)
Accumulated Deficit - End of Period $(4,347,388) $(6,088,593) $(4,347,388) $(6,088,593)
============ =========== =========== ===========
Basic and Diluted Net Income per Common
Share (After Preferred Stock Dividend) $ .10 $ .14 $ .29 $ .40
============ =========== =========== ===========
Weighted average number
of shares outstanding 3,982,605 3,982,605 3,982,605 3,982,605
============ =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
THT Inc.
Condensed Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
1998 1997
------------------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $1,184,830 $1,765,257
---------- ----------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 472,086 406,783
Deferred compensation 120,197 162,951
Changes in assets and liabilities:
Accounts receivable, net (194,529) (190,009)
Inventories (102,523) 38,666
Other current assets 40,934 (94,565)
Other assets (67,071) (51,800)
Accounts payable and accrued liabilities (189,733) (227,012)
Due to Former Shareholders - current (8,821)
Income taxes payable (129,496) 41,753
---------- ----------
Net cash provided by operating activities 1,134,695 1,843,203
Cash flows from investing activities:
Purchase of property and equipment (342,152) (551,263)
Settlement of Former Shareholders' earnout (296,000)
---------- ----------
Net cash used in investing activities (342,152) (847,263)
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<PAGE>
THT Inc.
Condensed Consolidated Statement of Cash Flows (continued)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
June 30,
1998 1997
-------------------------------
<S> <C> <C>
Cash flows from financing activities:
Repayment of debt (600,000) (2,034,012)
Cash dividends paid (35,000) (175,000)
Note payable-net 900,000
Preferred Stock repurchase (1,000,000) (1,000,000)
Long-term debt - proceeds 2,000,000
----------- -----------
Net cash used in financing activities (1,635,000) (309,012)
----------- -----------
Net (decrease) increase in cash
and cash equivalents (842,457) 686,928
Cash and cash equivalents at beginning
of period 1,659,062 914,325
----------- -----------
Cash and cash equivalents at end of period $ 816,605 $ 1,601,253
=========== ===========
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest $ 124,547 $ 77,891
=========== ==========
Taxes $ 898,546 $ 165,986
=========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
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<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 and
nine-month periods ended June 30, 1998 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 - 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.
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>
June 30, September 30,
1998 1997
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(Unaudited)
<S> <C> <C>
Raw materials $1,108,314 $1,063,862
Work in process 263,027 355,413
Finished goods 829,964 678,236
Packaging and supplies 63,454 64,725
---------- ----------
Total inventories $2,264,759 $2,162,236
========== ==========
</TABLE>
Note 4 - Property, Plant and Equipment
Property, plant and equipment consist of:
<TABLE>
<CAPTION>
June 30, September 30,
1998 1997
---------- ----------
(Unaudited)
<S> <C> <C>
Land $ 114,522 $ 114,522
Buildings and improvements 2,581,287 2,352,067
Machinery and equipment 3,888,325 3,800,873
Furniture, fixtures & autos 111,683 87,353
---------- ----------
6,695,817 6,354,815
Less accumulated depreciation 3,152,691 2,786,108
---------- ----------
Total property, plant and equipment $3,543,126 $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, if any, by the weighted average
number of shares of Common Stock outstanding during the three-month and nine-
month periods ended June 30, 1998.
Note 7 - 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 $3,246,404 as of June 30, 1998, 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 funds used by
the Company to retire the then outstanding Preferred Stock of $1,000,000 and the
accelerated payoff of long term debt of $400,000, as offset by the Company's
earnings. The Company had cash on hand as of June 30, 1998 of $816,605, 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. 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.
On March 31, 1997, the Company borrowed $2,000,000 under the Term Loan. The
current outstanding principal amount of $1,200,000 thereof bears interest at a
current rate of 7.75%.
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.
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<PAGE>
The Company intends to fund its operations in the near term from cash on
hand, 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 $2,000,000 at June 30, 1998). 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
- ---------------------
Nine Months Ended June 30, 1998, as compared to the Nine Months Ended
- ---------------------------------------------------------------------
June 30,1997
- ------------
The Company, on a consolidated basis, generated net sales of $14,564,800 for
the nine-month period ended June 30, 1998, as compared to net sales of
$13,575,066 for the same period of the prior year.
The overall approximate 7% increase in sales over the prior year's
comparable period was due to an approximate 2% increase in sales at the
Company's Setterstix subsidiary and an approximate 19% increase at its Jackburn
subsidiary. The increase in sales at the Setterstix subsidiary was due mainly
to increases in volume due to higher customer demand for product, partially
offset by certain selling price reductions. The increase in sales at the
Jackburn subsidiary was due mainly to the recovery of business from one customer
who had moved to an alternative supplier last year, expanded sales in the
subsidiary's wire-forming business, and increases in volume due to higher demand
for product from existing customers.
Gross profit was $4,907,495 (approximate 34% gross profit margin) for the
nine months ended June 30, 1998, as compared to $4,562,710 (approximate 34%
gross profit margin) for the same period of the previous year. The increase in
gross profit was due directly to higher sales volume.
Selling, general and administrative expenses were $2,768,551 and $2,437,536
for the nine months ended June 30, 1998 and 1997, respectively. The increase of
$331,015 (14%) was due to the fact that the prior year's expenses were favorably
impacted by a bad debt recovery of $110,000. The balance of the increase was due
to higher selling expenses as a result of higher sales at Jackburn and higher
overall administrative costs.
Interest expense was $128,825 and $90,540 for the nine months ended June 30,
1998 and 1997, respectively. The increase is the result of higher overall 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 $1,184,830 for the nine months ended
June 30, 1998, as compared to net income of $1,765,257 for the same period of
the prior year. The approximate 33% decrease in net income was the result of
higher federal tax expenses. The Company utilized the remainder of its Federal
net tax loss carryforward during the prior year. The Company's tax
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<PAGE>
expenses at June 30, 1998 were $771,000 versus $241,000 during the same period
of the prior year, which significantly affected the Company's net income.
Three Months Ended June 30, 1998, as compared to the Three Months Ended
- -----------------------------------------------------------------------
June 30, 1997
- -------------
The Company, on a consolidated basis, generated net sales of $5,130,957 for
the three-month period ended June 30, 1998, as compared to net sales of
$4,953,988 for the same period of the prior year.
The overall approximate 4% increase in sales over the prior year's quarter
was due to an approximate 7% increase in sales at the Company's Jackburn
subsidiary, and by an approximate 3% increase at its Setterstix subsidiary. The
increase in sales at both subsidiaries were due mainly to increases in volume
due to higher demand for product from existing customers.
Gross profit was $1,726,083 (approximate 34% gross profit margin) for the
three months ended June 30, 1998, as compared to $1,689,365 (approximate 34%
gross profit margin) for the same period of the previous year. The increase in
gross profit was due directly to higher sales volume.
Selling, general and administrative expenses were $982,258 and $965,409 for
the three months ended June 30, 1998 and 1997, respectively. The increase of
$16,849 (2%) was due primarily to higher selling expenses as a result of higher
sales at the Company's Jackburn subsidiary.
Interest expense was $42,184 and $41,077 for the three months ended June 30,
1998 and 1997, respectively. This increase was insignificant.
The Company generated net income of $412,347 for the three months ended
June 30, 1998, as compared to net income of $604,310 for the same period of the
prior year. The approximate 32% decrease in net income was the result of higher
federal tax expenses. The Company utilized the remainder of its Federal net tax
loss carryforward during the prior year. The Company's tax expenses for the
quarter ended June 30, 1998 were $265,000 versus $72,000 during the same period
of the prior year, which significantly affected the Company's net income.
Management Information Systems
- ------------------------------
The Company believes that advanced information processing is essential to
maintaining its competitive position. The Company participates in the
electronic data interchange program maintained by its larger customers. This
program allows the Company to receive customer orders, provide advanced shipping
notices and track orders on-line from the time such orders are placed through
delivery. The Company is also able to notify certain of its customers'
warehouses, in advance, as to shipments. The Company currently is upgrading its
management information systems, which it expects to complete in 1998, to ensure
proper processing of transactions relating
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<PAGE>
to the year 2000 and beyond. The Company continues to evaluate appropriate
courses of corrective action, including replacement of certain systems. The
Company does not expect the costs associated with ensuring year 2000 compliance
to have a material effect on its financial position or results of operations.
All costs associated with year 2000 compliance are being funded with cash flow
generated from operations and are being expensed as incurred. Although the
Company believes that the information systems of its major customers and vendors
(insofar as they relate to the Company's business) comply with year 2000
requirements, there can be no assurance that the year 2000 issue will not affect
the information systems of such customers and vendors as they relate to the
Company's business, or that any such impact on such customers' and vendors'
information systems would not have a material adverse effect on the Company's
business, financial condition or results of operations.
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<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None
(b) Reports on Form 8-K.
None.
-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 21, 1998 By: /s/ Frederick A. Rossetti
---------------------------
Frederick A. Rossetti, President,
Principal Executive Officer,
and Principal Accounting Officer
-15-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> JUN-30-1998
<CASH> 816,605
<SECURITIES> 0
<RECEIVABLES> 1,636,145
<ALLOWANCES> 33,000
<INVENTORY> 2,264,759
<CURRENT-ASSETS> 5,162,643
<PP&E> 6,695,817
<DEPRECIATION> 3,152,691
<TOTAL-ASSETS> 12,505,915
<CURRENT-LIABILITIES> 1,916,239
<BONDS> 0
0
0
<COMMON> 39,826
<OTHER-SE> 13,055,280
<TOTAL-LIABILITY-AND-EQUITY> 12,505,915
<SALES> 14,564,800
<TOTAL-REVENUES> 14,564,800
<CGS> 9,657,305
<TOTAL-COSTS> 12,425,856
<OTHER-EXPENSES> 100,195
<LOSS-PROVISION> 33,000
<INTEREST-EXPENSE> 724,547
<INCOME-PRETAX> 1,955,830
<INCOME-TAX> 771,000
<INCOME-CONTINUING> 1,184,830
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,184,830
<EPS-PRIMARY> 0.29
<EPS-DILUTED> 0.29
</TABLE>
