SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-Q
______________________________________________________________________
Quarterly Report Pursuant To Section 13 or 15(d) of the
Securities Exchange Act of 1934
For quarter ended October 31, 1995 Commission file number 0-12195
THERMWOOD CORPORATION
______________________________________________________________________
(Exact name of Registrant as specified in its charter)
INDIANA 35-1169185
_______________________________ _______________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P. O. Box 436, Dale, Indiana 47523
_________________________________ _______________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 812-937-4476
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, and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
Common Stock, no par value, 5,850,546 shares outstanding as of October 31, 1995
<TABLE>
<CAPTION>
THERMWOOD CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Item 1.
Three Months Ended October 31
1995 1994
------------------------------
<S> <C> <C>
SALES $3,851,297 $3,183,761
Less commissions 514,747 367,340
---------------- ------------
NET SALES 3,336,550 2,816,421
COST OF SALES 2,080,501 1,751,788
---------------- ------------
GROSS PROFIT 1,256,049 1,064,633
RESEARCH & DEVELOPMENT,
MARKETING, ADMINISTRATIVE &
GENERAL EXPENSES 955,741 736,753
---------------- ------------
OPERATING PROFIT 300,308 327,880
---------------- ------------
OTHER INCOME (EXPENSE)
Interest expense - related party (709) (2,658)
Interest expense - other (64,262) (73,875)
Other 10,512 20,510
---------------- ------------
Total Other Income (Expense) (54,459) (56,023)
EARNINGS FROM CONTINUING OPERATIONS 245,849 271,857
Income taxes 0 5,000
---------------- ------------
NET EARNINGS $ 245,849 $ 266,857
================ ============
Earnings per common and common
equivalent share:
Primary .03 .03
Assuming full dilution .03 .03
Average number of common shares
outstanding
Primary 5,591,213 5,161,311
Assuming full dilution 7,343,541 7,231,311
See accompanying notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
THERMWOOD CORPORATION
CONDENSED BALANCE SHEETS
Item 1. (Unaudited)
October 31 July 31
1995 1995
ASSETS -------------- -------------
Current Assets
<S> <C> <C>
Cash $ 27,774 $ 10,544
Accounts receivable 1,088,797 1,181,599
Inventories--Note B 3,171,410 3,008,947
Deferred income taxes 454,000 454,000
Prepaid expenses 249,236 375,165
-------------- ------------
Total Current Assets 4,911,217 5,030,255
-------------- ------------
Other Assets
Patents, trademarks and other 207,273 211,861
Deferred income taxes 782,000 782,000
-------------- ------------
Total Other Assets 961,449 993,861
-------------- ------------
Property and Equipment (net of
accumulated depreciation 1,443,241 1,502,977
-------------- ------------
Total Assets $7,395,907 $7,527,093
============== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 818,505 $ 792,544
Accrued liabilities 679,496 752,688
Customer deposits 494,635 642,359
Current portion of long-term liabilities 21,506 31,598
------------- ------------
Total Current Liabilities 2,014,142 2,219,189
Long-term Liabilities - less current portion
Capital lease obligations 20,253 21,738
Bonds payable, net of
unamortized discount 1,245,819 1,848,684
------------- -------------
Total Long-term Liabilities 1,266,072 1,870,422
------------- -------------
Shareholders' Equity
Preferred stock, no par value,
2,000,000 shares authorized,
980,988 and 1,000,000 shares
issued and outstanding 3,372,512 3,437,120
Common stock, no par value,
20,000,000 shares authorized
5,850,546 and 5,149,546 shares
issued and outstanding 9,571,259 8,988,897
Accumulated deficit (8,828,078) (8,988,535)
-------------- -------------
Total Shareholders' Equity 4,115,693 3,437,482
-------------- -------------
Total Liabilities and Shareholders' Equity $7,395,907 $7,527,093
============== =============
See accompanying notes to financial statements.
</TABLE>
<TABLE>
<CAPTION>
THERMWOOD CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
Item 1. (Unaudited)
Three Months Ended October 31
-----------------------------
1995 1994
------------- ---------------
OPERATING ACTIVITIES:
<S> <C> <C>
Net earnings $ 245,849 $ 266,857
Adjustments to reconcile net
income to net cash
provided by operating activities:
Depreciation and amortization 89,828 78,828
Amortization of bond discount 7,285 6,730
Changes in operating assets and liabilities:
Accounts receivable 92,802 26,029
Inventories (162,463) (182,586)
Prepaid expenses 125,929 (26,340)
Other assets 0 700
Accounts payable 25,961 (56,959)
Accrued liabilities (73,192) (67,813)
Customer deposits (147,724) 80,342
----------- ------------
Net cash provided by operating activities 204,275 125,788
----------- ------------
INVESTING ACTIVITIES:
Purchases of property and equipment (28,843) 0
----------- ------------
Net cash used by investing activities (28,843) 0
----------- ------------
FINANCING ACTIVITIES:
Principal payments on lease obligations
and long-term debt (11,577) (18,299)
Redemption of preferred stock (64,608) 0
Payment of dividends on preferred stock (85,392) (87,833)
Exercise of qualified stock options 3,375 0
----------- ------------
Net cash used by financing activities (158,202) (106,132)
----------- ------------
Increase in cash 17,230 19,656
Cash, beginning of period 10,544 9,707
----------- ------------
Cash, end of period $ 27,774 $ 29,363
=========== ============
ADDITIONAL INFORMATION:
Interest paid $ 64,971 $ 68,334
=========== ============
Conversion of bonds payable $ 578,987 $ 0
=========== ============
Subscriptions receivable for
common stock issued $ 20,000 $ 0
=========== ============
Asset acquired under capital lease $ 0 $ 31,929
=========== ============
See accompanying notes to financial statements.
</TABLE>
NOTES TO FINANCIAL STATEMENTS:
Note A - Basis of Presentation
___________________________
The unaudited condensed financial statements have been prepared in
accordance with the instructions to Form l0-Q and, therefore, do not
include all information and footnotes required by generally accepted
accounting principles for complete financial statements. The
statements have not been examined by independent accountants but
include, in the opinion of the Company, all adjustments (consisting of
normal recurring adjustments) necessary to present fairly the
condensed financial position and the results of operations for the
periods presented. These financial statements should be read in
conjunction with the Company's financial statements included on Form
10-K for the year ended July 31, 1995 and Form 10-Q for the quarter
ended October 31, 1994.
Operating results for the interim periods are not necessarily
indicative of the results that may be expected for the year ended July
31, 1996.
Note B - Inventories
___________________
Inventories are priced at the lower of cost (first-in, first-out
method) or market.
October 31 July 31
Components of inventory: 1995 1995
---------- ------------
Raw material $1,800,667 $1,753,104
Work in process 1,200,680 995,106
Finished goods 170,063 260,737
---------- ------------
Total $3,171,410 $3,008,947
========== ============
Note C - Reclassifications
________________________
Certain amounts presented in the prior year condensed financial
statements have been reclassified to conform to the current year
presentation.
Note D - Earnings per Share
______________________________
Primary earnings per common and common equivalent share is based on
net earnings less preferred stock dividend requirements and the
weighted average number of common shares outstanding adjusted for the
incremental shares attributed to dilutive stock options and warrants
using the treasury stock method.
Earnings per share assuming full dilution is determined by dividing
net earnings attributable to common shareholders plus interest and
amortization expense (net of income taxes) related to convertible
debentures by the sum of the weighted average number of common shares
outstanding and the incremental shares attributed to dilutive common
stock equivalents and the assumed conversion of the convertible
debentures.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
- ---------------------
Net sales for the quarter ended October 31, 1995 were $3,336,550, an
increase of 18% over the first quarter net sales in fiscal 1995.
Gross profit for the current quarter was $1,256,049, an increase of
18% over the first quarter last year. Cost of sales as a percentage of
net sales increased slightly from approximately 62.2% in the first
quarter of fiscal year 1995 to approximately 62.4% in the first
quarter of fiscal year 1996. This increase was primarily due to an
across-the-board wage increase and associated taxes and benefits
during the first quarter of fiscal 1996. Discounting and a
difference in product mix also contributed to a slight decrease of
margin as a percentage of net sales from 37.8% to 37.6% in the current
quarter.
The slightly lower gross margin as a percentage of sales coupled with
an increased level of research and development, marketing,
administrative and general expenses of $955,741 compared with $736,753
for the first quarter of fiscal 1995 resulted in an operating profit
of $300,308 compared to $327,880 for the same period in fiscal year
1995, or a decrease of 8.4%. Research and development, marketing,
administrative and general expenses were 28.6% of net sales for the
quarter ended October 31, 1995 compared to 26.2% for the same period
of fiscal 1995. The increase of approximately $200,000 from October
31, 1994 compared to October 31, 1995, is primarily due to increased
marketing expenses. Salary increases and related expenses also
contributed to the increase.
Interest expense in the first quarter of fiscal year 1996 was $64,971
a decrease of approximately 15% from $76,533 last year. This lower
level is due to the conversion of debentures to common stock, thus
eliminating the related interest on the converted debentures.
The net earnings in the first quarter of fiscal year 1996 were
$245,849 compared to $266,857 in the first quarter of fiscal year
1995, or a decrease of approximately 7.8%. As discussed previously,
higher research and development, marketing, administrative and general
expenses, along with lower interest expense combined to produce the
earnings in the current quarter.
Liquidity and Capital Resources
- -------------------------------
The Company's current marketing strategy is focused on the sale and
production of low cost standard machines. This type of equipment
generally requires a lower level of working capital than the large
custom machines which required many months to produce as well as
significant labor costs in connection with supporting and servicing
these machines.
At October 31, 1995 the Company's working capital was $2,977,075
compared to $2,811,066 at July 31, 1995. This increase was due to
cash generated from operations. An increase of approximately $162,000
in inventory was due to purchasing bulk quantities of raw materials
such as steel in order to now begin internal production of many
components which were previously purchased already machined, thus
contributing to reduced product cost. Current inventory levels are
considered necessary to produce anticipated orders and the backlog of
approximately $1,300,000. Current backlog is approximately $560,000
less than the $1,860,000 backlog at July 31, 1995. While a slower
period of orders occurred in September and October, November orders
were at more typical levels. Management anticipates that orders are
now at a normal level and that the backlog will be sufficient at this
time to supply working capital to allow the Company to efficiently
manufacture its products.
Shareholders' equity increased from $3,437,482 at July 31, 1995 to
$4,115,693 in the three-month period ending October 31, 1995. As a
result of the increased market price of Thermwood's common stock,
holders of the 12% debentures began converting the debentures to
common stock. A total of 678,000 shares at a price of $1 per share
were converted through October 31, 1995 for an increase to
shareholders' equity in the amount of $578,987, net of discount and
issuance costs. An additional increase to shareholders' equity of
$3,375 occurred as a result of the exercise of qualified stock options
by employees.
The Company has redeemed 19,002 shares of preferred stock for the
quarter ended October 31, 1995.
THERMWOOD CORPORATION
FORM 10Q
10/31/95
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
None.
ITEM 2. CHANGES IN SECURITIES:
A total of $678,000 of 12% convertible debentures were converted to
678,000 common shares at a price of $1 per share during the quarter
ended October 31, 1995. Due to the exercise of qualified stock
options by employees an additional 23,000 shares of common stock were
issued.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
a. None.
b. Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
None.
ITEM 5. OTHER INFORMATION:
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
None
SIGNATURES
____________
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
THERMWOOD CORPORATION
__________________________
(Registrant)
December 13, 1995 /s/ Kenneth J. Susnjara
Date _________________ By__________________________________________
Kenneth J. Susnjara
President (Principal Executive Officer)
December 13, 1995 /s/ Rebecca F. Fuller
Date____________ By__________________________________________
Rebecca F. Fuller
Treasurer (Principal Financial Officer)
<TABLE> <S> <C>
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</TABLE>
