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, 1996
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, 6,548,546 shares outstanding as of October 31, 1996
<TABLE>
THERMWOOD CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Item 1.
Three Months Ended
October 31
----------------------------
1996 1995
----------- -----------
<S> <C> <C>
SALES $4,253,973 $3,851,297
Less commissions 509,068 514,747
----------- -----------
NET SALES 3,744,905 3,336,550
COST OF SALES 2,310,882 2,080,501
----------- -----------
GROSS PROFIT 1,434,023 1,256,049
RESEARCH & DEVELOPMENT, MARKETING,
ADMINISTRATIVE & GENERAL EXPENSES 953,411 955,741
----------- -----------
OPERATING PROFIT 480,612 300,308
----------- -----------
OTHER INCOME (EXPENSE)
Interest expense - related party 0 (709)
Interest expense - other (26,904) (64,262)
Other (5,970) 10,512
----------- -----------
Total Other Income (Expense) (32,874) (54,459)
EARNINGS FROM CONTINUING OPERATIONS 447,738 245,849
----------- --------------
Income taxes (159,141) 0
----------- --------------
NET EARNINGS $ 288,597 $ 245,849
=========== ==============
Earnings per common and common
equivalent share:
Primary .03 .03
Assuming full dilution .03 .03
Average number of common shares
outstanding
Primary 6,826,423 5,591,213
Assuming full dilution 7,579,423 7,343,541
See accompanying notes to
financial statements.
</TABLE>
<TABLE>
THERMWOOD CORPORATION
CONDENSED BALANCE SHEETS
Item 1. (Continued) (Unaudited)
October 31 July 31
1996 1996
ASSETS ------------ ------------
Current Assets
<S> <C> <C>
Cash $ 45,167 $ 18,995
Accounts receivable 1,144,395 812,540
Inventories--Note B 3,643,754 3,329,337
Deferred income taxes 1,073,000 1,073,000
Prepaid expenses 361,539 339,015
---------- ----------
Total Current Assets 6,267,855 5,572,887
---------- ----------
Other Assets
Patents, trademarks and other 156,092 159,716
Deferred income taxes 1,341,000 1,341,000
--------- ---------
Total Other Assets 1,497,092 1,500,716
--------- ---------
Property and Equipment (net of
accumulated depreciation) 1,661,419 1,692,687
---------- ----------
Total Assets $9,426,366 $8,766,290
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $ 952,902 $ 694,603
Accrued liabilities 816,979 587,424
Customer deposits 578,568 494,009
Current portion of long-term liabilities 6,485 6,264
---------- ---------
Total Current Liabilities 2,354,934 1,782,300
---------- ---------
Long-term Liabilities - less current portion
Capital lease obligations 13,767 15,474
Bonds payable, net of unamortized discount 687,298 693,279
---------- ---------
Total Long-term Liabilities 701,065 708,753
---------- ---------
Shareholders' Equity
Preferred stock, no par value, 2,000,000
shares authorized 862,000 and 900,000
shares issued and outstanding 2,967,920 3,097,120
Common stock, no par value, 20,000,000
shares authorized 6,548,546 and 6,538,546
shares issued and outstanding 10,199,120 10,190,404
Accumulated deficit (6,771,923) (6,984,162)
------------ ------------
6,395,117 6,303,362
Less subscriptions receivable 24,750 28,125
------------ ------------
Total Shareholders' Equity 6,370,367 6,275,237
------------ ------------
Total Liabilities and Shareholders'Equity $9,426,366 $8,766,290
============ ============
See accompanying notes to financial statements.
</TABLE>
<TABLE>
THERMWOOD CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
Item 1. (Continued) (Unaudited)
Three Months Ended October 31
1996 1995
OPERATING ACTIVITIES: -------------- --------------
<S> <C> <C>
Net earnings $ 288,597 $ 245,849
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 70,421 89,828
Amortization of bond discount 2,735 7,285
Changes in operating assets and liabilities:
Accounts receivable (331,855) 92,802
Inventories (314,417) (162,463)
Prepaid expenses and other assets (20,939) 125,929
Accounts payable and other accrued expenses 487,854 (47,231)
Customer deposits 84,559 (147,724)
-------------- --------------
Net cash provided by operating activities 266,955 204,275
-------------- --------------
INVESTING ACTIVITIES:
Purchases of property and equipment (37,114) (28,843)
-------------- --------------
Net cash used by investing activities (37,114) (28,843)
FINANCING ACTIVITIES:
Principal payments on lease obligations
and long-term debt (1,486) (11,577)
Redemption of preferred stock (129,200) (64,608)
Payment of dividends on preferred stock (76,358) (85,392)
Payment received for subscriptions receivable 3,375 0
Exercise of qualified stock options 0 3,375
------------- -----------
Net cash used by financing activities (203,669) (158,202)
Increase in cash 26,172 17,230
Cash, beginning of period 18,995 10,544
------------- -----------
Cash, end of period $ 45,167 $ 27,774
============= ===========
ADDITIONAL INFORMATION:
Interest paid $ 26,904 $ 64,971
============= ===========
Conversion of bonds payable $ 10,000 $ 578,987
============= ===========
Subscriptions receivable for
common stock issued $ 24,750 $ 20,000
============= ===========
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, 1996 and Form 10-Q for the quarter
ended October 31, 1995
Operating results for the interim periods are not necessarily
indicative of the results that may be expected for the year ended July 31, 1997
Note B - Inventories
____________________
Inventories are priced at the lower of cost (first-in, first-out
method) or market.
<TABLE>
October 31 July 31
Components of 1996 1996
inventory: ---------- ----------
<S> <C> <C>
Raw material $2,075,828 $1,916,980
Work in process 1,250,659 903,447
Finished goods 317,267 508,910
---------- ----------
Total $3,643,754 $3,329,337
========== ==========
</TABLE>
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, 1996 were $3,744,905, an
increase of 12% over the first quarter net sales in fiscal 1996.
Gross profit for the current quarter was $1,434,023, an increase of
14% over the first quarter last year. Cost of sales as a percentage of
net sales decreased slightly from approximately 62.4% in the first
quarter of fiscal year 1996 to approximately 61.7% in the first
quarter of fiscal year 1997. This decrease was primarily due to more
efficient production methods and in- house production of components
previously sent to outside vendors. This decrease also contributed
to the slight increase in margin as a percentage of net sales from
37.6% to 38.3% in the current quarter.
The higher gross margin as a percentage of sales coupled with research
and development, marketing, administrative and general expenses of
$953,411 compared with $955,741 for the first quarter of fiscal 1996
resulted in an operating profit of $480,612 compared to $300,308 for
the same period in fiscal year 1996, or a 60% increase. Research and
development, marketing, administrative and general expenses were 25.5%
of net sales for the quarter ended October 31, 1996 compared to 28.6%
for the same period of fiscal 1996. Expenses for the first quarter of
fiscal 1997 were at a normal level as a percentage of sales.compared
to slightly higher than normal expenses in the first quarter of fiscal
1996 which were as a result of increased marketing expenses and salary
increases.
Interest expense in the first quarter of fiscal year 1997 was $26,904
a decrease of approximately 57% from $64,971 last year. This lower
level is due to the conversion of debentures to common stock, thus
eliminating the related interest on the converted debentures.
Earnings from continuing operations before income taxes in the first
quarter of fiscal year 1997 were $447,738 compared to $245,849 in the
first quarter of fiscal year 1996, or an increase of approximately
82%. Federal income taxes were accrued in the amount of $159,141,
lowering earnings to a net of $288,597 compared to $245,849 in the
first quarter of fiscal 1996. It was not necessary to accrue for
federal income taxes in fiscal 1996 due to tax loss carryforwards. In
fiscal year 1997, there will not be an outlay of cash for federal
income taxes except for the alternative minimum tax. Taxes will,
however, decrease the deferred tax asset.
Liquidity and Capital Resources
- -------------------------------
At October 31, 1996 the Company's working capital was $3,912,921
compared to $3,790,587 at July 31, 1996. This increase was due to
cash generated from operations and an increase of approximately
$314,000 in inventory and a $332,000 increase in accounts receivable.
The increase in inventory was necessary in order to purchase bulk
quantities of raw materials such as steel for production of components
which were previously purchased already machined. Current inventory
levels are also considered necessary to produce anticipated orders and
the backlog of approximately $1,800,000. Current backlog is
approximately $200,000 higher than the $1,600,000 backlog at July 31,
1996. Management anticipates that orders will continue at this level;
however, no assurances can be made to this increase.
Shareholders' equity increased from $6,275,237 at July 31, 1996 to
$6,370,367 in the three-month period ending October 31, 1996. While a
total of 678,000 shares of common stock at a price of $1 per share
were converted from the 12% debentures during the quarter ended
October 31, 1995 for an increase to shareholders' equity in the amount
of $578,987, net of discount and issuance costs, 10,000 shares were
added to common stock at a net amount of $5,341 in the first quarter
of fiscal 1997.
The Company has redeemed 38,000 shares of preferred stock at $3.40 per
share for the quarter ended October 31, 1996 compared to 19,002 shares
for the same period last year.
THERMWOOD CORPORATION
FORM 10Q
10/31/96
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
None.
ITEM 2. CHANGES IN SECURITIES:
A total of $10,000 of 12% convertible debentures were converted to
10,000 common shares at a price of $1 per share during the quarter
ended October 31, 1996.
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)
Date November 12, 1996 By__/s/ Kenneth J. Susnjara
_________________________
Kenneth J. Susnjara
President (Principal Executive Officer)
Date November 12, 1996 By__/s/ Rebecca F. Fuller
_______________________
Rebecca F. Fuller
Treasurer (Principal Financial Officer)
<TABLE> <S> <C>
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<PERIOD-END> OCT-31-1996
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2967920
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</TABLE>
