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 January 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, 6,283,146 shares outstanding as of January 31, 1996
<TABLE>
THERMWOOD CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Item 1.
Three Months Ended Six Months Ended
January 31 January 31
---------------------- -----------------------
1996 1995 1996 1995
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
SALES $3,225,514 $3,217,182 $7,076,811 $6,400,943
Less commissions 345,540 353,258 860,287 720,598
---------- ---------- ----------- ----------
NET SALES 2,879,974 2,863,924 6,216,524 5,680,345
COST OF SALES 1,777,134 1,746,212 3,857,635 3,498,000
---------- ---------- ---------- ----------
GROSS PROFIT 1,102,840 1,117,712 2,358,889 2,182,345
RESEARCH AND DEVELOPMENT,
MARKETING, ADMINISTRATIVE
AND GENERAL EXPENSES 822,066 776,860 1,777,807 1,513,613
---------- ---------- ---------- ----------
OPERATING PROFIT 280,774 340,852 581,082 668,732
OTHER INCOME (EXPENSE):
Interest expense -
related party (277) (2,195) (986) (4,853)
Interest expense - other (40,485) (70,373) (104,747) (144,248)
Other (2,528) 2,327 7,984 22,837
----------- ---------- ---------- ----------
Net other income (expense) (43,290) (70,241) (97,749) (126,264)
----------- ---------- ---------- ----------
EARNINGS BEFORE INCOME TAXES 237,484 270,611 483,333 542,468
Income taxes 0 0 0 5,000
----------- ---------- ---------- ----------
NET EARNINGS $237,484 $270,611 $483,333 $537,468
Earnings per common and common
equivalent share:
Primary .02 .04 .05 .07
Assuming full dilution .02 .04 .05 .07
Average number of common
shares outstanding
Primary 6,396,721 5,149,546 6,174,131 5,155,429
Assuming full dilution 7,357,721 7,219,546 7,135,131 7,225,429
See notes to condensed financial statements.
</TABLE>
<TABLE>
THERMWOOD CORPORATION
CONDENSED BALANCE SHEETS
(Unaudited)
Item 1. (Continued)
January 31 July 31
1996 1995
--------------- -------------
<S> <C> <C>
ASSETS
Current Assets
Cash $ 90,344 $ 10,544
Accounts receivable 699,171 1,181,599
Inventories--Note B 3,220,427 3,008,947
Deferred income taxes 454,000 454,000
Prepaid expenses 283,261 375,165
---------- ----------
Total Current Assets 4,747,203 5,030,255
---------- ----------
Property and Equipment (Net of
Accumulated Depreciation 1,523,571 1,502,977
Other Assets
Patents, trademarks and other 149,163 211,861
Deferred income taxes 782,000 782,000
---------- ---------
Total Other Assets 931,163 993,861
---------- ---------
Total Assets $7,201,937 $7,527,093
---------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable 770,537 792,544
Accrued liabilities 690,790 752,688
Customer deposits 290,045 642,359
Current portion of long-term
liabilities 5,842 31,598
---------- -----------
Total Current Liabilities 1,757,214 2,219,189
Long-term Liabilities - less current portion
Capital lease obligations 18,715 21,738
Bonds payable, net of
unamortized discount 861,554 1,848,684
--------- -----------
Total Long-term Liabilities 880,269 1,870,422
--------- -----------
Shareholders' Equity
Preferred Stock, no par value
2,000,000 shares authorized, and
1,000,000 shares issued and outstanding 3,302,819 3,437,120
Common stock, no par value, 20,000,000
shares authorized, 6,283,146 and 5,149,546
shares issued and outstanding 9,955,993 8,988,897
Less subscriptions receivable (20,000) 0
Accumulated deficit (8,674,358) (8,988,535)
----------- -----------
Total Shareholders' Equity 4,564,454 3,437,482
----------- -----------
Total Liabilities and Shareholders' Equity $7,201,937 $7,527,093
=========== ===========
See notes to condensed financial statements.
</TABLE>
<TABLE>
THERMWOOD CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Item 1. (Continued)
Six Months Ended January 31
1996 1995
-------------- ---------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net earnings $483,333 $537,468
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 167,656 146,657
Amortization of bond discount 14,665 13,579
Gain on sale of assets (15,630) 0
Changes in operating assets and liabilities:
Accounts receivable 482,428 (263,492)
Inventories (211,480) (309,028)
Prepaid expenses 91,904 21,304
Other assets 0 (5,265)
Accounts payable (22,007) 119,402
Accrued liabilities (61,898) (32,404)
Customer deposits (352,314) 63,261
--------- ----------
Net cash provided by operating activities 576,657 291,482
--------- ----------
INVESTING ACTIVITIES:
Proceeds on sale of fixed assets 40,000 0
Purchases of property and equipment (209,122) (65,577)
--------- ----------
Net cash used by investing activities (169,122) (65,577)
--------- ----------
FINANCING ACTIVITIES:
Principal payments on long-term liabilities (28,778) (29,539)
Payment of dividends on preferred stock (169,156) (196,054)
Redemption of preferred stock (134,301) 0
Exercise of qualified stock options 4,500 0
--------- ---------
Net cash used by financing activities (327,735) (225,593)
--------- ---------
Increase in cash 79,800 312
Cash, beginning of period 10,544 9,707
--------- ---------
Cash, end of period $ 90,344 $ 10,019
========= =========
ADDITIONAL INFORMATION:
Interest paid $ 90,030 $127,146
========= =========
Conversion of bonds payable,
net of unamortized discount $942,596 $ 0
========= =========
Subscriptions receivable for
common stock issued $ 20,000 $ 0
========= =========
Assets acquired under capital lease $ 0 $ 31,929
========= =========
</TABLE>
See notes to condensed financial statements.
NOTES TO CONDENSEDFINANCIAL 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
January 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, 1996.
Note B - Inventories
________________
Inventories are priced at the lower of cost (first-in, first-
out method) or market.
<TABLE>
January 31 July 31
Components of 1996 1995
inventory: ------------ ----------
<S> <C> <C>
Raw material $1,839,257 $1,753,104
Work in process 934,735 995,106
Finished goods 446,435 260,737
---------- ----------
Total $3,220,427 $3,008,947
========== ==========
</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 January 31, 1996 were
$2,879,974 a slight increase of less than 1% compared to
second quarter net sales in fiscal 1995 and a decrease of
approximately 14% from the first quarter of fiscal year
1996. Net sales for the six months of the current fiscal
year were $6,216,524, an increase of $536,179, or 9.4%, from
last year's six-month period.
Gross profit for the current quarter was $1,102,840, a
decrease of 1.3% from the second quarter last year and a
decrease of 12% from the first quarter of 1996. Gross
profit for the six months ended January 31, 1996 was an
increase of approximately $177,000, or 8%, over the same
period for fiscal year 1995. Gross profit margin as a
percentage of net sales was 38.3% for the quarter ended
January 31, 1996 compared to 37.7% for the first quarter of
fiscal 1996 and 39.0% during the second quarter of fiscal
year 1995 and decreased from 38.4% to 37.9% for the six
month periods ended January 31, 1995 and 1996, respectively.
The lower gross margin for the second quarter of fiscal 1996
and increased research and development, marketing,
administrative and general expenses resulted in a decrease
of approximately $33,000 from net earnings of $270,611 for the
second quarter of fiscal year 1995 to $237,484 for the second
quarter of fiscal year 1996.
Research and development, marketing and administrative
expenses increased slightly for the second quarter of
fiscal year 1996 compared to the same period in 1995 but
decreased approximately $134,000 or 14% from the first
quarter of 1996. Some marketing expenses in the first
quarter of fiscal 1996 did not recur during the second
quarter.
Interest expense in the second quarter of fiscal year 1996
was $40,762, a decrease of approximately 43.8% from $72,568
for the same quarter last year and a decrease of 5.6% over
the first quarter of fiscal year 1996. For the six-month
period ended 1996, interest expense was $105,733 compared to
$149,101 for the same period of fiscal year 1995, a decrease
of approximately 29%. This lower level of interest is due
primarily to a reduction of approximately $1.1 million in
long-term 12% debentures which were voluntarily converted to
common stock. The remaining balance of debentures is
approximately $861,000, net of unamortized discount, at
January 31, 1996.
Liquidity and Capital Resources
- -------------------------------
At January 31, 1996 the Company's working capital was
$2,989,989 compared to $2,811,066 at July 31, 1995. This
increase was primarily due to cash generated from
operations. The Company is now purchasing bulk quantities
of raw materials in order to produce many components which
were previously purchased already machined, thus increasing
inventory approximately $211,000. Several machines were
built to a certain point before options were added in
anticipation of the needs of customers for a prompt
delivery. While this contributed to an increase in
inventory, the faster delivery schedules contributed to a
lower level of customer deposits which decreased by
approximately $352,000 from July 31, 1995.
Backlog decreased during the second fiscal quarter ended
January 31, 1996 to $900,000 compared to $1,300,000 at the
end of the preceding quarter. Accounts receivable decreased because
of lower sales levels in November and December due to the slowing of
orders in September and October. Sales in January and February picked
up because of increased orders in the months of November and December,
and it appears that on the basis of these results, accounts receivable
and sales will continue at more normal levels.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
None.
ITEM 2. CHANGES IN SECURITIES:
A total of $431,000 of 12% convertible debentures were
converted to 431,000 common shares at a price of $1 per
share during the quarter ended January 31, 1996. These
debentures combined with those converted during the first
quarter of fiscal 1996 equal a total of $1,109,000 debentures
converted year to date. An additional 1,600 shares of common
shares were issued during the quarter ended January 31, 1996
due to the exercise of qualified stock options by employees.
The year-to-date total of qualified stock options exercised is 24,600.
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:
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
a. Exhibits. None.
b. Reports on Form 8-K. None were filed during the quarter.
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____________ By__________________________________________
Kenneth J. Susnjara
President (Principal Executive Officer)
Date____________ By__________________________________________
Rebecca F. Fuller
Treasurer (Principal Financial Officer)
<TABLE> <S> <C>
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</TABLE>
