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, 1997 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 January 31, 1997
<TABLE>
THERMWOOD CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Item 1.
Three Months Ended Six Months Ended
January 31 January 31
------------------ ----------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
SALES $4,333,186 $3,225,514 $8,587,159 $7,076,811
Less commissions 541,014 345,540 1,050,082 860,287
---------- ---------- ---------- ----------
NET SALES 3,792,172 2,879,974 7,537,077 6,216,524
COST OF SALES 2,198,812 1,777,134 4,509,694 3,857,635
---------- ---------- ---------- ----------
GROSS PROFIT 1,593,360 1,102,840 3,027,383 2,358,889
RESEARCH AND DEVELOPMENT,
MARKETING, ADMINISTRATIVE
AND GENERAL EXPENSES 1,017,207 822,066 1,970,618 1,777,807
---------- --------- ---------- ----------
OPERATING PROFIT 576,153 280,774 1,056,765 581,082
OTHER INCOME (EXPENSE):
Interest expense - related party 0 -277 0 -986
Interest expense - other -26,392 -40,485 -53,296 -104,747
Other 7,641 -2,528 1,671 7,984
----------- --------- ---------- ----------
Net other income (expense) -18,751 -43,290 -51,625 -97,749
----------- --------- ---------- ----------
EARNINGS FROM
CONTINUING OPERATIONS 557,402 237,484 1,005,140 483,333
Income taxes 233,913 0 393,054 0
----------- --------- ---------- ----------
NET EARNINGS $ 323,489 $ 237,484 $ 612,086 $ 483,333
=========== ========= ========== =========
Earnings per common and common
equivalent share:
Primary .04 .02 .07 .05
Assuming full dilution .03 .02 .07 .05
Average number of common shares outstanding
Primary 6,779,756 6,396,721 6,779,756 6,174,131
Assuming full dilution 7,550,274 7,357,721 7,550,274 7,135,131
See notes to condensed financial statements.
</TABLE>
<TABLE>
THERMWOOD CORPORATION
CONDENSED BALANCE SHEETS
(Unaudited)
Item 1. (Continued)
January 31, 1997 July 31, 1996
---------------- -------------
ASSETS
Current Assets
<S> <C> <C>
Cash $ 123,196 $ 18,995
Accounts receivable 1,037,719 812,540
Inventories-Note B 4,107,977 3,329,337
Deferred income taxes 727,379 1,073,000
Prepaid expenses 269,166 339,015
------------- ------------
Total Current Assets 6,265,437 5,572,887
------------- ------------
Property and Equipment (Net of
Accumulated Depreciation) 1,675,086 1,692,687
------------- ------------
Other Assets
Patents, trademarks and other 152,631 159,716
Deferred income taxes 1,341,000 1,341,000
------------- ------------
Total Other Assets 1,493,631 1,500,716
------------- ------------
Total Assets $ 9,434,154 $ 8,766,290
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable 711,827 694,603
Accrued liabilities 705,077 587,424
Customer deposits 822,012 494,009
Current portion of long-term liabilities 6,715 6,264
------------ -----------
Total Current Liabilities 2,245,631 1,782,300
Long-term Liabilities - less current portion
Capital lease obligations 12,000 15,474
Bonds payable, net of unamortized
discount 690,400 693,279
------------ -----------
Total Long-term Liabilities 702,400 708,753
------------ -----------
Shareholders' Equity
Preferred Stock, no par value, 2,000,000
shares authorized 822,400 and 900,000 shares
issued and outstanding 2,833,280 3,097,120
Common stock, no par value, 20,000,000
shares authorized 6,538,546 shares in 1996
and 6,548,546 shares in 1997 issued and
outstanding 10,199,120 10,190,404
Accumulated deficit -6,521,527 -6,984,162
------------ ----------
6,510,873 6,303,362
Less subscriptions receivable 24,750 28,125
------------ ----------
Total Shareholders'Equity 6,486,123 6,275,237
------------ ----------
Total Liabilities and Shareholders' Equity $9,434,154 $8,766,290
Shareholders' Equity ============ ==========
See notes to condensed financial statements.
</TABLE>
<TABLE>
THERMWOOD CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Item 1. (Continued)
Six Months Ended January 31
---------------------------
1997 1996
------------- ------------
OPERATING ACTIVITIES:
<S> <C> <C>
Net earnings $ 612,086 $ 483,333
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 141,042 167,656
Amortization of bond discount 8,643 14,665
Gain on sale of assets 0 -15,630
Changes in operating assets and liabilities:
Accounts receivable -225,179 482,428
Inventories -778,640 -211,480
Prepaid expenses and other assets 415,471 91,904
Accounts payable 17,223 -22,007
Accrued liabilities 117,653 -61,898
Customer deposits 328,003 -352,314
--------- ---------
Net cash provided by operating activities 636,302 576,657
--------- ---------
INVESTING ACTIVITIES:
Proceeds from sale of fixed assets 0 40,000
Purchases of property and equipment -119,163 -209,122
--------- ---------
Net cash used by investing activities -119,163 -169,122
FINANCING ACTIVITIES:
Principal payments on lease obligations and
long-term debt -3,023 -28,778
Payment of dividends on preferred stock -149.450 -169,156
Redemption of preferred stock -263,840 -134,301
Exercise of qualified stock options 0 4,500
Payment received for subscriptions receivable 3,375 0
--------- ---------
Net cash used by financing activities -203,669 -327,735
--------- ---------
Increase in cash 104,201 79,800
Cash, beginning of period 18,995 10,544
--------- ---------
Cash, end of period $ 123,196 $ 90,344
========= =========
ADDITIONAL INFORMATION:
Interest paid $ 53,296 $ 90,030
========= =========
Conversion of bonds payable,
net of unamortized discount $ 10,000 $ 942,596
========= =========
Subscriptions receivable for common stock issued $ 0 $ 20,000
========= =========
See notes to condensed financial statements.
</TABLE>
NOTES TO CONDENSED 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 January 31, 1996. 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>
January 31 July 31
Components of 1997 1996
inventory: ----------- -------------
<S> <C> <C>
Raw material $2,238,927 $1,916,980
Work in process 1,615,103 903,447
Finished goods 253,947 508,910
----------- -------------
Total $4,107,977 $3,329,337
=========== =============
</TABLE>
Note C - 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, 1997 were $3,792,172,
an increase of 31.7% compared to second quarter net sales in fiscal
1996 and an increase of approximately 1% from the first quarter of
fiscal year 1997. Net sales for the six months of the current fiscal
year were $7,537,077, an increase of $1,320,553, or 21.3%,
from last year's six month period.
Gross profit for the current quarter was $1,593,360, an increase of
44.5% over the second quarter last year and an increase of 11% over
the first quarter of 1997. Gross profit for the six months ended
January 31, 1997 was an increase of approximately $668,494, or 28.3%,
over the same period for fiscal year 1996. Gross profit margin as a
percentage of net sales was 42.0% for the quarter ended January 31, 1997
compared to 38.2% for the first quarter of fiscal 1997 and 38.3%
during the second quarter of fiscal year 1996 and increased to 40.2%
from 37.9% for the six month periods ended January 31, 1997 and 1996,
respectively.
Research and development, marketing and administrative expenses decreased
as a percentage of sales from 28.5% in 1996 to 26.8% for the same period
in 1997 but increased slightly from the 25.5% for the first quarter of
fiscal 1997. Expenses also decreased to 26.1% from 28.6% for the six months
ending January 31, 1997 and 1996, respectively.
Interest expense in the second quarter of fiscal year 1997 was $26,392,
a decrease of approximately 34.8% from $40,485 for the same quarter last
year and a decrease of approximately 2% from the first quarter of
fiscal year 1997. For the six-month period ended 1997, interest expense
was $53,296 compared to $104,747 for the same period of fiscal year
1996, a decrease of approximately 49.1%. The steady decrease in interest
is primarily due to the conversion of 12% debentures to common stock.
Approximately $1.1 million of the original $2,070,000 in debentures were
voluntarily converted to common stock in the first six months of fiscal 1996.
The remaining balance of debentures is approximately $690,000, net of
unamortized discount, at January 31, 1997.
Liquidity and Capital Resources
At January 31, 1997 the Company's working capital was $4,019,806
compared to $3,790,587 at July 31, 1996. 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 raw material
inventory. An increase in backlog of approximately $900,000 from the
$1,600,000 at July 31, 1996 also contributed to an increased work-in-process
inventory. Increased inventories contributed to the increase in working
capital by approximately $779,000.
Backlog increased to approximately $2,500,000 during the second fiscal
quarter ended January 31, 1997 from $1,800,000 at the end of the
preceding quarter. Accounts receivable also increased approximately
$225,000 because of higher sales levels. Other assets decreased
because of an accrual of approximately $390,000 in federal income taxes
which offsets the current portion of the deferred income tax benefit.
Shareholders' equity increased from $6,275,237 at July 31, 1996 to
$6,486,123 in the six month period ending January 31, 1997. While a total
of 1,109,000 shares of common stock at a price of $1 per share were
converted from the 12% debentures during the six months ended January 31,
1996 for an increase to shareholders' equity in the amount of $987,130,
net of discount and issuance costs, 10,000 shares were added to common
stock at a net amount of $8,716 in the first six months of fiscal 1997.
THERMWOOD CORPORATION
FORM 10Q
1/31/97
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
None.
ITEM 2. CHANGES IN SECURITIES:
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES:
a. None.
b. Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
a. An annual meeting of shareholders was held in Dale,
Indiana on December 12, 1996.
b. All nominees for directors as listed on the Company's
proxy statement dated November 18, 1996 were elected.
c. Matters voted on by shareholders:
(1.) Election of directors:
Votes Votes
For Against Abstain
______ _________ _______
Kenneth J. Susnjara 5,965,538 20,000 0
Linda S. Susnjara 5,965,538 20,000 0
Edgar Mulzer 5,964,238 21,300 0
Peter N. Lalos 5,965,538 20,000 0
Lee Ray Olinger 5,963,738 21,800 0
(2.) Ratification of KPMG Peat Marwick LLP as the
Company's independent auditors:
Votes for 5,977,738; Votes against 4,000; Abstain 3,800.
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_February 25, 1997 _ By_/s/Kenneth J.Susnjara
__________________________________
Kenneth J. Susnjara
President (Principal Executive Officer)
Date_February 25, 1997 _ By_/s/ Rebecca F. Fuller
____________________________________
Rebecca F. Fuller
Treasurer (Principal Financial Officer)
<TABLE> <S> <C>
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</TABLE>
