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, 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, 7,107,546, shares outstanding
as of October 31, 1997
<TABLE>
THERMWOOD CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Item 1.
Three Months Ended
October 31
1997 1996
---------- ----------
<S> <C> <C>
SALES $5,536,722 $4,253,973
Less commissions 732,027 509,068
---------- ----------
NET SALES 4,804,695 3,744,905
COST OF SALES 2,761,843 2,310,882
---------- ---------
GROSS PROFIT 2,042,852 1,434,023
RESEARCH & DEVELOPMENT, MARKETING,
ADMINISTRATIVE & GENERAL EXPENSES 1,468,373 953,411
---------- ---------
OPERATING PROFIT 574,479 480,612
---------- ---------
OTHER INCOME (EXPENSE)
Interest expense (25,445) (26,904)
Other 8,631 (5,970)
---------- --------
Total Other Income (Expense) (16,814) (32,874)
---------- --------
EARNINGS FROM CONTINUING OPERATIONS 557,665 447,738
Income taxes (202,626) (159,141)
---------- ----------
NET EARNINGS $355,039 $ 288,597
========== ==========
Earnings per common and common
equivalent share:
Primary .04 .03
Assuming full dilution .04 .03
Average number of common shares
outstanding
Primary 7,458,369 6,826,423
Assuming full dilution 8,877,596 7,579,423
</TABLE>
See accompanying notes to financial
statements.
<TABLE>
THERMWOOD CORPORATION
CONSOLIDATED BALANCE SHEETS
Item 1. (Continued) (Unaudited)
October 31 July 31
1997 1997
ASSETS ---------- --------------
Current Assets
<S> <C> <C>
Cash $ 336,137 $ 512,480
Accounts receivable 1,924,049 1,802,569
Inventories 4,867,690 4,618,001
Deferred income taxes 1,676,000 1,676,000
Prepaid expenses 384,365 372,287
------------ ------------
Total Current Assets 9,188,241 8,981,337
------------ ------------
Other Assets
Patents, trademarks and other 136,951 141,691
Deferred income taxes 326,000 326,000
------------ ------------
Total Other Assets 462,951 467,691
------------ ------------
Property and Equipment (net of 1,783,017 1,824,005
accumulated depreciation) ------------ ------------
Total Assets $11,434,209 $11,273,033
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable $1,495,776 $1,375,005
Accrued liabilities 1,439,462 1,611,157
Customer deposits 798,485 907,110
Current portion of long-term
liabilities 0 7,755
------------ ------------
Total Current Liabilities 3,733,723 3,901,027
------------ ------------
Long-term Liabilities - less current
portion
Capital lease obligations 0 5,918
Note payable to bank 2,546,320 0
Bonds payable, net of
unamortized discount 203,740 278,775
----------- ------------
Total Long-term Liabilities 2,750,060 284,693
------------ ------------
Shareholders' Equity
Preferred stock, no par value,
2,000,000 shares authorized
1,000,000 shares issued and 738,000
shares outstanding For July 31, 1997 0 2,546,320
Common stock, no par value,
20,000,000 shares authorized 7,107,546
and 7,000,546 shares issued and outstanding 10,671,802 10,599,285
Accumulated deficit (5,718,176) (6,033,542)
------------ -----------
4,953,626 7,112,063
Less subscriptions receivable 3,200 24,750
------------ -----------
Total Shareholders' Equity 4,950,426 7,087,313
------------ -----------
Total Liabilities and Shareholders'Equity $11,434,209 $11,273,033
============ ===========
See accompanying notes to financial statements.
</TABLE>
<TABLE>
THERMWOOD CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended October 31
1997 1996
OPERATING ACTIVITIES: ------------------ ---------------
<S> <C> <C>
Net earnings $ 355,039 $ 288,597
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 103,619 70,421
Amortization of bond discount 2,601 2,735
Changes in operating assets and liabilities:
Accounts receivable (121,480) (331,855)
Inventories (249,689) (314,417)
Prepaid expenses and other assets (12,078) (20,939)
Accounts payable and other accrued expenses (50,925) 487,854
Customer deposits (108,625) 84,559
------------ ----------
Net cash provided by operating activities (81,538) 266,955
------------ ----------
INVESTING ACTIVITIES:
Purchases of property and equipment (60,492) (37,114)
Net cash used by investing activities (60,492) (37,114)
------------ -----------
FINANCING ACTIVITIES:
Principal payments on lease obligations
and long-term debt (13,673) (1,486)
Note payable at bank 2,546,320 0
Redemption of preferred stock (2,546,320) (129,200)
Payment of dividends on preferred stock (42,190) (76,358)
Payment Received for subscriptions receivable 21,550 3,375
------------ ------------
Net cash used by financing activities (34,313) (203,669)
------------ ------------
Increase (decrease) in cash (176,343) 26,172
Cash, beginning of period 512,480 18,995
------------ -------------
Cash, end of period $ 336,137 $ 45,167
============ =============
ADDITIONAL INFORMATION:
Interest paid $8,970 $ 26,904
============ ============
Conversion of bonds payable $82,000 $ 10,000
============ ============
Subscriptions receivable for common
stock issued $3,200 $ 24,750
============ ============
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, 1997 and Form 10-Q for the quarter
ended October 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, 1998
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 inventory: 1997 1997
--------------- ------------
<S> <C> <C>
Raw material $2,505,125 $2,802,040
Work in process 2,008,871 1,171,284
Finished goods 353,694 644,477
--------------- ------------
Total $4,867,690 $4,618,001
=============== ============
</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, 1997 were $4,804,695, an
increase of 28% over the first quarter net sales in fiscal 1997.
Gross profit for the current quarter was $2,042,852, an increase of
42% over the first quarter last year. Cost of sales as a percentage of
net sales decreased from approximately 61.7% in the first quarter of
fiscal year 1997 to approximately 57.5% in the first quarter of fiscal
year 1998. 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
increase in margin as a percentage of net sales from 38.3% to 42.5% in
the current quarter.
Research and development, marketing, administrative and general
expenses were $1,468,373 compared with $953,411 for the first quarter
of fiscal 1997. Operating profit was $574,479 compared to $480,612
for the same period in fiscal year 1997, or a 20% increase. Research
and development, marketing, administrative and general expenses were
30.6% of net sales for the quarter ended October 31, 1997 compared to
25.5% for the same period of fiscal 1997. Expenses for the first
quarter of fiscal 1998 were at a higher level as a percentage of
sales.compared to fiscal year 1997 primarily as a result of increased
salaries and related employee expenses due to additional employees in
the United States and Thermwood's subsidiary in Europe. Other
European operating expenses, including advertising and trade show
expenses, contributed to the increase in expenses.
Interest expense in the first quarter of fiscal year 1997 was $25,445
a slight decrease from $26,904 last year. A lower level of interest
occurred due to the conversion of debentures to common stock; however,
additional interest was accrued in October, 1997 on a $2,500,000 loan
at 8.9% to repurchase the preferred stock.
Earnings from continuing operations before income taxes in the first
quarter of fiscal year 1998 were $557,665 compared to $447,738 in the
first quarter of fiscal year 1997, or an increase of approximately
24%. Federal income taxes were accrued in the amount of $202,626
compared to $159,141 for fiscal year 1997, lowering earnings to a net
of $355,039 compared to $288,597 in the first quarter of fiscal year
1997.
Liquidity and Capital Resources
- -------------------------------
At October 31, 1997 the Company's working capital was $5,454,518
compared to $5,080,310 at July 31, 1997. This increase was due to
cash generated from operations, increases in inventory and accounts
receivable of approximately $100,000 each, and a decrease in other
liabilities of approximately $170,000. Customer deposits also
decreased by approximately $100,000 which corresponds to a decrease in
backlog from approximately $4,080,000 at July 31, 1997 to $3,200,000
at October 31, 1997. Management anticipates that orders will continue
in this range; however, no assurances can be made to this effect.
Shareholders' equity decreased from $7,087,313 at July 31, 1997 to
$4,950,426 in the three-month period ending October 31, 1997. A total
of 82,000 shares of common stock at a price of $1 per share were
converted from the 12% debentures during the quarter ended October 31,
1997 for an increase to shareholders' equity in the amount of $72,517,
net of discount and issuance costs, compared to 10,000 shares added to
common stock at a net amount of $5,341 in the first quarter of fiscal
1997.
The Company has repurchased the balance of 738,000 shares of preferred
stock for $2,546,320 for the quarter ended October 31, 1997 and
entered into a line of credit with a bank in the amount $3.5 million.
This transaction enabled the Company to take clear title to its land
and building in order to proceed with an expansion of its production
facilities of 20,000 square feet. For the same period in fiscal year
1997, the Company redeemed 38,000 shares of the preferred stock at
$3.40.
THERMWOOD CORPORATION
FORM 10Q
10/31/97
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS:
None.
ITEM 2. CHANGES IN SECURITIES:
The balance of 738,000 shares of preferred stock was redeemed for
$2,546,320 on October 7, 1997.
A total of $82,000 of 12% convertible debentures were converted to
82,000 common shares at a price of $1 per share during the quarter
ended October 31, 1997
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 24, 1997 By__/s/ Kenneth J. Susnjara___________
Kenneth J. Susnjara
President (Principal Executive Officer)
Date November 24, 1997 By___/s/ Rebecca F. Fuller____________
Rebecca F. Fuller
Treasurer (Principal Financial Officer)
<TABLE> <S> <C>
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</TABLE>
