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 April 30, 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, 6,943,546 shares outstanding as of April 30, 1997
<TABLE>
THERMWOOD CORPORATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Item 1.
Three Months Ended Nine Months Ended
April 30 April 30
---------------------- ------------------------
1997 1996 1997 1996
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
SALES $4,652,865 $3,342,859 $13,240,024 $10,419,670
Less commissions 533,389 400,990 1,583,471 1,261,277
---------- ---------- ----------- -----------
NET SALES 4,119,476 2,941,869 11,656,553 9,158,393
COST OF SALES 2,603,005 1,759,542 7,112,699 5,617,177
---------- ---------- ----------- -----------
GROSS PROFIT 1,516,471 1,182,327 4,543,854 3,541,216
RESEARCH AND DEVELOPMENT,
MARKETING, ADMINISTRATIVE
AND GENERAL EXPENSES 1,089,935 834,767 3,060,553 2,612,574
---------- ---------- ----------- -----------
OPERATING PROFIT 426,536 347,560 1,483,301 928,642
Interest expense - related party 0 0 0 (889)
Interest expense - other (16,734) (39,577) (70,030) (144,421)
Other income (expense) 1,639 (6,053) 3,309 1,931
----------- ---------- ---------- ----------
Net other income (expense) (15,095) (45,630) (66,720) (143,379)
----------- ---------- ---------- -----------
EARNINGS BEFORE INCOME TAXES 411,441 301,930 1,416,581 785,263
Income taxes 157,847 9,000 550,901 9,000
----------- ---------- ---------- -----------
NET EARNINGS $253,594 $292,930 $865,680 $776,263
Earnings per common and common equivalent share:
Primary $0.03 $0.03 $0.10 $0.08
Assuming full dilution 0.03 0.03 0.10 0.08
Average number of common shares outstanding
Primary 7,027,821 6,286,501 6,836,405 6,046,368
Assuming full dilution 7,385,821 7,177,501 7,182,790 6,286,501
</TABLE>
See notes to condensed financial statements.
<TABLE>
THERMWOOD CORPORATION
CONDENSED BALANCE SHEETS
(Unaudited)
Item 1. (Continued)
April 30 July 31
1997 1996
ASSETS ------------ -------------
Current Assets
<S> <C> <C>
Cash $ 30,408 $ 18,995
Accounts receivable 1,300,414 812,540
Inventories--Note B 4,518,001 3,329,337
Deferred income taxes 570,525 1,073,000
Prepaid expenses 316,132 339,015
------------ ------------
Total Current Assets 6,735,480 5,572,887
------------ ------------
Property and Equipment
(Net of Accumulated Depreciation) 1,762,587 1,692,687
------------ ------------
Other Assets
Patents, trademarks and other 136,377 159,716
Deferred income taxes 1,341,000 1,341,000
------------ ------------
Total Other Assets 1,477,377 1,500,716
------------ ------------
Total Assets 9,975,444 8,766,290
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable 1,099,153 694,603
Accrued liabilities 769,362 587,424
Customer deposits 881,707 494,009
Current portion of long-term liabilities 6,953 6,264
------------ ------------
Total Current Liabilities 2,757,175 1,782,300
------------ ------------
Long-term Liabilities -
less current portion
Capital lease obligations 10,170 15,474
Bonds payable, net of unamortized discount 330,219 693,279
------------ ------------
Total Long-term Liabilities 340,389 708,753
------------ ------------
Shareholders' Equity
Preferred Stock, no par value, 2,000,000
shares authorized 780,800 and 900,000
issued and outstanding 2,691,840 3,097,120
Common stock, no par value, 20,000,000 shares
authorized 6,406,546 shares in 1996 and
6,943,546 shares in 1997 issued and outstanding 10,548,384 10,190,404
Accumulated deficit (6,337,594) (6,984,162)
------------ ------------
6,902,630 6,303,362
Less subscriptions receivable 24,750 28,125
------------ ------------
Total Shareholders' Equity 6,877,880 6,275,237
------------ ------------
Total Liabilities and Shareholders' Equity $9,975,444 $8,766,290
============ ============
</TABLE>
See notes to condensed financial statements.
<TABLE>
THERMWOOD CORPORATION
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Item 1. (Continued)
Nine Months Ended
April 30
-----------------------------
1997 1996
OPERATING ACTIVITIES: --------------- -------------
<S> <C> <C>
Net earnings $ 865,680 $ 776,263
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 211,563 211,984
Amortization of bond discount
and issuance costs 11,842 19,590
Gain on sale of property and equipment 0 (15,630)
Changes in operating assets and liabilities:
Accounts receivable (487,874) 295,569
Inventories (1,188,664) (337,956)
Prepaid expenses and other assets 525,357 155,818
Accounts payable 404,550 (136,006)
Accrued liabilities 181,939 (104,541)
Customer deposits 387,698 (173,481)
----------- -----------
Net cash provided by operating activities 912,091 691,610
----------- -----------
INVESTING ACTIVITIES:
Proceeds from sale of property and equipment 0 40,000
Purchases of property and equipment (275,046) (216,981)
----------- -----------
Net cash used by investing activities (275,046) (176,981)
----------- -----------
FINANCING ACTIVITIES:
Principal payments on notes payable, lease
obligations and long-term debt (4,615) (30,164)
Payment of dividends on preferred stock (219,112) (250,888)
Redemption of preferred stock (405,280) (235,960)
Exercise of qualified stock options 0 35,175
Payment received for subscriptions receivable 3,375 0
------------ -----------
Net cash used by financing activities (625,632) (481,837)
Increase in cash 11,413 32,792
Cash, beginning of period 18,995 10,544
------------ -----------
Cash, end of period $ 30,408 $ 43,336
============ ===========
ADDITIONAL INFORMATION:
Interest paid $ 70,030 $ 119,094
============ ===========
Conversion of bonds payable, net of
unamortized discount $ 357,980 $1,012,596
============ ===========
Subscriptions receivable for common stock issued $ 0 $ 45,875
============ ===========
</TABLE>
See notes to condensed financial statements.
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 April 30, 1996.
Operating results for the interim periods are not necessarily indicative of
the results that may be expected for the year.
Note B - Inventories
- --------------------
Inventories are priced at the lower of cost (first-in, first-out method)
or market.
<TABLE>
April 30 July 31
1997 1996
----------- -----------
Components of inventory:
<S> <C> <C>
Raw material $ 2,462,393 $ 1,916,980
Work in process 1,759,464 903,447
Finished goods 296,144 508,910
----------- -----------
Total $ 4,518,001 $ 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 April 30, 1997 were $4,119,476 an increase of
40.0% from the third quarter net sales in fiscal 1996 and an increase of 8.6%
over the second quarter of fiscal year 1997. Net sales for the nine months
of the current fiscal year were $11,656,553, an increase of $2,498,160, or
27.3%, from last year's nine-month period.
Gross profit for the current quarter was $1,516,471, an increase of 28.3% from
the third quarter last year and a decrease of 4.8% from the second quarter
of 1997. Gross profit for the nine months ended April 30, 1997 was an
increase of $1,002,638, or 28.3%, over the same period of fiscal year 1996.
Gross profit as a percentage of net sales was 36.8% compared to 42.0% for the
second quarter of 1997 and 40.2% during the third quarter of fiscal year 1996
and increased from 38.7% to 39.0% for the nine-month periods ended April 30,
1996 and 1997, respectively.
The higher gross profit for the third quarter of fiscal 1997 and reduced
interest costs resulted in earnings before income taxes of $411,441, an
improvement of $109,511 over a profit of $301,931 for the same period in
fiscal year 1996. The cost of sales increase of 47.9% from the third
quarter of fiscal year 1996 was due primarily to proportionately higher net
sales for the same period. Cost of sales was also higher due to wage
increases and a learning curve involved with hiring additional people for a
night shift because of increased backlog.
Research and development, marketing and administrative and general expenses
for the third quarter of fiscal year 1997 increased approximately 30.6%
from the third quarter of fiscal year 1996 and increased approximately 17.1%
for the nine-month period ended April 30, 1997, compared to the same period
in fiscal year 1996. The year-to-date increase is due primarily to an
increased work force and increases in salaries and bonuses based upon
profitability. Additionally, European operations in the first year added
increased expenses of approximately 2% of the total.
Interest expense in the third quarter of fiscal year 1997 was $16,734, a
decrease of approximately 57.7% from $39,577 for the same quarter last year
and a decrease of approximately 36.6% from the second quarter of fiscal year
1997. For the nine-month period ended April 30, 1997 interest expense was
$70,030 compared to $145,310 for the same period of fiscal year 1996, a
decrease of approximately 51.8%. This lower level of interest is due
primarily to a reduction of an additional $405,000 in long-term 12%
debentures which were voluntarily converted to common stock. The remaining
balance of debentures is approximately $330,000, net of unamortized discount,
at April 30, 1997.
The net earnings in the third quarter of fiscal year 1997 were $253,594, a
decrease of 13.4% from the third quarter of fiscal year 1996. For the
nine-month period ended April 30, 1997, net earnings increased by $89,417
over the net earnings of $776,263 for the first nine months in fiscal year
1996. Income taxes of $550,901 were accrued for the nine months ended
April 30, 1997 compared to $9,000 accrued for the same period in 1996.
Liquidity and Capital Resources
- -------------------------------
At April 30, 1997, the Company's working capital was $3,978,305 compared to
$3,790,587 at July 31, 1996. This increase was primarily due to cash
generated by operations. An increase in backlog of approximately $2,200,000
from the $1,600,000 at July 31, 1996 contributed to increased raw material
and work-in-process inventories. Increased inventories contributed to the
increase in working capital by approximately $1,190,000. Inventory levels
were increased to support the backlog covering the shorter production period
and faster turnaround demanded by customers.
Backlog increased during the third fiscal quarter ended April 30, 1997 to
$3,800,000 compared to $2,500,000 at the end of the preceding quarter and
$1,400,000 for the quarter ended April 30, 1996. Accounts receivable also
increased approximately $490,000 while accounts payable and customer deposits
also increased approximately $400,000 each from July, 1996 due to higher
sales levels. Other assets decreased because of an accrual of approximately
$500,000 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 $6,877,880
in the nine-month period ending April 30, 1997. While a total of 1,179,000
shares of common stock at a price of $1 per share were converted from the 12%
debentures during the nine months ended April 30, 1996 for an increase to
shareholders' equity in the amount of $987,130, net of discount and issuance
costs, 405,000 shares were added to common stock at a net amount of $357,980
in the first nine months of fiscal 1997.
THERMWOOD CORPORATION
FORM 10Q
4/30/97
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:
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_May 27, 1997_By_/s/ Kenneth J. Susnjara________________________
President (Principal Executive Officer)
Date_May 27, 1997 --By_/s/ Rebecca F. Fuller__________________________
Treasurer (Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUL-31-1997
<PERIOD-END> APR-30-1997
<CASH> 30408
<SECURITIES> 0
<RECEIVABLES> 1325414
<ALLOWANCES> 25000
<INVENTORY> 4518001
<CURRENT-ASSETS> 6735480
<PP&E> 4083529
<DEPRECIATION> 2320942
<TOTAL-ASSETS> 9975444
<CURRENT-LIABILITIES> 2757175
<BONDS> 330219
2691840
2691840
<COMMON> 10523634
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 9975444
<SALES> 4119476
<TOTAL-REVENUES> 4119476
<CGS> 2603005
<TOTAL-COSTS> 2603005
<OTHER-EXPENSES> 1089935
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16734
<INCOME-PRETAX> 411441
<INCOME-TAX> 157847
<INCOME-CONTINUING> 253594
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 253594
<EPS-PRIMARY> .03
<EPS-DILUTED> .03
</TABLE>
