FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________to________________
Commission File Number__________________0-9790___________________
_____________________Thermal_Industries,_Inc.____________________
(Exact name of registrant as specified in its charter)
_______Pennsylvania_________________________________25-1145753___
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
_____301_Brushton_Avenue_______Pittsburgh,_Pennsylvania__15221___
(Address of principal executive offices) (Zip Code)
_________________________(412)___244-6400________________________
(Registrant's telephone number, including area code)
________________________________N/A______________________________
(Former name, former address and former fiscal year,
if changed since last report.)
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 (or for such
shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for
the past 90 days.
Yes___X______ No__________
Number of shares outstanding of issuer's common stock, as of
March 31, 1996 was 1,957,112.
<PAGE>
THERMAL_INDUSTRIES,_INC._AND_SUBSIDIARIES
Index
Page
Number
Part_I.__Financial_Information
Condensed Consolidated Balance Sheets -
March 31, 1996 and June 30, 1995 1
Condensed Consolidated Statements of Income -
Three Months Ended March 31, 1996 and 1995 2
Nine Months Ended March 31, 1996 and 1995
Condensed Consolidated Statements of Cash Flows -
Nine Months Ended March 31, 1996 and 1995 3
Notes to Condensed Consolidated Financial
Statements 4,5
Management's Discussion and Analysis of
the Financial Condition and Results of
Operations 6,7
Part_II.__Other_Information
Item 1. Legal Proceedings 8
Item 6. Exhibits and Report on Form 8-K 8,9
Signature 10
<PAGE>
<TABLE>
PART_I-_FINANCIAL_INFORMATION
THERMAL_INDUSTRIES,_INC._AND_SUBSIDIARIES
CONDENSED_CONSOLIDATED_BALANCE_SHEETS
<CAPTION>
MARCH 31, JUNE 30,
1996 1995
_(UNAUDITED) (AUDITED)
<S> <C> <C>
CURRENT_ASSETS
Cash and cash equivalents $ 2,116,988 $ 1,873,405
Temporary investments 5,147,500 5,489,920
Accounts receivable - net 3,114,713 3,167,191
Inventories 4,991,619 4,451,615
Prepaid expenses 372,529 132,481
Other receivables 93,434 55,787
Prepaid corporate taxes ____106,408 ___________
TOTAL_CURRENT_ASSETS _15,943,191 _15,170,399
PROPERTY_AND_EQUIPMENT_-_NET __5,590,543 __5,646,688
OTHER_ASSETS
Trade accounts receivable -
long term 670,617 762,297
Miscellaneous _____84,859 _____92,247
TOTAL_OTHER_ASSETS ____755,476 ____854,544
TOTAL_ASSETS $22,289,210 $21,671,631
LIABILITIES_AND_SHAREHOLDERS'_EQUITY
CURRENT_LIABILITIES
Current portion of long term debt $ 171,911 $ 170,313
Accounts payable 477,644 365,603
Accrued wages 340,317 659,366
Accrued profit sharing contribution 330,819 443,060
Accrued payroll and sales taxes 232,048 275,505
Customers' deposits 228,274 275,364
Accrued income taxes 40,579
Other payables _____19,719 ______8,888
TOTAL_CURRENT_LIABILITIES __1,800,732 __2,238,678
LONG_TERM_DEBT __2,078,034 __2,232,169
SHAREHOLDERS'_EQUITY
Common stock - par value $.01 per share 41,205 41,205
Paid in capital 419,485 403,691
Retained earnings _17,949,754 _16,755,888
TOTAL_SHAREHOLDERS'_EQUITY _18,410,444 _17,200,784
TOTAL_LIABILITIES_AND
___SHAREHOLDERS'_EQUITY $22,289,210 $21,671,631
</TABLE>
See notes to condensed consolidated financial statements.
-1-<PAGE>
<TABLE>
THERMAL_INDUSTRIES,_INC._AND_SUBSIDIARIES
CONDENSED_CONSOLIDATED_STATEMENTS_OF_INCOME_(UNAUDITED)
<CAPTION>
THREE_MONTHS_ENDED NINE_MONTHS_ENDED
MARCH 31, MARCH 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
SALES $_6,945,518 $_6,883,146 $29,092,315 $27,860,217
COSTS_AND_EXPENSES
Manufacturing costs
of product sold 3,599,745 4,205,351 16,028,038 15,381,027
Administrative and
selling expenses 3,815,090 3,245,917 10,062,535 9,407,745
Depreciation and
amortization 406,693 289,374 1,021,071 628,046
Interest expense _____14,085 _____26,035 _____61,395 _____80,972
TOTAL_COSTS
AND_EXPENSES __7,835,613 __7,766,677 _27,173,039 _25,497,790
___(890,095) ___(883,531) __1,919,276 __2,362,427
OTHER_INCOME
Investment income 102,519 124,356 326,134 307,586
Gain (loss) on
disposal of assets ______1,400 _______(525) ______5,435 _______(237)
____103,919 ____123,831 ____331,569 ____307,349
Income (loss) before
income taxes (786,176) (759,700) 2,250,845 2,669,776
Provision (benefit)
for income taxes ___(333,687) ___(333,212) ____864,413 __1,035,788
NET_INCOME (LOSS) $__(452,489) $__(426,488) $_1,386,432 $_1,633,988
Average number of
shares outstanding 1,957,112 1,947,062 1,956,245 1,947,062
Earnings (loss) per
share of common stock $ (.23) $ (.22) $ .71 $ .84
</TABLE>
See notes to condensed consolidated financial statements.
-2-<PAGE>
<TABLE>
THERMAL_INDUSTRIES,_INC._AND_SUBSIDIARIES
CONDENSED_CONSOLIDATED_STATEMENTS_OF_CASH_FLOWS
<CAPTION>
NINE_MONTHS_ENDED_MARCH_31,
1996 1995
<S> <C> <C>
NET CASH PROVIDED
_______BY_OPERATING_ACTIVITIES $1,076,130 $1,919,307
CASH_FLOWS_FROM_INVESTING_ACTIVITIES:
Additions to property, plant
and equipment (956,917) (1,799,503)
Proceeds from sale or redemption
of temporary investments 880,705
Additions to temporary investments (524,143) (948,660)
Decrease in accounts receivable -
long term 91,680
Other _____5,435 _______500
NET_CASH_USED_IN_INVESTING_ACTIVITIES __(503,240) (2,747,663)
CASH_FLOWS_FROM_FINANCING_ACTIVITIES
Net decrease in notes payable (152,537) (150,986)
Proceeds from sale of treasury stock 17,950 22,775
Dividends paid __(194,720) __(115,727)
NET_CASH_USED_IN_FINANCING_ACTIVITIES __(329,307) __(243,938)
Net increase (decrease) in cash
and cash equivalents 243,583 (1,072,294)
Cash and cash equivalents at beginning
of period _1,873,405 _3,784,710
Cash and cash equivalents at end
of period $2,116,988 $2,712,416
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 61,395 $ 80,972
Income taxes $1,061,158 $ 988,279
</TABLE>
See notes to condensed consolidated financial statements.
-3-<PAGE>
THERMAL_INDUSTRIES,_INC._AND_SUBSIDIARIES
NOTES_TO_CONDENSED_CONSOLIDATED_FINANCIAL_STATEMENTS
Note 1 - In the opinion of management, all adjustments, consisting
only of normal recurring adjustments necessary for a fair
presentation of (a) the condensed consolidated results
of operations for the three and nine months ended March
31, 1996 and 1995, (b) the condensed consolidated financial
position at March 31, 1996 and June 30, 1995,
and (c) the condensed consolidated statements of cash flows
for the three and nine months ended March 31, 1996
and 1995 have been made. For further information, refer to
the consolidated financial statements and notes thereto
included in the Company's Annual Report and its report on
Form 10-K for the year ended June 30, 1995. The results
for the three and nine months ended March 31, 1996 are
not necessarily indicative of the results that may be
expected for the year ended June 30, 1996.
Note 2 - Inventories consisted of the following:
<TABLE>
<CAPTION>
March 31, June 30,
____1996_____ ___1995___
<S> <C> <C>
Finished Goods $2,263,459 $1,093,739
Work in Process 50,000 22,544
Raw Materials and Supplies _2,678,160 _3,335,332
$4,991,619 $4,451,615
</TABLE>
Inventories are stated at actual cost which is
lower than market. Cost is determined substantially
by the first-in, first-out method of inventory
valuation.
Note 3 - Long Term Debt
Long term debt consists of a bond issue (originally
$2,000,000) by the Pennsylvania Economic Development
Financing Authority (PEDFA) for $1,400,000 less the
current portion of $100,000. Proceeds from the bond
issue were used to purchase property in Murrysville,
Pennsylvania in 1989 for $1,870,000 plus renovations
and additional equipment for the Company's manufacturing
facility.
-4-<PAGE>
Principal payments of $100,000 plus interest are due
annually for fifteen years beginning in November 1990
followed by a balloon payment of $500,000 at the end
of the fifteen year term. Interest is variable, set
at weekly auction, with the current rate ranging from
3.45 to 4.30 percent,
The Company has a mortgage payable to Pennsylvania
Industrial Development Authority (PIDA) totalling
$849,945 of which $71,911 is current and $778,034 is
long term debt. The original borrowing of $1,000,364
was made on June 28, 1991 and a final advance of $194,734
was made in September 1993 which terminated PIDA's original
commitment to Thermal. The mortgage bears interest at
3%, has monthly principal and interest payments of
$8,035.50, and is to be paid over a fifteen year period
ending in the year 2006.
Note 4 - The calculation of earnings per share is based upon the
average number of common shares outstanding during
the period.
-5-<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Three months ended March 31, 1996 versus
Three months ended March 31, 1995
Sales for the third quarter of fiscal 1996 were $6.9 million,
a 1% increase over last year's third quarter. Incoming unit orders
increased approximately 8.6% for the same comparative time periods.
Incoming order units for April 1996 are about 35% higher and sales
25% higher than April, 1995. These figures are not representative
of the increases anticipated for the balance of the year. However,
since severe winter weather held down deliveries during the current
quarter while incoming work orders were strong, it is anticipated
that billed sales will be strong in the fourth quarter.
Manufacturing costs, which include depreciation and interest,
were 57.2% of sales compared to 64.7% of sales for the corresponding
prior year period. Product mix resulted in a decrease in material
costs from 26% of sales in 1995 to 19.9% in 1996. Manufacturing
labor as a percentage of sales was 20.6% for both corresponding time
periods. Overhead costs decreased from 18.1% to 16.7% for the
comparative third quarters. Lower production line expenses (gases,
saw blades, small manufacturing supplies) contributed significantly
to the decrease in overhead costs.
Selling and administrative expenses as a percentage of sales
increased from 48.1% to 55.6%, primarily because of increases in
payroll and related costs (payroll taxes, insurance, employee benefit
costs) which rose from 26.9% to 33.3% of sales for the comparative
quarters. Staff additions were centered around the deck and dock
program and increasing production administration.
Investment income, comprised of interest, dividends, and gains
from sales of marketable securities decreased approximately 18% over
the previous year's third quarter.
Due to the seasonal nature of the business, the Company
operated at a loss in its third quarter. The current year's quarterly
net loss after taxes was $452,849, compared to last year's third
quarter loss of $426,488.
Nine months ended March 31, 1996 versus
Nine months ended March 31, 1995
Sales for nine months of the current fiscal year were $29
million, a 4% increase over last year's volume of $27.9 million.
Unit sales were 2.4% higher this year over last year's corresponding
time period. Enclosures, decks and docks contributed about 5%
to total sales.
Manufacturing costs increased slightly from 57.1% to 58.1% of
sales for the corresponding nine month periods. Material costs
decreased from 28.2% to 26.3% of sales. Manufacturing labor costs
-6-<PAGE>
increased from 17.0% to 18.8% of sales while overhead costs increased
from 11.9% to 13.0% of sales for the comparable periods. Increases in
labor and overhead were due primarily to development costs of new
products such as boat docks, decks, decorative glass windows and patio
enclosures. Also contributing to increased labor and overhead were
the costs of additional personnel needed for operation, supervision
and maintenance of new high tech production equipment.
Selling and administrative expenses increased from $9.6 million
or 34.4% of sales to $10.3 million or 35.3% of sales for the
comparative nine month periods. Payroll and related costs (payroll
taxes, insurance, employee benefit costs) increased from $5.9 million
to $6.2 million, but as a percentage of sales remained approximately
the same.
Investment income increased approximately 6% over last year's
corresponding period.
Net income after taxes for the first nine months of fiscal
1996 was $1.4 million or 4.8% of sales compared to $1.6 million
or 5.9% of sales for the previous year's nine month period.
The Company historically has earned a profit in the fourth
quarter. Profit for the full year is expected to come close to
$1.00 per share but is not expected to reach last year's $1.05.
Liquidity and Capital Resources
Net cash flow increased $243,583 for the first nine months
of fiscal 1996. Cash provided by operating activities was primarily
due to positive cash flow generated from earnings offset by increases
in inventories and decreases in payables.
Cash used for investing activities was approximately $503,000.
The principal causes for this were capital expenditures of $957,000
partially offset by net redemptions of short-term municipal bonds
of $363,000. This compares to last year's purchases of short term
investments of $948,000 and capital expenditures of $1.8 million for
the same nine month period.
Cash used for financing activities totalling $329,000 was
primarily due to payments of long term indebtedness of $152,000
and dividend payments of $195,000 offset by proceeds from the sale
of treasury stock totalling $18,000.
Total expenditures for equipment are expected to be
approximately $2 million for fiscal 1996.
The Company believes that the cash flows provided from
operating and investing activities will be sufficient to meet all
of its anticipated fiscal 1996 needs for planned capital expenditures,
debt retirement and operating activities.
-7-<PAGE>
PART_II.__OTHER_INFORMATION
Item_1.__Legal_Proceedings
Reference is made to Item 3 of Form 10-K for the
year ended June 30, 1995.
Item_6.__Exhibits_and_Reports_on_Form_8-K
(a) Exhibits - Report on Review by Independent
Certified Public Accountant
(b) Report on Form 8-K - There were no reports
on Form 8-K filed for the three
months ended March 31, 1996.
-8-<PAGE>
Item 6(a). Report on Review by Independent Certified Public Accountant
Board of Directors and Shareholders
Thermal Industries, Inc.
I have made a review of the condensed consolidated balance
sheet of Thermal Industries, Inc. as of March 31, 1996 and
the related condensed consolidated statements of income and cash
flows for the three and nine month periods ended March 31, 1996
and 1995, in accordance with Statements on Standards for Accounting
and Review Services issued by the American Institute of Certified
Public Accountants. I previously audited and expressed my
unqualified opinion in my report dated September 12, 1995 on the
consolidated financial statements as of June 30, 1995 from which
the condensed consolidated balance sheet of that date is derived.
A review of interim financial information consists principally
of obtaining an understanding of the system for the preparation
of interim financial information, applying analytical review
procedures to financial data, and making inquiries of persons
responsible for financial and accounting matters. It is
substantially less in scope than an examination in accordance with
generally accepted auditing standards, the objective of which
is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, I do not express such an opinion.
Based on my review, I am not aware of any material
modifications that should be made to the condensed consolidated
balance sheet as of March 31, 1996 or to the condensed
consolidated statements of income and cash flows for the three
and nine months ended March 31, 1996 and 1995, for them to be
in conformity with generally accepted accounting principles.
_______________________________
Sydney Heisler
Certified Public Accountant
Pittsburgh, Pennsylvania
May 3, 1996
-9-<PAGE>
SIGNATURE
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.
THERMAL INDUSTRIES, INC.
(REGISTRANT)
_______________________________
Eric Rascoe
Secretary-Treasurer
(Principal Financial and
Accounting Officer)
DATE:_______________________
-10-<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 2,116,988
<SECURITIES> 5,147,500
<RECEIVABLES> 3,114,713
<ALLOWANCES> 0
<INVENTORY> 4,991,619
<CURRENT-ASSETS> 15,943,191
<PP&E> 12,983,050
<DEPRECIATION> 7,302,507
<TOTAL-ASSETS> 22,289,210
<CURRENT-LIABILITIES> 1,800,732
<BONDS> 0
0
0
<COMMON> 41,205
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 22,289,210
<SALES> 29,092,319
<TOTAL-REVENUES> 29,092,319
<CGS> 16,028,038
<TOTAL-COSTS> 27,111,644
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 61,395
<INCOME-PRETAX> 2,250,845
<INCOME-TAX> 864,413
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,386,432
<EPS-PRIMARY> 0.71
<EPS-DILUTED> 0
</TABLE>
