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, 1997
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 (l) 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, 1997 was 1,961,712.
<PAGE>
THERMAL INDUSTRIES, INC. AND SUBSIDIARIES
Index
Page
Number
Part I. Financial Information
Condensed Consolidated Balance Sheets -
March 31, 1997 and June 30, 1996 1
Condensed Consolidated Statements of Income -
Three Months ended March 31, 1997 and 1996
Nine Months ended March 31, 1997 and 1996 2
Notes to Condensed Consolidated Financial
Statements 3,4
Management's Discussion and Analysis of
the Financial Condition and Results
of Operations 5,6
<PAGE>
PART I - FINANCIAL INFORMATION
THERMAL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
MARCH 31 JUNE 30,
1997 1996
(UNAUDITED) (AUDITED)
CURRENT ASSETS
Cash and cash equivalents $ 3,677,594 $ 2,083,260
Temporary investments 5,501,311 5,153,783
Accounts receivable - net 3,539,713 4,252,434
Inventories 5,201,030 5,083,556
Prepaid expenses 745,411 333,791
Prepaid taxes 64,955
Other receivables 189,041 59,357
TOTAL CURRENT ASSETS 18,854,100 17,031,136
PROPERTY AND EQUIPMENT - NET 5,338,168 5,987,436
OTHER ASSETS
Trade accounts receivable - long term 1,016,287 862,931
Miscellaneous 74,951 82,364
TOTAL OTHER ASSETS 1,091,238 945,295
TOTAL ASSETS $25,283,506 $23,963,867
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long term debt $ 174,098 $ 172,452
Accounts payable 608,856 993,344
Accrued wages 733,492 567,236
Accrued profit sharing contribution 501,876 614,800
Accrued payroll and sales taxes 134,865 260,844
Customers' deposits 245,641 285,222
Accrued income taxes 96,259
Other payables 9,673 4,757
TOTAL CURRENT LIABILITIES 2,504,760 2,898,655
LONG TERM DEBT 1,903,936 2,059,717
SHAREHOLDERS' EQUITY
Common stock - par value $.01 per share 41,205 41,205
Paid in capital 432,474 420,509
Retained earnings 20,401,131 18,543,781
TOTAL SHAREHOLDERS' EQUITY 20,874,810 19,005,495
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $25,283,506 $23,963,867
See notes to condensed consolidated financial statements.
-1-
THERMAL INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE MONTHS ENDED NINE MONTHS ENDED
MARCH 31, MARCH 31,
1997 1996 1997 1996
SALES $ 8,203,967 $ 6,945,518 $34,452,727 $29,092,315
COSTS AND EXPENSES
Manufacturing costs
of product sold 5,465,722 3,599,745 19,678,882 16,028,038
Administrative and
selling expenses 3,492,004 3,815,090 10,853,295 10,062,535
Depreciation and
amortization 405,382 406,693 1,184,119 1,021,071
Interest expense 20,825 14,085 61,997 61,395
TOTAL COSTS
AND EXPENSES 9,383,93 7,835,613 31,778,293 27,173,039
(1,179,966) (890,095) 2,674,434 1,919,276
OTHER INCOME
Investment income 130,370 102,519 372,202 326,134
Gain on disposal
of assets 850 1,400 5,778 5,435
131,220 103,919 377,980 331,569
Income (loss) before
income taxes (1,048,746) (786,176) 3,052,414 2,250,845
Provision (benefit)
income taxes (428,200) (333,687) 1,197,000 864,413
NET INCOME (loss) $ (620,546) $ (452,489) $ 1,855,414 $ 1,386,432
Average number of
shares outstanding 1,961,712 1,957,112 1,960,290 1,956,245
Earnings per share
of common stock $ (.32) $ (.23) $ .95 $ .71
See notes to condensed consolidated financial statements.
<PAGE>
-3-
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 months ended March 31,
1997 and 1996, (b) the condensed consolidated financial
position at March 31, 1997 and June 30, 1996,
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, 1996. The results
for the nine months ended March 31, 1997 are not
necessarily indicative of the results that may be expected
for the year ended June 30, 1997.
Note 2 - Inventories consisted of the following:
March 31, June 30,
1997___ __1996_
Finished Goods $2,040,928 $2,398,771
Work in Process 50,000 51,976
Raw Materials and Supplies _3,110,102 _2,632,809
$5,201,030 $5,083,556
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 - Accounts receivable - long term
Trade accounts receivable - long term consists of two
unsecured trade accounts receivable in monthly installments
of $15,000 and $20,000 respectively, which includes interest
at 8%, commencing January 1995 and July 1996 respectively.
Total account balance as of March 31, 1997 is $1,321,601
of which $1,016,287 is long term.
-4-
Note 4 - Long Term Debt
Long term debt consists of:
1989 Pennsylvania Economic Development Financing
Authority (PEDFA) bonds, variable interest rate
(recent interest rates ranging from 3.75 to 4.750
percent), principal payable $100,000 per year
plus interest for fifteen years beginning in
November 1990 and a balloon payment of $500,000
at the end of the fifteen year term $1,300,000
Pennsylvania Industrial Development Authority
(PIDA) mortgage note, payable in monthly
installments of $8,035.50, including interest
at 3% through July 2006 778,034
2,078,034
Less current portion 174,098
$1,903,936
Note 5 - The calculation of earnings per share is based upon the
average number of shares outstanding during the period.
Note 6 - On January 6, l997 Thermal's board of directors unanimously
approved a definitive merger agreement which provides that
H.I.G. Investment Group acquire all Thermal outstanding stock
for $15 per share in cash. Proxy statements have been mailed
to shareholders and a meeting to vote on the H.I.G. offer has
been scheduled for May 22, 1997. Earliest anticipated date
for completion of this transaction is May 23, 1997.
-5-
Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
Three months ended March 31, 1997 versus
Three months ended March 31, 1996
Sales for the third quarter of fiscal 1997 were $8.2 million, an
18.0% increase over the $6.95 million reported in the third quarter of
fiscal 1996. Unit sales increased approximately 11% for the same
comparative time periods. Incoming order units for April, 1997 are
about 4.5% higher than those of the previous year. Projected unit orders
for the quarter ended June 30, 1997 are approximately 7% higher than
those of the previous year's comparative period.
Manufacturing costs, which include depreciation and interest, were
approximately 70.8% of sales compared to 57.2% of sales for the
corresponding prior year period. Product mix resulted in an increase in
material costs from 19.9% of sales in 1996 to 26.5% of sales in 1997.
Manufacturing labor as a percentage of sales increased from 20.6% to
25.0%, respectively.
Overhead costs increased from 16.7% to 19.3% of sales for the
comparative third quarters.
Selling and administrative expenses as a percentage of sales decreased
from 55.6% to 43.6%. Contributing primarily to this decrease
were payroll and related costs (payroll taxes and insurance) which
decreased from 31.7% to 24.0 of sales and dealer promotion costs which
decreased from 6.1% to 2.2% of sales for the respective third quarters.
Investment income, comprised of interest, dividends and gains from
sales of marketable securities increased approximately 27% over last
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 $620,546, compared to last year's third quarter loss of $452,849.
Nine months ended March 31, 1997 versus
Nine months ended March 31, 1996
Sales for the current year's first nine months were $34.4 million, an
18.4% increase over last year's volume of $29.1 million for the same
period. Unit sales rose 13% over last year's similar nine month period.
Manufacturing costs increased from 58.1% to 60.0% of sales for the
corresponding nine month periods. Material costs increased from 26.3% to
27.5% of sales. Manufacturing labor and overhead as a percentage of sales
were similar for both years.
-6-
Selling and administrative expenses rose approximately $815,000, but as
a percentage of sales decreased from 35.3% to 32.2%. Payroll and related
costs (payroll taxes and insurance) increased approximately $351,000 but
decreased as a percentage of sales from 20.3% to 18.2%.
Dealer promotion costs increased approximately $84,000 and as a
percentage of sales increased from 2.2% to 2.1%.
Investment income increased approximately 14% over last year's
corresponding period.
Net income after taxes for the first nine months of fiscal 1997 was
$1.9 million or $5.4% of sales compared to $1.4 million or 4.8% of sales
for the previous year's nine month period.
Liquidity and Capital Resources
Due to pending change of ownership by May 22, 1997, the Company cannot
anticipate any changes in cash flows for the coming year.
<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)
_____/s/ Eric Rascoe_________
Eric Rascoe
Secretary-Treasurer
(Principal Financial and
Accounting Officer)
DATED: ___May 20, 1997_____
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-END> MAR-31-1997
<CASH> 3,677,594
<SECURITIES> 5,501,311
<RECEIVABLES> 3,746,535
<ALLOWANCES> (206,822)
<INVENTORY> 5,201,030
<CURRENT-ASSETS> 18,854,100
<PP&E> 14,333,385
<DEPRECIATION> (8,995,217)
<TOTAL-ASSETS> 25,283,506
<CURRENT-LIABILITIES> 2,504,760
<BONDS> 0
0
0
<COMMON> 41,205
<OTHER-SE> 20,833,605
<TOTAL-LIABILITY-AND-EQUITY> 25,283,506
<SALES> 34,452,727
<TOTAL-REVENUES> 34,020,807
<CGS> 20,870,926
<TOTAL-COSTS> 31,778,293
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 61,997
<INCOME-PRETAX> 3,052,414
<INCOME-TAX> 1,197,000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,855,414
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