-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HrIPLuE7e5izXLFQtitBgKo15anC1lYk7IoE6qVSccic52oKxK+kQ9jZTCDo4mEg /LJF082i++tm88txUYERQg== 0000041980-97-000006.txt : 19970509 0000041980-97-000006.hdr.sgml : 19970509 ACCESSION NUMBER: 0000041980-97-000006 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970508 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: GODDARD INDUSTRIES INC CENTRAL INDEX KEY: 0000041980 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS FABRICATED METAL PRODUCTS [3490] IRS NUMBER: 042268165 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-02052 FILM NUMBER: 97598299 BUSINESS ADDRESS: STREET 1: 705 PLANTATION ST CITY: WORCESTER STATE: MA ZIP: 01605 BUSINESS PHONE: 5088522435 MAIL ADDRESS: STREET 1: P O BOX 165 CITY: WORCESTER STATE: MA ZIP: 01613-0765 10QSB 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB 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 __ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from _______________ to ________________ Commission File No. 0-2052 GODDARD INDUSTRIES, INC. (Exact name of registrant as specified in its charter) Massachusetts 04-2268165 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 705 Plantation Street, Worcester, Massachusetts 01605 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code (508)852- 2435 Check whether the registrant (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 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 State the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Title of Each Class of Number of Shares Outstanding Common Stock Outstanding at March 31, 1997 Common Stock, $.01 par value 2,049,369 Transitional Small Business Disclosure Format Yes ___ No __X__ GODDARD INDUSTRIES, INC. TABLE OF CONTENTS PART I - FINANCIAL INFORMATION PAGE Item 1 Financial Statements Consolidated Balance Sheet - March 31, 1997 and September 28, 1996 3 Consolidated Statement of Income - Six Months Ended March 31, 1997 and March 31, 1996 4 Consolidated Statement of Cash Flows - Six Months Ended March 31, 1997 and March 31, 1996 5 Notes to Consolidated Financial Statements 6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 9 PART II - OTHER INFORMATION Item 6 Exhibits and Reports on Form 8-K 11 -2- GODDARD INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET (UNAUDITED) March 31, September 28, 1997 1996 AUDITED ASSETS (ALL PLEDGED, NOTE 4) CURRENT ASSETS: Cash $ 109,799 $ 65,951 Accounts receivable, net of allowances 1,475,729 1,154,871 Miscellaneous Receivable 90,000 785,000 Inventories (Note 3) 3,326,163 3,312,449 Prepaid expenses and taxes 51,389 33,809 Deferred income taxes (Note 5) 84,300 82,000 TOTAL CURRENT ASSETS 5,137,380 5,434,080 PROPERTY, PLANT AND EQUIPMENT, at cost 3,924,527 3,641,818 Less - Accumulated depreciation -2,703,704 - -2,589,252 1,220,823 1,052,566 OTHER ASSETS: Excess of cost of investment in subsidiaries over equity in net assets acquired 16,502 18,380 Deferred income taxes (Note 5) 171,000 167,000 Total other assets 187,502 185,380 TOTAL ASSETS $ 6,545,705 $6,672,026 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt (Note 4) $ 117,000 $ 51,000 Accounts payable 435,847 317,321 Accrued expenses 385,690 399,861 Accrued environmental costs (Note 6) 45,000 795,000 Income taxes payable 91,671 191,771 TOTAL CURRENT LIABILITIES 1,075,208 1,754,953 LONG-TERM DEBT, net of current maturities (Note 4) 1,010,887 1,026,398 DEFERRED COMPENSATION 551,000 551,000 SHAREHOLDERS' EQUITY: Common stock - par value $.01 per share, authorized 3,000,000 shares, issued and outstanding 2,049,369 shares. 20,493 20,401 Additional paid-in capital 406,531 399,353 Retained earnings 3,481,586 2,919,921 TOTAL SHAREHOLDERS'EQUITY 3,908,610 3,339,675 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 6,545,705 $6,672,026 -3- GODDARD INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) March 31, 1997 March 31, 1996 For The Three For the Six For the Three For the Six Months Ended Months Ended Months Ended Month Ended NET SALES $2,872,729 $5,862,252 $2,056,016 $3,847,258 COST OF SALES 1,889,681 3,847,002 1,396,486 2,597,442 GROSS PROFIT 983,048 2,015,250 659,530 1,249,186 SELLING AND ADMINISTRATIVE EXPENSES 537,592 1,040,260 431,923 813,988 INCOME FROM OPERATIONS 445,456 974,990 227,607 435,828 OTHER INCOME (EXPENSE): Interest expense -23,844 -43,227 -25,968 - -53,972 Other income, net 8,787 16,503 10,362 17,257 TOTAL OTHER INCOME (EXPENSE) -15,057 -26,724 -15,606 - -36,715 INCOME BEFORE INCOME TAXES 430,399 948,266 212,001 399,113 PROVISION FOR INCOME TAXES 176,000 386,600 86,900 164,800 NET INCOME $254,399 $561,666 $125,101 $234,313 EARNINGS PER SHARE (Note 7) Primary $ 0.12 $ 0.26 $ 0.06 $ 0.12 -4- GODDARD INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS ENDED March 31, 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $561,666 $234,313 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 116,330 100,747 Deferred income taxes -6,300 - -14,000 Changes in assets and liabilities: Accounts receivable -320,858 - -71,058 Inventories -13,714 7,885 Miscellaneous receivable 695,000 0 Prepaid expenses and other -17,580 - -35,371 Accounts payable 118,526 42,747 Accrued expenses -14,171 49,796 Accrued environmental liability -750,000 0 Income taxes payable -100,100 - -213,347 Deferred compensation 0 19,000 Total Adjustments -292,867 - -113,601 NET CASH PROVIDED BY OPERATING ACTIVITIES 268,799 120,712 CASH FLOWS FROM INVESTING ACTIVITIES: Property,plant and equipment additions -66,881 - -64,294 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common shares 7,270 2,907 Increase in long-term debt 1,616,000 1,441,000 Repayments of long-term debt -1,781,340 - -1,495,131 NET CASH (USED IN) FINANCING ACTIVITIES -158,070 - -51,224 NET INCREASE IN CASH 43,848 5,194 CASH AND EQUIVALENTS - BEGINNING 65,951 74,937 CASH AND EQUIVALENTS - ENDING $109,799 $ 80,131 CASH PAID DURING THE PERIOD Interest $43,100 $ 54,181 Income taxes $493,000 $402,147 -5- GODDARD INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS March 31, 1997 (UNAUDITED) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Reference is made to the financial statements included in the Annual Report for the year ended September 28, 1996 for a summary of significant accounting policies and other disclosures. NOTE 2. BASIS OF PRESENTATION: The information shown in the consolidated financial statements reflects all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim period. NOTE 3. INVENTORIES: Consolidated inventories are comprised of: March 31, September 28, 1997 1996 Finished goods $3,017,612 $3,003,898 Work in process 21,687 21,687 Raw materials 286,864 286,864 $3,326,163 $3,312,449 The following factors were taken into consideration in determining inventory values: Goddard Valve Corp. - March 31, 1997 - $1,834,210 (estimated) and September 28, 1996 - $1,657,426. Interim inventories were valued by management using the gross profit method. Webstone Company, Inc. - March 31, 1997 - $1,491,953 (estimated) and September 28, 1996 - $1,655,023. Interim inventory was valued by management using the gross profit method. Total inventory is comprised of finished goods. NOTE 4. LONG-TERM DEBT The Company has available a revolving line of credit totaling $1,750,000 bearing interest at the greater of (i) prime plus 3/4% or (ii) the Federal Funds Effective Rate plus 1 1/4% per annum. On March 31, 1997 the effective interest rate was 9.0%. The agreement expires March 31, 1999 and is secured by all property and assets. Advances are restricted by certain limitations on eligible receivables and inventories. continued -6- LONG-TERM OBLIGATIONS (continued) The credit agreement contains a number of covenants, the most restrictive of which relate to working capital, tangible net worth, and profitability levels, and restrict payment of cash dividends to 10% of the immediately preceding year's net income before taxes. At March 31, 1997 long-term debt consisted of the following: LONG-TERM CURRENT Revolving line of credit $ 784,503 $ - Capital lease obligations for machinery, payable in monthly installments of $5,274, through July 1, 1999, with imputed interest rate of 8.936% and monthly installments of $6,807, through March 1, 2,000, with imputed interest rate of 8.441%. 226,364 117,000 $1,010,867 $117,000 NOTE 5. INCOME TAXES: The tax effects of the principal temporary differences giving rise to the net current and non-current deferred tax assets are as follows: March 31, September 28, 1997 1996 Deferred tax asset Deferred compensation $ 220,400 $ 220,400 Inventory valuation 61,200 60,800 Accrued salaries 6,200 6,200 Environmental matters 4,000 4,000 Bad debts 12,900 11,000 304,700 302,400 Depreciation 49,400 53,400 $ 255,300 $ 249,000 Management does not believe that any valuation allowance is necessary. -7- NOTE 6 ENVIRONMENT MATTERS The Company has been a party to the following environmental matters: DEP Matter: An environmental assessment of the Corporate headquarters in connection with a proposed bank financing in 1987 revealed that there may have been a release or threat of release of oil or hazardous materials and that an off-site source may be introducing the contaminants. The Company notified the Massachusetts Department of Environmental Protection (DEP). In 1995 the site was designated as a Tier 1C Site under the Massachusetts Contingency Plan and the Company must complete a further site investigation by November 1997. One of the Company's insurance carriers has paid the Company $70,000 to be used as the Company determines in defense of the DEP proceeding in exchange for a release of any further claim with respect to this matter. In addition, environmental engineers employed by the Company estimate that the required remediation costs will be a minimum of $45,000. Shrewsbury matter: The Shrewsbury environmental litigation was settled in January, 1997 and the effects of that settlement reflected in the financial statements for the year ended September 28, 1996. In the accompanying financial statements, the miscellaneous receivable represents amounts due from insurance carriers with respect to environmental matters and accrued environmental costs represents amounts due the Town of Shrewsbury and the minimum estimated remediation costs related to the DEP matter. NOTE 7 COMMON STOCK: Primary earnings per share are computed on a weighted average number of shares outstanding. Fully diluted earnings per share are not presented because the effect of the exercise of the stock options would not be dilutive. -8- PART I - FINANCIAL INFORMATION Item 2 - Management's Discussion and Analysis of Financial Condition RESULTS OF OPERATIONS FISCAL QUARTER ENDED MARCH 31, 1997 COMPARED TO FISCAL QUARTER ENDED MARCH 31, 1996 Goddard enjoyed a productive second quarter with sales and earnings well ahead of last year. For the quarter ended March 31, 1997 consolidated sales were $2,873,000, a 39.7% increase over the same quarter for the prior year. During the preceding 12 months, the order backlog in the Valve division had reached record levels and delivery times had lengthened. The Company purchased additional new machinery and added a second shift, enabling it to increase levels of production, shorten the delivery time for new orders, and increase revenues. As a result of this increased output, backlog has been reduced. Gross profits as a percentage of sales increased from 32% to 34.2% over the corresponding quarter of the prior year, primarily as a result of larger orders and changes in product mix. Selling and administrative expenses as a percentage of sales declined to 18.7% in the quarter ended March 31, 1997 compared to 21% for the same quarter of fiscal 1996, as those expenses did not increase at the same rate as sales. As a result of the increase in sales volume, improved operating efficiencies and changes in product mix, income from operations almost doubled to $446,000 for the quarter ended March 31, 1997, compared to $228,000 in the same quarter of fiscal 1996. Earnings, at $254,000 ($.12/share), were approximately double the $125,000 earnings ($.06/share) reported for the same quarter in fiscal 1996. While the order backlog in the Valve division has been reduced as a result of the Company's improved output, the growth in the level of new orders experienced over the last few quarters appears to have leveled off. Management anticipates that new product lines now in the prototype stage which are being developed for the Valve division will enter production late this year, and that these lines will increase sales volume. Management believes that the development of these new lines reflecting advanced product design, together with the Company's emphasis on prompt, dependable service, help the Company maintain its competitive position as a leader in the cryogenic valve industry. The Webstone Division also has been adding new plumbing items and an array of high styled faucets to its product offerings, which will be introduced when its new catalog is published for national distribution in mid-May 1997. - 9 - SIX MONTH PERIOD ENDED MARCH 31, 1997 COMPARED TO SIX MONTH PERIOD ENDED MARCH 31, 1996 Both sales and earnings for the six months ended March 31, 1997 were up substantially over the same period last fiscal year. Consolidated sales for the six month period ended March 31, 1997 were $5,862,000, a 52.4% increase over the $3,847,000 recorded for the same period in fiscal 1996. The increase in sales resulted from larger blanket orders received in prior periods and sales of recently developed product lines, as well as increased production in the most recent quarter. Gross profits as a percentage of sales increased to 34.4% for the six month period ended March 31, 1997, compared to 32.4% for corresponding period of fiscal 1996, reflecting the economies involved in larger orders and favorable product mix. Selling and administrative expenses as a percentage of sales declined from 21.1% in the first six months of fiscal 1996 to 17.7% in the first six months of fiscal 1997, as those expenses did not increase proportional to increased sales. Income from operations as a percentage of sales increased from 11.3% in the first six months of fiscal 1996 to 16.6% in the first six months of fiscal 1997, reflecting the improved operating efficiencies, economy of larger orders, favorable product mix and increased output. As a result, net income during the six month period improved to $562,000 (or $.26 per share) compared to $234,000 (or $.12 per share) for the same period of fiscal 1996, a 140% increase. LIQUIDITY AND CAPITAL RESOURCES Historically, the Company has funded operations primarily through earnings and bank borrowings. At March 31, 1996, the Company had net working capital of approximately $4,062,000, including $110,000 in cash. The Company also had a line of credit of $1,750,000 from BankBoston collarteralized by substantially all of the assets of the Company. At March 31, 1997, approximately $785,000 have been drawn under the line of credit, which bears interest at a rate equal to the bank's prime rate plus 3/4s of 1%. During the first six months of fiscal 1997, operating activities of the Company provided $269,000 of cash. Cash was generated principally from earnings ($562,000), increases in accounts payable ($119,000) and depreciation and amortization ($116,000). The principal uses of cash were increases in accounts receivable ($321,000), decreased tax liabilities ($100,000) and net environmental settlement obligations ($55,000). During the six month period, the Company used approximately $67,000 to purchase machinery and equipment, and repayment of financing consumed approximately $158,000. - 10 - The Company borrows funds for periods of up to five years for the purchase of new machinery and meets the required amortization and interest payments from its current working capital. The Company plans to add an additional 10,000 square feet of manufacturing and warehouse space to the rear of its existing building in Worcester. Its lending bank has agreed to allow it to finance the addition using moneys available under the existing line of credit. The Company believes that the remaining amounts available under its line of credit after that borrowing, plus cash flow from operations and other available sources, should provide sufficient liquidity to handle the normal working capital requirements of its present business. As described in Note 6 to the financial statements, the Company is a party to an administrative environmental proceed which the Company does not anticipate will have a material effect on the Company's financial resources. Inflation has not been a factor in the Company's business for the last several years, although there can be no assurance that this will continue to be the case. The Company's results of operations have not been materially affected by seasonality. FORWARD LOOKING INFORMATION Information contained in this Form 10-QSB contains certain "forward looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, which can be identified by the use of forward looking terminology such as "may", "will", "expect", "anticipate", "believe", "intend", "estimate" or other variations or comparable terminology. All forward looking statements involve risks and uncertainties, and actual results could differ materially from those set forth in the forward looking statements. Some of the principal factors which could affect the Company's future operations include the loss of or decline in level of orders from a major customer, the failure of the market to accept the new product lines being introduced by the Valve division and the Webstone division in the coming months, and changes in general economic conditions. - 11 - PART II - OTHER INFORMATION Item 1 - Legal Proceedings There have been no further developments in the DEP environmental proceeding from those described in the Company's Form 10-QSB for the year ended September 28, 1996. Item 6 - Exhibits and Reports on Form 8-K (a) Exhibits (11) Statement Re: Computation of Per Share Earnings. The information set forth in Note 7 to the Financial Statements found in PART I hereof is hereby incorporated. (27) Financial Data Schedule (b) The Company did not file any reports on Form 8-K during the quarter ended March 31, 1997. -12- SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused the Report to be signed on its behalf by the undersigned thereunto duly authorized. Dated as of May 9, 1997 GODDARD INDUSTRIES, INC. by/s/Saul I. Reck Saul I. Reck, President Chief Executive Officer and Principal Financial Officer EX-27 2
5 3-MOS 6-MOS SEP-28-1997 SEP-28-1997 MAR-31-1997 MAR-31-1997 0 109,799 0 0 0 1,598,263 0 32,534 0 3,326,163 0 5,137,380 0 3,924,527 0 2,703,704 0 6,545,705 0 1,075,208 0 0 0 0 0 0 0 20,493 0 3,481,586 0 6,545,705 2,872,729 5,862,252 983,048 2,015,250 1,889,681 3,847,002 537,592 1,040,260 0 0 3,000 6,000 15,057 26,724 430,399 948,266 176,000 386,600 0 0 0 0 0 0 0 0 254,399 561,666 .12 .26 0 0
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