-----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, QEm0DwMZPxocbv2F2H0iQ4ePfn7F7ZDgrr4a2Hfbc/O0XrmMz++c78QtWUV3BrQt 6q2yLHdMahemmQN+pYoNEQ== 0000041980-98-000005.txt : 19980814 0000041980-98-000005.hdr.sgml : 19980814 ACCESSION NUMBER: 0000041980-98-000005 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980813 SROS: NONE 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: SEC FILE NUMBER: 000-02052 FILM NUMBER: 98685571 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 June 30, 1998 __ 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 June 30, 1998 Common Stock, $.01 par value 2,129,198 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 - June 30, 1998 and September 27, 1997 3 Consolidated Statement of Income - Nine Months Ended June 30, 1998 and June 30, 1997 4 Consolidated Statement of Cash Flows - Nine Months Ended June 30, 1998 and June 30, 1997 5 Notes to Consolidated Financial Statements 6 Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations 10 PART II - OTHER INFORMATION Item 6 Exhibits and Reports on Form 8-K 13 -2- GODDARD INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET June 30, September 27, 1998 1997 UNAUDITED AUDITED ASSETS (ALL PLEDGED, NOTE 4) CURRENT ASSETS: Cash $ 113,037 $ 82,943 Accounts receivable, net of allowances 1,280,718 1,203,244 Inventories (Note 3) 3,571,384 3,541,862 Prepaid expenses and taxes 80,453 31,420 Deferred income taxes (Note 5) 136,500 133,000 TOTAL CURRENT ASSETS 5,182,092 4,992,469 PROPERTY, PLANT AND EQUIPMENT, at cost 4,659,435 4,266,837 Less - Accumulated depreciation -3,010,145 - -2,826,006 1,649,290 1,440,831 OTHER ASSETS: Excess of cost of investment in subsidiaries over equity in net assets acquired 11,807 14,624 Deferred income taxes - long term(Note 5) 158,900 165,000 Total other assets 170,707 179,624 TOTAL ASSETS $7,002,089 $6,612,924 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt (Note 4) $ 187,500 $ 119,000 Accounts payable 313,150 374,689 Accrued expenses 298,201 423,035 Accrued environmental costs (Note 6) 4,648 45,000 Income taxes payable 0 52,660 TOTAL CURRENT LIABILITIES 803,499 1,014,384 LONG-TERM DEBT, net of current maturities (Note 4) 921,941 786,668 DEFERRED COMPENSATION 551,000 551,000 SHAREHOLDERS' EQUITY: Common stock - par value $.01 per share, authorized 3,000,000 shares, issued and outstanding 2,129,198 shares. (2,126,649 shares at September 27, 1997) 21,291 21,266 Additional paid-in capital 431,700 429,353 Retained earnings 4,272,658 3,810,253 TOTAL SHAREHOLDERS'EQUITY 4,725,649 4,260,872 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $7,002,089 $6,612,924 -3- GODDARD INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) June 30, 1998 June 30, 1997 For The Three For the Nine For The Three For the Nine Months Ended Months Ended Months Ended Months Ended NET SALES $2,302,369 $7,201,616 $2,277,240 $8,139,492 COST OF SALES 1,465,639 4,682,959 1,511,003 5,358,005 GROSS PROFIT 836,730 2,518,657 766,237 2,781,487 SELLING AND ADMINISTRATIVE EXPENSES 519,130 1,583,633 485,827 1,526,087 INCOME FROM OPERATIONS 317,600 935,024 280,410 1,255,400 OTHER INCOME (EXPENSE): Interest expense -21,900 -66,792 -21,136 - -64,363 Other income, net 9,780 24,432 9,198 25,701 TOTAL OTHER INCOME (EXPENSE) -12,120 -42,360 -11,938 - -38,662 INCOME BEFORE INCOME TAXES 305,480 892,664 268,472 1,216,738 PROVISION FOR INCOME TAXES 125,200 366,400 107,000 493,600 NET INCOME (loss) $180,280 $526,264 $161,472 $723,138 EARNINGS PER SHARE (Note 7) Basic $ 0.08 $ 0.25 $ 0.08 $ 0.35 Diluted $ 0.08 $ 0.24 $ 0.08 $ 0.35 -4- GODDARD INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) For The Nine Months Ended June 30, 1998 1997 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $526,264 $723,138 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 186,956 181,386 Deferred income taxes 2,600 - -23,500 Changes in assets and liabilities: Accounts receivable -77,474 - -14,995 Inventories -29,522 - -237,993 Miscellaneous receivable 0 785,000 Prepaid expenses and other -49,033 - -35,921 Accounts payable -61,539 - -79,613 Accrued expenses -124,834 - -27,352 Accrued environmental costs -40,352 - -750,000 Income taxes payable -52,660 - -163,511 Total Adjustments -245,858 - -366,499 NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 280,406 356,639 CASH FLOWS FROM INVESTING ACTIVITIES: Property,plant and equipment additions -210,398 - -105,478 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common shares 2,372 26,020 Payment of Dividends -63,859 0 Increase in long-term debt 2,501,000 2,534,000 Repayments of long-term debt -2,479,427 - -2,784,381 NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES -39,914 - -224,361 NET INCREASE(DECREASE) IN CASH 30,094 26,800 CASH AND EQUIVALENTS - BEGINNING 82,943 65,951 CASH AND EQUIVALENTS - ENDING $113,037 $ 92,751 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION CASH PAID DURING THE PERIOD: Interest $ 66,340 $ 64,363 Income taxes $459,195 $680,611 -5- GODDARD INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1998 (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 27, 1997 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: June 30, September 27, 1998 1997 Finished goods $3,135,571 $3,106,049 Work in process 66,441 66,441 Raw materials 369,372 369,372 $3,571,384 $3,541,862 The following factors were taken into consideration in determining inventory values: Goddard Valve Corp. - June 30, 1998 - $1,963,808. (estimated) and September 27, 1997 - $1,966,653. Interim inventories were valued by management using the gross profit method. Webstone Company, Inc. - June 30, 1998 - $1,607,576. (estimated) and September 27, 1997 - $1,575,209. 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 1/2% or (ii) the Federal Funds Effective Rate plus 1 1/4% per annum. On June 30, 1998 the effective interest rate was 9%. The agreement expires March 30, 2000 and is secured by all property and assets. Advances are restricted by certain limitations on eligible receivables and inventories. continued -6- LONG-TERM DEBT (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 June 30, 1998 long-term obligations consisted of the following: LONG-TERM CURRENT Revolving line of credit $ 740,000 $ 0 Capital lease obligations for machinery, payable in monthly installments of $17,831, through 2001, with imputed interest rate of approximately 9%. 181,941 187,500 $ 921,941 $ 187,500 During the nine months ended June 30, 1998 the Company directly financed machinery with a cost of $182,200 through a capital lease arrangement. At June 30, 1998 the related assets are included in Property, Plant, and Equipment. 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: June 30, September 27, 1998 1997 Deferred tax asset Deferred compensation $ 220,400 $ 220,400 Inventory valuation 93,800 93,300 Accrued salaries 9,200 9,200 Environmental matters 6,000 18,000 Bad debts 15,300 12,400 344,700 353,300 Depreciation 49,300 55,300 $ 295,400 $ 298,000 Management does not believe that any valuation allowance is necessary. -7- NOTE 6. ENVIRONMENTAL MATTER In 1995, the Massachusetts Department of Environmental Protection (DEP) designated the Company's facility in Worcester, MA as a Tier 1C site under the Massachusetts Contingency Plan as a result of a prior release of oil or hazardous materials onto the site. The Company engaged an environmental consulting firm to perform further site investigation and file reports with the DEP. In February, 1998 a Phase II report was submitted to the DEP and in March 1998 a Phase III report was submitted that recommended continued monitoring of the site for the next five years. The cost of such monitoring over the next five years is not expected to materially exceed the $4,600 that the Company has recorded as a liability in the financial statements. NOTE 7. EARNING PER SHARE: The Company adopted Statement of Financial Accounting Standards No. 128 (SFAS No. 128), "Earnings per Share", effective with the quarter ended December 31, 1997. SFAS No. 128 changes the method of computing earnings per share and requires that they be presented on both a basic and diluted basis. In accordance with SFAS No. 128 earnings per share for the periods ended June 30, 1997 have been restated. The following data show the amounts used in computing earnings per share (EPS) and the effects on income and the weighted average number of shares of dilutive potential common stock. Nine Months ended June 30, 1998 Income Common Shares EPS Basic EPS: Income available to common shareholders $526,264 2,128,156 $0.25 Dilutive effect of potential common Stock: Stock options - 43,546 Diluted EPS: Income available to common shareholders after assumed exercise of dilutive securities $526,264 2,171,702 $0.24 Nine Months ended June 30, 1997 Income Common Shares EPS Basic EPS: Income available to common shareholders $723,138 2,047,699 $0.35 Dilutive effect of potential common Stock: Stock options - 18,791 Diluted EPS: Income available to common shareholders after assumed exercise of dilutive securities $723,138 2,066,490 $0.35 -8- NOTE 7. EARNING PER SHARE: (continued) Quarter ended June 30, 1998 Income Common Shares EPS Basic EPS: Income available to common shareholders $180,280 2,129,198 $0.08 Dilutive effect of potential common Stock: Stock options - 17,737 Diluted EPS: Income available to common shareholders after assumed exercise of dilutive securities $180,280 2,146,935 $0.08 Quarter ended June 30, 1997 Income Common Shares EPS Basic EPS: Income available to common shareholders $161,472 2,062,867 $0.08 Dilutive effect of potential common Stock: Stock options - 34,217 Diluted EPS: Income available to common shareholders after assumed exercise of dilutive securities $161,472 2,097,084 $0.08 -9- PART I - FINANCIAL INFORMATION Item 2 - Management's Discussion and Analysis of Financial Condition RESULTS OF OPERATIONS FISCAL QUARTER ENDED JUNE 30, 1998 COMPARED TO FISCAL QUARTER ENDED JUNE 30, 1997 For the quarter ended June 30, 1998, consolidated sales were $2,302,000, a 1.1% increase over the same quarter of fiscal 1997. Sales of the Webstone division increased 14.1% over the same quarter of fiscal 1997, reflecting the addition of more product lines and the contribution to revenue of the retail distribution group which began operations in April, 1998. Sales of the Valve division decreased 7.8% from sales in the corresponding quarter of fiscal 1997, as delays in introducing new product lines resulted in deferral of orders and sales. These new product lines were introduced during the months of June and July fiscal 1998, and management expects that these lines will begin to make a significant contribution to revenue as production and sales gain momentum. Gross profit margins for the quarter ended June 30, 1998 improved to 36.3% from 33.6% in the corresponding quarter of fiscal 1997, reflecting a favorable change in product mix. Selling and administrative expenses as a percentage of revenue increased from 21.3% in the corresponding quarter of fiscal 1997 to 22.5% in the quarter ended June 30, 1998. Net earnings for the most recent quarter increased to $180,000 ($.08 per share) compared to $161,500 ($.08 per share) reported for the corresponding quarter in fiscal 1997. NINE MONTH PERIOD ENDED JUNE 30, 1998 COMPARED TO NINE MONTH PERIOD ENDED JUNE 30, 1997 For the nine months ended June 30, 1998, consolidated sales were $7,202,000, an 11.4% decrease from $8,139,000 consolidated sales for the corresponding period of fiscal 1997, primarily as a result of lower revenues in the Valve division. For the nine month period, revenues of the Valve division decreased 22.1% and revenues of the Webstone division increased 12.3% compared to the corresponding periods of fiscal 1997. The Webstone division has had sales increases in line with management forecasts in each of the first three quarters of fiscal 1998, as both wholesale and retail operations have grown. While revenues of the Valve division for the nine month period have declined, there has been a noticeable improvement in new orders since the spring of 1998, resulting in a substantial increase in backlog from June 30, 1997 ($385,000) to June 30, 1998 ($1,033,000). Many of these orders are scheduled for delivery in the last quarter of fiscal 1998 and the first two quarters of fiscal 1999. For the nine months ended June 30, 1998, gross profit margins were 35%, compared to 34.2% for the corresponding period of fiscal 1997, while selling and administrative expenses increased as a percentage of revenue to 22% during the first nine months of fiscal 1998, compared to 18.8% during the corresponding period of fiscal 1997. The increase in selling and administrative expenses as a percentage of revenues was due - 10 - to higher professional fees. As a result, income from operations declined to 13% of revenue in the first nine months of fiscal 1998, compared to 15.9% in fiscal 1997. Net earnings for the nine month period ended June 30, 1998, were $526,300 ($.24 per share), compared to $723,000 ($.35 per share) for the corresponding period in fiscal 1997. LIQUIDITY AND CAPITAL RESOURCES Historically, the Company has funded operations through earnings and bank borrowings. At June 30, 1998 the Company had net working capital of approximately $4,379,000, including approximately $113,000 in cash. The Company also has a line of credit of $1,750,000 with BankBoston collateralized by substantially all of the assets. As of June 30, 1998 approximately $740,000 had been drawn under that credit line, which bears interest at a rate equal to the bank's prime rate plus 1/2%. The Company believes that its working capital and cash position, together with the line of credit, provide sufficient liquidity to handle the normal working capital requirements of its business. During the first nine months of fiscal 1998, operating activities produced $280,000 of cash. The major sources of cash were net income of $526,000 and depreciation and amortization of $187,000. The major uses of cash were a reduction in accrued expenses of $124,000, an increase in accounts receivable of $77,000, a reduction in accounts payable of $62,000, and a reduction in income taxes payable of $53,000. The Company invested approximately $210,000 in property and equipment during the nine months ended June 30, 1998, compared to $105,000 during the corresponding period of the prior year. This additional investment was required to enable the Company to produce new product lines for the Valve division and to improve the production of existing manufactured product lines. 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's results of operations have not been materially affected by seasonality. YEAR 2000 The Company has completed its assessment of the ability of its own information technology systems [and non- IT systems] to process information involving the Year 2000 and beyond accurately. The Company estimates that the total cost to address this "Year 2000" problem for its internal systems is approximately $50,000, which will be paid out of working capital and expensed currently. As of June 30, 1998, the Company had completed approximately 60% of this work. The Company to date has only been able to obtain a limited amount of information from suppliers and customers as to the possible impact of Year 2000 problems on its dealings with them. - 11 - 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, that address such matters as new product introductions and projected future sales. These statements can be identified by the use of forward looking terminology such as "expect", "anticipate", "believe", "intend", "estimate" or other 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 major customers, delays in introducing new products, the failure of the market to accept new products, changes in general economic conditions, and unanticipated Year 2000 problems. - 12 - PART II - OTHER INFORMATION 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 June 30, 1998. - 13 - 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 August 14, 1998 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 9-MOS OCT-03-1998 OCT-03-1998 JUN-30-1998 JUN-30-1998 0 113,037 0 0 0 1,304,232 0 23,514 0 3,571,384 0 5,182,092 0 4,659,435 0 3,010,145 0 7,002,089 0 0 0 0 0 0 0 0 0 21,291 0 4,704,358 0 7,002,089 2,302,369 7,201,616 2,302,369 7,201,616 1,465,639 4,682,959 519,130 1,583,633 0 0 3,000 9,000 12,120 42,360 305,480 892,664 125,200 366,400 0 0 0 0 0 0 0 0 180,280 526,264 .08 .25 .08 .24
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