10QSB 1 0001.txt 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 July 1, 2000 __ 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 July 1, 2000 Common Stock, $.01 par value 2,134,431 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 - July 1, 2000 and October 2, 1999 3 Consolidated Statement of Income - Nine Months Ended July 1, 2000 and July 3, 1999 4 Consolidated Statement of Cash Flows - Nine Months Ended July 1, 2000 and July 3, 1999 5 Notes to Consolidated Financial Statements 6 Item 2 Management Discussion and Analysis 11 PART II - OTHER INFORMATION Item 6 Exhibits and Reports on Form 8-K 13 -2- GODDARD INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS ASSETS July 1, October 2, 2000 1999 (UNAUDITED) (AUDITED) CURRENT ASSETS: Cash and cash equivalents $1,658,721 $1,773,389 Accounts receivable, net of allowances 542,451 478,941 Refundable taxes on income 17,742 33,708 Inventories 2,182,787 1,924,507 Prepaid expenses and taxes 45,832 49,550 Deferred income taxes 83,600 87,000 TOTAL CURRENT ASSETS 4,531,133 4,347,095 PROPERTY, PLANT AND EQUIPMENT, at cost 4,525,246 4,438,959 Less - Accumulated depreciation -3,170,436 -3,005,849 1,354,810 1,433,110 OTHER ASSETS: Investment 250,000 250,000 Deferred charges 29,374 - Deferred income taxes - long term 93,700 92,000 TOTAL OTHER ASSETS 373,074 342,000 TOTAL ASSETS $6,259,017 $6,122,205 LIABILITIES AND SHAREHOLDERS'EQUITY CURRENT LIABILITIES: Current maturities of long-term debt $ 60,650 $ 96,000 Accounts payable 123,642 75,380 Accrued expenses 173,740 291,336 Income taxes payable 24,476 - Deferred compensation 69,000 69,000 TOTAL CURRENT LIABILITIES 451,508 531,716 CAPITAL LEASE OBLIGATIONS - 44,222 DEFERRED COMPENSATION 454,431 476,791 SHAREHOLDERS' EQUITY: Common stock - par value $.01 Per share; authorized 3,000,000 Shares, issued and outstanding 2,134,431 shares at July 1, 2000 and 2,131,531 shares at October 2, 1999 21,344 21,315 Additional paid-in capital 483,398 480,713 Retained earnings 4,848,336 4,567,448 TOTAL SHAREHOLDERS'EQUITY 5,353,078 5,069,476 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 6,259,017 $6,122,205 -3- GODDARD INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF INCOME July 1, 2000 July 3, 1999 For The Three For The Nine For The Three For The Nine Months Ended Months Ended Months Ended Months Ended NET SALES $ 975,492 $2,961,875 $1,109,346 $3,879,161 COST OF SALES 584,277 1,779,450 703,338 2,396,019 GROSS PROFIT 391,215 1,182,425 406,008 1,483,142 SELLING AND ADMINISTRATIVE EXPENSES 287,067 894,921 301,371 922,352 INCOME FROM OPERATIONS 104,148 287,504 104,637 560,790 OTHER INCOME (EXPENSE): Interest expense -11,095 -35,493 -18,169 -40,681 Other income, net 75,885 224,477 13,378 39,466 TOTAL OTHER INCOME (EXPENSE) 64,790 188,984 -4,791 -1,215 INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 168,938 476,488 99,846 559,575 PROVISION FOR INCOME TAXES Current 76,500 193,900 49,300 248,200 Deferred -7,000 1,700 -3,900 -12,700 Total income Taxes 69,500 195,600 45,400 235,500 INCOME FROM CONTINUING OPERATIONS $ 99,438 $280,888 $ 54,446 $324,075 DISCONTINUED OPERATIONS: INCOME (LOSS) FROM OPERATIONS, NET OF TAX -32,583 30,294 LOSS ON DISPOSAL, NET OF TAX - - -408,861 -408,861 NET INCOME $ 99,438 $280,888 $-386,998 $ -54,492 EARNINGS PER SHARE: Continuing Operations Basic $ 0.05 $ 0.13 $ 0.03 $ 0.15 Diluted $ 0.05 $ 0.13 $ 0.03 $ 0.15 Net Income: Basic $ 0.05 $ 0.13 $ -0.18 $ -0.03 Diluted $ 0.05 $ 0.13 $ -0.18 $ -0.03 -4- GODDARD INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For The Nine Months Ended July 1, July 3, 2000 1999 NET INCOME $ 280,888 $-54,492 Adjustments to reconcile net income to net cash provided by operating activities: (Income) from discontinued operations - -30,294 Loss on disposition of business - 408,861 Income from continuing operations $ 280,888 $324,075 Depreciation and amortization 184,572 188,261 Deferred income taxes 1,700 -49,700 Changes in assets and liabilities: Accounts receivable -63,510 -16,630 Refundable taxes on income 40,442 -13,719 Inventories -258,280 86,758 Prepaid expenses and other 3,718 770 Accounts payable 48,262 -41,418 Accrued expenses -117,596 73,026 Accrued environmental - -4,648 Deferred compensation -22,360 -192 NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 97,836 546,583 CASH FLOWS FROM INVESTING ACTIVITIES: Net proceeds from disposition of business - 1,152,930 Deferred charges -29,374 - Property, plant and equipment additions -106,272 -98,013 NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES -135,646 1,054,0917 CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of long term debt -79,572 -143,839 Issuance of common stock 2,714 1,372 NET CASH USED IN FINANCING ACTIVITIES -76,858 -142,467 NET INCREASE (DECREASE) IN CASH -114,668 1,459,033 CASH AND EQUIVALENTS - BEGINNING 1,773,389 149,756 CASH AND EQUIVALENTS - ENDING $ 1,658,721 $1,608,789 Supplemental Disclosures of Cash Flow Information CASH PAID DURING THE PERIOD: Interest $ 35,493 $ 24,528 Income taxes $ 165,000 $165,000 -5- GODDARD INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS July 1, 2000 (UNAUDITED) NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Reference is made to the financial statements included in the Annual Report for the year ended October 2, 1999 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: July 1, October 2, 2000 1999 Finished goods $1,865,775 $1,607,495 Work in process 30,646 30,646 Raw materials 286,366 286,366 $2,182,787 $1,924,507 NOTE 4. LONG-TERM DEBT At July 1, 2000 the capital lease obligation consisted of the following: LONG-TERM CURRENT Capital lease obligation for machinery, payable in monthly installments through 2001, with imputed interest rate of approximately 8.5% $ - $ 60,650 -6- 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: July 1, October 2, 2000 1999 Deferred tax asset Deferred compensation $ 209,400 $ 218,300 Capital loss carryforward 167,700 167,700 Inventory valuation 46,400 45,800 Accrued salaries 6,000 6,000 Bad debts 7,200 7,200 436,700 445,000 Depreciation -91,700 -98,300 345,000 346,700 Less valuation allowance -167,700 -167,700 $177,300 $179,000 Management has established a valuation allowance against the deferred tax asset attributable to the capital loss carryforward. NOTE 6. ENVIRONMENTAL MATTER Environmental Matters: In 1998, the Company filed a Class "C" Response Action Outcome Statement with the Massachusetts Department of Environmental Protection regarding its facility in Worcester, Massachusetts. Based upon the information presently available, periodic monitoring is required. -7- NOTE 7. DISCONTINUED OPERATIONS: On July 1, 1999 the Board of Directors of Goddard Valve Corporation approved the sale of Webstone Company, Inc. (Webstone), its wholly-owned subsidiary, to Michael E. Reck, President of Webstone since 1996. The sale was consummated on July 2, 1999. Webstone's discontinued operations are as follows: For The Three For The Nine Months Ended Months Ended July 1, 2000 July 1, 2000 SALES $ 956,338 $3,017,982 COST OF SALES 651,044 2,022,990 GROSS PROFIT 305,294 994,992 SELLING AND ADMINISTRATIVE Expenses 359,068 943,994 INCOME FROM operations -53,774 50,998 OTHER INCOME (EXPENSE): Interest expense -19 -2,075 Other income, net -490 1,671 TOTAL OTHER EXPENSE -509 -404 INCOME BEFORE INCOME TAXES -54,283 50,594 PROVISION FOR INCOME TAXES -21,700 20,300 NET INCOME $-32,583 $30,294 -8- NOTE 8. EARNING PER SHARE: The following data show the amounts used in computing earnings per share (EPS) from continuing operations and the effects on income and the weighted average number of shares of dilutive potential common stock. Nine Months Ended July 1, 2000 Income Common Shares EPS Basic EPS: Income available to common shareholders $280,888 2,132,667 $0.13 Dilutive effect of potential common Stock: Stock options - 12,576 Diluted EPS: Income available to common shareholders after assuming exercise of dilutive securities $280,888 2,145,243 $0.13 Three Months Ended July 1, 2000 Income Common Shares EPS Basic EPS: Income available to common shareholders $ 99,438 2,133,532 $0.05 Dilutive effect of potential common Stock: Stock options - 13,286 Diluted EPS: Income available to common shareholders after assuming exercise of dilutive securities $ 99,438 2,146,818 $0.05 -9- Nine Months Ended July 3, 1999 Income Common Shares EPS Basic EPS: Income available to common shareholders $324,075 2,130,255 $0.15 Dilutive effect of potential common Stock: Stock options - 11,812 Diluted EPS: Income available to common shareholders after assuming exercise of dilutive securities $324,075 2,142,067 $0.15 Three Months Ended July 3, 1999 Income Common Shares EPS Basic EPS: Income available to common shareholders $ 54,446 2,130,766 $0.03 Dilutive effect of potential common Stock: Stock options - 14,633 Diluted EPS: Income available to common shareholders after assuming exercise of dilutive securities $ 54,446 2,145,399 $0.03 Per share amounts attributable to discontinued operations, net of tax, are as follows: For The Three For the Nine Months Months Ended July 3 Ended July 3, 1999 1999 Basic $ -0.21 $ -0.18 Diluted $ -0.21 $ -0.18 -10- Item 2 Management Discussion and Analysis Results of Operations Net sales from continuing operations for the quarter ended July 1, 2000 were $975,000, with net income from continuing operations of $99,000, or $.05 per share. This compared with net sales of $1,109,000 and net income of $54,000, or $.03 per share, from continuing operations for the same quarter of fiscal 1999. There were no extraordinary gains or losses in the three month period ending July 1, 2000. However, in last year's third quarter, net sales from discontinued operations were $956,000, with a net loss from discontinued operations of $33,000, or $.02 per share. The sale of the Webstone plumbing supplies division on July 3, 1999 resulted in a book loss of $409,000, or $.19 per share. As a result, consolidated net loss for the third quarter of fiscal 1999 from continuing operations, discontinued operations, and loss on the sale of Webstone was $387,000, or $.18 per share. Net sales from continuing operations for the nine months ended July 1, 2000 were $2,962,000, with net income from continuing operations of $281,000, or $.13 per share. This compared with net sales of $3,879,000 and net income of $324,000, or $.15 per share, from continuing operations for the same period of fiscal 1999. There were no extraordinary gains or losses in the nine month period ending July 1, 2000. However, net sales from discontinued operations for the nine months ended July 3, 1999 were $3,018,000, with net income from discontinued operations of $30,000, or $.01 per share. The consolidated net loss for the nine months ended July 3, 1999 from continuing operations, discontinued operations, and loss on sale of Webstone was $55,000, or $.03 per share. New orders in the third quarter of this year were 17% higher than the same period one year ago, reversing the year-to- year decline that has been experienced in the last few quarters. Bookings in the first and second quarters of this year were lower by 5% and 29%, respectively, compared with last year's comparable quarters. Accelerated bookings of the company's manifold system, coupled with a surge in the bulk storage tank refurbishment market, have led the improvement over last year. Bookings for the nine months were 7% lower than for the nine months one year ago. Gross profit margins from continuing operations for the third quarter of fiscal 2000 improved to 40.1% from 36.6% in the corresponding quarter of fiscal 1999. For the first nine months of fiscal 2000, gross profit margins from continuing operations improved to 39.9% from 38.2% in the corresponding period of fiscal 1998. The improvements in gross profits are the result of changes in product mix, which have so far overcome increasing pressure for lower prices. LIQUIDITY AND CAPITAL RESOURCES At July 1, 2000, the company had $1,659,000 in cash and cash equivalents, and no long term debt. Cash reserves are invested in short-term instruments. The Company's line of credit with FleetBoston has been temporarily discontinued pending specific requirements for additional capital. However, the Company believes that its working capital and cash position provide sufficient liquidity to handle the normal working capital requirements of its business. -11- FORWARD LOOKING INFORMATION Information contained in this Form 10-QSB may contain 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 conditions in major customer industries such as the industrial gas business. -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 July 1, 2000. -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 9, 2000 GODDARD INDUSTRIES, INC. By:/s/Salvatore J. Vinciguerra -------------------------------- --- Salvatore J. Vinciguerra, President -14-