0000041980-95-000006.txt : 19950920 0000041980-95-000006.hdr.sgml : 19950920 ACCESSION NUMBER: 0000041980-95-000006 CONFORMED SUBMISSION TYPE: 10QSB/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950919 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/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-02052 FILM NUMBER: 95574602 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/A 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1995 ___ 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, 1995 Common Stock, $.01 par value 2,032,804 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, 1995 and October 1,1994........................................ 3 Consolidated Statement of Income - Nine Months Ended June 30, 1995 and June 30, 1994........................... 4 Consolidated Statement of Cash Flows - Six Months Ended June 30, 1995 and June 30, 1994 ..................... 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.......................... 12 -2- GODDARD INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET June 30, October 1 1995 1994 UNAUDITED AUDITED ASSETS (ALL PLEDGED, NOTE 4) CURRENT ASSETS: Cash and equivalents $ 69,196 $ 62,634 Accounts receivable, net of allowances 960,571 750,205 Inventories (Note 3) 2,721,508 2,578,217 Prepaid expenses and taxes 14,597 75,116 Deferred income taxes (Note 5) 63,100 60,000 TOTAL CURRENT ASSETS 3,828,972 3,526,172 PROPERTY, PLANT AND EQUIPMENT, 3,309,621 3,209,793 at cost Less - Accumulated depreciation 2,327,402 -2,188,825 982,219 1,020,968 OTHER ASSETS: Excess of cost of investment in subsidiaries over equity in net assets acquired 23,276 25,893 Deferred income taxes - long term 135,400 118,000 Total other assets 158,676 143,893 TOTAL ASSETS $4,969,867 $4,691,033 LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt (Note 4) $ 181,000 $ 203,807 Accounts payable 219,025 374,423 Accrued expenses 222,548 157,147 Income taxes payable 143,692 - TOTAL CURRENT LIABILITIES 766,265 735,377 LONG-TERM DEBT, net of current maturities (Note 4) 1,252,061 1,259,814 DEFERRED COMPENSATION 503,500 475,000 STOCKHOLDERS' EQUITY: Common stock - par value $.01 per share; authorized 3,000,000 shares, issued and outstanding 2,032,804 shares. 20,328 20,328 Additional paid-in capital 395,763 395,763 Retained earnings 2,031,950 1,804,751 TOTAL STOCKHOLDERS' EQUITY 2,448,041 2,220,842 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $4,969,867 $4,691,033 -3- GODDARD INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
JUNE 30, 1995 JUNE 30, 1994 FOR THE THREE FOR THE NINE FOR THE THREE FOR THE NINE MONTHS ENDED MONTHS ENDED MONTHS ENDED MONTHS ENDED NET SALES $1,923,086 $4,977,317 $1,231,080 $3,620,826 COST OF SALES 1,266,108 3,279,844 795,409 2,336,455 GROSS PROFIT 656,978 1,697,473 435,671 1,284,371 SELLING AND ADMINISTRATIVE EXPENSES 449,416 1,214,469 370,663 1,136,180 INCOME FROM OPERATIONS 207,562 483,004 65,008 148,191 OTHER INCOME (EXPENSE): Interest expense -36,019 -108,926 -20,221 -52,415 Other income, net 9,848 19,519 5,070 9,584 TOTAL OTHER INCOME (EXPENSE) -26,171 -89,407 -15,151 -42,831 INCOME BEFORE INCOME TAXES 181,391 393,597 49,857 105,360 PROVISION FOR INCOME TAXES 76,200 166,400 19,000 42,000 NET INCOME $105,191 $227,197 $ 30,857 $ 63,360 PRIMARY EARNINGS PER SHARE (Note 7) Net Income $0.05 $0.11 $ .02 $ .03
-4- GODDARD INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) FOR THE NINE MONTHS ENDED JUNE 30, 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 227,197 $63,360 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 141,194 130,375 Deferred income taxes -20,500 -42,000 Changes in assets and liabilities: Accounts receivable -210,366 105,863 Inventories -143,291 -391,601 Prepaid expenses and other 60,519 -7,741 Accounts payable -155,398 153,727 Accrued expenses 65,401 -63,347 Income taxes payable 143,692 -73,262 Deferred Compensation 28,500 90,000 Total Adjustments -90,249 -97,986 NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 136,948 -34,626 CASH FLOWS FROM INVESTING ACTIVITIES: Property, plant and equipment additions -99,828 -89,174 CASH FLOWS FROM FINANCING ACTIVITIES: Increase in long-term debt 1,384,000 1,074,500 Repayments of long-term debt -1,414,558 -978,760 NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES -30,558 95,740 NET INCREASE (DECREASE) IN CASH 6,562 -28,060 CASH AND EQUIVALENTS - BEGINNING 62,634 119,588 CASH AND EQUIVALENTS - ENDING $ 69,196 $ 91,528 CASH PAID DURING THE PERIOD: Interest $ 105,313 $ 47,185 Income taxes $ 29,214 $ 164,070 -5- GODDARD INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 1995 (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 1, 1994 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, October 1, 1995 1994 Finished goods $ 2,616,089 $ 2,472,797 Work in process 12,596 12,596 Raw materials 92,824 92,824 $ 2,721,509 $ 2,578,217 The following factors were taken into consideration in determining inventory values: Goddard Valve Corp. - June 30, 1995 - $977,310 (estimated) and October 1, 1994 - $867,801. Interim inventories were valued by management using the gross profit method. Webstone Company, Inc. - June 30, 1995 - $1,744,199 (estimated) and October 1, 1994 - $1,710,416. 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. The agreement expires March 31, 1997 and is secured by all property and assets. Advances are restricted by certain limitations on eligible receivables and inventories. -6- continued 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 June 30, 1995 long-term obligations consisted of the following: LONG-TERM CURRENT Revolving line of credit $ 1,247,503 $ - Capital lease obligations for machinery, payable in monthly installments of $8,455, through July 1, 1996, with imputed interest rates between 7.34% and 8.02%. 4,558 93,000 Note due 1995, unsecured, interest at 10% 35,000 Term note due 1996, principal payments of $5,880 per month beginning June 1, 1993 plus interest at 7%, secured by all property and assets. 53,000 1,252,061 181,000 NOTE 5 INCOME TAXES Included in other assets at June 30, 1995 and October 1, 1994 is a deferred tax asset of $198,500 and $118,000, respectively. 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, October 1, 1995 1994 Deferred tax asset Deferred Compensation $ 200,000 $ 190,000 Inventory valuation 35,200 35,000 Accrued Salaries 11,000 11,000 Bad Debts 13,600 10,000 260,700 246,000 Depreciation 62,200 68,000 $ 198,500 $ 178,000 Management does not believe that any valuation allowance is necessary. - 7 - NOTE 6 CONTINGENCIES In 1990, the Town of Shrewsbury, Massachusetts commenced a lawsuit in Massachusetts Superior Court against the Company and another corporation alleging that they had caused the Town to incur response costs for assessment, containment and removal of oil and hazardous materials in relation to the Town's Home Farm wells. The Town is seeking damages which now exceed $6,500,000. The Company is defending itself vigorously against this claim and has joined, as third party defendants, eight other businesses which could be identified as likely to have used the types of compounds detected as contaminating the Town's wells. Motions for summary judgement were made during 1992 and 1993 resulting in dismissal of some, but not all, of the Shrewsbury complaint. Non- expert discovery in this case has been completed, while expert discovery continues. Trial is presently scheduled to begin October 1995. Legal counsel are unable to form an opinion regarding the outcome of this matter. Accordingly, the Company has not recorded any loss provision with respect to this lawsuit. In connection with a proposed bank financing in 1987, the Company retained an environmental engineering firm to perform a site assessment at its corporate headquarters. The results of that assessment revealed that the ground water is contaminated and that an off-site source may have introduced the contaminants. As required by law, the Company notified the Massachusetts Department of Environmental Protection (DEP). The DEP has issued a Notice of Responsibility designating the site as a priority disposal site. A Phase One Limited Site Investigation report was submitted to the DEP. On August 10, 1994 the Company received a Tier I Transition Classification and Permit Statement Cover Letter designating the site as a Tier IA Site under the Massachusetts Contingency Plan. The Company submitted a request to the DEP to reclassify the site as Tier IB or IC, which will remove any response actions from DEP oversight. At the present time, it is not possible to ascertain the cost, if any, of remediation or whether the Company will be able to obtain reimbursement for such costs from any third party causing the contamination or any insurance carrier. Accordingly, the Company has not recorded any provision for loss with respect to this DEP matter. Several of the Company's insurers are participating in the Company's defense in both the DEP matter and the Town of Shrewsbury litigation under a reservation of rights. The trial in the Town of Shrewsbury litigation is presently scheduled to begin October, 1995. The Company's principal insurer has also filed suit for a declaratory judgement that they have no duty to defend or indemnify the Company. This action is currently stayed until October 1995. In the event that the Company does not prevail, these matters could have a material adverse impact on the Company's financial condition. - 8- 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. -9- PART I - FINANCIAL INFORMATION Item 2 - Management's Discussion and Analysis of Financial Condition and results of Operations RESULTS OF OPERATIONS FISCAL QUARTER ENDED JUNE 30, 1995 COMPARED TO FISCAL QUARTER ENDED JUNE 30, 1994 Consolidated sales for the quarter ended June 30, 1995 were $1,923,000, a 56.7% increase over the $1,231,000 reported for the same period in 1994. The sales increase was shared by both divisions. Our Valve division enjoyed increased orders and sales as the cryogenic industry recovered from the generally slow period encountered during the prior year. The sales increase for the current quarter over the corresponding period last year in our Webstone division came about from a larger sales force and an improved program in motivating the Company's sales representatives. Consolidated gross profit margins for the current quarter were 34.2%, a slight reduction from the 35.4% reported last year, while selling and administrative expenses as a percentage of sales decreased from 30.1% to 23.4%. Consolidated net earnings for the June quarter were $105,191 (.05 per share) compared to 1994 earnings of $30,857 (.02 per share) in the same quarter last year. NINE MONTHS ENDED JUNE 30, 1995 COMPARED TO NINE MONTHS ENDED JUNE 30, 1994 Consolidated sales for the nine month period ended June 30, 1995 were $4,977,000, 37.5% ahead of sales for the same period last year. During this nine month period incoming orders in both divisions were at record levels and management believes that this trend will continue for the balance of fiscal 1995. In our Valve division, orders for export have increased while in our Webstone division the addition of sales representatives has made a significant difference in the level of incoming orders and sales. Consolidated gross profit margins of 34.1% were slightly lower than the 35.5% reported for the same period for 1994. Although selling and administrative expenses increased by $78,000, they decreased as a percentage of net sales from 31.4% in the first nine months of 1994 to 24.4% in the first nine months of 1995. Interest expense approximately doubled for the period due to increased loan levels. Net earnings for the nine month period were $227,197 compared to $63,360 for 1994. Per share earnings were $0.11 and $0.03 respectively. - 10 - LIQUIDITY AND CAPITAL RESOURCES During the nine months ended June 30, 1995 operating activities generated $137,000 of cash. The major sources of cash were earnings ($227,000), depreciation and amortization ($142,000) and increased income tax liabili- ties ($143,000) associated with improved earnings. Increased inventories ($144,000) and accounts receivable ($210,000) required by the additional sales and a reduction in accounts payable ($155,000) consumed cash during the period. The cash generated from operations and $91,000 of additional advances on the line of credit were used to acquire $100,000 of additional equipment and to retire $121,000 of installment debt. The Company presently maintains a line of credit of $1,750,000 with The First National Bank of Boston collateralized by sub- stantially all of the assets of the Company which expires on March 31, 1997. On June 30, 1995, approximately $1,252,000 had been drawn under that line of credit. The Company believes that the line of credit provides sufficient liquidity to handle the normal working capital requirements of its present business and will be increased, if required, as sales and earnings expand. 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 believes that its future capital requirements for equipment can be met from the cash flow from operations, bank borrowings and other available sources. As more fully described under Note 6 to the financial statements, the Company is a party to two law suits and an administrative proceeding relating to environmental matters. At the present time, because of numerous uncertanties (including without limitation the origin of the alleged contamination, the scope and cost of any required remediation, the ability to obtain reimbursement from third parties who may have caused the alleged contamination, and the extent of insurance coverage which may be available), it is not possible to estimate the amount of loss, if any, the Company may incur with respect to these matters. If the Company does not prevail in its defense of the proceedings or in its third-party claims for contribution or coverage, the adverse resolution of the DEP or Shrewsbury proceedings could have a material adverse effect on the results of operations and on the Company's financial resources. Inflation has not been a major factor in the Company's business for the last several years. There can be no assurance that this will continue. The Company's results of operations have not been materially affected by seasonality. -11- PART II - OTHER INFORMATION Item 1 - Legal Proceedings As more fully described in the Company's Form 10-KSB for the year ended October 1, 1994, the Company is a defendant in a suite by the Town of Shrewsbury, Massachusetts to incur various environmental response costs and a suit by certain of its prior insurers contesting overage for environmental claims under insurance policies. There have been no material developments in those cases since the filing of the Form 10-KSB. 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, 1995. - 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 August 11, 1995 GODDARD INDUSTRIES, INC. by /s/ Saul I. Reck Saul I. Reck, President, Chief Executive Officer and Principal Financial Officer - 13 - EX-27 2
5 This schedule contains summary financial information extracted from form 10-QSB and is qualified in its entirety by reference to such financial statements. 3-MOS 6-MOS 9-MOS SEP-30-1995 SEP-30-1995 SEP-30-1995 DEC-31-1994 MAR-31-1995 JUN-30-1995 82,697 133,519 69,196 0 0 0 616,092 798,310 986,041 37,651 23,800 25,470 2,011,763 2,938,361 2,721,508 2,769,904 3,924,083 3,828,972 3,054,823 3,260,107 3,309,621 2,058,236 2,284,723 2,327,042 3,900,202 5,053,282 4,969,867 539,888 757,053 766,265 0 0 0 20,307 20,328 20,328 0 0 0 0 0 0 3,340,007 3,322,542 2,427,913 3,900,202 5,053,282 4,969,867 1,923,086 3,054,251 4,977,317 1,932,934 3,083,422 4,996,836 1,266,108 2,013,736 3,279,844 449,416 765,053 1,214,469 0 0 0 3,000 6,000 9,000 36,020 72,906 108,926 181,391 212,226 393,597 76,200 90,200 166,400 0 0 0 0 0 0 0 0 0 0 0 0 105,191 122,026 277,197 .05 .06 .11 .05 .06 .11