-----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, WuBex8MgRh59Uidy0pixkQ1c/8fLGHaP10GOfj/0mgpo91HrNYPkh7iOK5Q/0vRT BePFzf/QY5AraHlvqsU0Vg== 0000041980-96-000002.txt : 19960213 0000041980-96-000002.hdr.sgml : 19960213 ACCESSION NUMBER: 0000041980-96-000002 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960212 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: 1934 Act SEC FILE NUMBER: 000-02052 FILM NUMBER: 96515867 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 (Mark One) X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 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 December 31, 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 - December 31, 1995 and September 30, 1995........................................................ 3 Consolidated Statement of Income - Three Months Ended December 31, 1995 and December 31, 1994.......................... 4 Consolidated Statement of Cash Flows - Three Months Ended December 31, 1995 and December 31, 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................................... 11 -2- GODDARD INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET December 31, September 30, 1995 1995 UNAUDITED AUDITED ASSETS (ALL PLEDGED, NOTE 4) CURRENT ASSETS: Cash and equivalents $ 137,511 $ 74,937 Accounts receivable, net of allowances 875,418 973,477 Inventories (Note 3) 3,012,124 2,911.234 Prepaid expenses and taxes 39,850 23,018 Deferred income taxes (Note 5) 57,200 56,000 TOTAL CURRENT ASSETS 4,122,103 4,038,666 PROPERTY, PLANT AND EQUIPMENT, at cost 3,347,774 3,336,001 Less - Accumulated depreciation - 2,435,077 -2,385,267 912,697 950,734 OTHER ASSETS: Excess of cost of investment in subsidiaries over equity in net assets acquired 21,197 22,136 Deferred income taxes - long term 144,800 139,000 Total other assets 165,997 161,136 TOTAL ASSETS $5,200,797 $5,150,536 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of long-term debt (Note 4) $ 67,388 $ 109,191 Accounts payable 349,639 305,655 Accrued expenses 276,099 256,631 Income taxes payable 42,526 222,626 TOTAL CURRENT LIABILITIES 735,652 894,103 LONG-TERM DEBT, net of current maturities (Note 4) 1,182,503 1,092,503 DEFERRED COMPENSATION 522,500 513,000 SHAREHOLDERS' 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 2,344,051 2,234,839 TOTAL SHAREHOLDERS' EQUITY 2,760,142 2,650,930 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $5,200,797 $5,150,536 - -3- GODDARD INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF INCOME (UNAUDITED)
FOR THE THREE MONTHS ENDED December 31, 1995 1994 NET SALES $1,791,242 $1,405,253 COST OF SALES 1,200,956 934,983 GROSS PROFIT 590,286 470,270 SELLING AND ADMINISTRATIVE EXPENSES 382,065 375,831 INCOME FROM OPERATIONS 208,221 94,439 OTHER INCOME (EXPENSE): Interest expense -28,004 - -34,468 Other income, net 6,895 3,404 TOTAL OTHER INCOME (EXPENSE) -21,109 - -31,064 INCOME BEFORE INCOME TAXES 187,112 63,375 PROVISION FOR INCOME TAXES 77,900 27,700 NET INCOME $109,212 $35,675 EARNINGS (LOSS)PER SHARE (Note 7) Primary Net Income $0.05 $0.02
-4- GODDARD INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) FOR THE THREE MONTHS ENDED December 31, 1995 1994 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 109,212 $35,675 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 50,749 48,690 Deferred income taxes - - 7,000 - 7,000 Changes in assets and liabilities: Accounts receivable 98,059 62,069 Inventories - -100,890 -119,066 Prepaid expenses and other - - 16,832 - 1,951 Accounts payable 43,984 -172,227 Accrued expenses 19,468 - 17,344 Income taxes payable - -180,100 37,500 Deferred Compensation 9,500 9,500 Total Adjustments - - 83,062 -159,829 NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 26,150 -124,154 CASH FLOWS FROM INVESTING ACTIVITIES: Property, plant and equipment additions - 11,773 - 30,989 CASH FLOWS FROM FINANCING ACTIVITIES: Increase in long-term debt 809,000 706,000 Repayments of long-term debt - -760,803 -510,104 NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 48,197 195,896 NET INCREASE (DECREASE) IN CASH 62,574 40,753 CASH AND EQUIVALENTS - BEGINNING 74,937 62,634 CASH AND EQUIVALENTS - ENDING $137,511 $103,387 CASH PAID DURING THE PERIOD: Interest $ 27,649 $ 32,027 Income taxes $265,000 $ 800 -5- GODDARD INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 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: December 31, September 30, 1995 1995 Finished goods $2,806,173 $2,705,283 Work in process 11,003 11,003 Raw materials 194,948 194,948 $3,012,124 $2,911,234 The following factors were taken into consideration in determining inventory values: Goddard Valve Corp. - December 31, 1995 - $1,211,282 (estimated) and September 30, 1995 - $1,132,582. Interim inventories were valued by management using the gross profit method. Webstone Company, Inc. - December 31, 1995 - $1,800,842 (estimated) and Sepember 30, 1995 - $1,778,652. 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 December 31, 1995 long-term obligations consisted of the following: LONG- TERM CURRENT Revolving line of credit $ 1,147,503 $ - 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%. 49,668 Note due 1997, 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. 17,720 $ 1,182,503 $67,388 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: December 31, September 30, 1995 1995 Deferred tax asset Deferred Compensation $ 209,000 $ 205,200 Inventory valuation 39,200 39,000 Accrued Salaries 5,800 5,800 Bad Debts 12,000 11,000 266,000 261,000 Depreciation 64,000 66,000 $ 202,000 $ 195,000 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, Neles-Jamesbury, 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 approximately $7 million in damages. The Company intends to defend itself vigorously against this claim and has joined, as third party defendants, several 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. In September 1995, the court issued an order providing for a single, unified trial of all claims related to this matter. Discovery between the Company and the Town of Shrewsbury, with the exception of expert discovery, is complete. Discovery between the Company, Neles-Jamesbury, and the third party defendants is ongoing. All discovery is to be completed by May 1, 1996 and the trial is scheduled to begin on June 3, 1996. The Company and legal counsel are unable to form an opinion regarding the outcome of this matter. Consequently, no loss provision with respect to this lawsuit has been recorded. 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 be introducing 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 has been submitted to the DEP. In November 1995 the Company received a Tier I Transition Classification and Permit Statement Cover Letter designating the site as a Tier 1C Site under the Massachusetts Contingency Plan. Under DEP regulations, the Company must complete further site investigaion by November 1997. Until that investigation is completed, 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 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. - -8- In the event that the Company does not prevail, these matters could have a material adverse impact on the Company's financial condition. 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 RESULTS OF OPERATIONS FISCAL QUARTER ENDED DECEMBER 31, 1995 COMPARED TO FISCAL QUARTER ENDED DECEMBER 31, 1994 The trend of increasing consolidated sales and earnings continued in the first quarter of fiscal 1996 as the result of both of the Company's divisions gaining market share in their product lines. Consolidated sales for the quarter ended December 31, 1995 were $1,791,000, compared to $1,405,000 in the corresponding quarter of the prior year, an increase of 27.5%. Gross profit margins actually declined slightly from 33.5% to 33% as a result of changes in product mix. Despite the 27.% increase in sales, selling and administrative expenses increased only 2% over the corresponding quarter of 1994 as the Company benefited from efficiencies of scale. Interest expenses were down 18.7% compared to the same period in the prior year. This reflected lower interest rates and levels of bank borrowing during the quarter. As a result of the above developments, the earnings for the first quarter of fiscal 1996 increased from $36,000 in the corresponding quarter last year to $109,000, a gain of 203%, while earnings per share were $.05 compared to $.02 for the same quarter in the prior year. LIQUIDITY AND CAPITAL RESOURCES Operating activities of the Company provided new cash of $26,000. The principal uses of cash were an increase in income taxes of $180,000 and an inventory of $101,000. Major sources of cash were earnings $109,000, reduced accounts receivable $98,000, and depreciation and amortization $51,000. The Company also invested $12,000 in additional equipment and retired $41,000 of installment debt. These uses of cash were offset by net borrowings of $89,000 on the line of credit. The Company borrows funds for period 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. 10 - PART II - OTHER INFORMATION Item 1 - Legal Proceedings As more fully described in the Company's Form 10-KSB for the year ended September 30, 1995, the Company is a defendant in a suit by the Town of Shrewsbury, Massachusetts alleging that the defendant caused Shrewsbury to incur various environmental response costs and a suit by certain of its prior insurers contesting coverage 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 December 31, 1995. - 11- 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 February 12, 1996 GODDARD INDUSTRIES, INC. by /s/ Saul I. Reck Saul I. Reck, President, Chief Executive Officer and Principal Financial Officer - 13 - -----END PRIVACY-ENHANCED MESSAGE-----