U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from __________________ to ______________
Commission file number 0-9352
Gibbs Construction, Inc.
(Exact name of small business issuer as specified in its charter)
Texas 75-2095676
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
1855 Wall Street, Garland, TX 75041
(Address of principal executive offices) (Zip Code)
(972) 278-3433
(Registrant's telephone number)
- -------------------------------------- ----------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (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 ____
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date: 4,000,000
<PAGE>
PART I - FINANCIAL INFORMATION
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 451,755 $ 438,445
Temporary Investments 60,451 142,533
Accounts Receivable
Trade 7,319,518 7,662,445
Costs and Estimated Earnings in Excess of
Billings on Uncompleted Contracts 1,596,792 1,834,063
Prepaid Expenses 71,037 82,309
Deferred Tax Asset 307,350 350,000
------------ ------------
TOTAL CURRENT ASSETS 9,806,903 10,509,795
------------ -----------
LAND, BUILDINGS AND EQUIPMENT 1,297,550 1,105,556
Less Accumulated Depreciation (606,430) (542,015)
------------ ------------
NET LAND, BUILDINGS AND EQUIPMENT 691,120 563,541
------------ ------------
OTHER ASSETS
Receivables From Affiliates and Employees 118,496 118,040
Deferred Tax Asset 1,381,440 1,426,540
------------ ------------
TOTAL OTHER ASSETS 1,499,936 1,544,580
------------ ------------
TOTAL ASSETS $11,997,959 $12,617,916
=========== ===========
</TABLE>
(Continued)
F-1
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Notes Payable $ 150,000 $ 150,000
Current Installments of Long-Term Debt 171,868 380,769
Accounts Payable 6,794,049 7,482,475
Accrued Expenses 661,285 685,722
Billings in Excess of Costs and Estimated Earnings
on Uncompleted Contracts 1,282,193 1,372,152
Payable to Stockholders 420,213 422,245
------------ ------------
TOTAL CURRENT LIABILITIES 9,479,608 10,493,363
LONG-TERM DEBT - Excluding Current Installments 447,115 210,232
------------ ------------
TOTAL LIABILITIES 9,926,723 10,703,595
------------ -----------
STOCKHOLDERS' EQUITY
Common Stock of $.01 Par Value. Authorized 15,000,000
Shares; Issued and Outstanding 4,000,000 Shares 40,000 40,000
Paid-In-Capital 4,907,272 4,907,272
Retained (Deficit) (2,876,036) (3,032,951)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 2,071,236 1,914,321
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $11,997,959 $12,617,916
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements
F-2
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS AND OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
1998 1997 1998 1997
----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
CONSTRUCTION REVENUES $13,520,229 $12,422,143 $36,805,220 $30,489,929
COST OF CONSTRUCTION 13,008,206 11,588,762 35,262,467 28,983,134
----------- ----------- ---------- -----------
GROSS PROFIT 512,023 833,381 1,542,753 1,506,795
GENERAL AND ADMINISTRATIVE
EXPENSES 497,672 340,721 1,253,130 1,017,977
------------ ------------ --------- -----------
INCOME BEFORE OTHER
INCOME (EXPENSE) 14,351 492,660 289,623 488,818
OTHER INCOME (EXPENSE)
Gain on Disposal of Equipment 5,000 - 5,000 9,140
(Loss) on Temporary Investments Transactions (34,561) - (84,668) (540)
Interest Income 124,833 440 127,336 5,067
Interest Expense (26,952) (27,114) (79,261) (86,261)
Other - (7,222) - (66)
--------------- ------------- -------------- ---------------
INCOME BEFORE
INCOME TAXES 82,671 458,764 258,030 416,158
INCOME TAX BENEFIT (EXPENSE) (46,515) (154,500) (101,115) (140,000)
-------------- -------------- -------------- -------------
NET INCOME $ 36,156 $ 304,264 $ 156,915 $ 276,158
============ ============== ============== ============
INCOME PER SHARE $ .01 $ .08 $ .04 $ .07
============== ============== ============== ============
WEIGHTED AVERAGE NUMBER
OF SHARES 4,000,000 4,000,000 4,000,000 4,000,000
============== ============== ============== ============
</TABLE>
The accompanying note is an integral part
of these consolidated financial statements
F-3
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1998 1997
-------------------------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net Income $ 156,915 $ 276,158
Adjustments to Reconcile Net Income
to Net Cash From Operating Activities
Depreciation 112,455 110,320
(Gain) Loss on Disposal of Equipment (5,000) (9,140)
Loss on Temporary
Investments Transactions 84,668 540
Deferred Taxes 87,750 140,000
Changes in Current Assets and Liabilities
Decrease in Accounts Receivable 342,927 3,379,726
Decrease in Billings Related to
Cost and Earnings on Uncompleted Contracts 147,312 1,036,035
Decrease (Increase) in Prepaid Expenses 11,272 (36,926)
(Decrease) in Accounts Payable (688,426) (2,932,483)
(Decrease) Increase in Accrued Expenses (24,437) (111,509)
Purchase of Temporary Investments (876,143) (204,160)
Proceeds from Sale of Temporary Investments 873,557 -
----------- -------------
NET CASH FLOW PROVIDED
BY OPERATING ACTIVITIES 222,850 1,648,561
----------- ----------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Equipment (243,958) (43,068)
Proceeds from Sale of Equipment 8,924 30,936
Decrease (Increase) in Other Assets (456) 47,535
------------ -----------
NET CASH FLOW PROVIDED (USED)
IN INVESTING ACTIVITIES (235,490) 35,403
----------- -----------
</TABLE>
The accompanying note is an integral part
of these consolidated financial statements
F-4
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Continued)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1998 1997
-----------------------------
<S> <C> <C>
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from Notes Borrowings $ 505,430 $ 167,277
Repayments of Notes Borrowings (477,448) (419,291)
Changes in Stockholder Payables (2,032) (3,350)
----------- -----------
NET CASH FLOW (USED) PROVIDED BY
FINANCING ACTIVITIES 25,950 (255,364)
----------- -----------
NET INCREASE IN CASH 13,310 1,428,600
CASH AT THE BEGINNING OF THE PERIOD 438,445 124,565
---------- -----------
CASH AT THE END OF THE PERIOD $ 451,755 $1,553,165
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash Paid During the Year For:
Interest Expense $ 79,261 $ 86,261
========== ===========
Income Tax Paid $ 13,365 $ -
========== ===========
</TABLE>
The accompanying note is an integral part
of these consolidated financial statements
F-5
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principals for
interim financial information and with the instructions to Form 10-Q and
Rule 10-01 of Regulations S-X. They do not include all information and notes
required by generally accepted accounting principals for complete financial
statements. However, except as disclosed, there has been no material change
in the information disclosed in the notes to consolidated financial
statements included in the Annual Report on Form 10-K of Gibbs Construction,
Inc. and Subsidiary for the year ended December 31, 1997. In the opinion of
management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the nine month period ended September 30, 1998, are not
necessarily indicative of the results that may be expected for the year
ending December 31, 1998.
F-6
<PAGE>
Item 2. Management's Discussion and Analysis of Operations.
Nine Months Ended September 30, 1998 compared to Nine Months Ended
September 30,1997
Net income was $156,915 for the nine month period ended September 30, 1998,
compared to $276,158 for the same period in 1997. The Company experienced some
decrease in gross margins in the third quarter, but the Company's net income was
adversely affected by increased general and administrative expenses in the third
quarter because it wrote off approximately $207,000 in receivables. This
decrease was partially offset by the recognition of approximately $125,000
interest on a receivable that the Company anticipates collecting.
The Company's revenues increased in the first nine months of 1998 by
approximately 20.7% when compared to the first nine months of 1997, to
$36,805,220 in 1998 compared to $30,489,929 in 1997. The increase in revenues is
attributable to the Company expanding into construction for clients other than
national retail chains. During the first half of 1998 the Company constructed
nursing homes, schools and small hotels in addition to its traditional business
of construction for large retail chains. The decline in gross margins in the
1998 period combined with the increase in revenues resulted in a modest increase
in gross profit for the nine month period over the same period in 1997, to
$1,542,753 from $1,506,795.
Three Months Ended September 30, 1998 compared to Three Months Ended
September 30,1997
Net income for the three months ended September 30, 1998 decreased to $36,156
from $304,264 for the same period ended September 30, 1997. The decrease
reflects the write offs of receivables referred to above as well as decreased
gross margins in 1998. Revenues increased 8.8 percent in the third quarter of
1998 when compared to the third quarter of 1997. The increase in revenues is
attributable to the factors discussed above. The increase in revenues was not
sufficient to offset a decline in operating margins in the later period such
that gross profit declined to $512,023 in the later period when compared to
$833,381 in the same period in 1997.
Liquidity and capital resources
Although the Company's working capital position improved since the first quarter
of 1997, the Company's working capital position has essentially remained
unchanged since second quarter of 1997. The Company is seeking to increase its
operating capital, particularly cash, to increase its opportunity to expand its
business.
The Company has recently upgraded its accounting software at a cost of $30,000
so that its management and financial systems would be year 2000 compliant. The
Company plans to continue to purchase personal computers to replace existing
ones as wells as upgrade software systems such that all systems would be year
2000 compliant by the end of 1999. The Company anticipates that its principal
vendors, namely, subcontractors, will undergo similar upgrades over the next
several months. Many of these subcontractors, however, operate with manual
systems and are unaffected by the year 2000 software problems.
<PAGE>
PART II - OTHER INFORMATION
None
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Gibbs Construction, Inc.
November 13, 1998 /s/ Danny R. Gibbs
Danny R. Gibbs, President and
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 451,755
<SECURITIES> 60,451
<RECEIVABLES> 7,319,518
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,806,903
<PP&E> 691,120
<DEPRECIATION> 112,455
<TOTAL-ASSETS> 11,997,959
<CURRENT-LIABILITIES> 9,479,608
<BONDS> 0
<COMMON> 40,000
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 11,997,959
<SALES> 36,805,220
<TOTAL-REVENUES> 36,805,220
<CGS> 35,262,467
<TOTAL-COSTS> 36,515,597
<OTHER-EXPENSES> 84,668
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 79,261
<INCOME-PRETAX> 258,030
<INCOME-TAX> 101,115
<INCOME-CONTINUING> 156,915
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 156,915
<EPS-PRIMARY> 0.04
<EPS-DILUTED> 0.04
</TABLE>
