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 June 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
Item 1. Financial Statements.
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 541,464 $ 438,445
Temporary Investments 91,011 142,533
Accounts Receivable
Trade 7,589,096 7,662,445
Costs and Estimated Earnings in Excess of
Billings on Uncompleted Contracts 1,182,441 1,834,063
Prepaid Expenses 37,627 82,309
Deferred Tax Asset 307,350 350,000
------------ ------------
TOTAL CURRENT ASSETS 9,748,989 10,509,795
------------ -----------
LAND, BUILDINGS AND EQUIPMENT 1,114,836 1,105,556
Less Accumulated Depreciation (614,015) (542,015)
------------ ------------
NET LAND, BUILDINGS AND EQUIPMENT 500,821 563,541
------------ ------------
OTHER ASSETS
Receivables From Affiliates and Employees 131,260 118,040
Deferred Tax Asset 1,414,590 1,426,540
------------ ------------
TOTAL OTHER ASSETS 1,545,850 1,544,580
------------ ------------
TOTAL ASSETS $11,795,660 $12,617,916
=========== ===========
</TABLE>
(Continued)
F-1
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Notes Payable $ 150,000 $ 150,000
Current Installments of Long-Term Debt 142,533 380,769
Accounts Payable 6,843,092 7,482,475
Accrued Expenses 607,355 685,722
Billings in Excess of Costs and Estimated Earnings
on Uncompleted Contracts 1,235,416 1,372,152
Payable to Stockholders 420,745 422,245
------------ ------------
TOTAL CURRENT LIABILITIES 9,399,141 10,493,363
LONG-TERM DEBT - Excluding Current Installments 361,439 210,232
------------ ------------
TOTAL LIABILITIES 9,760,580 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) (2,912,192) (3,032,951)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 2,035,080 1,914,321
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $11,795,660 $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
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1998 1997 1998 1997
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
CONSTRUCTION REVENUES $11,821,015 $9,373,868 $23,284,991 $18,067,786
COST OF CONSTRUCTION 11,227,710 8,912,538 22,254,261 17,394,372
----------- ---------- ----------- -----------
GROSS PROFIT 593,305 461,330 1,030,730 673,414
------------ ---------- ----------- ------------
GENERAL AND ADMINISTRATIVE
EXPENSES 383,065 349,841 755,458 677,256
------------ ---------- ------------ ------------
INCOME (LOSS) BEFORE OTHER
INCOME (EXPENSE) 210,240 111,489 275,272 (3,842)
OTHER INCOME (EXPENSE)
Gain on Disposal of Equipment - 9,140 - 9,140
(Loss) on Temporary Investments
Transactions (50,107) - (50,107) (540)
Interest Income - - 2,503 64
Interest Expense (31,219) (29,130) (52,309) (54,585)
Other - 889 - 7,157
--------------- ------------ --------------- -------------
INCOME (LOSS) BEFORE
INCOME TAXES 128,914 92,388 175,359 (42,606)
INCOME TAX (EXPENSE) BENEFIT ( 38,825) (31,400) (54,600) 14,500
------------ ----------- ------------- ------------
NET INCOME (LOSS) $ 90,089 $ 60,988 $ 120,759 $ (28,106)
============ =========== ============ ============
INCOME (LOSS) PER SHARE $ .02 $ .01 $ .03 $ (.01)
============= ============ ============== =============
WEIGHTED AVERAGE
NUMBER OF SHARES 4,000,000 4,000,000 4,000,000 4,000,000
=========== ========== ============ ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements
F-3
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-----------------------------------
1998 1997
--------- --------------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net Income (Loss) $120,759 $ (28,106)
Adjustments to Reconcile Net Income (Loss)
to Net Cash From Operating Activities
Depreciation 72,000 74,320
(Gain) on Disposal of Equipment - (9,140)
(Gain) Loss on Temporary
Investments Transactions 50,107 540
Deferred Taxes 54,600 (14,500)
Changes in Current Assets and Liabilities
Decrease in Accounts Receivable 73,349 3,672,713
Decrease in Billings Related to Cost and
Earnings on Uncompleted Contracts 514,886 164,895
Decrease in Prepaid Expenses 44,682 -
(Decrease) in Accounts Payable (639,383) (3,546,691)
(Decrease) in Accrued Expenses (78,367) (66,383)
Purchase of Temporary Investments - (105,035)
Proceeds from Sale of Temporary Investments 1,415 -
--------- --------------
NET CASH FLOW PROVIDED
BY OPERATING ACTIVITIES 214,048 142,613
-------- -----------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Equipment (9,280) (43,068)
Proceeds from Disposal of Equipment - 30,936
(Increase) in Other Assets (13,220) -
-------- --------------
NET CASH FLOW (USED) IN
INVESTING ACTIVITIES (22,500) (12,132)
-------- -----------
</TABLE>
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Continued)
<TABLE>
<CAPTION>
Six Months Ended June 30,
-----------------------------------
1998 1997
--------- --------------
<S> <C> <C>
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from Notes Borrowings $ 350,000 $ 167,277
Repayments of Notes Borrowings (437,029) (239,024)
Changes in Stockholder Receivables (1,500) (2,000)
---------- ----------
NET CASH FLOW (USED)
BY FINANCING ACTIVITIES (88,529) (73,747)
---------- ----------
NET INCREASE IN CASH 103,019 56,734
CASH AT THE BEGINNING OF
THE PERIOD 438,445 124,565
--------- ---------
CASH AT THE END OF THE PERIOD $ 541,464 $ 181,299
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash Paid During the Year For:
Interest Expense $ 52,309 $ 54,585
========= =========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements
F-5
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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. 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 six
month period ended June 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.
Six Months Ended June 30, 1998 compared to Six Months Ended June 30,1997
Income from continuing operations was $120,759 for the six month period ended
June 30, 1998, compared to a loss of $28,106 for the same period in 1997. This
change is attributable to increased revenues in the 1998 period, increased gross
margins in the 1998 period when gross margins were approximately 4.4% compared
to approximately 3.7% in the 1997 period and lower general and administrative
costs as a percentage of revenue in the 1998 period, 3.2% in the 1998 period
compared to 3.7% in same period in 1997. The increase in gross margins in the
1998 period reflects the fact that in the earlier year the Company had several
contracts with one client where the margins were low or nonexistent. Although
the Company experienced some contracts in the first half of 1998 in which the
Company lost money due to subcontractor, these contracts did not result in
losses as severe as those in 1997.
The Company's revenues increased in the first half of 1998 by approximately 29%
when compared to the first half of 1997, to $23,284,991 in 1998 compared to
$18,067,786 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.
General and administrative expenses in the six month period ended June 30, 1998,
declined as a percentage of revenue when compared to the same 1997 period
although general and administrative costs increased to $755,458 from $677,256 in
the earlier period. The increase in amount reflects higher salaries in the later
period as well as higher insurance costs.
Three Months Ended June 30, 1998 compared to Three Months Ended June 30,1997
Net income for the three months ended June 30, 1998 increased to $90,089 from
$60,988 for the same period ended June 30, 1997. The increase, approximately
47%, reflects an increase of revenues of approximately 26.1%, to $11,821,015
from $9,373,868, with gross margins and operating margins improving slightly in
the later period. The increase in revenues is attributable to the factors
discussed above.
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.
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote fo Security Holders.
On July 15, 1998, the registrant held its annual meeting of stockholders.
Danny R. Gibbs, Tony G. Gibbs, Dennis T. Mitchell and L. W. Reynolds. Each
director had 3,975,833 votes for election, 10,130 votes against and 10,000
abstained from voting. At the annual meeting, stockholders also ratified the
appointment of Killman Murrell & Co as the auditors for the 1998 fiscal year
with 6,968,963 voting for, 7,000 voting against and 10,000 abstaining. The only
matters acted upon at the annual meeting was the election of directors and the
ratification of the appointment of the registrant's accounting firm.
<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.
August 24, 1998 By: /s/ Danny R. Gibbs
-----------------------------
Danny R. Gibbs, President and
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 541,464
<SECURITIES> 91,011
<RECEIVABLES> 7,589,096
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,748,989
<PP&E> 500,821
<DEPRECIATION> 72,000
<TOTAL-ASSETS> 11,795,660
<CURRENT-LIABILITIES> 9,399,141
<BONDS> 0
0
0
<COMMON> 40,000
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 11,795,660
<SALES> 23,284,991
<TOTAL-REVENUES> 23,284,991
<CGS> 22,254,261
<TOTAL-COSTS> 23,009,719
<OTHER-EXPENSES> 102,416
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 52,309
<INCOME-PRETAX> 175,359
<INCOME-TAX> 54,600
<INCOME-CONTINUING> 120,759
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 120,759
<EPS-PRIMARY> 0.03
<EPS-DILUTED> 0
</TABLE>
