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, 1999
[ ] 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 of (IRS Employer
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: 4,030,000
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------ -----------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 214,204 $ 1,066,665
Temporary Investments 399,393 99,768
Accounts Receivable
Trade 9,949,604 7,313,519
Costs and Estimated Earnings in Excess of
Billings on Uncompleted Contracts 2,263,194 2,134,170
Prepaid Expenses 40,887 107,549
Deferred Tax Asset 350,000 350,000
------------ -----------
TOTAL CURRENT ASSETS 13,217,282 11,071,671
----------- -----------
LAND, BUILDINGS AND EQUIPMENT 1,431,531 1,341,939
Less Accumulated Depreciation (704,488) (657,394)
------------ ------------
NET LAND, BUILDINGS AND EQUIPMENT 727,043 684,545
------------ ------------
OTHER ASSETS
Receivables From Affiliates, Employees and Other 125,964 202,290
Deferred Tax Asset 1,032,840 1,173,840
------------ ------------
TOTAL OTHER ASSETS 1,158,804 1,376,130
------------ ------------
TOTAL ASSETS $15,103,129 $13,132,346
=========== ===========
</TABLE>
(Continued)
F-1
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
------------ ------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Notes Payable $ 150,000 $ 150,000
Current Installments of Long-Term Debt 164,984 193,260
Accounts Payable 9,588,518 7,975,704
Accrued Expenses 867,515 794,765
Billings in Excess of Costs and Estimated Earnings
on Uncompleted Contracts 856,538 832,447
Payable to Stockholders 384,683 397,740
------------ ------------
TOTAL CURRENT LIABILITIES 12,012,238 10,343,916
LONG-TERM DEBT - Excluding Current Installments 387,534 408,402
------------ ------------
TOTAL LIABILITIES 12,399,772 10,752,318
----------- -----------
STOCKHOLDERS' EQUITY
Common Stock of $.01 Par Value. Authorized 15,000,000
Shares; Issued and Outstanding 4,030,000 and 4,000,000
Shares in 1999 and 1998, respectively 40,300 40,000
Paid-In-Capital 4,957,597 4,907,272
Retained (Deficit) (2,294,540) (2,567,244)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 2,703,357 2,380,028
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $15,103,129 $13,132,346
=========== ===========
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements
F-2
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1999 1998 1999 1998
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
CONSTRUCTION REVENUES $16,725,803 $11,821,015 $30,330,099 $23,284,991
COST OF CONSTRUCTION 15,959,003 11,227,710 28,833,003 22,254,261
----------- ----------- ----------- -----------
GROSS PROFIT 766,800 593,305 1,497,096 1,030,730
------------ ------------ ------------ -----------
GENERAL AND ADMINISTRATIVE
EXPENSES 590,932 383,065 1,088,282 755,458
------------ ------------ ------------ ------------
INCOME BEFORE OTHER
INCOME (EXPENSE) 175,868 210,240 408,814 275,272
OTHER INCOME (EXPENSE)
Gain on Disposal of Equipment 5,000 - 5,000 -
Gain (Loss) on Temporary Investments
Transactions 65,082 (50,107) 66,342 (50,107)
Interest Income - - - 2,503
Interest Expense (40,204) (31,219) (78,681) (52,309)
Other 11,913 - 12,229 -
------------- -------------- ------------- ---------------
INCOME (LOSS) BEFORE
INCOME TAXES 217,659 128,914 413,704 175,359
INCOME TAX (EXPENSE) BENEFIT (74,350) ( 38,825) (141,000) (54,600)
------------- ------------ ------------ -------------
NET INCOME (LOSS) $ 143,309 $ 90,089 $ 272,704 $ 120,759
============ ============ ============ ============
INCOME (LOSS) PER SHARE $ 0.04 $ 0.02 $ 0.07 $ 0.03
=============== ============== =============== ===============
WEIGHTED AVERAGE
NUMBER OF SHARES 4,007,500 4,000,000 4,004,286 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,
1999 1998
---------- ---------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net Income $ 272,704 $120,759
Adjustments to Reconcile Net Income
to Net Cash From Operating Activities
Depreciation 87,788 72,000
(Gain) on Disposal of Equipment (5,000) -
(Gain) Loss on Temporary
Investments Transactions (66,342) 50,107
Deferred Taxes 141,000 54,600
Issuance of Common Stock for Services 50,625 -
Changes in Current Assets and Liabilities
(Increase) Decrease in Accounts Receivable (2,636,085) 73,349
(Increase) Decrease in Billings Related to Cost and
Earnings on Uncompleted Contracts (104,933) 514,886
Decrease in Prepaid Expenses 66,662 44,682
Increase (Decrease) in Accounts Payable 1,612,814 (639,383)
Increase (Decrease) in Accrued Expenses 72,750 (78,367)
Purchase of Temporary Investments (2,439,124) -
Proceeds from Sale of Temporary Investments 2,205,841 1,415
---------- ---------
NET CASH FLOW (USED) PROVIDED
BY OPERATING ACTIVITIES (741,300) 214,048
---------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Equipment (144,005) (9,280)
Proceeds from Disposal of Equipment 18,719 -
Change in Other Assets 76,326 (13,220)
----------- ---------
NET CASH FLOW (USED) IN
INVESTING ACTIVITIES (48,960) (22,500)
----------- ---------
</TABLE>
The accompanying notes are 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>
Six Months Ended June 30,
1999 1998
----------- ----------
<S> <C> <C>
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from Note Borrowings $ 67,027 $ 350,000
Repayments of Note Borrowings (116,171) (437,029)
Changes in Stockholders' Receivables (13,057) (1,500)
----------- ----------
NET CASH FLOW (USED)
BY FINANCING ACTIVITIES (62,201) (88,529)
----------- ----------
NET (DECREASE) INCREASE IN CASH (852,461) 103,019
CASH AT THE BEGINNING OF
THE PERIOD 1,066,665 438,445
---------- ---------
CASH AT THE END OF THE PERIOD $ 214,204 $ 541,464
========== =========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash Paid During the Year For:
Interest Expense $ 78,681 $ 52,309
========== =========
</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, 1998. 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, 1999, are not necessarily indicative of the
results that may be expected for the year ending December 31, 1999.
F-6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Six Months Ended June 30, 1999, Compared to Six Months Ended June 30, 1998
Net income for the six months ended June 30, 1999, was $272,704 compared to
$120,509 for the six month period ended June 30, 1998, an increase of 126%. The
increase is attributable principally to increased revenues in the 1999 period.
Revenues for the 1999 period were $30,330,099 compared to $23,284,991 for the
1998 period, an increase of 30%.
Gross margins also improved in the 1999 period when compared to the 1998 period,
4.9% in the 1999 period compared to 4.4% in the earlier period. The effect of
the increased gross margins when combined with increased revenues resulted in an
increase in gross profit to $1,497,096 in the 1999 period from $1,030,730 in the
1998 period, an increase of 45%. Although the gross margins improved in the
later period, the Company experienced losses on some of the small hotels that
the Company contracted to construct. In the first six months of 1998, gross
margins were depressed because the Company had problems with a subcontractor.
The Company continues to attempt to improve margins through closer supervision
of the projects on which it is awarded construction contracts as well as
contract with entities with whom it has confidence and for projects with which
its has expertise.
General and administrative expenses as a percentage of revenues remained
essentially unchanged between the periods, 3.59% in the 1999 period and 3.24% in
the 1998 period. However, general and administrative expenses increased $332,824
in the first six months of 1999 over the first six months of 1998. Of this
increase approximately 35% involves continued litigation expense relating to the
collection of receivables that were written off in 1998 and 45% relates to
marketing expenses at trade shows incurred in 1999 that were not incurred in
1998.
Three Months Ended June 30, 1999, Compared to Three Months Ended June 30, 1998
The revenue trends discussed above were accentuated in the second quarter of
1999 when compared to the second quarter of 1998 with revenues increasing to
$16,725,803 from $11,821,015, an increase of 41%. Gross margins, however,
declined in the 1999 period to 4.58% from 5.02% because the losses the Company
incurred on the construction of small hotels occurred principally in the second
quarter of 1999, and in the 1998 period the Company had already expensed losses
referred to above incurred in certain contracts involving one subcontractor.
Nonetheless, gross profit improved to $766,800 in the second quarter of 1999
from $593,305 because revenues in the second quarter of 1999 were significantly
more than those in the second quarter of 1998.
The improved gross profit was offset by increases in general and administrative
expenses. Although general and administrative expenses as a percentage of
revenues did not change significantly, 3.24% in the 1998 period compared to
3.53% in the 1999 period, general and administrative expenses increased $207,867
to $590, 932 in the 1999 period from $383,065 in the 1998 period. Of this
increase, approximately 43% is attributable to increased marketing expense
incurred in connection with trade shows, and approximately 36% is attributable
to increased professional fees incurred in connection with collection efforts
for bad debts that have been charged off.
<PAGE>
Income before income taxes was $217,659 for the second quarter of 1999 compared
to $128,914 in the second quarter of 1998, a difference of $88,745. Almost all
of this difference can be attributed to a loss of $50,107 in the second quarter
of 1998 on temporary investments and a gain of $65,082 in the second quarter of
1999, a difference of $115,189. Early in the third quarter of 1999 the Company
liquidated the securities that gave rise to the gain recognized in the second
quarter of 1999.
The improvement in the second quarter of 1999 can be attributed, consequently,
to improved revenues and the recognition of a gain in temporary investments.
These favorable developments were offset by increased general and administrative
expenses.
Liquidity and capital resources
Over the last 18 months, the Company has continued to improve its working
capital position. Except for debt incurred for equipment, the Company finances
its operations through cash generated by those operations.
Year 2000
In 1998, the Company began an upgrade of its accounting software and the
computers on which the software operates, a process that is now being completed.
The cost of these upgrades exceeds $60,000, and the Company believes that these
upgrades has resulted in the Company being year 2000 compliant. The Company
anticipates that its principal vendors, namely, subcontractors, will undergo
similar upgrades over the next several months if they have not already done so.
Many of these subcontractors, however, operate with manual systems and are
unaffected by year 2000 software problems.
<PAGE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters of Vote to Security Holders
On July 30, 1999, the registrant held its annual meeting of shareholders.
At that meeting, directors were re-elected and the appointment of Killman
Murrell & Company, P.C. as the registrant's independent auditors was
ratified. The results of the voting was as follows:
Directors:
Name FOR AGAINST
Danny Gibbs 2,225,255 15,230
Tony Gibbs 2,225,255 15,230
Dennis T. Mitchell 2,225,255 15,230
L. W. Reynolds 2,225,255 15,230
Ratification of Killman Murrell & Company, P.C. as independent auditors
FOR AGAINST ABSTAIN
2,236,385 3,000 1,100
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Index
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K: 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.
August 12, 1999 /s/ Danny R. Gibbs
Danny R. Gibbs, President and
Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 214,204
<SECURITIES> 399,393
<RECEIVABLES> 12,212,798
<ALLOWANCES> 785,104
<INVENTORY> 0
<CURRENT-ASSETS> 13,217,282
<PP&E> 727,043
<DEPRECIATION> 87,788
<TOTAL-ASSETS> 15,103,129
<CURRENT-LIABILITIES> 12,012,238
<BONDS> 0
0
0
<COMMON> 40,300
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 15,103,129
<SALES> 16,725,803
<TOTAL-REVENUES> 16,725,803
<CGS> 15,959,003
<TOTAL-COSTS> 16,549,935
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 60,104
<INTEREST-EXPENSE> 40,204
<INCOME-PRETAX> 217,659
<INCOME-TAX> 74,350
<INCOME-CONTINUING> 143,309
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 143,309
<EPS-BASIC> 4,007,500
<EPS-DILUTED> 0
</TABLE>
