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, 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 (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: 4,030,000
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
-------------- --------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS
Cash $ 853,693 $ 1,066,665
Temporary Investments 188,085 99,768
Real Estate Held for Resale 666,857 -
Accounts Receivable
Trade 7,850,054 7,313,519
Costs and Estimated Earnings in Excess of
Billings on Uncompleted Contracts 2,979,786 2,134,170
Prepaid Expenses 36,621 107,549
Deferred Tax Asset 350,000 350,000
-------------- --------------
TOTAL CURRENT ASSETS 12,925,096 11,071,671
------------ ------------
LAND, BUILDINGS AND EQUIPMENT 1,480,682 1,341,939
Less Accumulated Depreciation (752,674) (657,394)
------------- -------------
NET LAND, BUILDINGS AND EQUIPMENT 728,008 684,545
------------- -------------
OTHER ASSETS
Receivables From Affiliates and Employees 86,369 202,290
Deferred Tax Asset 999,940 1,173,840
------------- ------------
TOTAL OTHER ASSETS 1,086,309 1,376,130
------------ ------------
TOTAL ASSETS $14,739,413 $13,132,346
=========== ===========
</TABLE>
(Continued)
F-1
<PAGE>
GIBBS CONSTRUCTION, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------------ --------------
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES
Notes Payable $ 219,309 $ 150,000
Current Installments of Long-Term Debt 170,733 193,260
Accounts Payable 9,096,290 7,975,704
Accrued Expenses 689,624 794,765
Billings in Excess of Costs and Estimated Earnings
on Uncompleted Contracts 1,097,674 832,447
Payable to Stockholders 344,683 397,740
------------ -------------
TOTAL CURRENT LIABILITIES 11,618,313 10,343,916
LONG-TERM DEBT - Excluding Current Installments 379,482 408,402
------------ -------------
TOTAL LIABILITIES 11,997,795 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 4,956,659 4,907,272
Retained (Deficit) (2,255,341) (2,567,244)
------------ ------------
TOTAL STOCKHOLDERS' EQUITY 2,741,618 2,380,028
------------ ------------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $14,739,413 $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 AND OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Sept. 30, Nine Months Ended Sept. 30,
1999 1998 1999 1998
----------- ------------ ----------- -----------
<S> <C> <C> <C> <C>
CONSTRUCTION REVENUES $16,144,549 $13,520,229 $46,474,648 $36,805,220
COST OF CONSTRUCTION 15,656,072 13,008,206 44,489,075 35,262,467
----------- ------------ ----------- -----------
GROSS PROFIT 488,477 512,023 1,985,573 1,542,753
GENERAL AND ADMINISTRATIVE
EXPENSES 410,823 497,672 1,499,105 1,253,130
------------ ------------- ----------- -----------
INCOME BEFORE OTHER
INCOME (EXPENSE) 77,654 14,351 486,468 289,623
OTHER INCOME (EXPENSE)
Gain on Disposal of Equipment - 5,000 5,000 5,000
(Loss) Gain on Temporary Investments
Transactions (17,966) (34,561) 48,376 (84,668)
Interest Income - 124,833 - 127,336
Interest Expense (28,534) (26,952) (68,363) (79,261)
Other 64,147 - 37,524 -
------------- ----------------- ------------- ----------------
INCOME BEFORE
INCOME TAXES 95,301 82,671 509,005 258,030
INCOME TAX (EXPENSE) (56,102) (46,515) (197,102) (101,115)
------------- -------------- ------------- ------------
NET INCOME $ 39,199 $ 36,156 $ 311,903 $ 156,915
============= ============= =========== ============
INCOME PER SHARE $ .01 $ .01 $ .08 $ .04
=============== =============== ============= ===============
WEIGHTED AVERAGE NUMBER
OF SHARES 4,030,000 4,000,000 4,021,000 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,
1999 1998
---------- -----------
<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES
Net Income $ 311,903 $ 156,915
Adjustments to Reconcile Net Income
to Net Cash From Operating Activities
Depreciation 135,974 112,455
(Gain) on Disposal of Equipment (5,000) (5,000)
(Gain) Loss on Temporary
Investments Transactions (48,376) 84,668
Deferred Taxes 173,900 87,750
Issuance of Common Stock for Service 49,687 -
Changes in Current Assets and Liabilities
Decrease in Accounts Receivable (536,535) 342,927
(Increase) Decrease in Billings Related to
Cost and Earnings on Uncompleted Contracts (580,389) 147,312
Decrease in Prepaid Expenses 70,928 11,272
Increase (Decrease) in Accounts Payable 1,120,586 (688,426)
(Decrease) in Accrued Expenses (105,141) (24,437)
Purchase of Temporary Investments (5,869,106) (876,143)
Proceeds from Sale of Temporary Investments 5,829,165 873,557
Purchase of Real Estate Held for Resale (666,857) -
---------- --------------
NET CASH FLOW (USED) PROVIDED
BY OPERATING ACTIVITIES (119,261) 222,850
----------- ----------
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of Equipment (193,156) (243,958)
Proceeds from Sale of Equipment 18,719 8,924
Decrease (Increase) in Other Assets 115,921 (456)
---------- ------------
NET CASH FLOW (USED)
IN INVESTING ACTIVITIES (58,516) (235,490)
----------- ----------
</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
1999 1998
----------- ------------
<S> <C> <C>
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from Notes Borrowings $ 259,309 $ 505,430
Repayments of Notes Borrowings (241,447) (477,448)
Changes in Stockholder Payables (53,057) (2,032)
----------- ------------
NET CASH FLOW (USED) PROVIDED BY
FINANCING ACTIVITIES (35,195) 25,950
----------- ------------
NET (DECREASE) INCREASE IN CASH (212,972) 13,310
CASH AT THE BEGINNING OF THE PERIOD 1,066,665 438,445
---------- -----------
CASH AT THE END OF THE PERIOD $ 853,693 $ 451,755
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Cash Paid During the Year For:
Interest Expense $ 68,363 $ 79,261
=========== ===========
Income Tax Paid $ 23,202 $ 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, 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 nine month period ended September 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.
Nine Months Ended September 30, 1999, Compared to Nine Months Ended September
30, 1998
Net income for the nine months ended September 30, 1999, was $311,903 compared
to $156,915 for the nine month period ended September 30, 1998, an increase of
99%. The increase is attributable principally to increased revenues and lower
selling, general and administrative expenses as a percentage of revenues in the
1999 period.
Revenues increased in the 1999 period from the 1998 period by 26%, to
$46,474,648 from $36,805,220. Revenues increased primarily in connection with
fewer jobs that were larger in scope than those in the prior period.
Gross margins modestly improved in the 1999 period when compared to the 1998
period, 4.27% in the 1999 period compared to 4.19% in the earlier period. The
effect of the increased gross margins when combined with increased revenues
resulted in an increase in gross profit to $1,985,573 in the 1999 period from
$1,542,753 in the 1998 period, an increase of 29%. In both 1998 and 1999, the
Company experienced losses on some projects which depressed margins. 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, 3.23% in the 1999 period and 3.40% in
the 1998 period. General and administrative expense increased to $1,499,105 in
the 1999 period from $1,253,130 principally reflecting increased marketing
expense incurred in 1999. This increase was partially offset in the third
quarter of 1999 by the recovery in that quarter of a receivable in the amount of
$115,000 that had previously been written off.
Three Months Ended September 30, 1999, Compared to Three Months Ended September
30, 1998
The revenue trends discussed in the third quarter of 1999 when compared to the
third quarter of 1998 were consistent with those discussed above with revenues
increasing 19% to $16,144,549 from $13,520,229. Gross margins, however, declined
in the 1999 period to 3.03% from 3.79% because the losses the Company incurred
on the construction of small hotels. Accordingly, gross profit declined somewhat
to $488,477 in the third quarter of 1999 from $512,023 when compared to the
third quarter of 1998.
Declining general and administrative costs as a percentage of revenues in the
1999 period more than offset that period's declining gross margins when compared
to the earlier period resulting in an overall improvement in operating profit to
$77,654 in the third quarter of 1999 when compared to $14,351 in the earlier
period. General and administrative expenses decreased to $410,823 in the 1999
period from $497,672 in the 1998 period, or 2.54% and 3.68% of revenues,
respectively. This decrease is principally attributable to the recovery of a
receivable in the third quarter of 1999 that had been previously written off.
Net income between the periods was essentially unchanged, $39,199 in the third
quarter of 1999 compared to $36,156 in the third quarter of 1998. The third
quarter of 1998 was favorably affected by interest income of $124,833.
Liquidity and capital resources
Over the last 24 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. In the third quarter
<PAGE>
of 1999, the Company acquired a piece of property on behalf of a client that has
committed to use the Company for construction purposes related to this property.
The Company anticipates selling this property to the client in the fourth
quarter of 1999.
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 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.
November 12, 1999 /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-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 853,693
<SECURITIES> 188,085
<RECEIVABLES> 7,850,054
<ALLOWANCES> 600,153
<INVENTORY> 0
<CURRENT-ASSETS> 12,925,096
<PP&E> 728,008
<DEPRECIATION> 135,974
<TOTAL-ASSETS> 14,739,413
<CURRENT-LIABILITIES> 11,618,313
<BONDS> 0
0
0
<COMMON> 40,300
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 14,739,413
<SALES> 46,474,648
<TOTAL-REVENUES> 46,474,648
<CGS> 44,489,075
<TOTAL-COSTS> 45,988,180
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 164,656
<INTEREST-EXPENSE> 68,363
<INCOME-PRETAX> 509,005
<INCOME-TAX> 197,102
<INCOME-CONTINUING> 311,903
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 311,903
<EPS-BASIC> 0.08
<EPS-DILUTED> 0
</TABLE>
