SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the Quarter Ended Commission File No.
October 31, 1999 0-10146
- --------------------- -------------------
ABRAMS INDUSTRIES, INC.
(Exact name of Registrant as specified in its charter)
Georgia 58-0522129
- ------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1945 The Exchange, Suite 300, Atlanta, Georgia 30339
---------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(770) 953-0304
---------------------------------------------------
(Registrant's telephone number, including area code)
N/A
----------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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 / /
The number of shares of $1.00 par value Common Stock of the Registrant
outstanding as of November 30, 1999, was 2,936,356.
<PAGE>
ABRAMS INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
OCTOBER 31, 1999 APRIL 30, 1999
---------------- --------------
ASSETS
- ------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 3,615,991 $ 7,448,551
Receivables (note 2) 28,370,666 31,402,635
Less: Allowance for doubtful accounts (111,730) (122,396)
Inventories, net (note 3) 3,470,258 2,972,663
Costs and earnings in excess of billings 4,864,294 3,188,100
Condemnation Receivable (note 4) 4,500,000 --
Property held for sale (notes 4 and 5) 521,282 5,268,478
Deferred income taxes 820,829 820,829
Other 1,241,050 599,715
------------- -------------
Total current assets 47,292,640 51,578,575
------------- -------------
INCOME-PRODUCING PROPERTIES, net (note 5) 60,670,417 52,311,607
PROPERTY, PLANT AND EQUIPMENT, net 12,072,118 12,368,396
LAND HELD FOR FUTURE DEVELOPMENT OR SALE 3,716,564 4,237,845
OTHER ASSETS
Notes receivable 230,405 297,209
Cash surrender value of life insurance on officers, net 1,339,085 1,473,963
Deferred loan costs, net 828,529 788,356
Other 2,819,650 3,076,589
------------- -------------
$ 128,969,408 $ 126,132,540
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Trade and subcontractors payables $ 21,062,688 $ 18,391,697
Billings in excess of costs and earnings 2,697,027 2,947,814
Accrued expenses 3,635,361 5,202,597
Deferred income 486,038 225,888
Deferred gain on sale of asset (note 4) 2,764,216 --
Short-term borrowings 1,651,880 8,048,222
Current maturities of long-term debt 1,659,694 6,876,455
------------- -------------
Total current liabilities 33,956,904 41,692,673
------------- -------------
DEFERRED INCOME TAXES 3,849,809 2,910,771
OTHER LIABILITIES 3,375,402 1,702,048
MORTGAGE NOTES PAYABLE, less current maturities 34,492,852 27,447,977
OTHER LONG-TERM DEBT, less current maturities 28,864,496 29,106,511
------------- -------------
Total liabilities 104,539,463 102,859,980
------------- -------------
SHAREHOLDERS' EQUITY
Common stock, $1 par value; authorized 5,000,000 shares;
3,014,039 issued and 2,936,356 outstanding 3,014,039 3,014,039
Additional paid-in capital 2,019,690 2,019,690
Retained earnings 19,808,767 18,651,382
------------- -------------
24,842,496 23,685,111
Less cost of treasury stock 412,551 412,551
------------- -------------
Total shareholders' equity 24,429,945 23,272,560
------------- -------------
$ 128,969,408 $ 126,132,540
============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
ABRAMS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<CAPTION>
SECOND QUARTER ENDED SIX MONTHS ENDED
OCTOBER 31, OCTOBER 31,
------------------------------- --------------------------------
1999 1998 1999 1998
------------ ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES
Construction $ 44,612,384 $ 49,232,869 $ 88,416,588 $ 96,385,800
Manufacturing (note 7) 4,120,626 4,606,781 8,452,747 7,138,917
Real estate 3,450,239 3,509,943 13,476,491 6,779,940
------------ ------------- ------------- -------------
52,183,249 57,349,593 110,345,826 110,304,657
Less: Intersegment eliminations (405,573) (757,464) (819,116) (1,971,721)
------------ ------------- ------------- -------------
51,777,676 56,592,129 109,526,710 108,332,936
Interest 78,186 118,407 172,531 270,833
Other 53,185 40,703 115,253 51,409
------------ ------------- ------------- -------------
51,909,047 56,751,239 109,814,494 108,655,178
------------ ------------- ------------- -------------
COSTS AND EXPENSES
Applicable to REVENUES--
Construction 43,153,120 47,634,716 85,366,188 92,884,967
Manufacturing 2,972,297 3,795,141 6,472,342 6,328,273
Real estate, exclusive of interest 1,650,610 1,662,328 7,404,461 3,416,718
------------ ------------- ------------- -------------
47,776,027 53,092,185 99,242,991 102,629,958
Less: Intersegment eliminations (149,777) (402,452) (613,251) (1,572,826)
------------ ------------- ------------- -------------
47,626,250 52,689,733 98,629,740 101,057,132
------------ ------------- ------------- -------------
Selling, shipping, general and administrative
Construction 760,665 833,916 1,546,568 1,746,131
Manufacturing 1,010,494 979,493 2,019,925 2,012,224
Real estate 391,009 572,457 1,354,607 1,212,032
Parent 634,959 869,175 1,801,553 1,403,609
------------ ------------- ------------- -------------
2,797,127 3,255,041 6,722,653 6,373,996
Less: Intersegment eliminations (261,952) (62,064) (528,106) (424,683)
------------ ------------- ------------- -------------
2,535,175 3,192,977 6,194,547 5,949,313
------------ ------------- ------------- -------------
Interest costs incurred, less interest capitalized 1,506,275 1,355,700 2,754,913 2,618,919
------------ ------------- ------------- -------------
51,667,700 57,238,410 107,579,200 109,625,364
------------ ------------- ------------- -------------
EARNINGS (LOSS) BEFORE INCOME TAXES 241,347 (487,171) 2,235,294 (970,186)
INCOME TAX EXPENSE (BENEFIT) 92,672 (168,000) 843,000 (344,000)
------------ ------------- ------------- -------------
NET EARNINGS (LOSS) $ 148,675 $ (319,171) $ 1,392,294 $ (626,186)
============ ============= ============= =============
NET EARNINGS (LOSS) PER SHARE:
Basic and Diluted $ .05 $ (.11) $ 0.47 $ (0.21)
============ ============= ============= =============
DIVIDENDS PER SHARE $ .04 $ .05 $ .08 $ .10
============ ============= ============= =============
WEIGHTED AVERAGE SHARES OUTSTANDING 2,936,356 2,936,356 2,936,356 2,936,356
============ ============= ============= =============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
ABRAMS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED OCTOBER 31,
------------------------------
1999 1998
----------- --------------
<S> <C> <C>
Cash flows from operating activities
Net earnings (loss) $ 1,392,294 $ (626,186)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities
Depreciation and amortization 1,742,136 1,543,839
Deferred tax expense 939,038 --
Gain on sales of real estate and property, plant and equipment (2,974,931) --
Decrease (increase) in assets
Receivables 3,021,303 (6,341,642)
Inventories (497,595) (674,733)
Costs and earnings in excess of billings (1,676,194) 2,380,498
Other current assets (641,335) (383,478)
Other assets 420,259 (418,652)
Increase (decrease) in liabilities
Accounts payable 2,670,991 (771,819)
Billings in excess of costs and earnings (250,788) 2,954,118
Accrued expenses (1,641,492) (3,550,248)
Deferred income 260,150 --
Other liabilities (244,532) 167,977
----------- ------------
Net cash provided by (used in) operating activities 2,519,304 (5,720,326)
----------- ------------
Cash flows from investing activities
Proceeds from sales of real estate and property, plant and equipment 6,581,881 --
Additions to properties, property, plant and equipment, net (9,579,268) (3,289,294)
----------- ------------
Net cash used in investing activities (2,997,387) (3,289,294)
----------- ------------
Cash flows from financing activities
Net short-term borrowings (6,396,342) 1,845,688
Debt proceeds 9,502,355 234,570
Debt repayments (6,059,719) (623,267)
Additions to deferred loan costs (165,863) (49,281)
Cash dividends (234,908) (293,636)
----------- ------------
Net cash (used in) provided by financing activities (3,354,477) 1,114,074
----------- ------------
Net decrease in cash and cash equivalents (3,832,560) (7,895,546)
Cash and cash equivalents at beginning of period 7,448,551 13,240,471
----------- ------------
Cash and cash equivalents at end of period $ 3,615,991 $ 5,344,925
=========== ============
Supplemental schedule of cash flow information
Interest paid, net of amounts capitalized $ 2,697,077 $ 2,554,981
=========== ============
Income taxes paid, net of refunds $ (316,955) $ 158,572
=========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
ABRAMS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 1999, AND APRIL 30, 1999
(UNAUDITED)
NOTE 1. UNAUDITED STATEMENTS
- -----------------------------
The accompanying unaudited consolidated financial statements have been
prepared by the Company in accordance with generally accepted accounting
principles, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements have been condensed or omitted pursuant to such rules and
regulations, although management believes that the disclosures are adequate to
make the information presented not misleading. In the opinion of management, the
accompanying financial statements contain all adjustments, which consist solely
of normal recurring accruals, necessary for a fair statement of the results for
the interim periods presented. These financial statements should be read in
conjunction with the consolidated financial statements and the notes thereto
included in the Company's Annual Report to Shareholders for the year ended April
30, 1999. Results of operations for interim periods are not necessarily
indicative of annual results.
NOTE 2. RECEIVABLES
- --------------------
All contract and trade receivables are expected to be collected within
one year.
NOTE 3. INVENTORIES
- --------------------
The classes of inventory are as follows:
October 31, 1999 April 30, 1999
---------------- --------------
Finished goods $1,664,563 $1,268,048
Work in process 1,006,774 845,495
Raw materials 798,921 859,120
---------- ----------
$3,470,258 $2,972,663
========== ==========
NOTE 4. EMINENT DOMAIN TAKING OF FORMER MANUFACTURING PLANT
- ------------------------------------------------------------
In June 1999, the Company received notice from the Georgia State
Properties Commission that the Georgia World Congress Center Authority had made
the determination to acquire the Manufacturing Segment's former wood
manufacturing facility in Atlanta, Georgia. In October 1999, a Special Master
awarded the Company $4,500,000 for the property which was deposited into the
court for distribution. In November 1999, the cash was distributed to the
Company. Both the State and the Company have filed appeals of the award amount.
Pending a resolution of the appeals, the Company has deferred recognition of the
approximately $2.76 million gain on the transaction.
NOTE 5. REAL ESTATE DISPOSITION AND ACQUISITION
- -----------------------------------------------
In May 1999, the Company sold its shopping center located in Newnan,
Georgia. The sale was structured as a tax-deferred, like-kind exchange pursuant
to Internal Revenue Code Section 1031, which allows a deferral of the tax gain
if the Company utilizes the proceeds of the sale to purchase other real estate
within 180 days of the sale. The proceeds were used in July 1999, to purchase an
approximately 174,000 square foot shopping center located in Jacksonville,
Florida for $9,000,000. The purchase was also financed with cash held by the
Company, and the Company's lines of credit. Subsequently, the Company closed on
a permanent mortgage loan secured by the property and used the proceeds to pay
back the lines of credit. The permanent loan, in the amount of $9,500,000, bears
interest at 7.375% and is scheduled to be fully amortized over twenty years.
<PAGE>
Loan proceeds received in excess of the purchase price were used to pay
financing costs and are available for use for tenant improvements and
commissions on new leases. The loan may be called at any time by the lender
after September 1, 2002. If the loan were called, the Company would have up to
thirteen months to repay the principal amount of the loan without penalty. In
conjunction with the loan, an Additional Interest Agreement was executed which
entitles the lender to be paid additional interest equal to fifty percent of the
quarterly net cash flow and fifty percent of the appreciation in the property
upon sale or refinance. The liability related to the lender's fifty percent
share of the appreciation in the property was $1,673,354 at October 31, 1999.
NOTE 6. OPERATING SEGMENTS
- --------------------------
The Company has three operating segments: construction, manufacturing and
real estate. The Construction Segment provides construction services for
commercial and industrial projects. The Manufacturing Segment produces store
fixtures for retail outlets, display fixtures for point-of-sale merchandising
and other products. The Real Estate Segment develops or acquires
income-producing properties for investment and usually provides property
management for the properties after development or acquisition.
The operating segments are managed separately and maintain separate
personnel due to the differing products offered by each segment. Management of
each of the segments evaluates and monitors the performance of the segments
based on the earnings or losses prior to income taxes.
The table below exhibits selected financial data on a segment basis.
Operating earnings (loss) is total revenue less operating expenses, including
depreciation and interest. Parent expenses and income taxes have not been
allocated to the other subsidiaries.
<PAGE>
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED OCTOBER 31, 1999 CONSTRUCTION MANUFACTURING REAL ESTATE PARENT ELIMINATIONS CONSOLIDATED
------------ ------------- ----------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Revenues from unaffiliated customers $44,612,384 $4,117,322 $3,047,971 $ -- $ -- $51,777,677
Interest and other income 39,893 14,587 82,793 16,488 (22,391) 131,370
Intersegment revenue -- 3,305 402,268 -- (405,573) --
----------- ---------- ---------- --------- --------- -----------
Total revenues $44,652,277 $4,135,214 $3,533,032 $ 16,488 $(427,964) $51,909,047
=========== ========== ========== ========= ========= ===========
Operating earnings (loss) $ 708,788 $ 117,768 $ 33,237 $(624,603) $ 6,157 $ 241,347
=========== ========== ========== ========= ========= ===========
- ---------------------------------------------------------------------------------------------------------------------------------
For the Quarter Ended October 31, 1998 Construction Manufacturing Real Estate Parent Eliminations Consolidated
------------ ------------- ----------- ---------- ------------ ------------
Revenues from unaffiliated customers $49,061,527 $ 4,421,406 $3,109,196 $ -- $ -- $ 56,592,129
Interest and other income 65,559 1,171 73,760 18,620 -- 159,110
Intersegment revenue 171,342 185,375 400,747 -- (757,464) --
----------- ----------- ---------- --------- --------- ------------
Total revenues $49,298,428 $ 4,607,952 $3,583,703 $ 18,620 $(757,464) $ 56,751,239
=========== =========== ========== ========= ========= ============
Operating earnings (loss) $ 707,637 $ (311,882) $ 23,162 $(853,430) $ (52,658) $ (487,171)
=========== =========== ========== ========= ========= ============
- -----------------------------------------------------------------------------------------------------------------------------------
For the Six Months Ended October 31, 1999 Construction Manufacturing Real Estate Parent Eliminations Consolidated
------------ ------------- ----------- ---------- ------------ ------------
Revenues from unaffiliated customers $88,416,588 $ 8,436,459 $12,673,663 $ -- $ -- $109,526,710
Interest and other income 99,545 82,706 119,835 37,720 (52,022) 287,784
Intersegment revenue -- 16,288 802,828 -- (819,116) --
----------- ----------- ----------- ----------- --------- ------------
Total revenues $88,516,133 $ 8,535,453 $13,596,326 $ 37,720 $(871,138) $109,814,494
=========== =========== =========== =========== ========= ============
Operating earnings (loss) $ 1,573,090 $ (46,210) $ 2,166,140 $(1,779,967) $ 322,241 $ 2,235,294
=========== =========== =========== =========== ========= ============
- ----------------------------------------------------------------------------------------------------------------------------------
For the Six Months Ended October 31, 1998 Construction Manufacturing Real Estate Parent Eliminations Consolidated
------------ ------------- ----------- ---------- ------------ ------------
Revenues from unaffiliated customers $95,270,977 $ 6,913,459 $ 6,148,500 $ -- $ -- $ 108,332,936
Interest and other income 127,873 8,181 151,863 34,325 -- 322,242
Intersegment revenue 1,114,823 225,458 631,440 -- (1,971,721) --
----------- ----------- ----------- ----------- ----------- -------------
Total revenues $96,513,673 $ 7,147,098 $ 6,931,803 $ 34,325 $(1,971,721) $ 108,655,178
=========== =========== =========== =========== =========== =============
Operating earnings (loss) $ 1,882,946 $(1,236,293) $ (268,549) $(1,374,080) $ 25,790 $ (970,186)
=========== =========== =========== =========== =========== =============
</TABLE>
NOTE 7. DISCONTINUANCE OF MANUFACTURING OPERATIONS
- --------------------------------------------------
On December 10, 1999, the Board of Directors of the Company decided to
discontinue the manufacturing operations of Abrams Fixture Corporation. The
Company is in the process of completing a formal plan to wind down operations
and identify the actions and timetable to dispose of its manufacturing equipment
and the expected costs that will be incurred to dispose of the Manufacturing
Segment. The Company will accrue the costs to dispose of the Segment when a
formal plan of disposal is completed and approved. The Company estimates that
the pre-tax loss to be incurred to dispose of the Manufacturing Segment will not
exceed $4 million, including employee job termination costs. The estimate is
subject to the asset values that are actually realized.
On December 13, 1999, the Company notified its employees that their
positions would be eliminated as part of the discontinuance of the manufacturing
operations. The Company will accrue and include the employee job elimination
costs in the financial statements when these costs can be reasonably estimated.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
- --------------------------------------------------------------------------------
OF OPERATIONS.
- --------------
Changes in CONSOLIDATED BALANCE SHEETS between April 30, 1999, and October 31,
- --------------------------------------------------------------------------------
1999.
- -----
Accounts receivable decreased by $3,031,969 and Trade and subcontractors
payable increased by $2,670,991 primarily because of the timing of the
submission and payment of invoices for construction work performed.
Property held for sale decreased $4,747,196 primarily as a result of the
sale of a shopping center in Newnan, Georgia and the eminent domain taking of
the former manufacturing plant in Atlanta. As of October 31, 1999, an outparcel
in Davenport, Iowa and an outparcel in North Fort Myers, Florida were classified
as Property held for sale. These two parcels were previously classified as Land
held for future development or sale.
Income-producing properties increased by $8,358,810 primarily as a
result of the purchase of an approximately 174,000 square foot shopping center
in Jacksonville, Florida. Publix Super Markets previously leased approximately
86,000 square feet of space in the center, which it has vacated, while remaining
fully obligated under its lease until August 2010.
Accrued expenses decreased by $1,567,236 because of the payment of
year-end accruals.
Short term borrowings decreased by $6,396,342 primarily due to
repayments on the lines of credit. On April 30,1999, in order to facilitate the
sale of the Newnan, Georgia shopping center, the Company drew $5,600,000 on the
lines of credit to have funds available to pay the related mortgage debt. This
draw was repaid in May 1999.
Current maturities of long-term debt decreased by $5,216,761 primarily as
a result of the payoff of the related mortgage loan upon the sale of the Newnan,
Georgia shopping center.
Deferred income taxes increased by $939,038 reflecting the income tax
deferral of the gain on the sale of the Newnan, Georgia property. This
transaction was structured as a like-kind exchange pursuant to Internal Revenue
Code Section 1031, which allows a deferral of the recognition of the tax gain if
the Company utilizes the proceeds of the sale to purchase other real estate
within 180 days of the sale. Management believes it has complied with the
provisions of Internal Revenue Code Section 1031 and thus will defer federal tax
on the gain of this sale.
Other liabilities (long-term) increased by $1,673,354 primarily as a
result of the participation liability related to the participating mortgage loan
placed on the newly acquired Jacksonville center discussed above.
Mortgage notes payable, less current maturities, increased $7,044,875
primarily as a result of the placement of the loan on the newly acquired
shopping center in Jacksonville, Florida, as discussed above.
Results of operations of second quarter and first six months of fiscal 2000
- --------------------------------------------------------------------------------
compared to second quarter and first six months of fiscal 1999.
- ---------------------------------------------------------------
REVENUES
For the second quarter 2000, Consolidated REVENUES, including Interest
income and Other income and net of intersegment eliminations, were $51,909,047,
compared to $56,751,239 for the second quarter 1999, a decrease of 9%. For the
first six months of fiscal 2000, Consolidated REVENUES were $109,814,494,
compared to $108,655,178 for the first six months of fiscal 1999.
The figures in Chart A are Segment revenues before Intersegment
eliminations and do not include Interest income or Other income.
<PAGE>
<TABLE>
<CAPTION>
CHART A
REVENUE SUMMARY BY SEGMENT
(Dollar Amounts in Thousands)
Second Quarter Ended Six Months Ended
October 31, Amount Percent October 31, Amount Percent
---------------------- Increase Increase --------------------- Increase Increase
1999 1998 (Decrease) (Decrease) 1999 1998 (Decrease) (Decrease)
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Construction <F1> $ 44,612 $ 49,233 $ (4,621) (9) $ 88,417 $ 96,386 $ (7,969) (8)
Manufacturing <F2> 4,121 4,607 (486) (11) 8,453 7,139 1,314 18
Real Estate <F3> 3,450 3,510 (60) (2) 13,476 6,780 6,696 99
-------- -------- -------- --------- --------- --------
$ 52,183 $ 57,350 $ (5,167) (9) $ 110,346 $ 110,305 $ 41 0
======== ======== ======== ========= ========= ========
NOTES TO CHART A
----------------
<FN>
<F1> REVENUES for second quarter and the first six months of fiscal 2000 were
lower than those of second quarter and the first six months of fiscal
1999 because of a decrease in sales to existing and former customers,
partially offset by an increase in sales to new and other existing
customers.
<F2> REVENUES for the first six months of fiscal 2000 were higher than those
of the first six months of fiscal 1999 primarily because of increased
orders from two major customers. In the second quarter 2000, the
Manufacturing Segment experienced a decline in sales orders due to
increased competition resulting in fewer bid successes.
<F3> REVENUES for the first six months of fiscal 2000 were higher than those
of the first six months of fiscal 1999 primarily due to the sale of the
Newnan, Georgia shopping center in the first quarter 2000. There were no
real estate sales in the first six months of fiscal 1999.
</FN>
</TABLE>
The following table indicates the backlog of contracts, orders and
expected rentals for the next twelve months by industry segment:
October 31,
----------------------------------
1999 1998
------------ ------------
Construction $ 31,529,000 $ 37,602,000
Manufacturing 6,263,000 9,854,000
Real Estate 11,338,000 10,280,000
------------ ------------
Total Backlog $ 49,130,000 $ 57,736,000
============ ============
COSTS AND EXPENSES: Applicable to REVENUES
As a percentage of Segment REVENUES (See Chart A) for the second quarter
2000 and 1999, the applicable COSTS AND EXPENSES (See Chart B) were 92% and 93%,
respectively. As a percentage of Segment REVENUES for the first six months 2000
and 1999, the applicable COSTS AND EXPENSES were 90% and 93%, respectively.
The figures in Chart B are prior to Intersegment eliminations.
<PAGE>
<TABLE>
<CAPTION>
CHART B
COSTS AND EXPENSES APPLICABLE TO REVENUES SUMMARY BY SEGMENT
(Dollar Amounts in Thousands)
Percent of Segment Percent of Segment
Revenues For Revenues For
Second Quarter Ended Second Quarter Ended Six Months Ended Six Months Ended
October 31, October 31, October 31, October 31,
---------------------- --------------------- ------------------------ --------------
1999 1998 1999 1998 1999 1998 1999 1998
------- ------- ----- ---- -------- -------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Construction $43,153 $47,635 97 97 $ 85,366 $ 92,885 97 96
Manufacturing <F1> 2,972 3,795 72 82 6,472 6,328 77 89
Real Estate <F2> 1,651 1,662 48 47 7,405 3,417 55 50
------- ------- -------- --------
$47,776 $53,092 92 93 $ 99,243 $102,630 90 93
======= ======= ======== ========
NOTES TO CHART B
----------------
<FN>
<F1> The decrease in the percentage of COSTS AND EXPENSES: Applicable to
REVENUES for the second quarter and first six months 2000 compared the
second quarter and first six months 1999 was due to an improvement in
manufacturing efficiencies in fiscal 2000 after experiencing a disruption
in the prior year caused by the relocation of the manufacturing facility.
<F2> The increase in the dollar amount of COSTS AND EXPENSES: Applicable to
REVENUES for the first six months 2000 compared to the first six months
1999 was primarily attributable to the sale of the Newnan, Georgia
shopping center.
</FN>
</TABLE>
SELLING, SHIPPING, GENERAL AND ADMINISTRATIVE EXPENSES
For the second quarter 2000 and 1999, Selling, shipping, general and
administrative expenses, prior to intersegment eliminations, were $2,797,127 and
$3,255,041, respectively. As a percentage of Consolidated REVENUES, these
expenses were 5% and 6%, respectively. For the first six months 2000 and 1999,
Selling, shipping, general and administrative expenses, prior to intersegment
eliminations, were $6,722,653 and $6,373,996, respectively. As a percentage of
Consolidated REVENUES, these expenses were 6% for both periods. In reviewing
Chart C, the reader should recognize that the volume of revenues generally will
affect the amounts and percentages. The percentages in Chart C are based upon
expenses as they relate to Segment REVENUES (Chart A) prior to Intersegment
eliminations, except that Parent and Total expenses relate to Consolidated
REVENUES.
<PAGE>
<TABLE>
<CAPTION>
CHART C
SELLING, SHIPPING, GENERAL AND ADMINISTRATIVE EXPENSES BY SEGMENT
(Dollar Amounts in Thousands)
Percent of Segment Percent of Segment
Revenues For Revenues For
Second Quarter Ended Second Quarter Ended Six Months Ended Six Months Ended
October 31, October 31, October 31, October 31,
--------------------- --------------------- ------------------ ---------------
1999 1998 1999 1998 1999 1998 1999 1998
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Construction $ 761 $ 834 2 2 $1,547 $1,746 2 2
Manufacturing 1,010 980 25 21 2,020 2,012 24 28
Real Estate <F1> 391 572 11 16 1,355 1,212 10 18
Parent <F2> 635 869 1 2 1,801 1,404 2 1
------- ------ ------ ------
$2,797 $3,255 5 6 $6,723 $6,374 6 6
====== ====== ====== ======
NOTES TO CHART C
----------------
<FN>
<F1> On a dollar and percentage basis, Selling, shipping, general and
administrative expenses were lower for second quarter 2000 compared to
second quarter 1999 primarily because of a decrease in personnel costs.
<F2> On a dollar and percentage basis, Selling, shipping, general and
administrative expenses were lower for second quarter 2000 compared to
second quarter 1999 primarily because of a decrease in personnel costs.
On a dollar and percentage basis, Selling, shipping, general and
administrative expenses were higher for the first six months 2000
compared to the first six months 1999 primarily because of the accrual of
severance and consulting fees payable to the Company's former CEO.
</FN>
</TABLE>
Liquidity and capital resources.
- --------------------------------
Between April 30, 1999, and October 31, 1999, working capital increased
by $3,449,834. Operating activities provided cash of $2,519,304. Investing
activities used cash of $2,997,387 primarily for the purchase of the shopping
center in Jacksonville, Florida, which was partially offset by proceeds from the
sale of the Newnan, Georgia shopping center. Financing activities used cash of
$3,354,477 primarily for repayments on the Company's lines of credit and the
payoff of the mortgage on the Newnan center. The proceeds of the mortgage loan
on the newly acquired Jacksonville center partially offset this usage of cash.
At October 31, 1999, the Company and its subsidiaries had available
unsecured committed lines of credit totaling $13,000,000, of which none was
outstanding, $12,500,000 was available, and $500,000 was reserved for a letter
of credit issued as security for a mortgage loan on an Income-producing
property. The letter of credit has been extended until November 2000, at which
time it will be used to pay down the mortgage loan if certain leasing
requirements are not attained. In addition, the Company has a committed line of
credit totaling $2,500,000, secured by the Manufacturing Segment's inventory and
receivables, of which $1,651,880 was outstanding. In November 1999, the Company
received the $4,500,000 Special Master condemnation award discussed above. The
Manufacturing Segment's line of credit and the $114,278 outstanding debt on the
property were paid off with the proceeds. The remaining balance was invested in
short-term instruments and used for operations.
<PAGE>
The Company plans to replace the $10,969,929 letter of credit which
secures the taxable Industrial Development Revenue Bonds used to finance the
Manufacturing Segment's production facility and certain equipment. In December
1999, the Company received a proposal for a substitute letter of credit not to
exceed the lesser of $7,500,000 or seventy-five percent of the appraised value
of the land and building. The Company anticipates closing on the refinance
during the last quarter of fiscal 2000, utilizing cash received from the
condemnation award discussed above, proceeds from the liquidation of the
manufacturing equipment and cash from operations.
On December 10, 1999, the Board of Directors of the Company decided to
discontinue the manufacturing operations of the Manufacturing Segment. See Note
7 to the Consolidated Financial Statements of the Company. Although the Company
estimates that, subject to asset values that are actually realized, the pre-tax
loss to be recognized on the disposal will not exceed $4 million, the Company
does not expect the net cash requirements to fund the costs of discontinuing the
Manufacturing Segment's operations to be material, and plans to fund any cash
needs from operations and cash held by the Company.
Year 2000
- ---------
The Year 2000 has presented a problem for companies who use computer
systems that were developed without the ability to properly recognize and
process data relating to the Year 2000 and beyond. Such systems may include
hardware, software and other telecommunications information systems (IT), as
well as computer systems that do not relate to information technology, such as
building and other ancillary systems (non-IT). The Company, its vendors,
suppliers, and other significant third party service providers are all exposed
to the potential disruption of operations if such systems are not replaced or
remediated.
The Company has substantially completed its assessment and remediation
efforts for achieving Year 2000 compliance in its IT and non-IT systems. All
computer hardware and software have been inventoried and tested. The
Construction Segment has purchased a new Year 2000 compliant accounting software
package and upgraded its computer hardware system. The cost of the software and
hardware and the installation thereof is not considered to be material. The
Company installed the new hardware and software during the second quarter 1999
and began using it in the third quarter 1999. The Manufacturing Segment, at a
nominal cost, upgraded its current accounting software to be Year 2000 compliant
in July 1999, and the Real Estate Segment's accounting software is Year 2000
compliant. Other non-compliant hardware and software review and remediation
costs are considered to be minimal.
The Company has conducted a written survey of its IT and non-IT
significant third party vendors and service providers to determine their Year
2000 compliance status. The responses have indicated these businesses will be
substantially compliant on a timely basis. The Company, however, cannot ensure
that various third parties with which it deals will be Year 2000 compliant. The
failure of various third parties, such as banks, significant customers, tenants
and vendors to become Year 2000 compliant on a timely basis could have an
adverse impact on the Company's business.
Uncertainty exists concerning the scope and magnitude of the most
reasonably likely worst case scenario. The Company has not developed a
contingency plan for dealing with any catastrophic failure of the government,
utility companies, lending institutions or other regulated agencies, but will
consider the need for such if public or other information regarding the state of
readiness of these entities or other significant third parties indicates
imminent problems.
There can be no assurance that the Company will be able to identify and
correct all aspects of the effect of the Year 2000 issue on the Company.
Management, however, does not believe that the Year 2000 issue will pose
significant problems in its IT or non-IT systems, or that resolution of any
potential problems with respect to these systems will have a material effect on
the Company's financial condition or results of operations. Readers are
cautioned that forward-looking statements regarding Year 2000 issues should be
read in conjunction with the Company's disclosures under the heading "Cautionary
statement regarding forward-looking statements."
<PAGE>
Cautionary statement regarding forward-looking statements.
- ----------------------------------------------------------
Certain statements contained or incorporated by reference in this Quarterly
Report on Form 10-Q, including without limitation statements containing the
words "believes," "anticipates," "expects," and words of similar import, are
forward-looking statements within the meaning of the federal securities laws.
Such forward-looking statements involve known and unknown risks, uncertainties
and other matters which may cause the actual results, performance or
achievements of the Company to be materially different from any future results,
performance or uncertainties expressed or implied by such forward-looking
statements. Such risks, uncertainties and other matters include, but are not
limited to, Year 2000 compliance issues, the refinancing of the letter of credit
securing the Industrial Development Revenue Bonds and the discontinuance of
the manufacturing operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
- -------------------------------------------------------------------
Quantitative and qualitative disclosures about market risk were disclosed as
required in Form 10-K for fiscal year ended April 30, 1999. In July 1999, the
Company entered into a mortgage loan agreement secured by the newly acquired
Jacksonville shopping center. The permanent loan, in the amount of $9,500,000,
bears interest at 7.375% and is scheduled to be fully amortized over twenty
years. The loan may be called at any time by the lender after September 1, 2002.
If the loan were called, the Company would have up to thirteen months to repay
the principal amount of the loan without penalty. In conjunction with the loan,
an Additional Interest Agreement was executed which entitles the lender to be
paid additional interest equal to fifty percent of the quarterly net cash flow
and fifty percent of the appreciation in the property upon sale or refinance.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibit 27 - Financial Data Schedule (For SEC Use Only).
(b) The Registrant has filed the following report on Form 8-K during the quarter
ended October 31, 1999:
Form 8-K filed on October 14, 1999 to report Changes in Registrant's
Certifying Accountant.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ABRAMS INDUSTRIES, INC.
(Registrant)
Date: December 15, 1999 /s/ Alan R. Abrams
------------------------
Alan R. Abrams
Chief Executive Officer
Date: December 15, 1999 /s/ Melinda S. Garrett
------------------------
Melinda S. Garrett
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000001923
<NAME> ABRAMS INDUSTRIES, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-2000
<PERIOD-START> MAY-01-1999
<PERIOD-END> OCT-31-1999
<CASH> 3,615,991
<SECURITIES> 0
<RECEIVABLES> 28,370,666
<ALLOWANCES> (111,730)
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<BONDS> 63,357,348
0
0
<COMMON> 3,014,039
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<TOTAL-REVENUES> 109,814,494
<CGS> 98,629,740
<TOTAL-COSTS> 98,629,740
<OTHER-EXPENSES> 6,205,213
<LOSS-PROVISION> (10,666)
<INTEREST-EXPENSE> 2,754,913
<INCOME-PRETAX> 2,235,294
<INCOME-TAX> 843,000
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