SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended June 30, 1995
___ TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to
____________
Commission File: No. 0-2052
GODDARD INDUSTRIES, INC.
(Exact name of registrant as specified in its
charter)
Massachusetts 04-2268165
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification
No.)
705 Plantation Street, Worcester, Massachusetts
01605
(Address of principal executive office) (Zip
Code)
Registrant's telephone number, including area code (508)
852-2435
Check whether the registrant (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
State the number of shares outstanding of each of the
issuer's
classes of common stock, as of the latest practicable
date.
Title of Each Class of Number of Shares
Outstanding
Common Stock Outstanding at June 30, 1995
Common Stock, $.01 par value 2,032,804
Transitional Small Business Disclosure Format
Yes ___ No _X_
GODDARD INDUSTRIES, INC.
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
PAGE
Item 1. Financial Statements
Consolidated Balance Sheet - June 30, 1995
and October
1,1994........................................ 3
Consolidated Statement of Income - Nine Months Ended
June 30, 1995 and June 30,
1994........................... 4
Consolidated Statement of Cash Flows - Six Months
Ended
June 30, 1995 and June 30, 1994
..................... 5
Notes to Consolidated Financial
Statements............... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of
Operations....................... 10
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-
K.......................... 12
-2-
GODDARD INDUSTRIES, INC. AND
SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
June 30,
October 1
1995
1994
UNAUDITED
AUDITED
ASSETS
(ALL PLEDGED, NOTE 4)
CURRENT ASSETS:
Cash and equivalents $ 69,196
$ 62,634
Accounts receivable, net of allowances 960,571
750,205
Inventories (Note 3) 2,721,508
2,578,217
Prepaid expenses and taxes 14,597
75,116
Deferred income taxes (Note 5) 63,100
60,000
TOTAL CURRENT ASSETS 3,828,972
3,526,172
PROPERTY, PLANT AND EQUIPMENT, 3,309,621
3,209,793
at cost
Less - Accumulated depreciation 2,327,402
-2,188,825
982,219
1,020,968
OTHER ASSETS:
Excess of cost of investment in subsidiaries
over equity in net assets acquired 23,276
25,893
Deferred income taxes - long term 135,400
118,000
Total other assets 158,676
143,893
TOTAL ASSETS $4,969,867
$4,691,033
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of
long-term debt (Note 4) $ 181,000
$ 203,807
Accounts payable 219,025
374,423
Accrued expenses 222,548
157,147
Income taxes payable 143,692
-
TOTAL CURRENT LIABILITIES 766,265
735,377
LONG-TERM DEBT, net of
current maturities (Note 4) 1,252,061
1,259,814
DEFERRED COMPENSATION 503,500
475,000
STOCKHOLDERS' EQUITY:
Common stock - par value $.01 per share;
authorized 3,000,000 shares, issued and
outstanding 2,032,804 shares. 20,328
20,328
Additional paid-in capital 395,763
395,763
Retained earnings 2,031,950
1,804,751
TOTAL STOCKHOLDERS' EQUITY 2,448,041
2,220,842
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $4,969,867
$4,691,033
-3-
<TABLE>
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<CAPTION>
JUNE 30, 1995 JUNE 30, 1994
FOR THE THREE FOR THE NINE FOR THE THREE
FOR THE NINE
MONTHS ENDED MONTHS ENDED MONTHS ENDED
MONTHS ENDED
<S> <C> <C> <C>
<C>
NET SALES $1,923,086 $4,977,317 $1,231,080
$3,620,826
COST OF SALES 1,266,108 3,279,844 795,409
2,336,455
GROSS PROFIT 656,978 1,697,473 435,671
1,284,371
SELLING AND ADMINISTRATIVE
EXPENSES 449,416 1,214,469 370,663
1,136,180
INCOME FROM OPERATIONS 207,562 483,004 65,008
148,191
OTHER INCOME (EXPENSE):
Interest expense -36,019 -108,926 -20,221
-52,415
Other income, net 9,848 19,519 5,070
9,584
TOTAL OTHER INCOME
(EXPENSE) -26,171 -89,407 -15,151
-42,831
INCOME BEFORE INCOME TAXES 181,391 393,597 49,857
105,360
PROVISION FOR INCOME TAXES 76,200 166,400 19,000
42,000
NET INCOME $105,191 $227,197 $ 30,857 $
63,360
PRIMARY EARNINGS PER SHARE (Note 7)
Net Income $0.05 $0.11 $ .02
$ .03
</TABLE>
-4-
GODDARD INDUSTRIES, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
FOR THE
NINE MONTHS
ENDED
JUNE 30,
1995
1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 227,197
$63,360
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 141,194
130,375
Deferred income taxes -20,500
-42,000
Changes in assets and liabilities:
Accounts receivable -210,366
105,863
Inventories -143,291
-391,601
Prepaid expenses and other 60,519
-7,741
Accounts payable -155,398
153,727
Accrued expenses 65,401
-63,347
Income taxes payable 143,692
-73,262
Deferred Compensation 28,500
90,000
Total Adjustments -90,249
-97,986
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 136,948
-34,626
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment additions -99,828
-89,174
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in long-term debt 1,384,000
1,074,500
Repayments of long-term debt -1,414,558
-978,760
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES -30,558
95,740
NET INCREASE (DECREASE) IN CASH 6,562
-28,060
CASH AND EQUIVALENTS - BEGINNING 62,634
119,588
CASH AND EQUIVALENTS - ENDING $ 69,196 $
91,528
CASH PAID DURING THE PERIOD:
Interest $ 105,313 $
47,185
Income taxes $ 29,214
$ 164,070
-5-
GODDARD INDUSTRIES, INC. AND
SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
JUNE 30, 1995
(UNAUDITED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
Reference is made to the financial statements
included
in the Annual Report for the year ended October
1, 1994
for a summary of significant accounting policies
and other
disclosures.
NOTE 2 BASIS OF PRESENTATION:
The information shown in the consolidated
financial
statements reflects all adjustments which are,
in the
opinion of management, necessary for a fair
presentation
of the results for the interim period.
NOTE 3 INVENTORIES:
Consolidated inventories are comprised of:
June 30,
October 1,
1995
1994
Finished goods $ 2,616,089
$ 2,472,797
Work in process 12,596
12,596
Raw materials 92,824
92,824
$ 2,721,509
$ 2,578,217
The following factors were taken into
consideration in
determining inventory values:
Goddard Valve Corp. - June 30, 1995 -
$977,310
(estimated) and October 1, 1994 - $867,801.
Interim
inventories were valued by management using
the
gross profit method.
Webstone Company, Inc. - June 30, 1995 -
$1,744,199 (estimated) and October 1,
1994 -
$1,710,416. Interim inventory was valued
by
management using the gross profit method.
Total inventory is comprised of finished
goods.
NOTE 4. LONG-TERM DEBT
The Company has available a revolving line of credit
totaling
$1,750,000 bearing interest at the greater of (i) prime
plus 3/4% or
(ii) the Federal Funds Effective Rate plus 1 1/4% per
annum. The
agreement expires March 31, 1997 and is secured by all
property and
assets. Advances are restricted by certain limitations on
eligible
receivables and inventories.
-6-
continued
LONG-TERM OBLIGATIONS (continued)
The credit agreement contains a number of covenants,
the most restrictive of which relate to working
capital,
tangible net worth, and profitability levels, and
restrict
payment of cash dividends to 10% of the immediately
preceding year's net income before taxes.
At June 30, 1995 long-term obligations consisted of
the
following:
LONG-TERM
CURRENT
Revolving line of credit $ 1,247,503
$ -
Capital lease obligations for machinery,
payable in monthly installments of
$8,455, through July 1, 1996, with
imputed interest rates between 7.34%
and 8.02%. 4,558
93,000
Note due 1995, unsecured, interest
at 10%
35,000
Term note due 1996, principal payments of
$5,880 per month beginning June 1, 1993
plus interest at 7%, secured by all
property and assets.
53,000
1,252,061
181,000
NOTE 5 INCOME TAXES
Included in other assets at June 30, 1995 and October
1, 1994 is
a deferred tax asset of $198,500 and $118,000,
respectively.
The tax effects of the principal temporary
differences giving
rise to the net current and non-current deferred tax
assets are
as follows:
June 30,
October 1,
1995
1994
Deferred tax asset
Deferred Compensation $ 200,000
$ 190,000
Inventory valuation 35,200
35,000
Accrued Salaries 11,000
11,000
Bad Debts 13,600
10,000
260,700
246,000
Depreciation 62,200
68,000
$ 198,500
$ 178,000
Management does not believe that any valuation
allowance is
necessary.
- 7 -
NOTE 6 CONTINGENCIES
In 1990, the Town of Shrewsbury, Massachusetts commenced a
lawsuit in Massachusetts Superior Court against the
Company and
another corporation alleging that they had caused the Town
to incur
response costs for assessment, containment and removal of
oil and
hazardous materials in relation to the Town's Home Farm
wells.
The Town is seeking damages which now exceed $6,500,000.
The
Company is defending itself vigorously against this claim
and has
joined, as third party defendants, eight other businesses
which could
be identified as likely to have used the types of
compounds detected
as contaminating the Town's wells. Motions for summary
judgement were made during 1992 and 1993 resulting in
dismissal
of some, but not all, of the Shrewsbury complaint. Non-
expert
discovery in this case has been completed, while expert
discovery
continues. Trial is presently scheduled to begin October
1995.
Legal counsel are unable to form an opinion regarding the
outcome
of this matter. Accordingly, the Company has not recorded
any loss
provision with respect to this lawsuit.
In connection with a proposed bank financing in 1987,
the Company retained an environmental engineering firm to
perform
a site assessment at its corporate headquarters. The
results of that
assessment revealed that the ground water is contaminated
and that
an off-site source may have introduced the contaminants.
As
required by law, the Company notified the Massachusetts
Department of Environmental Protection (DEP). The DEP has
issued a Notice of Responsibility designating the site as
a priority
disposal site. A Phase One Limited Site Investigation
report was
submitted to the DEP. On August 10, 1994 the Company
received
a Tier I Transition Classification and Permit Statement
Cover Letter
designating the site as a Tier IA Site under the
Massachusetts
Contingency Plan. The Company submitted a request to the
DEP to
reclassify the site as Tier IB or IC, which will remove
any response
actions from DEP oversight. At the present time, it is
not possible
to ascertain the cost, if any, of remediation or whether
the Company
will be able to obtain reimbursement for such costs from
any third
party causing the contamination or any insurance carrier.
Accordingly, the Company has not recorded any provision
for loss
with respect to this DEP matter.
Several of the Company's insurers are participating in
the Company's defense in both the DEP matter and the Town
of
Shrewsbury litigation under a reservation of rights. The
trial in the
Town of Shrewsbury litigation is presently scheduled to
begin
October, 1995. The Company's principal insurer has also
filed suit
for a declaratory judgement that they have no duty to
defend or
indemnify the Company. This action is currently stayed
until
October 1995.
In the event that the Company does not prevail, these
matters could have a material adverse impact on the
Company's
financial condition.
- 8-
NOTE 7 COMMON STOCK:
Primary earnings per share are computed on a
weighted average number of shares outstanding. Fully
diluted
earnings per share are not presented because the effect of
the
exercise of the stock options would not be dilutive.
-9-
PART I - FINANCIAL INFORMATION
Item 2 - Management's Discussion and Analysis of Financial
Condition and results of Operations
RESULTS OF OPERATIONS
FISCAL QUARTER ENDED JUNE 30, 1995 COMPARED TO
FISCAL QUARTER ENDED JUNE 30, 1994
Consolidated sales for the quarter ended June 30, 1995
were
$1,923,000, a 56.7% increase over the $1,231,000 reported
for
the same period in 1994. The sales increase was shared by
both
divisions. Our Valve division enjoyed increased orders
and sales
as the cryogenic industry recovered from the generally
slow period
encountered during the prior year. The sales increase for
the current
quarter over the corresponding period last year in our
Webstone
division came about from a larger sales force and an
improved
program in motivating the Company's sales representatives.
Consolidated gross profit margins for the current quarter
were
34.2%, a slight reduction from the 35.4% reported last
year,
while selling and administrative expenses as a percentage
of sales
decreased from 30.1% to 23.4%.
Consolidated net earnings for the June quarter were
$105,191
(.05 per share) compared to 1994 earnings of $30,857
(.02 per share) in the same quarter last year.
NINE MONTHS ENDED JUNE 30, 1995 COMPARED
TO NINE MONTHS ENDED JUNE 30, 1994
Consolidated sales for the nine month period ended June
30, 1995 were
$4,977,000, 37.5% ahead of sales for the same period last
year.
During this nine month period incoming orders in both
divisions were
at record levels and management believes that this trend
will
continue for the balance of fiscal 1995. In our Valve
division,
orders for export have increased while in our Webstone
division the
addition of sales representatives has made a significant
difference in
the level of incoming orders and sales.
Consolidated gross profit margins of 34.1% were slightly
lower than
the 35.5% reported for the same period for 1994.
Although selling and administrative expenses increased by
$78,000, they decreased as a percentage of net sales from
31.4% in
the first nine months of 1994 to 24.4% in the first nine
months of
1995.
Interest expense approximately doubled for the period due
to
increased loan levels.
Net earnings for the nine month period were $227,197
compared
to $63,360 for 1994. Per share earnings were $0.11 and
$0.03
respectively. -
10 -
LIQUIDITY AND CAPITAL RESOURCES
During the nine months ended June 30, 1995 operating
activities generated $137,000 of cash. The major sources
of cash were earnings ($227,000), depreciation and
amortization ($142,000) and increased income tax liabili-
ties ($143,000) associated with improved earnings.
Increased
inventories ($144,000) and accounts receivable ($210,000)
required by the additional sales and a reduction in
accounts
payable ($155,000) consumed cash during the period.
The cash generated from operations and $91,000 of
additional
advances on the line of credit were used to acquire
$100,000
of additional equipment and to retire $121,000 of
installment
debt.
The Company presently maintains a line of credit of
$1,750,000
with The First National Bank of Boston collateralized by
sub-
stantially all of the assets of the Company which expires
on
March 31, 1997. On June 30, 1995, approximately
$1,252,000
had been drawn under that line of credit. The Company
believes
that the line of credit provides sufficient liquidity to
handle the
normal working capital requirements of its present
business and
will be increased, if required, as sales and earnings
expand.
The Company borrows funds for periods of up to five years
for
the purchase of new machinery and meets the required
amortization
and interest payments from its current working capital.
The
Company believes that its future capital requirements for
equipment
can be met from the cash flow from operations, bank
borrowings
and other available sources.
As more fully described under Note 6 to the financial
statements,
the Company is a party to two law suits and an
administrative
proceeding relating to environmental matters. At the
present time,
because of numerous uncertanties (including without
limitation
the origin of the alleged contamination, the scope and
cost of any
required remediation, the ability to obtain reimbursement
from
third parties who may have caused the alleged
contamination, and
the extent of insurance coverage which may be available),
it is not
possible to estimate the amount of loss, if any, the
Company may
incur with respect to these matters. If the Company does
not prevail
in its defense of the proceedings or in its third-party
claims for
contribution or coverage, the adverse resolution of the
DEP or
Shrewsbury proceedings could have a material adverse
effect on
the results of operations and on the Company's financial
resources.
Inflation has not been a major factor in the Company's
business
for the last several years. There can be no assurance
that this
will continue. The Company's results of operations have
not been
materially affected by seasonality.
-11-
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
As more fully described in the Company's Form 10-KSB
for
the year ended October 1, 1994, the Company is a defendant
in a
suite by the Town of Shrewsbury, Massachusetts to incur
various
environmental response costs and a suit by certain of its
prior
insurers contesting overage for environmental claims under
insurance policies. There have been no material
developments in
those cases since the filing of the Form 10-KSB.
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
(11) Statement Re: Computation of Per
Share Earnings. The information set
forth in Note 7 to the Financial
Statements found in PART I hereof is
hereby incorporated.
(27) Financial Data Schedule
(b) The Company did not file any reports on Form 8-K
during
the quarter ended March 31, 1995.
- 12 -
SIGNATURES
Pursuant to the requirements of the Securities
Exchange Act of
1934, the Registrant has duly caused the Report to be
signed on its
behalf by the undersigned thereunto duly authorized.
Dated as of August 11, 1995
GODDARD INDUSTRIES,
INC.
by /s/ Saul I. Reck
Saul I. Reck,
President,
Chief Executive
Officer
and Principal
Financial
Officer
- 13 -
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
form 10-QSB and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> SEP-30-1995 SEP-30-1995 SEP-30-1995
<PERIOD-END> DEC-31-1994 MAR-31-1995 JUN-30-1995
<CASH> 82,697 133,519 69,196
<SECURITIES> 0 0 0
<RECEIVABLES> 616,092 798,310 986,041
<ALLOWANCES> 37,651 23,800 25,470
<INVENTORY> 2,011,763 2,938,361 2,721,508
<CURRENT-ASSETS> 2,769,904 3,924,083 3,828,972
<PP&E> 3,054,823 3,260,107 3,309,621
<DEPRECIATION> 2,058,236 2,284,723 2,327,042
<TOTAL-ASSETS> 3,900,202 5,053,282 4,969,867
<CURRENT-LIABILITIES> 539,888 757,053 766,265
<BONDS> 0 0 0
<COMMON> 20,307 20,328 20,328
0 0 0
0 0 0
<OTHER-SE> 3,340,007 3,322,542 2,427,913
<TOTAL-LIABILITY-AND-EQUITY> 3,900,202 5,053,282 4,969,867
<SALES> 1,923,086 3,054,251 4,977,317
<TOTAL-REVENUES> 1,932,934 3,083,422 4,996,836
<CGS> 1,266,108 2,013,736 3,279,844
<TOTAL-COSTS> 449,416 765,053 1,214,469
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 3,000 6,000 9,000
<INTEREST-EXPENSE> 36,020 72,906 108,926
<INCOME-PRETAX> 181,391 212,226 393,597
<INCOME-TAX> 76,200 90,200 166,400
<INCOME-CONTINUING> 0 0 0
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 105,191 122,026 277,197
<EPS-PRIMARY> .05 .06 .11
<EPS-DILUTED> .05 .06 .11
</TABLE>
