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 December 31, 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 December 31, 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 - December 31, 1995
and September 30,
1995........................................................
3
Consolidated Statement of Income - Three Months Ended
December 31, 1995 and December 31,
1994.......................... 4
Consolidated Statement of Cash Flows - Three Months
Ended
December 31, 1995 and December 31, 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................................... 11
-2-
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
December 31, September 30,
1995 1995
UNAUDITED AUDITED
ASSETS
(ALL PLEDGED, NOTE 4)
CURRENT ASSETS:
Cash and equivalents $
137,511 $ 74,937
Accounts receivable, net of allowances
875,418 973,477
Inventories (Note 3)
3,012,124 2,911.234
Prepaid expenses and taxes
39,850 23,018
Deferred income taxes (Note 5)
57,200 56,000
TOTAL CURRENT ASSETS
4,122,103 4,038,666
PROPERTY, PLANT AND EQUIPMENT,
at cost
3,347,774 3,336,001
Less - Accumulated depreciation -
2,435,077 -2,385,267
912,697
950,734
OTHER ASSETS:
Excess of cost of investment in subsidiaries
over equity in net assets acquired
21,197 22,136
Deferred income taxes - long term
144,800 139,000
Total other assets
165,997 161,136
TOTAL ASSETS
$5,200,797 $5,150,536
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of
long-term debt (Note 4) $
67,388 $ 109,191
Accounts payable
349,639 305,655
Accrued expenses
276,099 256,631
Income taxes payable
42,526 222,626
TOTAL CURRENT LIABILITIES 735,652
894,103
LONG-TERM DEBT, net of
current maturities (Note 4)
1,182,503 1,092,503
DEFERRED COMPENSATION 522,500
513,000
SHAREHOLDERS' 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
2,344,051 2,234,839
TOTAL SHAREHOLDERS' EQUITY 2,760,142
2,650,930
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY
$5,200,797 $5,150,536
- -3-
<TABLE>
GODDARD INDUSTRIES, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENT OF
INCOME
(UNAUDITED)
<CAPTION>
FOR THE THREE MONTHS
ENDED December 31,
1995 1994
<S> <C> <C>
<C>
<C>
NET SALES $1,791,242
$1,405,253
COST OF SALES 1,200,956
934,983
GROSS PROFIT 590,286
470,270
SELLING AND ADMINISTRATIVE
EXPENSES 382,065 375,831
INCOME FROM OPERATIONS 208,221 94,439
OTHER INCOME (EXPENSE):
Interest expense -28,004
- -34,468
Other income, net 6,895
3,404
TOTAL OTHER INCOME
(EXPENSE) -21,109
- -31,064
INCOME BEFORE INCOME TAXES 187,112 63,375
PROVISION FOR INCOME TAXES 77,900
27,700
NET INCOME $109,212
$35,675
EARNINGS (LOSS)PER SHARE (Note 7)
Primary
Net Income $0.05
$0.02
</TABLE>
-4-
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
FOR THE THREE MONTHS
ENDED December 31,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income
$ 109,212 $35,675
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization
50,749 48,690
Deferred income taxes
- - 7,000 - 7,000
Changes in assets and liabilities:
Accounts receivable
98,059 62,069
Inventories
- -100,890 -119,066
Prepaid expenses and other
- - 16,832 - 1,951
Accounts payable
43,984 -172,227
Accrued expenses
19,468 - 17,344
Income taxes payable
- -180,100 37,500
Deferred Compensation
9,500 9,500
Total Adjustments
- - 83,062 -159,829
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES
26,150 -124,154
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment additions -
11,773 - 30,989
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in long-term debt
809,000 706,000
Repayments of long-term debt
- -760,803 -510,104
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES
48,197 195,896
NET INCREASE (DECREASE) IN CASH
62,574 40,753
CASH AND EQUIVALENTS - BEGINNING 74,937
62,634
CASH AND EQUIVALENTS - ENDING $137,511
$103,387
CASH PAID DURING THE PERIOD:
Interest
$ 27,649 $ 32,027
Income taxes
$265,000 $ 800
-5-
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
December 31, 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:
December 31, September 30,
1995 1995
Finished goods
$2,806,173 $2,705,283
Work in process
11,003 11,003
Raw materials
194,948 194,948
$3,012,124 $2,911,234
The following factors were taken into
consideration in
determining inventory values:
Goddard Valve Corp. - December 31, 1995 -
$1,211,282
(estimated) and September 30, 1995 -
$1,132,582. Interim
inventories were valued by management using
the
gross profit method.
Webstone Company, Inc. - December 31, 1995 -
$1,800,842 (estimated) and Sepember 30,
1995 -
$1,778,652. 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 December 31, 1995 long-term obligations consisted of
the following:
LONG-
TERM CURRENT
Revolving line of credit $
1,147,503 $ -
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%.
49,668
Note due 1997, 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.
17,720
$ 1,182,503 $67,388
NOTE 5 INCOME TAXES
The tax effects of the principal temporary differences
giving
rise to the net current and non-current deferred tax
assets are
as follows:
December 31, September 30,
1995 1995
Deferred tax asset
Deferred Compensation $ 209,000
$ 205,200
Inventory valuation
39,200 39,000
Accrued Salaries
5,800 5,800
Bad Debts
12,000 11,000
266,000 261,000
Depreciation
64,000 66,000
$
202,000 $ 195,000
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, Neles-Jamesbury, 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 approximately $7
million in
damages. The Company intends to defend itself vigorously
against
this claim and has joined, as third party defendants,
several 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. In
September 1995, the court issued an order providing for a
single, unified
trial of all claims related to this matter. Discovery
between the Company
and the Town of Shrewsbury, with the exception of expert
discovery, is
complete. Discovery between the Company, Neles-Jamesbury,
and the
third party defendants is ongoing. All discovery is to be
completed by
May 1, 1996 and the trial is scheduled to begin on June 3,
1996.
The Company and legal counsel are unable to form an opinion
regarding
the outcome of this matter. Consequently, no loss provision
with respect
to this lawsuit has been recorded.
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 be introducing 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
has
been submitted to the DEP. In November 1995 the Company
received
a Tier I Transition Classification and Permit Statement
Cover Letter
designating the site as a Tier 1C Site under the
Massachusetts
Contingency Plan. Under DEP regulations, the Company must
complete
further site investigaion by November 1997. Until that
investigation is
completed, 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
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.
- -8-
In the event that the Company does not prevail, these
matters could have a material adverse impact on the
Company's
financial condition.
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
RESULTS OF OPERATIONS
FISCAL QUARTER ENDED DECEMBER 31, 1995 COMPARED TO
FISCAL QUARTER ENDED DECEMBER 31, 1994
The trend of increasing consolidated sales and earnings
continued
in the first quarter of fiscal 1996 as the result of both of
the Company's
divisions gaining market share in their product lines.
Consolidated sales for the quarter ended December 31,
1995 were
$1,791,000, compared to $1,405,000 in the corresponding
quarter of the
prior year, an increase of 27.5%. Gross profit margins
actually declined
slightly from 33.5% to 33% as a result of changes in product
mix.
Despite the 27.% increase in sales, selling and
administrative expenses
increased only 2% over the corresponding quarter of 1994 as
the Company
benefited from efficiencies of scale. Interest expenses
were down 18.7%
compared to the same period in the prior year. This
reflected lower
interest rates and levels of bank borrowing during the
quarter.
As a result of the above developments, the earnings for
the first
quarter of fiscal 1996 increased from $36,000 in the
corresponding
quarter last year to $109,000, a gain of 203%, while
earnings per share
were $.05 compared to $.02 for the same quarter in the prior
year.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities of the Company provided new cash
of $26,000.
The principal uses of cash were an increase in income taxes
of $180,000
and an inventory of $101,000. Major sources of cash were
earnings
$109,000, reduced accounts receivable $98,000, and
depreciation and
amortization $51,000.
The Company also invested $12,000 in additional
equipment and
retired $41,000 of installment debt. These uses of cash
were offset
by net borrowings of $89,000 on the line of credit.
The Company borrows funds for period 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.
10 -
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
As more fully described in the Company's Form 10-KSB
for
the year ended September 30, 1995, the Company is a
defendant in a
suit by the Town of Shrewsbury, Massachusetts alleging that
the
defendant caused Shrewsbury to incur various environmental
response costs and a suit by certain of its prior insurers
contesting
coverage 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 December 31, 1995.
- 11-
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 February 12, 1996
GODDARD INDUSTRIES, INC.
by /s/ Saul I. Reck
Saul I. Reck, President,
Chief Executive Officer
and Principal Financial
Officer
- 13 -
