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, 1996
___ 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, 1996
Common Stock, $.01 par value 2,038,618
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, 1996
and September 30, 1995.............................
3
Consolidated Statement of Income - Nine Months Ended
June 30, 1996 and June 30, 1995 ..................
4
Consolidated Statement of Cash Flows - Nine Months
Ended June 30, 1996 and June 30, 1995...............
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 SHEETS
(Unaudited)
June 30,
September 30,
1996
1995
ASSETS
(ALL PLEDGED, NOTE 4)
CURRENT ASSETS:
Cash $141,201
$74,937
Accounts receivable, net of allowances 1,081,531
973,477
Inventories (Note 3) 3,125,944
2,911.234
Prepaid expenses and taxes 37,897
23,018
Deferred income taxes (Note 5) 59,600
56,000
TOTAL CURRENT ASSETS 4,446,173
4,038,666
PROPERTY, PLANT AND EQUIPMENT,
at cost 3,451,551
3,336,001
Less - Accumulated depreciation -2,533,195 -
2,385,267
918,356
950,734
OTHER ASSETS:
Excess of cost of investment in subsidiaries
over equity in net assets acquired 19,319
22,136
Deferred income taxes - long term (Note 5) 156,400
139,000
Total other assets 175,719
161,136
TOTAL ASSETS $5,540,248
$5,150,536
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of
long-term debt (Note 4) $ - $
109,191
Accounts payable 509,529
305,655
Accrued expenses 335,180
256,631
Income taxes payable 32,515
222,626
TOTAL CURRENT LIABILITIES 877,224
894,103
LONG-TERM DEBT, net of
current maturities (Note 4) 1,085,503
1,092,503
DEFERRED COMPENSATION 541,500
513,000
SHAREHOLDERS' EQUITY:
Common stock - par value $.01 per share;
authorized 3,000,000 shares, issued and
outstanding 2,038,618 shares. 20,386
20,328
Additional paid-in capital 398,612
395,763
Retained earnings 2,617,023
2,234,839
TOTAL SHAREHOLDERS' EQUITY 3,036,021
2,650,930
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $5,540,248
$5,150,536
-3-
<TABLE>
GODDARD INDUSTRIES, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENT OF
INCOME
(UNAUDITED)
<CAPTION>
JUNE 30, 1996 JUNE 30,
1995
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 $2,118,487 $5,965,745 $1,923,086
$4,977,317
COST OF SALES 1,426,342 4,023,784 1,266,108
3,279,844
GROSS PROFIT 692,145 1,941,961 656,978
1,697,473
SELLING AND ADMINISTRATIVE
EXPENSES 421,412 1,235,400 449,416
1,214,469
INCOME FROM
OPERATIONS 270,733 706,561 207,562
483,004
OTHER INCOME (EXPENSE):
Interest expense -24,733 -78,705 -36,019
- -108,926
Other income, net 7,471 24,728 9,848
19,519
TOTAL OTHER INCOME
(EXPENSE) -l7,262 -53,977 -26,171
- -89,407
INCOME BEFORE
INCOME TAXES 253,471 652,584 181,391
393,597
PROVISION FOR
INCOME TAXES 105,600 270,400 76,200
166,400
NET INCOME $147,871 $382,184 $105,191
$227,197
EARNINGS (LOSS)
PER SHARE (Note 7)
Primary
Net Income $0.07 $0.19 $.05
$.11
</TABLE>
-4-
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
FOR THE NINE
MONTHS
ENDED
JUNE 30,
1996
1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $382,184
$227,197
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 150,745
141,194
Deferred income taxes -21,000
- -20,500
Changes in assets and liabilities:
Accounts receivable -108,054
- -210,366
Inventories -214,710
- -143,291
Prepaid expenses and other -14,879
60,519
Accounts payable 203,874
- -155,398
Accrued expenses 78,549
65,401
Income taxes payable -190,111
143,692
Deferred Compensation 28,500
28,500
Total Adjustments -87,086
- -90,249
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 295,098
136,948
CASH FLOWS FROM INVESTING ACTIVITIES:
Property, plant and equipment additions -115,550
- -99,828
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 2,907
- -
Increase in long-term debt 2,108,000
1,384,000
Repayments of long-term debt -2,224,191 -
1,414,558
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES -113,284
- -30,558
NET INCREASE IN CASH 66,264
6,562
CASH - BEGINNING 74,937
62,634
CASH - ENDING $141,201
$69,196
CASH PAID DURING THE PERIOD:
Interest $79,370
$105,313
Income taxes $481,511 $
29,214
-5-
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
June 30, 1996
(UNAUDITED)
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES:
Reference is made to the financial statements
included
in the Annual Report for the year ended September
30,
1995 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,
September 30,
1996
1995
Finished goods 2,919,993
$2,705,283
Work in process 11,003
11,003
Raw materials 194,948
194,948
$3,125,944
$2,911,234
The following factors were taken into
consideration in
determining inventory values:
Goddard Valve Corp. - June 30, 1996 -
$1,461,299
(estimated) and September 30, 1995 -
$1,132,582.
Interim inventories were valued by management
using
the gross profit method.
Webstone Company, Inc. - June 30, 1996
$1,664,645
(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 OBLIGATIONS
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.
On March 31, 1996 the effective interest rate was 9.0%. The
agreement expires March 30, 1998 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, 1996 long-term obligations consisted of
the following:
LONG-TERM
CURRENT
Revolving line of credit $1,050,503 $
- -
Note due 1997, unsecured, interest
at 10% 35,000
- -
$1,085,503
- -
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:
June 30,
September 30,
1996
1995
Deferred tax asset:
Deferred Compensation $216,600
$205,200
Inventory valuation 39,600
39,000
Accrued Salaries 5,800
5,800
Bad Debts 14,000
11,000
276,000
261,000
Deferred tax liability:
Depreciation 60,000
66,000
$216,000 $
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 is defending 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 November 1, 1996 and the
trial is
scheduled to begin on January 6, 1997. 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-
NOTE 6 CONTINGENCIES (continued)
In the event that the Company does not prevail, these
matters could have a material adverse impact on the
Company's
financial condition, results of operations, and liquidity.
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
FISCAL QUARTER ENDED JUNE 30, 1996 COMPARED TO
FISCAL QUARTER ENDED JUNE 30, 1995
Consolidated sales for the June 30, 1996 quarter were
$2,118,000
compared to $1,923,000 for the same period in 1995. This
represents
a 10.2% sales increase for the current period. Both
divisions are
shipping at record levels as a result of increased levels of
incoming orders since last Fall.
New product lines that have recently been introduced
in both
the Goddard Valve and Webstone divisions combined with a
policy
of superior customer service have been major factors in
sales growth.
Selling and Administrative expenses have been reduced 6.2%
for the
June 1996 quarter compared to last year while Interest
Expense
has dropped approximately one-third for the same period.
Net
earnings for the quarter ended June 30, 1996 were $147,900
($.07/Share) 44% more than the $105,200 ($.05/Share)
reported
in 1995.
NINE MONTH PERIOD ENDED JUNE 30, 1996 COMPARED TO
NINE MONTH PERIOD ENDED JUNE 30, 1995
For the nine months ended June 30, 1996, consolidated
sales were $5,966,000 compared to sales of $4,977,000 for
the same
period in 1995 (a 19.9% increase). While both operating
divisions
shared in the increased sales, the Goddard Valve division
has gone
through a recent period where orders for future deliveries
have
reached an all time high. This is attributable to new
products
which are now available and others in design stages.
Goddard has taken an active role in the research and
development
needed by many of its customers to develop new valve
designs. Much of
this effort results in new product lines and expanded sales.
As of
June 30, 1996, back orders, which are indicative of future
sales, are
well over double the level of a year earlier.
The Company's inventory levels have increased in order
to
properly handle the increased sales and, in particular, the
new
product lines. The foreign location of many of the
suppliers of
Webstone products, and the long lead times required to
obtain many
of those products, require the Company to maintain
relatively high
levels.
- 10 -
NINE MONTH PERIOD ENDED JUNE 30, 1996 COMPARED TO
NINE MONTH PERIOD ENDED JUNE 30, 1995
(CONTINUED)
Gross profit margins, at 32.6% of sales, are slightly
lower
for the first nine months of 1996 than the 34.1% that was
reported
for 1995 due to lower margins in the Webstone division which
have
helped produce nearly 13% more sales. Selling and
Administrative
expenses as a percentage of sales, were 20.7% compared to
24.4% in
1995. As sales increased by $989,000 these expenses
remained substantially unchanged. Interest expense for the
nine month period
was reduced due to lower borrowing levels.
Net earnings of $382,000 were 68.2% ahead of a year
ago. Earnings
per share were $0.19 and $0.11 respectively.
LIQUIDITY AND CAPITAL RESOURCES
Operating activities of the Company provided $295,000
of cash
during the nine months ended June 30, 1996. Cash was
generated from
earnings ($382,000), depreciation and amortization
($151,000),
increases in accounts payable ($204,000), and increases in
accrued
expenses ($79,000).
The major uses of cash were increases in accounts
receivable
($108,000) and inventories ($214,000) and reductions in
income tax
liabilities ($190,000).
The cash provided by operating activities was used to
reduce
long-term debt by $116,000 and to invest in new equipment
totaling
$116,000.
The Company presently maintains a line of credit of
$1,750,000
with The First National Bank of Boston collateralized by
substantially
all of the assets of the Company. The agreement expires on
March 30,
1998. On June 30, 1996, approximately $1,050,500 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.
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.
- 11 -
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
(10)(I) Letter agreement between Company's
subsidiaries and the bank dated
March 31, 1996 modifying banking
arrangement.
(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 June 30, 1996.
- 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 13, 1996
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
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> SEP-28-1996 SEP-28-1996
<PERIOD-END> JUN-30-1996 JUN-30-1996
<CASH> 0 141,201
<SECURITIES> 0 0
<RECEIVABLES> 0 1,106,185
<ALLOWANCES> 0 24,654
<INVENTORY> 0 3,125,944
<CURRENT-ASSETS> 0 4,446,173
<PP&E> 0 3,451,551
<DEPRECIATION> 0 2,533,195
<TOTAL-ASSETS> 0 5,540,248
<CURRENT-LIABILITIES> 0 877,224
<BONDS> 0 0
0 0
0 0
<COMMON> 0 20,386
<OTHER-SE> 0 3,015,635
<TOTAL-LIABILITY-AND-EQUITY> 0 5,540,248
<SALES> 2,118,487 5,965,745
<TOTAL-REVENUES> 2,073,849 5,990,473
<CGS> 1,426,342 4,023,784
<TOTAL-COSTS> 421,412 1,235,400
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 3,000 9,000
<INTEREST-EXPENSE> 24,733 78,705
<INCOME-PRETAX> 253,471 652,584
<INCOME-TAX> 105,600 270,400
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 147,871 382,184
<EPS-PRIMARY> 0.07 0.19
<EPS-DILUTED> 0.00 0.00
</TABLE>
