SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended June 30, 1997
__ 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, 1997
Common Stock, $.01 par value 2,124,369
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, 1997
and September 28, 1996 3
Consolidated Statement of Income - Nine Months Ended
June 30, 1997 and June 30, 1996 4
Consolidated Statement of Cash Flows - Nine Months Ended
June 30, 1997 and June 30, 1996 5
Notes to Consolidated Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II - OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 11
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GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
June 30, September 28,
1997 1996
(UNAUDITED) AUDITED
ASSETS
(ALL PLEDGED, NOTE 4)
CURRENT ASSETS:
Cash $ 92,751 $ 65,951
Accounts receivable, net of allowances 1,169,866 1,154,871
Miscellaneous receivable (Note 6) 0 785,000
Inventories (Note 3) 3,550,442 3,312,449
Prepaid expenses and taxes 69,730 33,809
Deferred income taxes (Note 5) 85,500 82,000
TOTAL CURRENT ASSETS 4,968,289 5,434,080
PROPERTY, PLANT AND EQUIPMENT,
at cost 3,963,125 3,641,818
Less - Accumulated depreciation -2,767,822 -2,589,252
1,195,303 1,052,566
OTHER ASSETS:
Excess of cost of investment in
subsidiaries over equity in net
assets acquired 15,563 18,380
Deferred income taxes (Note 5) 187,000 167,000
Total other assets 202,563 185,380
TOTAL ASSETS $ 6,366,155 $6,672,026
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of
long-term debt (Note 4) $ 121,900 $ 51,000
Accounts payable 237,708 317,321
Accrued expenses 372,509 399,861
Accrued environmental costs (Note 6) 45,000 795,000
Income taxes payable 28,260 191,771
TOTAL CURRENT LIABILITIES 805,377 1,754,953
LONG-TERM DEBT, net of
current maturities (Note 4) 920,946 1,026,398
DEFERRED COMPENSATION 551,000 551,000
SHAREHOLDERS' EQUITY:
Common stock - par value $.01 per share,
authorized 3,000,000 shares, issued
and outstanding 2,124,369 shares
(2,040,129 shares at September 28,
1996). 21,243 20,401
Additional paid-in capital 424,531 399,353
Retained earnings 3,643,058 2,919,921
TOTAL SHAREHOLDERS'EQUITY 4,088,832 3,339,675
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $6,366,155 $6,672,026
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<TABLE>
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
<CAPTION>
JUNE 30, 1997 JUNE 30, 1996
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 $2,277,240 $8,139,492 $2,118.487 $5,965,745
COST OF SALES 1,511,003 5,358,005 1,426,342 4,023,784
GROSS PROFIT 766,237 2,781,487 692,145 1,941,961
SELLING AND ADMINISTRATIVE
EXPENSES 485,827 1,526,087 421,412 1,235,400
INCOME FROM OPERATIONS 280,410 1,255,400 270,733 706,561
OTHER INCOME (EXPENSE):
Interest expense -21,136 -64,363 -24,733 -78,705
Other income, net 9,198 25,701 7,471 24,728
TOTAL OTHER INCOME
(EXPENSE) -11,938 -38,662 -17,262 -53,977
INCOME BEFORE INCOME TAXES 268,472 1,216,738 253,471 652,584
PROVISION FOR INCOME TAXES 107,000 493,600 105,600 270,400
NET INCOME $161,472 $723,138 $147,871 $382,184
EARNINGS PER SHARE (Note 7)
Primary $ 0.08 $ 0.36 $ 0.07 $ 0.19
</TABLE>
-4-
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
FOR THE NINE MONTHS
ENDED JUNE 30,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $723,138 $382,184
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 181,386 150,745
Deferred income taxes -23,500 -21,000
Changes in assets and liabilities:
Accounts receivable -14,995 -108,054
Miscellaneous receivable 785,000 0
Inventories -237,993 -214,710
Prepaid expenses and other -35,921 -14,879
Accounts payable -79,613 203,874
Accrued expenses -27,352 78,549
Accrued environmental -750,000 0
Income taxes payable -163,511 -190,111
Deferred compensation 0 28,500
Total Adjustments -366,499 -87,086
NET CASH PROVIDED BY
OPERATING ACTIVITIES 356,838 295,098
CASH FLOWS FROM INVESTING ACTIVITIES:
Property,plant and equipment additions -105,476 -115,550
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock 26,020 2,907
Increase in long-term debt 2,534,000 2,108,000
Repayments of long-term debt -2,784,381 -2,224,191
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES -224,361 -113,284
NET INCREASE IN CASH 26,600 66,264
CASH - BEGINNING 65,951 74,937
CASH - ENDING 92,751 $141,201
CASH PAID DURING THE PERIOD
Interest $ 64,363 $ 79,370
Income taxes $680,611 $481,511
-5-
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
June 30, 1997
(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 28, 1996 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 28,
1997 1996
Finished goods $3,241,891 $3,003,898
Work in process 21,687 21,687
Raw materials 286,864 286,864
$3,550,442 $3,312,449
The following factors were taken into consideration in
determining inventory values:
Goddard Valve Corp. - June 30, 1997 - $1,818,629
(estimated) and September 28, 1996 - $1,657,426. Interim
inventories were valued by management using the
gross profit method.
Webstone Company, Inc. - June 30, 1997 - $1,731,813
(estimated) and September 28, 1996 - $1,655,023. 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. On
March 31, 1997 the effective interest rate was 9.0%. The
agreement expires March 31, 1999 and is secured by all property and
assets. Advances are restricted by certain limitations on eligible
receivables and inventories.
continued
-6-
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, 1997 long-term obligations consisted of the following:
LONG-TERM CURRENT
Revolving line of credit $728,503 $ -
Capital lease obligation for machinery,
payable in monthly installments of
$5,274, through July 1, 1999, with
imputed interest rate of 8.936% and
monthly installments of $6,807, through
March 1, 2,000, with imputed interest
rate of 8.441%. 192,443 121,900
$920,946 $121,900
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 28,
1997 1996
Deferred tax asset
Deferred compensation $ 220,400 $ 220,400
Inventory valuation 61,400 60,800
Accrued salaries 6,200 6,200
Accrued environmental 18,000 4,000
Bad debts 13,900 11,000
319,900 302,400
Depreciation 47,400 53,400
$ 272,500 $ 249,000
Management does not believe that any valuation allowance is
necessary.
-7-
NOTE 6 ENVIRONMENT MATTERS
The Company has been a party to the following environmental
matters:
DEP Matter:
An environmental assessment of the Corporate headquarters in
connection with a proposed bank financing in 1987 revealed
that there may have been a release or threat of release of
oil or hazardous materials and that an off-site source may
be introducing the contaminants. The Company notified the
Massachusetts Department of Environmental Protection (DEP).
In 1995 the site was designated as a Tier 1C Site under the
Massachusetts Contingency Plan and the Company must complete
a further site investigation by November 1997.
One of the Company's insurance carriers has paid the Company
$70,000 to be used as the Company determines in defense of
the DEP proceeding in exchange for a release of any further
claim with respect to this matter. In addition,
environmental engineers employed by the Company estimate
that the required remediation costs will be a minimum of
$45,000.
Shrewsbury matter:
The Shrewsbury environmental litigation was settled in
January, 1997 and the effects of that settlement reflected
in the financial statements for the year ended
September 28, 1996.
In the accompanying financial statements, the miscellaneous
receivable represents amounts due from insurance carriers with
respect to environmental matters and accrued environmental costs
represents amounts due the Town of Shrewsbury and the minimum
estimated remediation costs related to the DEP matter.
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.
NOTE 8 COMMITMENTS:
During June 1996 the Company entered into a commitment to construct an
addition to its manufacturing and warehouse facility in Worcester,
Massachusetts. The total construction costs are expected to be
approximately $270,000 which will be financed out of the Company's line
of credit facility with BankBoston.
-8-
PART I - FINANCIAL INFORMATION
Item 2 - Management's Discussion and Analysis of Financial
Condition
RESULTS OF OPERATIONS
FISCAL QUARTER ENDED JUNE 30, 1997 COMPARED TO
FISCAL QUARTER ENDED JUNE 30, 1996
For the quarter ended June 30, 1997, consolidated sales were
$2,277,000, a 7.5% increase over the same quarter of fiscal 1996.
However, as noted last quarter, the stron growth in the level of new
orders over the last couple of years appears to have leveled off, which
management believes is a reflection of a temporary slow-down in the
cryogenic industry. New Product lines were added to both divisions
during the last quarter and two additional new products are expected to
be added to the product line by the end of the fiscal year. Management
anticipates that these new products will add new customers and increase
revenues in the final quarter of the current fiscal year as well as in
subsequent years, although there can be no assurance that that will
occur.
Gross profits as a percentage of sales increased from 32.6% in the
third quarter of fiscal 1996 to 33.6% in the most recent quarter,
reflecting a change of product mix. Selling and administrative expenses
as a percentage of sales increased from 19.8% in the corresponding
quarter last year to 21.3% in the most recent quarter as a result of the
appointment of additional sales representatives, while interest costs
were slightly lower in the most recent quarter than in the corresponding
quarter in 1996. Earnings for the period of $161,500 ($.08 per share)
were a 9.1% increase above the $147,900 ($.07 per share) earnings in the
third quarter of fiscal 1996.
NINE MONTH PERIOD ENDED JUNE 30, 1997 COMPARED TO
NINE MONTH PERIOD ENDED JUNE 30, 1996
For the nine months ended June 30, 1997, consolidated sales were
$8,139,000 compared to sales of $5,966,000 for 1996, a 36.4% increase.
Goddard Valve's sales for the nine month period were up by 62.7% because
of a heavy backlog of orders from new product lines and an increasingly
larger market share for our cryogenic valves. Still to be completed
within the fiscal year are two new products that will add further sales
for this year and further growth for the years ahead. Our Webstone
Division sales were just slightly higher than the nine month period for
1996.
Selling and Administrative expenses as a percentage of sales for
the nine month period were reduced slightly, while gross profit margins
for the period were 33.6%, somewhat higher than the 32.7% reported for
1996. Gross profit margins vary slightly for each quarter because of
product mix changes for that quarter. Inventory levels have increased
only 7.2% since the June 1996 quarter to keep up with the 36.4% increase
in sales. Net earnings for the first three quarters were $723,000
($.36 per/share) compared to $382,200 ($.19 per share) for 1996.
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LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has funded operations primarily through
earnings and bank borrowings. At June 30, 1997, the Company had net
working capital of approximately $4,163,000, including approximately
$93,000 in cash. The Company has a line of credit of $1,750,000 from
BankBoston which expires March 30, 1999 and which is collateralized by
substantially all of the assets of the Company. At June 30, 1997,
approximately $728,500 has been drawn under this line of credit. The
Company believes that its working capital and cash position, together
with this line of credit, provide sufficient liquidity to handle the
normal working capital requirements of its present business.
During the nine months ended June 30, 1997, operating activities
of the Company provided $357,000 of cash. Cash was generated
principally from earnings ($723,000) and depreciation and amortization
($181,000). The principal uses of cash were increases in inventories
$238,000), reductions in income taxes liabilities ($164,000) and a
decrease in accounts payable ($80,000).
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 is in
the process of adding an additional 10,000 square feet of manufacturing
and warehouse space to the rear of its existing building in Worcester.
Its lending bank has agreed to allow it to finance the addition using
moneys available under the existing line of credit. The Company
believes that the remaining amounts available under its line of credit
after that borrowing, plus cash flow from operations and other available
sources, should provide sufficient liquidity to handle the normal
working capital requirements of its present business.
Inflation has not been a factor in the Company's business for the
last several years, although there can be no assurance that this will
continue to be the case. The Company's results of operations have not
been materially affected by seasonality.
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PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
There have been no further developments in the DEP environmental
proceeding from those described in the Company's Form 10-KSB for the
year ended September 28, 1996.
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 June 30, 1997.
-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 , 1997
GODDARD INDUSTRIES, INC.
by/s/Saul I. Reck
Saul I. Reck, President
Chief Executive Officer
and Principal Financial
Officer
