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 December 31, 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 December 31, 1996
Common Stock, $.01 par value 2,040,129
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, 1996
and September 28, 1996
3
Consolidated Statement of Income - Three Months Ended
December 31, 1996 and December 31, 1995
4
Consolidated Statement of Cash Flows - Three Months
Ended
December 31, 1996 and December 31, 1995
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
-2-
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
December 31,
September 28,
1996
1996
AUDITED
ASSETS
(ALL PLEDGED, NOTE 4)
CURRENT ASSETS:
Cash $ 97,818
$ 65,951
Accounts receivable, net of allowances 1,358,528
1,154,871
Other receivables (Note 6) 785,000
785,000
Inventories (Note 3) 3,310,550
3,312,449
Prepaid expenses and taxes 44,745
33,809
Deferred income taxes (Note 5) 84,400
82,000
TOTAL CURRENT ASSETS 5,681,041
5,434,080
PROPERTY, PLANT AND EQUIPMENT,
at cost 3,678,995
3,641,818
Less - Accumulated depreciation -2,642,446
- -2,589,252
1,036,549
1,052,566
OTHER ASSETS:
Excess of cost of investment in
subsidiaries over equity in net
assets acquired 17,441
18,380
Deferred income taxes - long term(Note 5)169,000
167,000
Total other assets 186,441
185,380
TOTAL ASSETS $6,904,031
$6,672,026
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of
long-term debt (Note 4) $ 54,000
$ 51,000
Accounts payable 404,627
317,321
Accrued expenses 285,681
399,861
Accrued environmental costs (Note 6) 795,000
795,000
Income taxes payable 147,771
191,771
TOTAL CURRENT LIABILITIES 1,687,079
1,754,953
LONG-TERM DEBT, net of
current maturities (Note 4) 1,019,011
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 2,040,129 shares. 20,401
20,401
Additional paid-in capital 399,353
399,353
Retained earnings 3,227,187
2,919,921
TOTAL SHAREHOLDERS'EQUITY 3,646,941
3,339,675
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $6,904,031
$6,672,026
-3-
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
FOR THE
THREE MONTHS
ENDED
December 31,
1996
1995
NET SALES $2,989,523
$1,791,242
COST OF SALES 1,957,321
1,200,956
GROSS PROFIT 1,032,202
590,286
SELLING AND ADMINISTRATIVE
EXPENSES 502,668
382,065
INCOME FROM OPERATIONS 529,534
208,221
OTHER INCOME (EXPENSE):
Interest expense -19,383
- -28,004
Other income, net 7,716
6,895
TOTAL OTHER INCOME
(EXPENSE) -11,667
- -21,109
INCOME BEFORE INCOME TAXES 517,867
187,112
PROVISION FOR INCOME TAXES 210,600
77,900
NET INCOME $307,267
$109,212
EARNINGS PER SHARE (Note 7)
Primary $ 0.14
$ 0.05
-4-
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
FOR THE
THREE MONTHS
ENDED
December 31,
1996
1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $307,267
$109,212
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 54,132
50,749
Deferred income taxes -4,400
- -7,000
Changes in assets and liabilities:
Accounts receivable -203,657
98,059
Inventories 1,899
- -100,890
Prepaid expenses and other -10,936
- -16,832
Accounts payable 87,306
43,984
Accrued expenses -114,180
19,468
Income taxes payable -44,000
- -180,100
Deferred compensation 0
9,500
Total Adjustments -233,836
- -83,062
NET CASH PROVIDED BY
OPERATING ACTIVITIES 73,431
26,150
CASH FLOWS FROM INVESTING ACTIVITIES:
Property,plant and equipment additions -37,177
- -11,773
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in long-term debt 989,000
809,000
Repayments of long-term debt -993,387
- -760,803
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES -4,387
48,197
NET INCREASE IN CASH 31,867
62,574
CASH - BEGINNING 65,951
74,937
CASH - ENDING $ 97,818
$137,511
CASH PAID DURING THE PERIOD
Interest $ 20,168
$ 27,649
Income taxes $259,000
$265,000
-5-
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
December 31, 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 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:
December 31,
September 28,
1996
1996
Finished goods $3,001,999
$3,003,898
Work in process 21,687
21,687
Raw materials 286,864
286,864
$3,310,550
$3,312,449
The following factors were taken into consideration in
determining inventory values:
Goddard Valve Corp. - December 31, 1996 - $1,834,838
(estimated) and September 28, 1996 - $1,657,426.
Interim
inventories were valued by management using the
gross profit method.
Webstone Company, Inc. - December 31, 1996 -
$1,475,712 (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
December 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.
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 December 31, 1996 long-term obligations consisted of
the following:
LONG-TERM
CURRENT
Revolving line of credit $ 927,503
$ -
Capital lease obligation for machinery,
payable in monthly installments of
$5,274, through July 1, 1999, with
imputed interest rate of 8.936% 91,508
54,000
$1,019,011
$54,000
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 28,
1996
1996
Deferred tax asset
Deferred compensation $ 220,400 $
220,400
Inventory valuation 61,200
60,800
Accrued salaries 6,200
6,200
Environmental matters 4,000
4,000
Bad debts 13,000
11,000
304,800
302,400
Depreciation 51,400
53,400
$ 253,400 $
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
agreed to pay
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, other
receivables
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.
-8-
PART I - FINANCIAL INFORMATION
Item 2 - Management's Discussion and Analysis of Financial
Condition
RESULTS OF OPERATIONS
FISCAL QUARTER ENDED DECEMBER 31, 1996 COMPARED TO
FISCAL QUARTER ENDED DECEMBER 31, 1995
The pattern of increased Company sales and earnings
continued
in the first quarter of fiscal 1997. Consolidated sales for
the three
months ended December 31, 1996 were a record $2,990,000, a
66.9%
increase over sales for the same quarter of fiscal 1996.
The increase
in sales in the Valve division resulted from substantially
larger
orders for both standard and newly designed product lines.
The
increase in Webstone division revenues resulted from larger
orders in a
newly acquired faucet line and from an increased market
share of standard catalog items. Levels of new orders and
the trade press indicate that the strength in revenues
should continue for at least the near term.
The Company's gross profit margins increased to 34.5%
from 32.9% in the same quarter last year, reflecting the
efficiencies resulting from increased sales volume, while
sales and administrative expenses declined as a percentage
of sales from 21.3% to 16.8% for the same reason. Interest
expense declined by approximately one third in the first
quarter of fiscal 1997 compared to the same period last year
as a result of lower interest rates and somewhat lower
borrowing levels.
The increased sales and relatively lower expenses
resulted in a 182% increase in the Company's net income to
$307,000 (or $.14 per share) in the first quarter of fiscal
1997, compared to $109,000 (or $.05 per share) in the
corresponding quarter last year.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has funded operations
primarily through earnings and bank borrowings. At December
31, 1996, the Company had net working capital of
approximately $3,994,000, including $98,000 in cash. The
Company also had 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. On December
31, 1996, approximately $928,000 had been drawn under that
line of credit, which bears interest at a rate equal to the
bank's prime rate plus 3/4 of 1%.
During the first quarter of fiscal 1997, the
operations of the Company produced $73,000 of cash. The
major sources of cash were net income ($307,000), increases
in accounts payable ($87,000) and depreciation ($54,000).
Principal uses of cash were increased accounts receivable
($204,000), reduced accrued expenses ($114,000), and a net
reduction in income taxes ($44,000).
During the quarter, the Company used approximately
$37,000 in investment activities for the purchase of
machinery and equipment, compared to $11,000 in the same
period of the prior year. Financing activities consumed
approximately $4,000 as the Company paid down long term
debt.
-9-
The Company plans to add an additional 10,000 square
feet of manufacturing and warehouse space to the rear of its
existing building in Worcester and to finance the addition
using moneys available under The First National Bank of
Boston line of credit. After the use of a portion of the
line of credit for that purpose, the Company believes that
the remaining amounts available under line of credit should
still provide 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.
As more fully described in Note 6 to the financial
statements, the Company is a party to an administrative
proceeding relating to environmental matters. Based upon
presently available information, the Company does not
anticipate that the resolution of the DEP proceeding will
have a material effect on the Company's financial resources.
The Company's results of operations have not been
materially affected by seasonality.
-10-
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 December 31, 1996.
-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 14, 1997
GODDARD INDUSTRIES, INC.
by/s/Saul I. Reck
Saul I. Reck, President
Chief Executive Officer
and Principal Financial
Officer
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<FISCAL-YEAR-END> SEP-28-1997
<PERIOD-END> DEC-31-1996
<CASH> 97,818
<SECURITIES> 0
<RECEIVABLES> 1,389,418
<ALLOWANCES> 30,890
<INVENTORY> 3,310,550
<CURRENT-ASSETS> 5,681,041
<PP&E> 3,678,995
<DEPRECIATION> 2,642,446
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<CURRENT-LIABILITIES> 1,687,079
<BONDS> 0
0
0
<COMMON> 20,401
<OTHER-SE> 3,626,540
<TOTAL-LIABILITY-AND-EQUITY> 6,904,031
<SALES> 2,989,523
<TOTAL-REVENUES> 1,032,202
<CGS> 1,957,321
<TOTAL-COSTS> 502,668
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,000
<INTEREST-EXPENSE> 19,383
<INCOME-PRETAX> 517,867
<INCOME-TAX> 210,600
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 307,267
<EPS-PRIMARY> .14
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