- 16 -
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Fiscal Year Ended September 27, 1997
or
[ ] Transition Report under Section 13 or 15(d) of the
Securities Exchange Act of 1934 for the Transition Period from
_________ to
Commission File Number 0-2052
GODDARD INDUSTRIES, INC.
(Name of Small Business Issuer as Specified in Its Charter)
Massachusetts 04-
2268165
(State or Other Juris- (I.R.S. Employer
Identifi-
diction of Incorporation cation No.)
or Organization)
705 Plantation Street, Worcester, 01605
Massachusetts
(Address of Principal Executive Offices) (Zip
Code)
Issuer's Telephone Number, Including Area Code (508) 852-2435
Securities registered under Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class On Which Registered
None N/A
Securities registered under Section 12(g) of the Exchange Act:
Common Stock $.01 par value
(Title of class)
Check whether the issuer: (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
Check if there is no disclosure of delinquent filers in response
to Item 405 of Regulation S-B contained in this form, and if no
disclosure will be contained, to the best of the registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any
amendment to this Form 10-KSB [ ]
The registrant's revenues for its most recent fiscal year are
$10,108,000.
The aggregate market value of the registrant's Common Stock, par
value $.01 per share, held by non-affiliates of the registrant at
December 1, 1997 was approximately $4,719,000, based on the mean
of the high and low sale prices on that date as reported by the
National Quotation Bureau, Inc.
As of December 1, 1997, there were outstanding 2,126,649 shares
of Common Stock, par value $.01 per share.
Transitional Small Business Disclosure Format:
Yes No X
PART I
ITEM 1. Business.
General.
Goddard Industries, Inc. (which together with its wholly-
owned subsidiaries is hereinafter referred to as the "Company")
is primarily engaged in the design, manufacture, distribution and
sale of cryogenic valves for industrial and commercial use and in
the distribution of plumbing goods, valves and fittings for
residential and commercial use.
The Company's Goddard Valve Corp. subsidiary ( referred to
as the "Valve Division") designs, manufactures and sells
cryogenic gate, globe and check valves and control devices
required for the handling of liquefied natural gas, liquid oxygen
and other liquefied gases. The principal markets for the Valve
Division's cryogenic valves historically have been public utility
companies involved with liquefied natural gas and manufacturers
of cryogenic tanks and transport trailers. In more recent years,
markets for special cryogenic valves have developed for use on
tanks required by the semi-conductor manufacturing and medical
technology industries. The Valve Division's cryogenic valves are
distributed domestically both by direct sales to customers and
through independent sales representatives. The Valve Division
also makes direct sales of the valves to customers in Canada,
Europe and Asian countries.
The Company's indirect subsidiary, The Webstone Company, Inc
(referred to as the "Webstone Division") is an importer of brass,
stainless steel and plastic plumbing products, as well as valves
for the gas industry, all of which are manufactured and packaged
to it's specifications in the Far East and in Europe, and
marketed under the Webstone name nationally through sales
representatives and in Canada through distributors. In addition,
the Webstone Division also manufactures and distributes
nationally certain domestic plumbing products, some of which have
been designed by the Valve Division. The principal markets for
the Webstone Division's plumbing products are plumbing supply and
hardware wholesalers who redistribute products to plumbers and
contractors involved in new construction or home alterations, and
to retail hardware outlets.
The Company is a Massachusetts corporation organized in
1959. Its executive offices are located at 705 Plantation
Street, Worcester, Massachusetts 01605.
Sources of Supply; Foreign Suppliers.
Raw materials for the Valve Division's business consist of
stainless steel, aluminum and bronze castings and bar stock,
which are available from a variety of regular and competitive
suppliers. The Company does not anticipate difficulty in
obtaining sufficient raw materials for that business.
The Webstone Division purchases substantially all of the
products for its plumbing supply business from a variety of
sources in foreign countries. The Webstone name is stamped or
cast into the part as well as its brand name being included in
the packaging. The Webstone Division has alternative sources of
supply in each country and does not anticipate problems in
maintaining adequate sources of supply.
The Webstone Division's reliance on foreign suppliers
involves hazards shared by most enterprises doing business in
foreign countries, including foreign economic and political
risks, currency fluctuations and controls, tariffs and import
controls. A substantial portion of the Webstone Division's
purchases are made in East Asian countries. To date, the
Webstone Division has not been affected by the recent economic
instability in East Asia, although there can be no assurance that
it will not be affected in the future.
Dependence Upon Principal Customers.
During fiscal 1997 the Valve Division sold a substantial
amount of its products to three customers which are manufacturers
of cryogenic vessels. It was dependent on one customer for 32.6%
of its cryogenic valve business (approximately 21.7% of the
Company's total revenue), and any loss or significant decrease in
business from this customer would have a material adverse effect
on the business of the Company. In addition, two other customers
accounted for approximately 7.4% and 7.3%, respectively, of the
Valve Division's cryogenic valve revenues during fiscal 1997, and
the loss of either of those customer also could have a material
adverse effect upon the Company.
No single customer accounts for 10% of the revenues of the
Webstone Division.
Backlog.
The dollar amount of backlog of orders believed to be firm
for the Valve Division was approximately $860,000 as of the end
of the 1997 fiscal year, as compared with approximately
$1,846,000 at the end of fiscal 1996 and $776,000 at the end of
fiscal 1995. The higher backlog at the end of fiscal 1996
compared to fiscal 1995 and fiscal 1997 was the result of a
number of large orders received in fiscal 1996 which were
delivered in fiscal 1997.
The dollar amount of orders believed to be firm in the
Webstone Division as of the end of fiscal 1997 was approximately
$107,000, as compared with approximately $110,000 as of the end
of the preceding fiscal year.
No part of the backlog of either business is seasonal.
Backlog varies according to business conditions within the
industry for both businesses. All backlog is expected to be
shipped within the current fiscal year.
Competition.
All aspects of the Company's business are highly
competitive. The Company believes there are between six and
eight principal competitors in the Valve Division's cryogenic
valve business. The Valve Division competes on the basis of
product performance and dependability. The Company believes that
the Valve Division's competitive position within that industry
has improved during the past several years, although there can be
no assurance that that situation will continue.
The Company believes there are approximately eight to ten
other major importers of foreign plumbing supplies which
distribute nationally and which compete with the Webstone
Division. The Company does not believe that there have been any
changes in competitive conditions in the plumbing supply business
or in the competitive position of the Webstone Division in that
industry during the past fiscal year. The Webstone Division
competes on the basis of price and delivery.
Research and Development.
During the last fiscal year, the Company spent approximately
$175,000 and had seven employees working full or part time on
Company-sponsored research and development, all of which was
spent on cryogenic valve development. During the previous year
the Company also spent approximately $175,000 for research and
development.
The Company has obtained a number of patents and has
additional patent applications pending with respect to certain of
the products of the Valve Division. There can be no assurance
that any of the pending patent applications will be granted or
that existing patents will be enforceable. While the Company
believes the patents have value, it believes that the success of
the Valve Division depends more upon the technical competence and
manufacturing skills of its employees than upon patents.
ITEM 2. Properties.
The Company's executive offices and the business of both the
cryogenic valve subsidiary and the plumbing products subsidiary
are located at 703-705 Plantation Street, Worcester,
Massachusetts in a building on a main thoroughfare owned by
Goddard Valve. The building is a one-story building erected in
1961, containing approximately 37,000 square feet, including a
27,000 square foot masonry structure and an approximately 10,000
square foot steel structure addition added in 1997. It is owned
by the Goddard Valve subsidiary. With the completion of that
addition, the facility should be adequate to meet Company needs
for the foreseeable future. The Company believes that its
existing facilities and equipment are well maintained and in good
operating condition.
ITEM 3. Legal Proceedings.
In 1987, the Company notified the Massachusetts Department
of Environmental Protection ("DEP") of the fact that an
environmental site assessment performed at its facility at 705
Plantation Street, Worcester for a proposed bank financing had
revealed that there may have been a release or threat of release
of oil or hazardous materials. In 1989, the DEP designated the
site as a disposal site under the Massachusetts Oil and Hazardous
Material Release, Prevention and Response Act (popularly known as
Chapter 21E). In 1991, the Company submitted a Phase One Limited
Site Investigation report to DEP. In 1995, the site was
designated as a Tier 1C Site under the Massachusetts Contingency
Plan. Further site investigation is presently being performed
pursuant to a permit from the DEP.
ITEM 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to the stockholders of the Company
during the fourth quarter of the 1997 fiscal year.
PART II
ITEM 5. Market for Registrant's Common Equity and Related
Stockholder Matters.
The Company's Common Stock is traded in the over-the-counter
market on the Nasdaq Bulletin Board. As of December 1, 1997,
there were 900 holders of the Company's Common Stock. The
quarterly high and low bid prices of the Company's Common Stock
for the two fiscal years ending September 28, 1996 and September
27, 1997 are set forth below. Prices are based upon quotations
from the National Quotation Bureau, Inc.
_________________________________
FISCAL 1996 BID PRICES
High Low
Quarter 12/31/95 $ .9375 $ .3125
Ending:
3/31/96 1.000 .5312
6/30/96 1.000 .8125
9/28/96 1.250 .8125
FISCAL 1997 BID PRICES
High Low
Quarter 12/31/96 $1.875 $1.625
Ending:
3/31/97 $2.50 $2.00
6/30/97 $2.75 $2.563
9/27/97 $4.375 $4.00
As of the end of fiscal 1997, the Company had never declared
a cash dividend, although it has declared stock dividends from
time to time.
ITEM 6. Management's Discussion and Analysis or Plan of
Operation.
Results of Operations - 1997 Compared to 1996
Consolidated sales for fiscal 1997 were a record
$10,108,000, a 21.8% increase over consolidated sales in fiscal
1996. This was primarily due to a 34.3% increase in sales in the
Valve Division from $5,000,000 to $6,727,000 resulting from more
frequent orders from larger customers. Sales in the Webstone
Division increased 2.8% from $3,290,000 to $3,382,000 as a result
of customers testing some of our newer product lines. Backlog
declined from $1,956,000 at fiscal 1996 year-end to $967,000 at
fiscal 1997 year-end as the result of completion in fiscal 1997
of a number of large orders received by the Valve Division in
fiscal 1996 which were delivered in fiscal 1997.
The Company's gross profit margin decreased slightly from
36.4% in fiscal 1996 to 35.8% in fiscal 1997 as a result of a
small increase in basic costs of materials. Sales and
administrative expenses declined as a percentage of sales from
22.0% to 20.3% reflecting economies as a result of increased
sales volume.
Consolidated operating profit increased 31.1% from
$1,197,000 in fiscal 1996 to $1,570,000 in fiscal 1997.
Operating profit of the Valve Division increased 35.9% from
$1,103,000 in fiscal 1996 to $1,498,000 in fiscal 1997, while
operating profit of the Webstone Division declined by 24.1% from
$94,000 in fiscal 1996 to $72,000 in fiscal 1997.
Interest expense declined 16.5% for fiscal 1997 as a result
of lower interest rates and somewhat lower borrowing levels.
As a result of the above developments, the Company's net
income increased 30.0% to $890,000 in fiscal 1997, compared to
$685,000 in fiscal 1996. This produced primary net income per
share of $.42 in fiscal 1997 and $.33 in fiscal 1996.
Results of Operations - 1996 Compared to 1995
Consolidated sales for fiscal 1996 were a record $8,300,000,
a 22.6% increase over consolidated sales in fiscal 1995. The
34.0% increase in sales in the Valve Division from $3,739,000 to
$5,010,000 resulted from substantially larger orders for both
standard and newly designed product lines. The 8.5% increase in
Webstone Division revenues from $3,032,000 to $3,290,000 resulted
from larger orders in a newly acquired faucet line and from an
increased market share of standard catalog items. At fiscal 1996
year-end, the backlog of orders in the Valve Division was
approximately 2 1/2 times higher than it was at fiscal 1995 year-end
as a result of a number of large orders received in fiscal 1996
which called for delivery in fiscal 1997.
The Company's gross profit margins increased slightly to
36.4% from 35.8%, reflecting the efficiencies resulting from
increased sales volume, while sales and administrative expenses
declined as a percentage of sales from 23.8% to 22.0% for the
same reason.
Interest expense declined 32.1% for fiscal 1996 as a result
of lower interest rates and somewhat lower borrowing levels.
As a result of the above, the Company's primary net income
increased 59.2% to $685,000 in fiscal 1996, compared to $430,000
in fiscal 1995. This produced primary net income per share of
$.33 in fiscal 1996 and $.21 in fiscal 1995.
Liquidity and Capital Resources
Historically, the Company has funded operations primarily
through earnings and bank borrowings. At September 27, 1997, the
Company had working capital of approximately $3,978,000,
including $83,000 in cash. The Company also had a line of credit
of $1,750,000 with BankBoston collateralized by substantially all
of the assets of the Company. On September 27, 1997,
approximately $621,000 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 fiscal 1997, the operations of the Company produced
$783,000 of cash. The major sources of cash were net income
($890,000) and depreciation ($241,000). Principal uses of cash
were the additional investment in inventories ($229,000),
increased accounts receivable ($48,000) and payment of income
taxes ($139,000). A large one time payment of an environmental
litigation settlement was largely offset by payments toward that
settlement from the Company's insurance carriers.
During fiscal 1997, investment activities used approximately
$409,000, as the Company used approximately $230,000 for the
construction of an addition to the Company's Plantation Street
facility and approximately $179,000 for the purchase of machinery
and equipment, compared to $140,000 used for purchase of
machinery and equipment in the prior year. Financing activity
consumed approximately $357,000 in iscal 1997 as the Company paid
down long term debt. This was partially offset by stock sales
from option exercises and employee stock purchase program
purchases.
The 1997 addition to the rear of the Company's facility in
Worcester was financed completely by using moneys available under
the BankBoston line of credit. The Company believes that the
remaining amounts available under the line of credit should
provide sufficient liquidity to handle the normal working capital
requirements of its present business, although there can be no
assurance that that will be the case.
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 Item 3 and in Note 8 to the
financial statements, the Company is responsible to perform
additional environmental assessment of its Worcester,
Massachusetts property. Based upon presently available
information, the Company does not anticipate that the resolution
of the DEP matter will have a material adverse effect on the
Company's financial resources.
The Company performed an internal assessment of the cost to
modify its computer systems so that it will be able to process
information or logic involving the year 2000 and beyond
completetely and accurately. The Company estimates that the
total cost to address this "Year 2000 problem" is approximately
$50,000. The Company has performed approximately one-third of
the anticipated work. The Company is not able to assess what the
impact of the Year 2000 problem may be on its suppliers and
customers.
The Company's results of operations have not been materially
effected by seasonality.
ITEM 7. Financial Statements and Supplementary Data.
The financial statements and supplementary data are listed
under Part III, Item 13 in this report.
ITEM 8. Changes In and Disagreements with Accountants on
Accounting and Financial Disclosures.
There have not been any changes in the Company's auditors in
more than two fiscal years.
PART III
ITEM 9. Directors, Executive Officers, Promoters and Control
Persons;
Compliance With Section 16(a) of the Exchange Act.
Information As To Officers, Directors and Beneficial Owners
The following table sets forth certain information, as of
November 30, 1997 with respect to each director, all officers and
directors as a group (7 persons) and each person owning five
percent or more of the Company's Common Stock. This table is
based on information furnished by such persons.
Number
of
Shares Year
of Term
Name, Age, Principal Common Percent Would
Occupation and Address Director Stock of Expire
Since Benefici Class and
ally Class
Owned
(1)
Dr. Jacky Knopp, Jr., 75 1972 78,000(2 3.7% 1999
President, Crosby ) Class 3
Research Associates
(marketing and
management consultants)
211 Delamere Road,
Buffalo, NY;
Account Executive, Moors
& Cabot, Inc. (stock
brokerage firm)
4575 Main Street,
Amherst, NY;
Professor Emeritus of
Canisius College,
Buffalo, NY
Saul I. Reck, 79 1959 321,955( 15.1% 2000
President of the Company 3) Class 1
Lyle E. Wimmergren, 66 1978 * 1998
Professor Emeritus of 10,000(4 Class 2
Management )
Worcester Polytechnic
Institute
55 Liberty Hill Road,
Henniker, NH
Robert E. Humphreys, 55 1997 462,950( 21.7% 1998
President of Antigen 5) Class 2
Express, Inc., a company
focused on creating
drugs for auto-immune
diseases, August 1995-
present; Professor and
Interim Chair,
Department of
Pharmacology, University
of Massachusetts Medical
School prior to August
1995
One Innovation Drive
Worcester, MA 01605
All executive officers --- 976,305( 42.6% ---
and directors as a group 6)
(7 persons)
Joseph A. Lalli --- 183,550( 8.6% ---
6 Middlemont Way, Stow, 7)
MA
- -------------------------------------
*Less than one percent
(1) Unless otherwise noted, each person identified
possesses sole voting and investment power.
(2) Includes 32,000 shares owned Dr. Knopp's wife, as to
which he disclaims beneficial interest, and an option
to acquire 10,000 shares held by Dr. Knopp.
(3) Includes 5,250 shares held by Mr. Reck's wife, as to
which he disclaims beneficial interest.
(4) Consists of options to acquire 10,000 shares held by
Mr. Wimmergren.
(5) Includes 217,650 shares as to which Mr. Humphreys has
sole voting and dispositive power and 240,300 shares as
to which Mr. Humphreys shares voting and dispositive
power by virtue of a power of attorney over the
investment accounts of seven persons. Mr. Humphreys
and certain other persons, acting as a group,
beneficially own an aggregate of 457,950 shares. Also
includes an option to acquire 5,000 shares held by Mr.
Humphreys.
(6) In addition to the matters noted above in (2) - (5),
includes 19,900 shares owned by an executive officer
jointly with his wife and options on 25,000 shares held
by two officers.
(7) Mr. Lalli has reported to the Company that a Schedule
13D, Amendment No. 6, was filed with the Securities and
Exchange Commission indicating that he has sole voting
and dispositive power of 154,050 shares and shared
voting and dispositive power with his wife of 29,500
shares.
All of the directors other than Mr. Humphreys have had the
same principal occupation for the last five years, except that
the Amherst, New York office of Moors & Cabot, Inc. at which Dr.
Knopp is an account executive was previously owned by other
brokerage firms. Saul I. Reck is the father of Michael E. Reck,
President of the Webstone Division, and of Joel M. Reck, Clerk of
the Company.
The Board of Directors of the Company held four meetings
during the fiscal year ended September 27, 1997. Each present
director attended at least 75% of the meetings of the Board of
Directors and of all committees of which he was a member.
The Board of Directors has an Audit Committee and a
Compensation Committee, both composed of Dr. Knopp and Mr.
Wimmergren. The Audit Committee, which met twice during the last
fiscal year, is charged with recommending to the Board of
Directors retention of a firm of independent accountants and with
reviewing the Company's internal audit and accounting controls,
the report of the independent accounts and the financial
statements of the Company. The Compensation Committee, which met
twice during the last fiscal year, is responsible for
recommending salary and bonus levels of officers and key
employees. There is no Nominating Committee of the Board of
Directors. The Board of Directors as a whole will consider
nominees for director submitted to it in writing by any
shareholder.
Executive Officers of the Company
The executive officers of the Company are as follows:
Name Age Position Executive Officer
Since
Saul I. Reck 79 Chairman of the 1959
Board
President and
Treasurer
Donald R. 62 Vice President 1973
Nelson
Michael E. 40 President of 1997
Reck Webstone Division
The term of office for all officers is from one annual
meeting of the Board of Directors to the next, subject to the
right of the Board of Directors to remove an officer at any time,
subject to the provisions of Mr. Reck's Employment Agreement
described under item 10 below.
Saul I. Reck and Donald R. Nelson have been employed by the
Company in the above-described capacities for more than five
years. Michael E. Reck joined the Company in August 1993 as
Sales Manager of the Webstone Division. In November 1996 he was
named President of the Webstone Division, and in December, 1997
he was designated an executive officer of the Company. Before
joining the Company, he owned and operated a restaurant.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires the Company's executive officers and directors,
and persons who own more than 10% of the Company's Common Stock,
to file reports of ownership and changes in ownership on Forms 3,
4 and 5 with the Securities and Exchange Commission. Executive
officers, directors and greater than 10% stockholders are
required to furnish the Company with copies of all Forms 3, 4 and
5 they file.
Based solely on the Company's review of the copies of such
forms it has received and written representations from certain
reporting persons that they were not required to file Forms 5 for
specified fiscal years; the Company believes that all of its
executive officers, directors and greater than 10% stockholders
complied with all Section 16(a) filing requirements applicable to
them during the Company's fiscal year ended September 27, 1997.
ITEM 10. Executive Compensation.
SUMMARY COMPENSATION TABLE
Annual Compensation
Name and Fiscal Salary Bonus (1) Other
Principal Year Annual
Position Ended $ $ Compensatio
n (2)
$
Saul I. Reck 9/27/97 $115,000 $143,300 $10,000
President & 9/28/96 115,000 108,700 10,000
Treasurer 9/30/95 115,000 55,000 10,000
Donald Nelson 9/27/97 $85,200 $20,000 ------
9/28/96 81,400 15,000 ------
9/30/95 79,200 10,000 ------
(1) Under the terms of his Employment Agreement with the
Company described below, Mr. Reck is entitled to receive a bonus
equal to 10% of the amount by which Company pre-tax profits
exceed specified base amounts.
(2) Consists of cash payments to Mr. Reck to be used for
purchase of retirement benefits.
The following table shows information concerning the
exercise of stock options during fiscal 1997 and the fiscal year-
end value of unexercised options and stock appreciation rights.
AGGREGATED OPTION/SAR EXERCISES IN LAST
FISCAL YEAR AND FY-END OPTION/SAR VALUES
Number of
Securities Value of
Underlying Unexercised
Shares Unexercise In-the Money
Acquired Value d Options/SARs
Name on Realized Options/SA at
Exercise Rs 9/27/97
9/27/97
Exercisabl Exercisable
e
(#) ($) (#) ($)
Saul I. 75,000 $281,250 --- ---
Reck
Donald --- --- 20,000 $82,500
Nelson
Under an Employment Agreement with Saul I. Reck entered into
in 1989, as amended in 1992 and again in 1994, Mr. Reck has
agreed to be employed by the Company as Chairman of the Board and
President on a full time basis. Mr. Reck received a base salary
of $115,000 in fiscal 1997, plus $10,000 to be used to purchase a
retirement benefit. In addition, Mr. Reck receives a bonus equal
to 10% of the amount by which the Company's pre-tax profits
exceed a base amount. After he retires, Mr. Reck will be
entitled to receive an unfunded annuity of $60,000 per year for
his life. On his death, his surviving spouse will be entitled to
an annuity of $30,000 per year for life, with both amounts
payable under these annuities subject to adjustment based upon
cost of living increases after October 1, 1993.
Compensation of Directors
Each director who is not also an officer or employee of the
Company receives a base fee of $2,400 per year. Each director
who is not also an officer or employee of the Company and who
lives in the greater Worcester area receives $500 for each
directors' meeting he attends. Each director who is not also an
officer or employee of the Company and who lives outside the
greater Worcester area receives $600 for each such meeting, plus
travel expenses to and from Worcester. No extra compensation is
paid for attendance at meetings of committees. All non-employee
directors as a group were paid $12,700 for services rendered
during fiscal year 1997.
The Board of Directors has a Severance Compensation Plan for
certain officers and all directors in the event that there is a
"change in control" of the Company not approved by the Board of
Directors resulting in the termination of employment or reduction
in the duties and responsibilities of the President, Vice-
Presidents and Treasurer (as determined by the Board of
Directors) and/or a termination of service as director of the
Company. The plan provides that such President, Vice Presidents
and Treasurer will continue to receive the compensation being
paid to them at the time of the termination or change in the
nature of employment, for a period of five years following such
termination or change, and the non-employee directors will
continue to receive directors' fees of $500 or $600 per fiscal
quarter, depending on whether or not the director lives in the
greater Worcester area, for such five year period. At the
current rate of compensation this would entail an aggregate
payment of $1,899,000 to the executive officers as a group and a
payment of $61,000 to the non-employee directors as a group.
ITEM 11. Security Ownership of Certain Beneficial Owners and
Management.
Information concerning security ownership of certain
beneficial owners and management required by this Item 11 is
hereby incorporated by reference to the information contained
under the heading "Information As To Officers, Directors and
Beneficial Owners" in Item 9 above.
ITEM 12. Certain Relationships and Related Transactions.
None.
ITEM 13. Exhibits and Reports on Form 8-K.
(a)(1) Financial Statements.
1. Report of Greenberg, Rosenblatt, Kull & Bitsoli,
P.C. dated November 17, 1997. (See page 21
hereof.)
2. Consolidated Balance Sheet as of September 27,
1997 and September 28, 1996. (See page 22
hereof.)
3. Consolidated Statement of Income for the fifty-two
weeks ended September 27, 1997, the fifty-two
weeks ended September 28, 1996 and fifty-two weeks
ended September 30, 1995. (See page 23 hereof.)
4. Consolidated Statement of Stockholders' Equity for
the fifty-two weeks ended September 27, 1997, the
fifty-two weeks ended September 28, 1996 and fifty-
two weeks ended September 30, 1995. (See page 24
hereof.)
5. Consolidated Statement of Cash Flows for the fifty-
two weeks ended September 27, 1997, the fifty-two
weeks ended September 28, 1996 and fifty-two weeks
ended September 30, 1995. (See page 25 hereof.)
6. Notes to the Consolidated Financial Statements.
(See pages 26-38 hereof.)
(a)(2) Exhibits.
(3) Articles of Incorporation and By-Laws:
(a) Articles of Organization. (Filed as Exhibit 3 to
the Company's Registration Statement on Form S-1
(Registration No. 2-16854 of Reva Enterprises,
Inc., now Goddard Industries, Inc.))*
Articles of Amendment to the Articles of
Organization, dated December 14, 1962. (Filed as
Exhibit 3 to the Company's Form 10-K for the
fiscal year ended September 28, 1985.)*
Articles of Merger and Consolidation, dated July
29, 1968. (Filed as Exhibit 3 to the Company's
Form 10-K for the fiscal year ended September 28,
1985.)*
Restated Articles of Organization, dated March 31,
1971. (Filed as Exhibit 3 to the Company's Form
10-K for the fiscal year ended September 28,
1985.)*
Articles of Amendment to Restated Articles of
Organization, dated June 1, 1972. (Filed as
Exhibit 3 to the Company's Form 10-K for the
fiscal year ended September 28, 1985.)*
Articles of Amendment to Restated Articles of
Organization, dated October 11, 1985. (Filed as
Exhibit 3 to the Company's Form 10-K for the
fiscal year ended September 28, 1985.)*
Articles of Amendment to Restated Articles of
Organization dated March 13, 1987. (Filed as
Exhibit 3 to the Company's Form 10-Q for the
quarter ended March 28, 1987.)*
(b)(1) By-Laws (filed as Exhibit 19 to the Company's
Form 10-Q for the quarter ended March 31, 1984.)*
(b)(2) By-Law Amendment dated as of September 28,
1990. (Filed as Exhibit 3(b)(2) to the Company's
Form 10-K for the fiscal year ended September 29,
1990.)*
(4) Instruments Defining the Rights of Security Holders:
(a) Specimen certificate of common stock. (Filed as
Exhibit 4(a) of Registration Statement on Form S-1
Registration No. 2-16854 of Reva Enterprises,
Inc., now Goddard Industries, Inc.))*
(10) Material Contracts:
(a) Consolidated Revolving and Term Credit and
Security Agreement dated as of January 3, 1991
among subsidiaries of the Company and the First
National Bank of Boston (the "Bank"). (Filed as
Exhibit 10(h) to the Company's Form 10-Q for the
quarter ended March 31, 1991.)*
(b) $1,600,000 revolving loan note and $383,124 term
loan note, both dated January 3, 1991 from subsi
diaries of the Company to the Bank. (Filed as
Exhibit 10(i) to the Company's Form 10-Q for the
quarter ended March 31, 1991.)*
(c) Unlimited guaranty to the Bank by the Company of
the obligations of the subsidiaries to the Bank.
(Filed as Exhibit 10(v) to the Company's Form 10-Q
for the quarter ended March 31, 1991.)*
(d) Letter agreement between the Company's
subsidiaries and the Bank dated April 27, 1992
modifying banking arrangements. (Filed as Exhibit
(10) to the company's Form 10-Q for the quarter
ended June 30, 1992.)*
(e) Amended and Restated Employment Agreement between
the Company and Saul I. Reck effective as of
October 1, 1991 and executed May 1, 1992. (Filed
as Exhibit 10(c) to the Company's Form 10-Q for
the quarter ended June 30, 1992.)*
(f) Restated Non-Qualified Stock Option Agreement
between the Company and Saul I. Reck. (Filed as
Exhibit 10(d) to the Company's Form 10-K for the
fiscal year ended September 30, 1989.)*
(g) Adoption Agreement (Non-Standardized Code 401(k)
Profit Sharing Plan) dated July 31, 1991, together
with related Defined Contribution Prototype Plan
and Trust Agreement. (Filed as Exhibit 10(h) to
the Company's Form 10-K for the fiscal year ended
September 28, 1991.)*
(h) Employee Stock Purchase Plan dated December 9,
1993. (Filed as Exhibit 10(h) to the Company's
Form 10-KSB for the fiscal year ended October 1,
1994.)*
(i)(A) Settlement Agreement and Release between the
Company and St. Paul Fire and Marine Insurance
Company dated July, 1996. (Filed as Exhibit
10(i)(A) to the Company's Form 10-K for the fiscal
year ended September 28, 1996.)*
(B) Amendment to Settlement Agreement and Release
executed December 3, 1996. (Filed as Exhibit
10(i)(B) to the Company's Form 10-K for the fiscal
year ended September 28, 1996.)*
(j) Form of Settlement Agreement and Release between
the Company and Gibralter Casualty Company dated
January 31, 1997. (Filed as Exhibit 10(j) to the
Company's Form 10-K for the fiscal year ended
September 28, 1996.)*.
(k) Form of Settlement Agreement and Release between
the Company and Lexington Insurance Company dated
January 31, 1997. (Filed as Exhibit 10(k) to the
Company's Form 10-K for the fiscal year ended
September 28, 1996.)*
(l) Form of Settlement Agreement among the Town of
Shrewsbury, the Company and certain defendants and
third-party defendants dated January 31, 1997.
(Filed as Exhibit 10(l) to the Company's Form 10-K
for the fiscal year ended September 28, 1996.)*
(11) Statement Re Computation of Per Share Earnings. The
Statement Re Computation of Per Share Earnings is set
forth in Note 14 to the Company's Consolidated
Financial Statements.
(21) Subsidiaries of the Registrant. (Filed as Exhibit 22
to the Company's Form 10-K for the fiscal year ended
September 30, 1989.)*
(27) Financial Data Schedule.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during the
last quarter of its fiscal year ended September 27, 1997.
______________________
*Not filed herewith. In accordance with Rule 12b-23 under the
Securities Exchange Act of 1934, as amended, reference is made to
the documents previously filed with the Commission.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GODDARD INDUSTRIES, INC.
Dated: December 22, 1998 By:
Saul I. Reck, President
In accordance with the Exchange Act, this report has been
signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
/s/ Saul I Reck Director, Principal December 22, 1997
Saul I. Reck Executive Officer,
Principal Financing
Officer and Principal
Accounting Officer
/s/ Jacky Knopp, Jr. Director December 22, 1997
Jacky Knopp, Jr.
/s/ Robert E. Director December 22, 1997
Humphreys
Robert E. Humphreys
/s/ Lyle Wimmergren Director December 22, 1997
Lyle Wimmergren
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 1997 AND SEPTEMBER 28, 1996
EXHIBIT INDEX
Exhibit
Number
Page
(3) Articles of Incorporation and By-Laws:
(a) Articles of Organization. (Filed as
Exhibit 3 to the Company's Registration
Statement on Form S-1 (Registration No. 2-
16854 of Reva Enterprises, Inc., now
Goddard Industries, Inc.))*
Articles of Amendment to the Articles of
Organization, dated December 14, 1962.
(Filed as Exhibit 3 to the Company's Form
10-K for the fiscal year ended September
28, 1985.)*
Articles of Merger and Consolidation,
dated July 29, 1968. (Filed as Exhibit 3
to the Company's Form 10-K for the fiscal
year ended September 28, 1985.)*
Restated Articles of Organization, dated
March 31, 1971. (Filed as Exhibit 3 to
the Company's Form 10-K for the fiscal
year ended September 28, 1985.)*
Articles of Amendment to Restated Articles
of Organization, dated June 1, 1972.
(Filed as Exhibit 3 to the Company's Form
10-K for the fiscal year ended September
28, 1985.)*
Articles of Amendment to Restated Articles
of Organization, dated October 11, 1985.
(Filed as Exhibit 3 to the Company's Form
10-K for the fiscal year ended September
28, 1985.)*
Articles of Amendment to Restated Articles
of Organization dated March 13, 1987.
(Filed as Exhibit 3 to the Company's Form
10-Q for the quarter ended March 28,
1987.)*
(b)(1) By-Laws (filed as Exhibit 19 to the
Company's Form 10-Q for the quarter ended
March 31, 1984.)*
(b)(2) By-Law Amendment dated as of
September 28, 1990. (Filed as Exhibit
3(b)(2) to the Company's Form 10-K for the
fiscal year ended September 29, 1990.)*
(4) Instruments Defining the Rights of Security
Holders:
(a) Specimen certificate of common stock.
(Filed as Exhibit 4(a) of Registration
Statement on Form S-1 Registration No. 2-
16854 of Reva Enterprises, Inc., now
Goddard Industries, Inc.))*
(10) Material Contracts:
(a) Consolidated Revolving and Term Credit and
Security Agreement dated as of January 3,
1991 among subsidiaries of the Company and
the First National Bank of Boston (the
"Bank"). (Filed as Exhibit 10(h) to the
Company's Form 10-Q for the quarter ended
March 31, 1991.)*
(b) $1,600,000 revolving loan note and
$383,124 term loan note, both dated
January 3, 1991 from subsidiaries of the
Company to the Bank. (Filed as Exhibit
10(i) to the Company's Form 10-Q for the
quarter ended March 31, 1991.)*
(c) Unlimited guaranty to the Bank by the
Company of the obligations of the
subsidiaries to the Bank. (Filed as
Exhibit 10(v) to the Company's Form 10-Q
for the quarter ended March 31, 1991.)*
(d) Letter agreement between the Company's
subsidiaries and the Bank dated April 27,
1992 modifying banking arrangements.
(Filed as Exhibit (10) to the company's
Form 10-Q for the quarter ended June 30,
1992.)*
(e) Amended and Restated Employment Agreement
between the Company and Saul I. Reck
effective as of October 1, 1991 and
executed May 1, 1992. (Filed as Exhibit
10(c) to the Company's Form 10-Q for the
quarter ended June 30, 1992.)*
(f) Restated Non-Qualified Stock Option
Agreement between the Company and Saul I.
Reck. (Filed as Exhibit 10(d) to the
Company's Form 10-K for the fiscal year
ended September 30, 1989.)*
(g) Adoption Agreement (Non-Standardized Code
401(k) Profit Sharing Plan) dated July
31, 1991, together with related Defined
Contribution Prototype Plan and Trust
Agreement. (Filed as Exhibit 10(h) to the
Company's Form 10-K for the fiscal year
ended September 28, 1991.)*
(h) Employee Stock Purchase Plan dated
December 9, 1993. (Filed as Exhibit 10(h)
to the Company's Form 10-KSB for the
fiscal year ended October 1, 1994.)*
(i)(A) Settlement Agreement and Release
between the Company and St. Paul Fire and
Marine Insurance Company dated July, 1996.
(Filed as Exhibit 10(i)(A) to the
Company's Form 10-K for the fiscal year
ended September 28, 1996.)*
(B) Amendment to Settlement Agreement and
Release executed December 3, 1996. (Filed
as Exhibit 10(i)(B) to the Company's Form
10-K for the fiscal year ended September
28, 1996.)*
(j) Form of Settlement Agreement and Release
between the Company and Gibralter Casualty
Company dated January 31, 1997. (Filed as
Exhibit 10(j) to the Company's Form 10-K
for the fiscal year ended September 28,
1996.)*.
(k) Form of Settlement Agreement and Release
between the Company and Lexington
Insurance Company dated January 31, 1997.
(Filed as Exhibit 10(k) to the Company's
Form 10-K for the fiscal year ended
September 28, 1996.)*
(l) Form of Settlement Agreement among the
Town of Shrewsbury, the Company and
certain defendants and third-party
defendants dated January 31, 1997. (Filed
as Exhibit 10(l) to the Company's Form 10-
K for the fiscal year ended September 28,
1996.)*
(11) Statement Re Computation of Per Share Earnings.
The Statement Re Computation of Per Share
Earnings is set forth in Note 14 to the
Company's Consolidated Financial Statements.
(21) Subsidiaries of the Registrant. (Filed as
Exhibit 22 to the Company's Form 10-K for the
fiscal year ended September 30, 1989.)*
(27) Financial Data Schedule.
(b) Reports on Form 8-K
The Company did not file any reports on Form 8-K during
the last quarter of its fiscal year ended September 27,
1997.
#648757 v4 - SEARLEJR - dwl104!.DOC - 1170/1170
1
Independent Auditors' Report
The Shareholders and Board of Directors
Goddard Industries, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of
Goddard Industries, Inc. and Subsidiaries as of September 27,
1997 and September 28, 1996 and the related consolidated
statements of income, shareholders' equity and cash flows for
each of the three years in the period ended September 27, 1997.
These financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether
the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of Goddard Industries, Inc. and Subsidiaries
as of September 27, 1997 and September 28, 1996 and the
consolidated results of their operations and cash flows for each
of the three years in the period ended September 27, 1997, in
accordance with generally accepted accounting principles.
/s/ GREENBERG, ROSENBLATT, KULL & BITSOLI, P.C.
Worcester, Massachusetts
November 17, 1997
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 27, 1997 AND SEPTEMBER 28, 1996
1997 1996
ASSETS (All pledged, Note 4)
Current assets:
Cash $ 82,943 $ 65,951
Accounts receivable (less allowance
for doubtful accounts of $30,900
in 1997 and $27,600 in 1996) 1,203,244 1,154,871
Other receivables (Note 8) - 785,000
Inventories (Note 2) 3,541,862 3,312,449
Prepaid expenses 31,420 33,809
Deferred income taxes (Note 7) 133,000 82,000
Total current assets 4,992,469 5,434,080
Property, plant and equipment (Note 3) 1,440,831 1,052,566
Other assets:
Excess of cost of investment in
subsidiaries over equity in net
assets acquired (less accumulated
amortization of $125,661 in 1997
and $121,905 in 1996) 14,624 18,380
Deferred income taxes (Note 7) 165,000 167,000
Total other assets 179,624 185,380
Total assets $6,612,924 $6,672,026
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term
debt (Note 4) $ 119,000 $ 51,000
Accounts payable 374,689 317,321
Accrued expenses 423,035 399,861
Accrued environmental costs
(Note 8) 45,000 795,000
Income taxes payable 52,660 191,771
Total current liabilities 1,014,384 1,754,953
Long-term debt (Note 4) 786,668 1,026,398
Deferred compensation (Note 9) 551,000 551,000
Shareholders' equity: (Notes 5 and 13)
Common stock - par value $.01 per
share; authorized 3,000,000 shares,
issued and outstanding 2,126,649
shares in 1997 and 2,040,129
in 1996 21,266 20,401
Additional paid in capital 429,353 399,353
Retained earnings (Note 4) 3,810,253 2,919,921
Total shareholders' equity 4,260,872 3,339,675
Total liabilities and shareholders'
equity $6,612,924 $6,672,026
The accompanying notes are an integral part
of the consolidated financial statements
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED SEPTEMBER 27, 1997,
SEPTEMBER 28, 1996 AND SEPTEMBER 30, 1995
1997 1996 1995
Sales $10,108,379 $ 8,300,167 $ 6,770,841
Cost of sales (Note 10) 6,488,124 5,280,654 4,343,329
Gross profit 3,620,255 3,019,513 2,427,512
Selling and administrative
expenses (Notes 8, 11
and 12) 2,050,501 1,822,502 1,614,656
Operating profit 1,569,754 1,197,011 812,856
Other income (expense):
Interest expense (85,654) (102,529)
(151,009)
Other income 31,232 55,600 47,241
Total other income
(expense) (54,422) (46,929)
(103,768)
Income before income taxes 1,515,332 1,150,082 709,088
Income taxes (benefit): (Note 7)
Current 674,000 519,000 296,000
Deferred (49,000) (54,000)
(17,000)
Total income taxes 625,000 465,000 279,000
Net income $ 890,332 $ 685,082 $ 430,088
Net income per share: (Note 14)
Primary $ .42 $ 0.33 $ 0.21
Fully diluted $ .42 $ 0.32 $ 0.21
The accompanying notes are an integral part
of the consolidated financial statements
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED SEPTEMBER 27, 1997,
SEPTEMBER 28, 1996 AND SEPTEMBER 30, 1995
Shares Additional
of common Common paid-in Retained
stock stock capital Earnings Total
Balance at
October 1,
1994 2,032,804 20,328 395,763 1,804,751
2,220,842
Net income - - - 430,088
430,088
Balance at
September 30,
1995 2,032,804 20,328 395,763 2,234,839
2,650,930
Net income - - - 685,082
685,082
Stock issued under
employee stock
purchase plan
(Note 13) 7,325 73 3,590 -
3,663
Balance at
September 28,
1996 2,040,129 20,401 399,353 2,919,921
3,339,675
Net income - - - 890,332
890,332
Stock Options
Exercised 80,000 800 20,450 -
21,250
Stock issued under
employee stock
purchase plan
(Note 13) 6,520 65 9,550 -
9,615
Balance at
September 27,
1997 2,126,649 $21,266 $429,353 $3,810,253
$4,260,872
The accompanying notes are an integral part
of the consolidated financial statements
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED SEPTEMBER 27, 1997,
SEPTEMBER 28, 1996 AND SEPTEMBER 30, 1995
1997 1996 1995
Operating activities:
Net income $ 890,332 $ 685,082 $
430,088
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 240,510 207,740
205,708
Provision for losses on
accounts receivable (3,300) (1,000)
12,000
Changes in assets and
liabilities:
Accounts receivable (45,073) (180,394)
(235,272)
Other receivables 785,000 (785,000) -
Inventories (229,413) (401,215)
(333,017)
Prepaid expenses 2,389 (10,790)
52,098
Accounts payable 57,368 11,666
(68,768)
Accrued expenses 23,174 143,230
99,484
Accrued environmental costs (750,000) 795,000 -
Income taxes payable (139,111) (30,855)
222,626
Deferred income taxes (49,000) (54,000)
(17,000)
Deferred compensation - 38,000
38,000
Net cash provided by
operating activities 782,876 417,464
405,947
Investing activities:
Property, plant and equipment
additions (409,190) (139,817)
(131,717)
Financing activities:
Proceeds from long-term debt 3,509,000 2,900,000
1,909,000
Repayments of long-term
debt (3,896,559)(3,190,296)
(2,170,927)
Issuance of common stock 30,865 3,663 -
Net cash used in
financing activities (356,694) (286,633)
(261,927)
Net increase (decrease) in cash 16,992 (8,986) 12,303
Cash - beginning 65,951 74,937 62,634
Cash - ending $ 82,943 $ 65,951 $74,937
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid during the year:
Interest $ 87,754 $ 105,108
$150,069
Income taxes $813,111 $ 549,855 $
46,945
The accompanying notes are an integral part
of the consolidated financial statements
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 1997, SEPTEMBER 28, 1996 AND SEPTEMBER 30, 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of consolidation:
The consolidated financial statements include the
accounts of Goddard Industries, Inc. and its wholly-owned
subsidiaries. All material intercompany transactions
have been eliminated.
Fiscal year:
The Company's fiscal year ends on the Saturday nearest to
September 30. The years ended September 27, 1997,
September 28, 1996 and September 30, 1995 each contain 52
weeks.
Inventories:
Inventories are valued at the lower of cost or market.
Cost is determined by the first-in, first-out method.
Property, Plant and Equipment:
Property, plant and equipment are carried at cost and
depreciated using the straight - line method over the
following estimated useful lives:
YEARS
Building and improvements 10 - 35
Machinery, equipment and tools 3 - 10
Office equipment and fixtures 5 - 10
Intangible Assets:
The excess of cost of investment in subsidiaries over
equity in net assets acquired is being amortized on a
straight-line basis over 40 years.
Advertising:
Advertising costs are expensed when incurred.
Income taxes:
Taxes are provided for items entering into the
determination of net income for financial reporting
purposes, irrespective of when such items are reported
for income tax purposes. Accordingly, deferred income
taxes have been provided for all temporary differences.
Tax credits are accounted for on the flow-through method,
whereby credits earned during the year are used to reduce
the current income tax provision.
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 1997, SEPTEMBER 28, 1996 AND SEPTEMBER 30, 1995
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Estimates:
The preparation of financial statements in conformity
with generally accepted accounting principles requires
management to make estimates and assumptions that affect
certain reported amounts and disclosures. Although these
estimates are based on management's knowledge of current
events and actions to be undertaken in the future, they
may differ from actual results.
Forward Exchange Contracts:
The Company periodically enters into forward exchange
contracts in foreign currencies to hedge against
anticipated foreign currency commitments with respect to
inventory purchases. The gains or losses on these
contracts are included as part of the cost of sales.
(2) INVENTORIES
Inventories consist of the following:
1997 1996
Finished goods 3,106,049 $3,003,898
Work in process 66,441 21,687
Raw materials 369,372 286,864
$3,541,862 $3,312,449
(3) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consists of the following:
1997 1996
Land $ 12,865 $
12,865
Building and improvements 909,881
665,658
Machinery, equipment and tools 3,189,821
2,821,028
Office equipment and fixtures 154,270
142,267
4,266,837
3,641,818
Accumulated depreciation (2,826,006)
(2,589,252)
$1,440,831
$1,052,566
Depreciation expense charged to income was $236,754, $203,984
and $201,952 in 1997, 1996 and 1995, respectively.
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 1997, SEPTEMBER 28, 1996 AND SEPTMEBER 30, 1995
(4) LONG-TERM DEBT
Long-term debt consists of the following:
1997 1996
Revolving line of credit of
$1,750,000 of which a maximum
of $300,000 may be used for
letters of credit, due to expire
March 31 1999. Advances are
limited by a formula applied to
eligible receivables and inventory
and are secured by all assets of
the Company. The agreement carries
interest at the bank's prime rate
plus 3/4% (9.25% and 9.0% for 1997
and 1996 respectively) and provides
for a commitment fee of 1/2% of any
unused balance $621,000 $884,503
Capital lease obligation, payments
of $5,273 per month including
interest at 9%, due in 1999 106,653 157,895
Capital lease obligation, payments
of $6,807 per month including
interest at 8.5%, due in 2000 178,015 -
Notes due 1998, unsecured,
interest payable monthly at 10%,
due to related parties. - 35,000
905,668 1,077,398
Current maturities 119,000 51,000
$ 786,668 $1,026,398
Minimum estimated principal payments are as follows:
1998 $ 119,000
1999 746,500
2000 40,168
$ 905,668
The above principal payments include amounts due under the
capital lease obligation of $145,000 in 1998, $135,000 in
1999 and $34,000 in 2000, including amounts representing
interest of $28,700.
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 1997, SEPTEMBER 28, 1996 AND SEPTEBER 30, 1995
(4) LONG-TERM DEBT (continued)
The Company entered into the above referenced lease
agreements for certain machinery and equipment. Assets
directly financed through leases totaling $215,829 for 1997,
$166,000 for 1996 and $248,000 for 1995 are included in
property plant and equipment. Amortization of these assets
totaling $34,949 in 1997, $8,300 in 1996 and $24,864 in
1995, is included in depreciation expense and accumulated
depreciation.
Under the revolving line of credit the Company is subject to
a number of covenants, the most restrictive of which relate
to maintenance of minimum working capital, tangible net
worth, and profitability levels. These agreements also
restrict payment of cash dividends to 10% of the immediately
preceding year's net income which represents unrestricted
consolidated retained earnings.
(5) COMMON STOCK OPTIONS
In each of 1997 and 1996 the Company granted options for
5,000 shares to each non-employee director and in varying
amounts to certain employees, for an aggregate of 69,000
shares of common stock. The exercise price of each option
equals the market price of the Company's stock on the date
of grant and the option's maximum term is five years.
The fair value of each option is estimated on the date of
grant using the Black-Scholes option-pricing model with the
following weighted average assumptions used for grants in
1996 and 1997.
1997 1996
Dividend yield None None
Expected volatility 68.19% 62.12%
Risk free interest rate 5.80% 6.12%
Expected lives 5 years 5 years
A summary of the status of the Company's outstanding options
as of September 27, 1997, September 28, 1996 and September
30, 1995 and the changes during the years ending on those
dates are presented below:
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 1997, SEPTEMBER 28, 1996 AND SEPTEBER 30, 1995
(5) COMMON STOCK OPTIONS (continued)
September September September
27, 1997 28, 1996 30, 1995
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
Outstanding at
beginning
of year: 105,000 $ 0.32 75,000 $ 0.25 75,000 $
0.25
Granted 39,000 $ 1.88 30,000 $ 0.50 -
- -
Exercised (80,000) .27 - - -
- -
Outstanding
at end
of year: 64,000 $ 1.34 105,000 $ 0.32 75,000 $
0.25
Options
Exercisable
at year end 64,000 105,000 75,000
Weighted
average fair
value of
options
granted
during
the year $ 1.16 $ .28 $ -
The following summarizes information about fixed stock
options outstanding at September 27, 1997:
Options Outstanding Options Exercisable
Weighted
Number Average Number
Out- Remaining Weighted Exer- Weighted
standing Contrac- Average cisable Average
Exercise at tual Life Exercise at Exercise
Price 9/27/97 in years Price 9/27/97 Price
$ .50 25,000 3.25 $ .50 25,000 $ .50
$1.88 39,000 4.50 $1.88 39,000 $1.88
64,000 64,000
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 1997, SEPTEMBER 28, 1996 AND SEPTEBER 30, 1995
(5) COMMON STOCK OPTIONS (Continued)
The Company applies APB Opinion 25 in accounting for
employee stock options. Accordingly, no compensation cost
has been recognized. Had compensation costs been determined
on the basis of FASB Statement 123 in 1997 and 1996, net
income would have been reduced to $865,767 and $680,065
which would have decreased primary net income per share by
$.01 in 1996. There would have been no affect on primary
net income per share in 1997 or on fully diluted net income
per share in 1997 or 1996.
(6) FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts reflected in the consolidated balance
sheets for cash, accounts receivable, accounts payable and
accrued expenses approximate fair value due to the short
maturities of these instruments. The carrying value of long-
term debt approximates fair value since the rates and terms
of these instruments are substantially equivalent to those
the Company would offer or obtain at the balance sheet date.
(7) INCOME TAXES
The following is a reconciliation of income tax expense
computed at the Federal statutory income tax rate to the
provision for income taxes:
1997 1996 1995
Federal income taxes at
the statutory rate $ 515,200 $ 391,000 $ 241,000
State income taxes net
of federal income tax
benefit 103,600 72,100 44,000
Nondeductible expenses 5,800 5,500 4,900
Other 400 (3,600) (10,900)
Income taxes $ 625,000 $ 465,000 $ 279,000
The provision for income taxes is summarized as follows:
1997 1996 1995
Current:
Federal $ 517,000 $ 400,000 $ 227,000
State 157,000 119,000 69,000
674,000 519,000 296,000
Deferred:
Federal (37,000) (42,000) (12,800)
State (12,000) (12,000) (4,200)
(49,000) (54,000) (17,000)
$ 625,000 $ 465,000 $ 279,000
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 1997, SEPTEMBER 28, 1996 AND SEPTEBER 30, 1995
(7) INCOME TAXES (continued)
The tax effects of the principal temporary differences
giving rise to the net current and non-current deferred tax
assets totaling $298,000 at September 27, 1997 and $249,000
at September 28, 1996 are as follows:
1997 1996
Deferred tax assets:
Deferred compensation $ 220,400 $ 220,400
Inventory valuation 93,300 60,800
Accrued salaries 9,200 6,200
Environmental matters 18,000 4,000
Bad debts 12,400 11,000
Total gross deferred
tax assets 353,300 302,400
Deferred tax liabilities:
Depreciation 55,300 53,400
Net deferred income tax
assets $ 298,000 $ 249,000
Management does not believe that any valuation allowance is
necessary.
(8) ENVIRONMENTAL MATTERS
The Company has been involved in the following
environmental
matters:
DEP matter:
The results of a site assessment at the Company's
headquarters 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. As required by law, the Company
notified the Massachusetts Department of Environmental
Protection (DEP). In 1995, the Company received a Tier I
Transition Classification and Permit Statement Cover
Letter designating the site as a Tier IC Site under the
Massachusetts Contingency Plan. Under DEP regulations,
the Company must complete further site investigation by
November 1997. An extension of this due date has been
requested to January 29, 1998
One of the Company's insurance carriers 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
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 1997, SEPTEMBER 28, 1996 AND SEPTEBER 30, 1995
(8) ENVIRONMENTAL MATTERS (continued)
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. Until the above referenced investigation is
completed no estimate of the maximum loss associated with
this matter can be made.
Shrewsbury matter:
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
water wells. In January 1997, the Company reached a
settlement with the Town of Shrewsbury. The Company paid
a total of $750,000 as its share of the settlement. In
addition, the Company reached an agreement with its three
insurance carriers. In exchange for a release of certain
claims, they paid a total of $715,000 of the $750,000 the
Company paid the Town of Shrewsbury.
In the accompanying financial statements other receivables
represents amounts due from insurance carriers with respect
to the above environmental matters and accrued environmental
costs represents amounts due to the Town of Shrewsbury and
the minimum estimated remediation costs related to the DEP
matter. The net amount ($10,000) is reported in selling and
administrative expenses for the year then ended September
28, 1996.
(9) COMMITMENTS AND CONTINGENCIES
Employment Agreements:
The Company extended, on a year to year basis, the
employment agreement with its President and Chairman of
the Board. In connection with the contract, the
President is entitled to incentive compensation equal to
10% of pretax earnings exceeding $200,000. Upon his
retirement, the Company must pay an annuity which is
being amortized over the period of the employment
contract. Accordingly $38,000 has been charged to
operations in each of 1996 and 1995. There has been no
such charge in 1997.
The Company has employment agreements with certain key
executive officers and directors that become operative
only upon a change in control of the Company without the
approval of the Board of Directors. Compensation which
might be payable under these agreements has not been
reflected in the consolidated financial statements of the
Company as of September 27, 1997, since a change in
control, as defined, has not occurred.
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 1997, SEPTEMBER 28, 1996 AND SEPTEBER 30, 1995
(9) COMMITMENTS AND CONTINGENCIES
Other Commitments:
At September 28, 1996, the Company had approximately
$88,000 in letters of credit outstanding.
(10) RESEARCH AND DEVELOPMENT COSTS
Research and development costs charged to operations in
1997, 1996, and 1995 were approximately $175,000, $175,000
and 138,000, respectively.
(11) ADVERTISING COSTS
Advertising costs charged to operations in 1997, 1996 and
1995 were approximately $77,000, $41,000 and $47,000,
respectively.
(12) PROFIT SHARING PLAN
The Company has a profit sharing plan covering substantially
all employees. The Company's contribution is determined
annually by the Board of Directors. The amount approved for
1997, 1996, and 1995 was $60,000, $50,000 and $30,000,
respectively.
(13) EMPLOYEE STOCK PURCHASE PLAN
The Company has a qualified employee stock purchase plan
covering all employees except officers and directors.
Employees participating in the plan are granted options semi-
annually to purchase common stock of the Company. The
number of full shares available for purchase is a function
of the employee's accumulated payroll deductions at the end
of each six month interval. The option price is the lesser
of 85% of the fair value of the Company's common stock on
the first day of the payment period or 85% of the fair value
of the Company's common stock on the last day of the payment
period. As of September 27, 1997, September 28, 1996 and
September 30, 1995 there were no options outstanding under
the plan.
(14) NET INCOME PER SHARE
Net income per share is computed on the weighted average
number of shares outstanding.
(15) INDUSTRY SEGMENT INFORMATION
The Company produces and sells cryogenic valves (industrial
valves) and imports and distributes plumbing supplies for
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 1997, SEPTEMBER 28, 1996 AND SEPTEBER 30, 1995
15) INDUSTRY SEGMENT INFORMATION (continued)
use in households, industry and agriculture (plumbing
supplies).
The financial information relating to foreign and export
sales is not presented as those items are not material.
Summarized segment financial information for the years ended
September 27, 1997, September 28, 1996 and September 30,
1995 is summarized as follows:
For the year ended Industrial Plumbing
September 27, 1997 Valves Supplies Consolidated
Sales to
unaffiliated
customers $ 6,726,853 $ 3,381,526 $10,108,379
Operating profit $ 1,498,202 $ 71,552 $ 1,569,754
Interest expense
(85,654)
Other income, net 31,232
Income before
income taxes $ 1,515,332
Assets September
27, 1997 $ 4,396,304 $ 2,216,620 $ 6,612,924
Depreciation
expense $ 223,604 $ 13,150 $ 236,754
Acquisition of
property, plant
and equipment $ 613,888 $ 11,130 $ 625,018
For the year ended Industrial Plumbing
September 28, 1996 Valves Supplies
Consolidated
Sales to
unaffiliated
customers $ 5,009,952 $ 3,290,215 $ 8,300,167
Operating profit $ 1,102,708 $ 94,303 $ 1,197,011
Interest expense
(102,529)
Other income, net 55,600
Income before
Income taxes $ 1,150,082
Assets September
28, 1996 $ 4,519,965 $ 2,152,061 $ 6,672,026
Depreciation
expense 194,276 $ 9,708 $ 203,984
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 27, 1997, SEPTEMBER 28, 1996 AND SEPTEBER 30, 1995
(15) INDUSTRY SEGMENT INFORMATION (continued)
Acquisition of
property, plant
and equipment $ 292,014 $ 13,803 $ 305,817
For the year ended Industrial Plumbing
September 30, 1995 Valves Supplies Consolidated
Sales to
unaffiliated
customers $ 3,738,962 $ 3,031,879 $ 6,770,841
Operating profit $ 669,752 $ 143,104 $ 812,856
Interest expense (151,009)
Other income, net 47,241
Income before
income taxes $ 709,088
Assets September
30, 1995 $ 2,840,762 $ 2,309,774 $ 5,150,536
Depreciation
expense $ 192,862 $ 9,090 $ 201,952
Acquisition of
property, plant
and equipment $ 123,777 $ 7,940 $ 131,717
The industrial valve segment of the Company sells a majority
of its products to a limited number of customers,
predominantly manufacturers of cryogenic vessels. Sales, in
thousands of dollars, to individual customers constituting
10% or more of total sales of the industrial valve segment
were as follows:
1997 1996 1995
Customer A $2,194 33% $2,317 46% $1,025 27%
Customer B $ - 0% $ 594 12% $ 426 11%
Customer C $ - 0% $ 703 14% $ - 0%
$2,194 33% $3,614 72% $1,451 38%
Exhibit 27
This schedule contains summary financial information
extracted from Form 10-KSB and is qualified in its entirety
by reference to such financial statements.
12-MOS
Fiscal Year end Sep 27 1997
Period start Sep 28 1996
Period end Sep 27 1997
CASH 82,943
SECURITIES 0
RECEIVABLES 1,234,144
ALLOWANCES 30,900
INVENTORY 3,541,862
CURRENT ASSETS 4,992,469
PP&E 4,266,837
DEPRECIATION 2,826,006
TOTAL ASSETS 6,612,924
CURRENT LIABILITIES 1,014,384
COMMON OTHER 21,266
TOTAL LIABILITIES AND EQUITY 6,612,924
SALES 10,108,379
TOTAL REVENUE 10,108,379
COS 6,488,124
TOTAL COSTS 2,050,501
OTHER EXPENSES 54,422
LOSS PROVISION -3,300
INTEREST EXPENSE 85,654
INCOME PRETAX 1,515,332
INCOME TAX 625,000
NET INCOME 890,332
DISCONTINUED 0
EXTRAORDINARY 0
CHANGES 0
NET INCOME 890,332
EPS-PRIMARY .42
EPS-DILUTIVE .42
_______________________________
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