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 March 31, 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 March 31, 1997
Common Stock, $.01 par value 2,049,369
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 - March 31, 1997
and September 28, 1996
3
Consolidated Statement of Income - Six Months Ended
March 31, 1997 and March 31, 1996
4
Consolidated Statement of Cash Flows - Six Months Ended
March 31, 1997 and March 31, 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
-2-
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
March 31,
September 28,
1997
1996
AUDITED
ASSETS
(ALL PLEDGED, NOTE 4)
CURRENT ASSETS:
Cash $ 109,799
$ 65,951
Accounts receivable, net of allowances 1,475,729
1,154,871
Miscellaneous Receivable 90,000
785,000
Inventories (Note 3) 3,326,163
3,312,449
Prepaid expenses and taxes 51,389
33,809
Deferred income taxes (Note 5) 84,300
82,000
TOTAL CURRENT ASSETS 5,137,380
5,434,080
PROPERTY, PLANT AND EQUIPMENT,
at cost 3,924,527
3,641,818
Less - Accumulated depreciation -2,703,704
- -2,589,252
1,220,823
1,052,566
OTHER ASSETS:
Excess of cost of investment in
subsidiaries over equity in net
assets acquired 16,502
18,380
Deferred income taxes (Note 5) 171,000
167,000
Total other assets 187,502
185,380
TOTAL ASSETS $ 6,545,705
$6,672,026
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of
long-term debt (Note 4) $ 117,000
$ 51,000
Accounts payable 435,847
317,321
Accrued expenses 385,690
399,861
Accrued environmental costs (Note 6) 45,000
795,000
Income taxes payable 91,671
191,771
TOTAL CURRENT LIABILITIES 1,075,208
1,754,953
LONG-TERM DEBT, net of
current maturities (Note 4) 1,010,887
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 2,049,369 shares. 20,493
20,401
Additional paid-in capital 406,531
399,353
Retained earnings 3,481,586
2,919,921
TOTAL SHAREHOLDERS'EQUITY 3,908,610
3,339,675
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 6,545,705
$6,672,026
-3-
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
March 31, 1997 March 31,
1996
For The Three For the Six For the Three
For the Six
Months Ended Months Ended Months Ended
Month Ended
NET SALES $2,872,729 $5,862,252 $2,056,016
$3,847,258
COST OF SALES 1,889,681 3,847,002 1,396,486
2,597,442
GROSS PROFIT 983,048 2,015,250 659,530
1,249,186
SELLING AND ADMINISTRATIVE
EXPENSES 537,592 1,040,260 431,923
813,988
INCOME FROM OPERATIONS 445,456 974,990 227,607
435,828
OTHER INCOME (EXPENSE):
Interest expense -23,844 -43,227 -25,968
- -53,972
Other income, net 8,787 16,503 10,362
17,257
TOTAL OTHER INCOME
(EXPENSE) -15,057 -26,724 -15,606
- -36,715
INCOME BEFORE INCOME TAXES 430,399 948,266 212,001
399,113
PROVISION FOR INCOME TAXES 176,000 386,600 86,900
164,800
NET INCOME $254,399 $561,666 $125,101
$234,313
EARNINGS PER SHARE (Note 7)
Primary $ 0.12 $ 0.26 $ 0.06
$ 0.12
-4-
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
FOR THE SIX
MONTHS
ENDED
March 31,
1997
1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $561,666
$234,313
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 116,330
100,747
Deferred income taxes -6,300
- -14,000
Changes in assets and liabilities:
Accounts receivable -320,858
- -71,058
Inventories -13,714
7,885
Miscellaneous receivable 695,000
0
Prepaid expenses and other -17,580
- -35,371
Accounts payable 118,526
42,747
Accrued expenses -14,171
49,796
Accrued environmental liability -750,000
0
Income taxes payable -100,100
- -213,347
Deferred compensation 0
19,000
Total Adjustments -292,867
- -113,601
NET CASH PROVIDED BY
OPERATING ACTIVITIES 268,799
120,712
CASH FLOWS FROM INVESTING ACTIVITIES:
Property,plant and equipment additions -66,881
- -64,294
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common shares 7,270
2,907
Increase in long-term debt 1,616,000
1,441,000
Repayments of long-term debt -1,781,340
- -1,495,131
NET CASH (USED IN)
FINANCING ACTIVITIES -158,070
- -51,224
NET INCREASE IN CASH 43,848
5,194
CASH AND EQUIVALENTS - BEGINNING 65,951
74,937
CASH AND EQUIVALENTS - ENDING $109,799
$ 80,131
CASH PAID DURING THE PERIOD
Interest $43,100
$ 54,181
Income taxes $493,000
$402,147
-5-
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
March 31, 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:
March 31,
September 28,
1997
1996
Finished goods $3,017,612
$3,003,898
Work in process 21,687
21,687
Raw materials 286,864
286,864
$3,326,163
$3,312,449
The following factors were taken into consideration in
determining inventory values:
Goddard Valve Corp. - March 31, 1997 - $1,834,210
(estimated) and September 28, 1996 - $1,657,426.
Interim
inventories were valued by management using the
gross profit method.
Webstone Company, Inc. - March 31, 1997 - $1,491,953
(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 March 31, 1997 long-term debt consisted of the
following:
LONG-TERM
CURRENT
Revolving line of credit $ 784,503
$ -
Capital lease obligations 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%. 226,364
117,000
$1,010,867
$117,000
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:
March 31,
September 28,
1997
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 12,900
11,000
304,700
302,400
Depreciation 49,400
53,400
$ 255,300 $
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.
-8-
PART I - FINANCIAL INFORMATION
Item 2 - Management's Discussion and Analysis of Financial
Condition
RESULTS OF OPERATIONS
FISCAL QUARTER ENDED MARCH 31, 1997 COMPARED TO
FISCAL QUARTER ENDED MARCH 31, 1996
Goddard enjoyed a productive second quarter with sales
and earnings well ahead of last year. For the quarter ended
March 31, 1997 consolidated sales were $2,873,000, a 39.7%
increase over the same quarter for the prior year. During
the preceding 12 months, the order backlog in the Valve
division had reached record levels and delivery times had
lengthened. The Company purchased additional new machinery
and added a second shift, enabling it to increase levels of
production, shorten the delivery time for new orders, and
increase revenues. As a result of this increased output,
backlog has been reduced.
Gross profits as a percentage of sales increased from
32% to 34.2% over the corresponding quarter of the prior
year, primarily as a result of larger orders and changes in
product mix. Selling and administrative expenses as a
percentage of sales declined to 18.7% in the quarter ended
March 31, 1997 compared to 21% for the same quarter of
fiscal 1996, as those expenses did not increase at the same
rate as sales.
As a result of the increase in sales volume, improved
operating efficiencies and changes in product mix, income
from operations almost doubled to $446,000 for the quarter
ended March 31, 1997, compared to $228,000 in the same
quarter of fiscal 1996. Earnings, at $254,000 ($.12/share),
were approximately double the $125,000 earnings ($.06/share)
reported for the same quarter in fiscal 1996.
While the order backlog in the Valve division has been
reduced as a result of the Company's improved output, the
growth in the level of new orders experienced over the last
few quarters appears to have leveled off. Management
anticipates that new product lines now in the prototype
stage which are being developed for the Valve division will
enter production late this year, and that these lines will
increase sales volume. Management believes that the
development of these new lines reflecting advanced product
design, together with the Company's emphasis on prompt,
dependable service, help the Company maintain its
competitive position as a leader in the cryogenic valve
industry. The Webstone Division also has been adding new
plumbing items and an array of high styled faucets to its
product offerings, which will be introduced when its new
catalog is published for national distribution in mid-May
1997.
- 9 -
SIX MONTH PERIOD ENDED MARCH 31, 1997 COMPARED TO
SIX MONTH PERIOD ENDED MARCH 31, 1996
Both sales and earnings for the six months ended March
31, 1997 were up substantially over the same period last
fiscal year. Consolidated sales for the six month period
ended March 31, 1997 were $5,862,000, a 52.4% increase over
the $3,847,000 recorded for the same period in fiscal 1996.
The increase in sales resulted from larger blanket orders
received in prior periods and sales of recently developed
product lines, as well as increased production in the most
recent quarter.
Gross profits as a percentage of sales increased to
34.4% for the six month period ended March 31, 1997,
compared to 32.4% for corresponding period of fiscal 1996,
reflecting the economies involved in larger orders and
favorable product mix. Selling and administrative expenses
as a percentage of sales declined from 21.1% in the first
six months of fiscal 1996 to 17.7% in the first six months
of fiscal 1997, as those expenses did not increase
proportional to increased sales.
Income from operations as a percentage of sales
increased from 11.3% in the first six months of fiscal 1996
to 16.6% in the first six months of fiscal 1997, reflecting
the improved operating efficiencies, economy of larger
orders, favorable product mix and increased output. As a
result, net income during the six month period improved to
$562,000 (or $.26 per share) compared to $234,000 (or $.12
per share) for the same period of fiscal 1996, a 140%
increase.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has funded operations
primarily through earnings and bank borrowings. At March
31, 1996, the Company had net working capital of
approximately $4,062,000, including $110,000 in cash. The
Company also had a line of credit of $1,750,000 from
BankBoston collarteralized by substantially all of the
assets of the Company. At March 31, 1997, approximately
$785,000 have been drawn under the line of credit, which
bears interest at a rate equal to the bank's prime rate plus
3/4s of 1%.
During the first six months of fiscal 1997, operating
activities of the Company provided $269,000 of cash. Cash
was generated principally from earnings ($562,000),
increases in accounts payable ($119,000) and depreciation
and amortization ($116,000). The principal uses of cash
were increases in accounts receivable ($321,000), decreased
tax liabilities ($100,000) and net environmental settlement
obligations ($55,000).
During the six month period, the Company used
approximately $67,000 to purchase machinery and equipment,
and repayment of financing consumed approximately $158,000.
- 10 -
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 plans to add 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.
As described in Note 6 to the financial statements,
the Company is a party to an administrative environmental
proceed which the Company does not anticipate will have a
material effect on the Company's financial resources.
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.
FORWARD LOOKING INFORMATION
Information contained in this Form 10-QSB contains
certain "forward looking statements" within the meaning of
the Private Securities Litigation Reform Act of 1995, which
can be identified by the use of forward looking terminology
such as "may", "will", "expect", "anticipate", "believe",
"intend", "estimate" or other variations or comparable
terminology. All forward looking statements involve risks
and uncertainties, and actual results could differ
materially from those set forth in the forward looking
statements. Some of the principal factors which could
affect the Company's future operations include the loss of
or decline in level of orders from a major customer, the
failure of the market to accept the new product lines being
introduced by the Valve division and the Webstone division
in the coming months, and changes in general economic
conditions.
- 11 -
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-QSB 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 March 31, 1997.
-12-
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of
1934, the Registrant has duly caused the Report to be signed
on its
behalf by the undersigned thereunto duly authorized.
Dated as of May 9, 1997
GODDARD INDUSTRIES, INC.
by/s/Saul I. Reck
Saul I. Reck, President
Chief Executive Officer
and Principal Financial
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> SEP-28-1997 SEP-28-1997
<PERIOD-END> MAR-31-1997 MAR-31-1997
<CASH> 0 109,799
<SECURITIES> 0 0
<RECEIVABLES> 0 1,598,263
<ALLOWANCES> 0 32,534
<INVENTORY> 0 3,326,163
<CURRENT-ASSETS> 0 5,137,380
<PP&E> 0 3,924,527
<DEPRECIATION> 0 2,703,704
<TOTAL-ASSETS> 0 6,545,705
<CURRENT-LIABILITIES> 0 1,075,208
<BONDS> 0 0
0 0
0 0
<COMMON> 0 20,493
<OTHER-SE> 0 3,481,586
<TOTAL-LIABILITY-AND-EQUITY> 0 6,545,705
<SALES> 2,872,729 5,862,252
<TOTAL-REVENUES> 983,048 2,015,250
<CGS> 1,889,681 3,847,002
<TOTAL-COSTS> 537,592 1,040,260
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 3,000 6,000
<INTEREST-EXPENSE> 15,057 26,724
<INCOME-PRETAX> 430,399 948,266
<INCOME-TAX> 176,000 386,600
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 254,399 561,666
<EPS-PRIMARY> .12 .26
<EPS-DILUTED> 0 0
</TABLE>
