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 April 3, 1999
__ 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 April 3, 1999
Common Stock, $.01 par value 2,130,766
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 - April 3, 1999
and October 3, 1998
3
Consolidated Statement of Income - Six Months Ended
April 3, 1999 and March 31, 1998
4
Consolidated Statement of Cash Flows - Six Months Ended
April 3, 1999 and March 31, 1998
5
Notes to Consolidated Financial Statements
6
Item 2 Management Discussion and Analysis
10
PART II - OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K
12
-2-
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
April 3,
October 3,
1999
1998
(UNAUDITED)
AUDITED
ASSETS
(ALL PLEDGED, NOTE 4)
CURRENT ASSETS:
Cash $ 115,185
$ 283,473
Accounts receivable, net of allowances 1,145,868
1,174,946
Inventories (Note 3) 3,489,287
3,410,767
Prepaid expenses 45,822
27,184
Refundable taxes on income 16,542
92,723
Deferred income taxes (Note 5) 115,800
111,000
TOTAL CURRENT ASSETS 4,928,504
5,100,093
PROPERTY, PLANT AND EQUIPMENT,
at cost 4,775,452
4,694,485
Less - Accumulated depreciation -3,212,691
- -3,079,727
1,562,761
1,614,758
OTHER ASSETS:
Excess of cost of investment in
subsidiaries over equity in net
assets acquired 8,990
10,868
Deferred income taxes - long term(Note 5)135,000
131,000
TOTAL OTHER ASSETS 143,990
141,868
TOTAL ASSETS $6,635,255
$6,856,719
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of
long-term debt (Note 4) $ 152,300
$ 184,000
Accounts payable 323,378
289,775
Accrued expenses 205,969
457,406
Accrued environmental costs (Note 6) -
4,648
Deferred compensation 60,000
42,500
TOTAL CURRENT LIABILITIES 741,647
978,329
LONG-TERM DEBT, net of
current maturities (Note 4) 76,354
377,515
DEFERRED COMPENSATION 491,000
508,500
SHAREHOLDERS' EQUITY:
Common stock - par value $.01 per share,
authorized 3,000,000 shares, issued
and outstanding 2,130,766 shares
(2,129,982 shares at October 3, 1998) 21,308
21,299
Additional paid-in capital 479,286
477,923
Retained earnings 4,825,660
4,493,153
TOTAL SHAREHOLDERS'EQUITY 5,326,254
4,992,375
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $6,635,255
$6,856,719
-3-
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
April 3, 1999 March 31,
1998
For The Three For the Six For The Three
For The Six
Months Ended Months Ended Months Ended
Months Ended
NET SALES $2,439,288 $4,831,459 $2,369,983
$4,899,247
COST OF SALES 1,544,905 3,064,627 1,513.248
3,317,320
GROSS PROFIT 894,383 1,766,832 856,735
1,761,927
SELLING AND ADMINISTRATIVE
ADMINISTRATIVE
EXPENSES 592,174 1,186,407 581,526
1,144,503
INCOME FROM
OPERATIONS 302,209 580,425 275,209
617,424
OTHER INCOME
(EXPENSE):
Interest expense -16,662 -24,567 -27,088
- -44,892
Other income, net 4,742 8,749 6,367
14,652
TOTAL OTHER
INCOME (EXPENSE) -11,920 -15,818 -20,721
- -30,240
INCOME BEFORE
INCOME TAXES 290,289 564,607 254,488
587,184
PROVISION FOR
INCOME TAXES 119,700 232,100 105,200
241,200
NET INCOME (loss) $170,589 $332,507 $149,288
$345,984
EARNINGS PER SHARE
(Note 7)
Basic $0.08 $0.16 $0.07
$0.16
Diluted $0.08 $0.16 $0.07
$0.16
-4-
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
FOR THE SIX
MONTHS ENDED
April 3,
March 31,
1999
1998
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $332,507
$345,984
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 134,842
121,884
Deferred income taxes -8,800
- -6,300
Changes in assets and liabilities:
Accounts receivable 29,078
128,328
Refundable taxes on income 76,181
- -
Inventories -78,520
- -225,822
Prepaid expenses and other -18,638
- -32,586
Accounts payable 33,603
176,199
Accrued expenses -251,437
- -175,469
Accrued environmental liability -4,648
- -19,238
Income taxes payable -
- -30,875
Total Adjustments -88,339
- -63,879
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 244,168
282,105
CASH FLOWS FROM INVESTING ACTIVITIES:
Property,plant and equipment additions -80,967
- -192,136
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common shares 1,372
2,372
Payment of Dividends -
- -63,859
Increase in long-term debt 880,000
1,776,000
Repayments of long-term debt -1,212,861
- -1,726,305
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES -331,489
- -11,792
NET INCREASE (DECREASE) IN CASH -168,288
78,177
CASH AND EQUIVALENTS - BEGINNING 283,473
82,943
CASH AND EQUIVALENTS - ENDING $115,185
$161,120
CASH PAID DURING THE PERIOD:
Interest $ 24,528
$ 42,913
Income taxes $165,000
$278,375
-5-
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
April 3, 1999
(UNAUDITED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Reference is made to the financial statements included in
the Annual Report for the year ended October 3, 1998 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:
April 3,
October 3,
1999
1998
Finished goods $2,926,178
$2,847,658
Work in process 139,945
139,945
Raw materials 423,164
423,164
$3,489,287
$3,410,767
The following factors were taken into consideration in
determining inventory values:
Goddard Valve Corp. - April 3, 1999 - $2,062,578.
(estimated) and October 3, 1998 - $2,066,224. Interim
inventories were valued by management using the
gross profit method.
Webstone Company, Inc. - April 3, 1999 - $1,426,709.
(estimated) and October 3, 1998 - $1,344,543. 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 1/4% or
(ii) the Federal Funds Effective Rate plus 1 1/4% per
annum. On
April 3, 1999 the effective interest rate was 8.25%. The
agreement expires March 31, 2001 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 April 3, 1999 long-term obligations consisted of
the following:
LONG-TERM
CURRENT
Capital lease obligations for machinery,
payable in monthly installments of
$12,080, through 2000, with imputed
interest rate of approximately 8.5% $ 76,354
$152,300
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:
April 3,
October 3,
1999
1998
Deferred tax asset
Deferred compensation $ 220,400 $
220,400
Inventory valuation 69,400
68,600
Accrued salaries 9,300
9,300
Environmental matters 1,900
1,900
Bad debts 18,100
14,100
319,100
314,300
Depreciation 68,300
72,300
$ 250,800 $
242,000
Management does not believe that any valuation allowance is
necessary.
-7-
NOTE 6. ENVIRONMENTAL 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 1 Transition
Classification and Permit Statement Cover Letter designating
the site as a Tier 1C Site under the Massachusetts
Contingency Plan. Those response actions culminated in the
filing of a Class "C" Response Action Outcome Statement with
the DEP in September 1998. Based upon the information
presently available, periodic monitoring is required, the
cost of which is not expected to be significant.
NOTE 7. EARNING PER SHARE:
The following data show the amounts used in computing
earnings per share
(EPS) and the effects on income and the weighted average
number of
shares of dilutive potential common stock.
Six Months ended
April 3, 1999
Income Common
Shares EPS
Basic EPS:
Income available to common
shareholders $332,507
2,129,999 $0.16
Dilutive effect of potential common
Stock:
Stock options -
12,588
Diluted EPS:
Income available to common
shareholders after assumed
exercise of dilutive securities $332,507
2,142,587 $0.16
Six Months ended
March 31, 1998
Income Common
Shares EPS
Basic EPS:
Income available to common
shareholders $345,984
2,127,641 $0.16
Dilutive effect of potential common
Stock:
Stock options -
43,546
Diluted EPS:
Income available to common
shareholders after assumed
exercise of dilutive securities $345,984
2,171,187 $0.16
-8-
NOTE 7. EARNING PER SHARE: (continued)
Quarter ended
April 3, 1999
Income Common
Shares EPS
Basic EPS:
Income available to common
shareholders $170,589
2,130,008 $0.08
Dilutive effect of potential common
Stock:
Stock options -
15,821
Diluted EPS:
Income available to common
shareholders after assumed
exercise of dilutive securities $170,589
2,145,829 $0.08
Quarter ended
March 31, 1998
Income Common
Shares EPS
Basic EPS:
Income available to common
shareholders $149,288
2,128,655 $0.07
Dilutive effect of potential common
Stock:
Stock options -
43,546
Diluted EPS:
Income available to common
shareholders after assumed
exercise of dilutive securities $149,288
2,172,201 $0.07
-9-
PART I - FINANCIAL INFORMATION
Item 2 - MANAGEMENT DISCUSSION AND ANALYSIS
Sales improved by 3% and income by 14% for the three months
ended April 3, 1999 when compared with the same quarter last
year. Consolidated net sales for this second quarter were
$2,439,300 with net income of $170,600, or $.08 per share,
compared with last year's net sales of $2,370,000 and net
income of $149,300, or $.07 per share. During this period,
net sales at the Webstone division increased by 17% while
Valve division net sales decreased by 6% when compared to
last year. Improvements in net income were the result of
higher gross margins year over year, with only slight
increases in selling and administrative expenses.
For the six months ended April 3, 1999, net sales were
$4,831,400 with net income of $332,500, or $.16 per share,
compared with net sales of $4,899,200 and net income of
$346,000, or $.16 per share, for the same period in fiscal
1998. The drop in sales for the six months of 1.4% was the
combined net result of an increase at the Webstone division
of 11% and a decline for the Valve division of 9%.
Sale improvements at Webstone reflect the success of the
Outback retail operation begun in March of last year.
Increases in sales at Outback offset declines in sales at
the wholesaling operation year over year.
The sales declines experienced at the Valve division for the
last six to eight quarters have now begun to moderate. There
have been signs that the bottom of the decline in the
industrial gas business may have been reached. Many
indicators are currently pointing to improvements in Asian
economies and the semiconductor industry, both of which have
been important contributors to declines in air separation
plant projects. Despite these promising signs, it was
necessary to reduce the Valve division work force during the
quarter to bring expenses in line with a lower level of
sales.
During this quarter, the Valve division made important
improvements in its engineering capabilities by fully
upgrading the Company's computer CAD systems to state of the
art computers, and contracting to implement an advanced 3D
solids modeling package, Pro Engineer. These improvements
are expected to improve lead times for new product
introduction and customer designs, as well as to reduce the
cost of maintaining critical manufacturing and engineering
documentation.
Liquidity remains strong, as operations generated close to
$250,000. Long-term debt was further reduced by $300,000 in
the first six months of this year, and although availability
under the line of credit remains, the Company has not drawn
upon it within this year. Long term obligations are
primarily leases against capital equipment.
During March of 1999, preparations to be Y2K compliant were
completed at the Valve division. All systems, computers,
and other electronic equipment have been tested and are
deemed satisfactory to pass into the new millennium.
- 10 -
Item 2 - MANAGEMENT DISCUSSION AND ANALYSIS (continued)
The Company's Webstone Division will be converting to a Year
2000 compliant hardware and software package rather than
upgrading its existing software. The Company has selected a
software system which will be implemented by the fourth
quarter of fiscal 1999. As a contingency plan for
converting to the new system, the Webstone Division's
purchasing system, the only system that uses dates more than
one month into the future, can be upgraded in a matter of
weeks.
The Company's results of operatings have not been materially
effected by seasonablity.
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, that
address such matters as new product introductions and
projected future sales. These statements can be identified
by the use of forward looking terminology such as "expect",
"anticipate", "believe", "intend", "estimate" or other
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 major customers,
delays in
introducing new products, the failure of the market to
accept new products, changes in general economic conditions
and conditions in major customer industries such as the
industrial gas business.
- 11 -
PART II - OTHER INFORMATION
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 April 3, 1999.
-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 17, 1999
GODDARD INDUSTRIES, INC.
By:/s/Salvatore J. Vinciguerra
--------------------------------
- ---
Salvatore J. Vinciguerra,
President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> OCT-02-1999 OCT-02-1999
<PERIOD-END> APR-03-1999 APR-03-1999
<CASH> 0 115,185
<SECURITIES> 0 0
<RECEIVABLES> 0 1,189,768
<ALLOWANCES> 0 43,900
<INVENTORY> 0 3,489,287
<CURRENT-ASSETS> 0 4,928,504
<PP&E> 0 4,775,452
<DEPRECIATION> 0 3,212,691
<TOTAL-ASSETS> 0 6,635,255
<CURRENT-LIABILITIES> 0 741,647
<BONDS> 0 0
0 0
0 0
<COMMON> 0 21,308
<OTHER-SE> 0 5,304,946
<TOTAL-LIABILITY-AND-EQUITY> 0 6,635,255
<SALES> 2,439,288 4,831,459
<TOTAL-REVENUES> 2,439,288 4,831,459
<CGS> 1,544,905 3,064,627
<TOTAL-COSTS> 592,174 1,186,407
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 3,000 6,000
<INTEREST-EXPENSE> 16,662 25,567
<INCOME-PRETAX> 290,289 564,607
<INCOME-TAX> 119,700 232,100
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 170,589 332,507
<EPS-PRIMARY> .08 .16
<EPS-DILUTED> .08 .16
</TABLE>
