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 January 2, 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 January 2, 1999
Common Stock, $.01 par value 2,129,982
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 - January 2, 1999
and October 3, 1998
3
Consolidated Statement of Income - Three Months Ended
January 2, 1999 and December 31, 1997
4
Consolidated Statement of Cash Flows - Three Months
Ended
January 2, 1999 and December 31, 1997
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
12
-2-
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
January 2,
October 3,
1999
1998
(UNAUDITED)
AUDITED
ASSETS
(ALL PLEDGED, NOTE 4)
CURRENT ASSETS:
Cash $ 45,819
$ 283,473
Accounts receivable, net of allowances 1,166,942
1,174,946
Inventories (Note 3) 3,413,724
3,410,767
Prepaid expenses and taxes 15,206
27,184
Refundable taxes on income -
92,723
Deferred income taxes (Note 5) 113,400
111,000
TOTAL CURRENT ASSETS 4,755,091
5,100,093
PROPERTY, PLANT AND EQUIPMENT,
at cost 4,742,236
4,694,485
Less - Accumulated depreciation -3,146,146
- -3,079,727
1,596,090
1,614,758
OTHER ASSETS:
Excess of cost of investment in
subsidiaries over equity in net
assets acquired 9,929
10,868
Deferred income taxes - long term(Note 5)133,000
131,000
TOTAL OTHER ASSETS 142,929
141,868
TOTAL ASSETS $6,494,110
$6,856,719
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of
long-term debt (Note 4) $ 190,000
$ 184,000
Accounts payable 206,100
289,775
Accrued expenses 246,765
457,406
Accrued environmental costs (Note 6) -
4,648
Deferred compensation 60,000
42,500
Income taxes payable 9,359
- -
TOTAL CURRENT LIABILITIES 712,224
978,329
LONG-TERM DEBT, net of
current maturities (Note 4) 136,593
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 2,129,982 shares. 21,299
21,299
Additional paid-in capital 477,923
477,923
Retained earnings 4,655,071
4,493,153
TOTAL SHAREHOLDERS'EQUITY 5,154,293
4,992,375
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $6,494,110
$6,856,719
-3-
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(UNAUDITED)
FOR THE THREE
MONTHS ENDED
January 2,
December 31,
1999
1997
NET SALES $2,392,171
$2,529,264
COST OF SALES 1,519,722
1,624,072
GROSS PROFIT 872,449
905,192
SELLING AND ADMINISTRATIVE
EXPENSES 594,233
562,977
INCOME FROM OPERATIONS 278,216
342,215
OTHER INCOME (EXPENSE):
Interest expense -7,905
- -17,804
Other income, net 4,007
8,285
TOTAL OTHER INCOME
(EXPENSE) -3,898
- -9,519
INCOME BEFORE INCOME TAXES 274,318
332,696
PROVISION FOR INCOME TAXES 112,400
136,000
NET INCOME $161,918
$196,696
EARNINGS PER SHARE (Note 7)
Basic $ 0.08
$ 0.09
Diluted $ 0.08
$ 0.09
-4-
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
FOR THE THREE
MONTHS ENDED
January 2,
December 31,
1999
1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $161,918
$196,696
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 67,358
60,942
Deferred income taxes -4,400
- -4,400
Changes in assets and liabilities:
Accounts receivable 8,004
21,461
Refundable taxes on income 92,723
- -
Inventories -2,957
- -29,551
Prepaid expenses and other 11,978
- -9,563
Accounts payable -83,675
- -88,550
Accrued expenses -210,641
- -214,387
Accrued environmental costs -4,648
- -9,554
Income taxes payable 9,359
15,400
Total Adjustments -116,899
- -258,202
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 45,019
- -61,506
CASH FLOWS FROM INVESTING ACTIVITIES:
Property,plant and equipment additions -47,751
- -110,768
CASH FLOWS FROM FINANCING ACTIVITIES:
Increase in long-term debt 550,000
861,000
Repayments of long-term debt -784,922
- -735,322
Issuance of common stock -
1,000
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES -234,922
126,678
NET INCREASE (DECREASE) IN CASH -237,654
- -45,596
CASH AND EQUIVALENTS - BEGINNING 283,473
82,943
CASH AND EQUIVALENTS - ENDING $ 45,819
$ 37,347
CASH PAID DURING THE PERIOD:
Interest $ 7,694
$ 19,176
Income taxes $ 15,000
$125,000
-5-
GODDARD INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS
January 2, 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:
January 2,
October 3,
1999
1998
Finished goods $2,850,615
$2,847,658
Work in process 139,945
139,945
Raw materials 423,164
423,164
$3,413,724
$3,410,767
The following factors were taken into consideration in
determining inventory values:
Goddard Valve Corp. - January 2, 1999 - $2,121,467.
(estimated) and October 3, 1998 - $2,066,224. Interim
inventories were valued by management using the
gross profit method.
Webstone Company, Inc. - January 2, 1999 - $1,292,257.
(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 3/4% or
(ii) the Federal Funds Effective Rate plus 1 1/4% per
annum. On
January 2, 1999 the effective interest rate was 8.25%.
The
agreement expires March 30, 2000 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 January 2, 1999 long-term obligations consisted of
the following:
LONG-TERM
CURRENT
Revolving line of credit $ 50,000
$ -
Capital lease obligations for machinery,
payable in monthly installments of
$12,080, through 2000, with imputed
interest rate of approximately 8.5% 136,593
190,000
$ 186,593
$190,000
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:
January 2,
October 3,
1999
1998
Deferred tax asset
Deferred compensation $ 220,400 $
220,400
Inventory valuation 69,000
68,600
Accrued salaries 9,300
9,300
Environmental matters 1,900
1,900
Bad debts 16,100
14,100
316,700
314,300
Depreciation 70,300
72,300
$ 246,400 $
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.
Quarter ended
January 2, 1999
Income Common
Shares EPS
Basic EPS:
Income available to common
shareholders $161,918
2,126,649 $.08
Dilutive effect of potential common
Stock:
Stock options -
12,588
Diluted EPS:
Income available to common
shareholders after assumed
exercise of dilutive securities $161,918
2,139,237 $.08
Quarter ended
December 31, 1997
Income Common
Shares EPS
Basic EPS:
Income available to common
shareholders $196,696
2,126,670 $.09
Dilutive effect of potential common
Stock:
Stock options -
41,638
Diluted EPS:
Income available to common
shareholders after assumed
exercise of dilutive securities $196,696
2,168,308 $.09
NOTE 8. RECLASSIFICATIONS
Certain amounts in the 1997 financial statements have
been reclassified to conform with the 1998 presentation with
no effect on previously reported net income or retained
earnings.
-8-
PART I - FINANCIAL INFORMATION
Item 2 - Management's Discussion and Analysis of Financial
Condition
RESULTS OF OPERATIONS
FISCAL QUARTER ENDED JANUARY 2, 1999 COMPARED TO
FISCAL QUARTER ENDED DECEMBER 31, 1997
Consolidated net sales for the three months ended
January 2, 1999 were $2,392,000 with net income of $161,900,
or $.08 per share, compared with net sales of $2,529,000 and
consolidated net income of $196,700, or $.09 per share, in
the same period one year earlier. Net sales of Webstone -
the plumbing supplies division - were up 5.6% over the same
quarter last year while net sales at Goddard Valve Corp. -
the cryogenic valve division - were 11.6% lower than the
same quarter last year. The lower sales of cryogenic valves
reflect continuation of lower demand in the cryogenic
industry as a whole, which has been impacted by the Asian
economic situation.
Gross profit improved from 35.8% of net sales in last
year's first quarter to 36.5% this year, while SG&A expenses
increased year on year largely as a result of costs
associated with the transition in the position of President
and Chief Executive Officer of Goddard Industries.
LIQUIDITY AND CAPITAL RESOURCES
The Company funds operations primarily through earnings
and bank borrowings when required. At January 2, 1999, the
Company had working capital of approximately $4,043,000
including $46,000 in cash. The Company continues its
$1,750,000 line of credit with BankBoston, which is
collateralized by substantially all of its assets. At
January 2, 1999, approximately $50,000 had been drawn under
that line of credit, which bears interest at a rate equal to
the bank's prime rate plus 1/2 of 1%.
During the 3 months ended January 2, 1999, the Company
produced $45,000 of cash from its operations. The major
sources of cash were net income ($162,000), depreciation and
amortization ($67,000), and refundable taxes on income
($93,000). The major uses of cash were reduction in accrued
expenses ($211,000), and reduction in accounts payable
($83,000).
In the first quarter, the company invested $48,000 in
property, plant and equipment versus $111,000 in the same
period last year. Long term debt was reduced by $235,000.
The Company believes that the amounts available under
the line of credit should provide sufficient liquidity to
handle its normal working capital requirements, 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 its operations, bank borrowings, and other
available sources.
- 9 -
PART I - FINANCIAL INFORMATION (continued)
The Company's results of operations have not been materially
effected by seasonality.
YEAR 2000
With respect to the "Year 2000 problem," all of the
Company's financial applications have been tested and the
Company has concluded that they will be able to process
information or logic involving the Year 2000 and beyond
completely and accurately. The Company anticipates that
work on its Valve Division's inventory, order processing and
related applications will be Year 2000 compliant by the
second quarter of fiscal 1999. Most of the Company's PC-
based software is currently able to process information or
logic involving the Year 2000 and beyond or performs
functions that are not data-dependent. The Company is
testing all of its personal computers to insure that the
hardware and firmware is Year 2000 capable, and will perform
upgrades as needed. The Company anticipates that this work
will be completed by early in the fourth quarter of fiscal
1999.
The Company has contacted its critical vendors and major
customers with regard to the Year 2000 and is not yet aware
of any major Year 2000 problems in its dealings with them.
The Company will continue to follow up on these contacts to
insure an uninterrupted flow of supplies and services into
the new millennium.
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 is in the
process of evaluating packages and intends to select a
package during the second quarter of fiscal 1999. The
Company anticipates that the conversion process will be
completed 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 anticipates that it will be fully Year 2000
compliant by the end of fiscal 1999 and well before the end
of calendar 1999. The Company has not yet prepared any
contingency plan for dealing with a reasonable worst case
scenario, but anticipates that it will do so by the fourth
quarter of fiscal 1999.
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
- 10 -
FORWARD LOOKING INFORAMTION (continued)
introducing new products, the failure of the market to
accept new products, changes in general economic conditions,
and unanticipated Year 2000 problems.
- 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 January 2, 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 February 16, 1999
GODDARD INDUSTRIES, INC.
By:/s/Salvatore J. Vinciguerra
--------------------------------
- ---
Salvatore J. Vinciguerra,
President
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<FISCAL-YEAR-END> OCT-02-1999
<PERIOD-END> JAN-02-1999
<CASH> 45,819
<SECURITIES> 0
<RECEIVABLES> 1,206,191
<ALLOWANCES> 39,249
<INVENTORY> 3,413,724
<CURRENT-ASSETS> 4,755,091
<PP&E> 4,742,236
<DEPRECIATION> 3,146,146
<TOTAL-ASSETS> 6,494,110
<CURRENT-LIABILITIES> 712,224
<BONDS> 0
0
0
<COMMON> 21,299
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 6,494,110
<SALES> 2,392,171
<TOTAL-REVENUES> 2,392,171
<CGS> 1,519,722
<TOTAL-COSTS> 594,233
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 3,000
<INTEREST-EXPENSE> 7,905
<INCOME-PRETAX> 274,318
<INCOME-TAX> 112,400
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
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