U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-QSB
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the quarterly period ended October 31, 1995
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission file number 0-1684
Gyrodyne Company of America, Inc.
- -----------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
New York
- --------------------------------------------------------------
(State or other jurisdiction of incorporation or organization)
11-1688021
- ---------------------------------
(IRS Employer Identification No.)
17 Flowerfield, Suite 15, St. James, N.Y. 11780
- -------------------------------------------------
(Address of principal executive offices)
(516) 584-5400
- ---------------------------
(Issuer's telephone number)
N/A
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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. . .
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12,13 or 15 (d) of the Exchange Act after the distribution
of securities under a plan confirmed by a court. Yes. . No. . .
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of
common equity, as of the latest practicable date:
995,818 Common $1 P.V. as of October 31, 1995
INDEX TO QUARTERLY REPORT
QUARTER ENDED OCTOBER 31, 1995
Sequence
Form 10-QSB Cover
Index to Form 10-QSB
Consolidated Balance Sheet
Consolidated Statements of Income
Consolidated Statements of Cash Flows
Footnotes to Financial Statements
Management's Discussion and Analysis or Plan of Operation
Part II - Other Information
Signatures
GYRODYNE COMPANY OF AMERICA, INC. 10-QSB
AND SUBSIDIARIES Part 1
CONSOLIDATED BALANCE SHEET Item 1 (a) (1)
(UNAUDITED)
<TABLE>
<CAPTION>
October 31,1995
ASSETS (NOTE 1)
CURRENT ASSETS:
<S> <C>
Cash and cash equivalents $553,208
Short-term investments 202,957
Accounts receivable, less allowance for
doubtful accounts of $6,000 (Note 3) 102,650
Prepaid expenses and other current assets (Note 6) 251,426
---------
Total current assets 1,110,241
INVESTMENT IN CITRUS GROVE PARTNERSHIP 1,285,104
PROPERTY, PLANT AND EQUIPMENT-NET (Note 5) 2,063,027
PREPAID PENSION COSTS (Note 2) 1,827,750
OTHER ASSETS (Note 7) 225,336
---------
TOTAL ASSETS $6,511,458
==========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
<S> <C>
Accounts payable and accrued expenses $179,998
Loans payable - short term portion 70,000
Income taxes payable 0
--------
Total Current Liabilities 249,998
=========
LONG TERM LIABILITIES
Loans payable - long term portion 995,463
DEFERRED INCOME TAXES 1,128,000
STOCKHOLDERS' EQUITY:
Common stock, par value $1 per share
authorized 2,000,000 shares, 1,531,086 shares
issued at October 31, 1995
(including 530,535 shares held in treasury) (Note 8) 1,531,086
Capital in excess of par value (Note 1 & 8) 6,172,310
Retained earnings (Note 1) (514,139)
---------
7,189,257
Less cost of shares of common stock
held in treasury (Note 1 & 8) (3,051,260)
---------
Total stockholders' equity` 4,137,997
----------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $6,511,458
==========
<FN>
See notes to consolidated financial statements
</FN>
</TABLE>
GYRODYNE COMPANY OF AMERICA, INC. 10-QSB
AND SUBSIDIARIES Part 1
CONSOLIDATED STATEMENTS OF INCOME Item 1 (a) (2)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
October 31, October 31,
REVENUE: 1995 1994 1995 1994
<S> <C> <C> <C> <C>
Rental income $903,227 822,075 $452,870 $417,026
-------- -------- -------- --------
Total Revenue from Operations 903,227 822,075 452,870 417,026
-------- -------- -------- --------
COSTS AND EXPENSES:
Cost of maintaining rental property (Note 9) 721,482 587,909 402,151 278,214
Aerospace net expense 35,208 25,648 16,605 7,318
General and administrative (Note 8) 447,416 368,804 289,140 192,822
--------- ------- -------- --------
Total costs and expenses 1,204,106 982,361 707,896 478,354
--------- ------- -------- -------
GROSS OPERATING MARGIN (300,879) (160,286) (255,026) (61,328)
<CAPTION>
OTHER INCOME AND EXPENSES:
<S> <C> <C> <C> <C>
Equity in earnings of Citrus Grove Partnership (300,000) (54,044) (168,000) (27,021)
Equity in earnings of Oil and Gas (Note 4) 3,151 (196,016) (2,307) (166,064)
Gain on sale of Gas Investments (Note 4) 172,176 0 0 0
Interest & Dividend Income 10,713 16,176 6,579 7,930
Pension Income\(Expense) (Note 2) (19,046) 3,839 (20,965) (21,021)
Interest Expense (26,014) (22,367) (15,144) (11,320)
Miscellaneous Income\(Expense) (40) (8,617) 7 (7,728)
--------- --------- --------- ---------
Total Other Income\(Expense) (159,060) (261,029) (199,830) (225,224)
--------- --------- --------- ---------
Income before income tax provision (459,939) (421,315) (454,856) (286,552)
INCOME TAX PROVISION:
Current taxes (Note 7) (109,691) (117,706) (109,691) (64,227)
Deferred taxes 0 0 0 0
---------- --------- --------- ---------
Total tax provision (109,691) (117,706) (109,691) (64,227)
---------- ---------- ---------- ----------
NET INCOME (LOSS) ($350,248) ($303,609) ($345,165) ($222,325)
========== ========== ========== ==========
WEIGHTED AVG. NO. OF COMMON
SHARES OUTSTANDING 1,000,551 1,000,551 1,000,551 1,000,551
========= ========= ========= =========
PER SHARE INFORMATION:
Earnings per share of common stock ($0.35) ($0.30) ($0.34) ($0.22)
<FN>
See notes to consolidated financial statements
</FN>
</TABLE>
GYRODYNE COMPANY OF AMERICA, INC. 10-QSB
AND SUBSIDIARIES Part 1
CONSOLIDATED STATEMENT OF CASH FLOWS Item 1 (a) (3)
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
OCTOBER 31, OCTOBER 31,
1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net earnings ($350,248) ($303,609)
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization of oil and gas investments 11,979 51,105
Depreciation and amortization of plant and equipment 32,836 32,690
Pension (income)\expense 19,045 (3,839)
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (18,785) (11,315)
Prepaid expenses and other assets (41,969) 212,682
Other assets 35,827 1,324
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (65,770) (12,555)
Taxes payable 0 0
-------- --------
Total adjustments (26,837) 270,092
--------- --------
Net cash (used)/provided by operating activities (377,085) (33,517)
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in short term investments 97,969 93
Decrease in oil and gas investments 119,743 157,629
Increase in oil and gas investments 0 0
Decrease in citrus grove investments 300,000 54,044
Increase in property, plant and equipment (543,319) (464,969)
--------- ---------
Net cash (used)/provided by investment activities (25,607) (253,203)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
New borrowings 1,050,000 0
Repayment of debt (424,537) (60,000)
Stock option exercise (Note 8) 145,007 0
--------- ---------
Net cash from financing activities 770,470 (60,000)
--------- ---------
Net increase (decrease) in cash and cash equivalents 367,778 (346,720)
Cash and cash equivalents at beginning of year 185,430 759,678
--------- --------
Cash and cash equivalents at end of period $553,208 $412,958
========= ========
<FN>
See notes to consolidated financial statements
</FN>
</TABLE>
10QSB
Part 1
Item 1 (a) (4)
FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The unaudited Consolidated Statements of Income for the six month periods
ended October 31, 1995 and October 31, 1994 and the Consolidated Balance Sheet
as of October 31, 1995 reflect all adjustments which, in the opinion of
Management, are necessary for the fair representation of results of such
periods. The results of operations for the six month periods ended October 31,
1995 and 1994 are not necessarily indicative of the results to be expected for
the full year.
2. The application of FASB 87 resulted in the Company's recognition, on the
basis of annual Actuarial reports, of $19,046 of net periodic pension expense
for the period ended October 31, 1995 and $3,839 of net periodic pension income
for the first
six months of Fiscal Year 1995. The turnaround from income to expense from
period to period is a result of the Pension Plan restructuring and lower
actuarial interest rate assumptions. The revised plan calls for increased
benefits to current and retired employees
3. At April 30, 1995, $6,000 had been provided as a reasonable reserve for
uncollectible accounts receivable. This reserve has not changed during the
first six months of FY 1996.
4. As anticipated, the Company completed the sale of its Gas investments in
July. The sale price of $284,000 was reduced by payables still outstanding on
these wells, which resulted in net proceeds to the Company of $201,000. The
effect on the Profit and Loss Statement from this transaction is highlighted
below.
<TABLE>
<CAPTION>
Six Months Ended Second Quarter Ended
October 31, October 31,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Sales of Oil & Gas $101,491 $135,720 $42,226 $40,599
-------- -------- ------- -------
Expenses:
Operating expenses 78,423 118,660 35,549 27,818
Depreciation (A) 313 23,397 0 10,403
Amortization of intangible drilling cost (A) 19,604 41,950 8,984 20,713
Slant well write-off 0 147,729 0 147,729
------- --------- -------- ---------
Total operating expenses 98,340 331,736 44,533 206,663
Income \ (Loss) from operations $3,151 ($196,016) ($2,307) ($166,064)
======== ========= ======== ========
Revenue from sale of gas investments 283,980 0 0 0
Net investment in gas 111,804 0 0 0
Gain on sale of gas investments $172,176 $0 $0 $0
<FN>
(A) prior year quarter includes depreciation and amortization of assets sold
in the current year
</FN>
</TABLE>
5. Property, Plant and Equipment increased $543,000 in the first six months
primarily due to capitalization of renovation costs to Building #7 South for a
new long lease tenant whose occupancy started in September. During the quarter
the Company negotiated long term financing for this project. A 10 year balloon
mortgage for $1,050,000 at a floating rate 2% above prime calculated on a 15
year amortization was secured. These funds were used for the above project and
to pay off the remaining balance of the short term Reception Center loan. The
mortgage is collateralized by Building #7 and surrounding acreage.
6. The calculation for the provision of current year taxes is based on the
actual gain or loss year-to-date. In the case of losses, an estimated refund is
calculated to offset a pre-tax loss. To date, in the current year, the Company
is reporting a pre-tax loss, which in turn is producing a potential tax refund.
For balance sheet presentation, this negative tax accrual has been reclassified
to the "Prepaid expenses and other current assets" category in the asset
section of the balance sheet. For the full year, based on the expected
Helicopter sale to be concluded in December, the Company is estimating a
taxable gain based on that projected revenue. In addition, during the current
quarter, the Company received a tax carryback refund of $170,888 based on the
FY 1995 loss.
7. Included in "Other Assets" at October 31, 1995 is $200,000 of restricted
cash which is being held as collateral for the irrevocable letter of credit
given to the seller of the land purchased in October 1994. The letter of
credit is to insure that Gyrodyne performs certain land improvements before
October 5, 1996. Also included in this category is the remaining equity of
$8,118 in the working interest of certain Texas oil wells.
8. The Company has established incentive compensation plans under which it is
authorized to grant common incentive stock options and non-qualified stock
options. The Company historically grants stock appreciation rights (SAR's) in
tandem with its grants. Upon exercise of a SAR the holder is entitled to
receive stock equal to the amount by which the market value of the Company's
common stock on the exercise date exceeds the grant price of the related stock
options. As SAR's are exercised the corresponding options are canceled.
Conversely, as options are exercised, the corresponding SAR's are canceled. On
August 6, 1995 officers and key employees exercised 10 restricted incentive
stock grants and options totaling 11,643 shares. These restricted options and
grants were awarded by the Board of Directors on August 6, 1994. Of the total,
Incentive Stock grants totaled 3,160 shares of which 1,095 were the result of
application of stock appreciation incentive provisions. Non/Qualified Stock
Options (NQSO) totaled 6,910 shares of which 2,535 were a result of application
of stock appreciation incentive provisions. The NQSO shares were purchased at
a grant price of $9.89 per share, a total purchase price of $68,360.
Additionally, as a result of vested ISO options, SAR's of 1,573 shares were
exercised with the resulting cancellation of the 2,713 underlying ISO
exercisable option shares. Employee compensation on the above transactions
amounted to $76,647 which is reflected as an expense on the Income Statement
entirely in General and Administrative Expense. The combination of $68,360
additional paid in capital and the recognition of $76,647 non-cash expense
are reflected in total as $145,007 as Stock option exercise in the Cash Flow
Statement.
On August 26, 1995 the Board of Directors awarded 11 additional restricted
stock options or grants to 11 key employees and Officers totaling 25,750 shares.
9. The year-to-year and quarter-to-quarter increases pertains to writing off
the expense portion of the renovation project. The $134,000 expense portion
of the project consisted primarily of partial re-roofing of the building
$46,000, partial re-paving of the parking lot $40,000, closing expenses on
the new loan $27,000, and tool rentals for the project $17,000.
10-QSB
Part 1
Item 2
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
(a) Not Applicable
(b) MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Total Revenues from Operations for the six month period were $81,000 higher
than the same period last year and $36,000 higher for the quarter to quarter
comparison. This reflects a 4% increase in the occupancy rate from
year-to-year. In addition, higher rates based on COLA increases and lease
renewals also contributed to the increase.
As a result of the Company's renovation to Building #7, to accommodate a major
tenant in the child care business and the employee compensation involved in the
stock option transactions, the year-to-year and quarter to quarter operating
expenses increased over $220,000 for both periods. The expense portion of this
renovation amounted to $133,000 and was spent primarily on re-roofing a large
section of the building and re-paving a portion of the surrounding parking
area. In addition $497,000 was spent for Capital improvements for this
renovation. The stock option compensation of $77,000 accounted for much of the
balance of the increase. The Aerospace cost included in operating expense also
increased for the comparable periods by $9,000. This increase is a result of
refurbishing Helicopters in anticipation of the forthcoming sale to Dornier
which is scheduled to be concluded during December 1995.
For financial planning purposes, effective January 1, 1995, Callery-Judge
Grove plans to adopt a Fiscal Year in order to better match revenues and
expenses to the natural growing and harvesting season. The Fiscal Year cycle
will begin October 1 annually and end September 30th. If approved by the IRS,
the anticipated first reporting year will be a short year of nine months ending
September 30, 1995. We have recently been informed by the Grove that IRS
approval is still pending. Based on the most recent Grove information, the
Company's $300,000 loss accrual should be sufficient. The current loss is a
result of severe weather conditions in the prior year which reduced the 1995
packout. Future results from the Grove are projected to show significant
improvement in output as the maturation of replanted acreage yields more
harvestable fruit and the new packing plant becomes fully operational.
The period-to-period turn around in Oil & Gas operations reflects the profit in
the current period for oil only. The gas wells were sold off in the first
quarter of the current period. In addition, the prior period year-to-date
and quarter comparisons contain the write off of the slant well in the amount
of $148,000.
The land purchase, for cash, in October of 1994 reduced our investment
portfolio thereby reducing Interest and Dividend income for the current six
month period. The Pension fund generated a loss during the current six months
resulting from an increase in benefits and the lowering by the U. S. Government
of actuarial interest rate assumptions for pension plans. On the
quarter-to-quarter comparison, the prior quarter expense is the result of the
income reduction adjustment falling into the current quarter. Last year the
rate of income accrual was reduced from an annual rate of $99,000 to $7,000
during the second 10-QSB quarter. Interest expense was slightly higher for
both period comparisons based on securing a new loan during the current
quarter which has a higher principle balance but whose payoff is spread over
a longer term.
The current ratio for the period ended October 31, 1995 increased to 4.44:1
from 2.83:1 at July 31, 1995 and up from 2.60:1 at October 31, 1994. The
increase from July 31, 1995 is due to an increase in cash from the new loan
and the tax refund. The increase from October 31, 1994 reflects a decrease in
accounts payable and the short term portion of loans payable. The payable
decrease is mainly due to the reduction of Oil & Gas payables caused by the
sale of Gas wells. The reduction in short term loans payable reflects the
swap in loans from year-to-year. The new loan is spread over a longer term
therefore the short term portion is smaller than the old loan.
For the six month period ending October 31, 1995, the Company is reporting an
after tax loss of $350,248 or $0.35 per share . On the basis of current
estimates, Management is projecting a return to profitability in the third
quarter of FY 1996. This estimate is contingent upon the finalization of the
Helicopter sale to Dornier which should take place in December 1995. The
common shares outstanding have been adjusted for the stock grants, options
and SAR's issued during the quarter. These shares were issued from Treasury
stock.
10-QSB
Part II
Item 1-6
Part II Other Information
Items 1 thru 4 are not applicable to the August 1, 1995 thru October 31, 1995
period.
Item 5. Other Information
The following Directors; Dimitri Papadakos, Joseph Dorn, Nicholas Xanthaky,
Robert Beyer, Nicholas Goudes, and Peter Papadakos were re-elected at the
Annual Meeting of Stockholders on October 27, 1995 held at the Company's
Flowerfield Complex. In addition the engagement of Holtz Rubenstein & Company
LLP as independent auditors for Fiscal Year 1996 was also approved by
stockholders.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required - None
(b) Reports on Form 8-K - None
SIGNATURES
Pursuant to the requirements 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.
GYRODYNE COMPANY OF AMERICA, INC.
(Registrant)
.
Date: December 14, 1995
SGD/ Dimitri P. Papadakos
Dimitri P. Papadakos
President and Principal Executive Officer
Date: December 14, 1995
SGD/ Joseph L. Dorn
Joseph L. Dorn
Treasurer, Secretary and
Principle Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> OCT-31-1995
<CASH> 553,208
<SECURITIES> 202,957
<RECEIVABLES> 108,650
<ALLOWANCES> (6,000)
<INVENTORY> 0
<CURRENT-ASSETS> 1,110,241
<PP&E> 5,299,727
<DEPRECIATION> 3,236,700
<TOTAL-ASSETS> 6,511,458
<CURRENT-LIABILITIES> 249,998
<BONDS> 995,463
<COMMON> 1,531,086
0
0
<OTHER-SE> 2,606,911
<TOTAL-LIABILITY-AND-EQUITY> 6,511,458
<SALES> 903,227
<TOTAL-REVENUES> 903,227
<CGS> 0
<TOTAL-COSTS> 756,690
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,014
<INCOME-PRETAX> (459,939)
<INCOME-TAX> (109,691)
<INCOME-CONTINUING> (350,248)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (350,248)
<EPS-PRIMARY> (0.35)
<EPS-DILUTED> (0.35)
</TABLE>
