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 July 31, 1996
-------------
[ ] 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.)
7 Flowerfield, Suite 28, St. James, N.Y. 11780
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(Address of principal executive offices)
(516) 584-5400
- ---------------------------
(Issuer's telephone number)
17 Flowerfield, Suite 15, St. James, N.Y. 11780
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(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:
1,000,551 Common $1 P.V. as of JULY 31, 1996
- ---------------------------------------------
INDEX TO QUARTERLY REPORT
QUARTER ENDED JULY 31, 1996
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
July 31,
1996
ASSETS (NOTE 1)
CURRENT ASSETS:
Cash and cash equivalents $ 716,179
Short-term investments 189,716
Accounts receivable, less allowance for
doubtful accounts of $6,000 (Note 3) 109,851
Prepaid expenses and other current assets 211,603
----------
Total current assets 1,227,349
INVESTMENT IN CITRUS GROVE PARTNERSHIP (Note 10) 1,585,104
PROPERTY, PLANT AND EQUIPMENT-NET (Note 5) 2,189,613
PREPAID PENSION COSTS (Note 2) 1,742,496
OTHER ASSETS (Note 8) 232,828
----------
TOTAL ASSETS $6,977,390
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 205,140
Loans payable - short term portion (Note 6) 70,000
----------
Total Current Liabilities 275,140
----------
LONG TERM LIABILITIES
Loans payable - long term portion (Note 6) 940,595
DEFERRED INCOME TAXES 1,231,114
STOCKHOLDERS' EQUITY:
Common stock, par value $1 per share
authorized 2,000,000 shares, 1,531,086 shares
issued at July 31, 1996 (including 530,535 shares
held in treasury) 1,531,086
Capital in excess of par value (Note 1) 6,172,311
Deficit (Note 1) (121,596)
----------
7,581,801
Less cost of shares of common stock
held in treasury (Note 1) (3,051,260)
----------
Total stockholders' equity 4,530,541
----------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $6,977,390
==========
See notes to consolidated financial statements
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
July 31, July 31,
REVENUE: 1996 1995
<S> <C> <C>
Rental income $ 489,244 $ 450,357
Aerospace income 6,000 500
---------- ----------
Total Revenue from Operations 495,244 450,857
---------- ----------
COSTS AND EXPENSES:
Cost of maintaining rental property 375,054 319,332
Aerospace net expense 25,617 19,103
General and administrative 221,947 158,276
---------- ----------
Total costs and expenses 622,618 496,711
---------- ----------
GROSS OPERATING LOSS (127,374) (45,854)
OTHER INCOME AND EXPENSES:
Equity in earnings of Citrus Grove Partnership (Note 10) 0 0
Equity in earnings of Oil and Gas (Note 4) 29,626 5,458
Gain on sale of Gas Investments (Note 4) 0 172,176
Interest & Dividend Income 9,947 4,134
Pension (Expense)/Income (Note 2) (9,523) 1,919
Interest Expense (26,393) (10,869)
Miscellaneous Income\(Expense) 0 (47)
---------- ---------
Total Other Income\(Expense) 3,657 172,771
---------- ---------
(Loss)/Income before income tax (benefit)/provision (123,717) 126,917
Income tax (Benefit)/Provision (Note 7) (49,708) 50,700
----------- ---------
NET (LOSS)/INCOME ($74,009) $76,217
=========== =========
WEIGHTED AVG. NO. OF COMMON SHARES OUTSTANDING 1,000,551 988,908
========== =========
PER SHARE INFORMATION:
(Loss)/Earnings per share of common stock ($0.07) 0.08
</TABLE>
See notes to consolidated financial statements
GYRODYNE COMPANY OF AMERICA, INC. 10-QSB
AND SUBSIDIARIES Part 1
CONSOLIDATED STATEMENTS OF CASH FLOWS Item 1 (a) (3)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JULY 31, JULY 31,
1996 1995
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss)/earnings ($74,008) $76,217
Adjustments to reconcile net (loss)/earnings to net
cash provided by/(used) in operating activities:
Depreciation and amortization of oil and gas investments 0 2,995
Depreciation and amortization of plant and equipment 24,204 15,243
Pension expense/(income) 9,523 (1,919)
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable 349,655 (25,505)
Prepaid expenses and other assets 6,400 (165,500)
Other assets (17,539) 39,813
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (141,534) (68,549)
Taxes payable 0 50,700
-------- --------
Total adjustments 230,709 (152,722)
-------- --------
Net cash (used)/provided by operating activities 156,701 (76,505)
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in short term investments 0 97,969
Decrease in oil and gas investments 0 119,742
Increase in property, plant and equipment (135,670) (100,188)
-------- --------
Net cash (used) in/provided by investment activities (135,670) 117,523
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of debt (18,080) (30,000)
-------- --------
Net cash used in financing activities (18,080) (30,000)
-------- --------
Net increase in cash and cash equivalents 2,951 11,018
Cash and cash equivalents at beginning of period 713,228 185,430
-------- --------
Cash and cash equivalents at end of period $716,179 $196,448
======== ========
</TABLE>
See notes to consolidated financial statements
10-QSB
Part 1
Item 1 (a) (4)
FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The interim statements furnished reflect all adjustments which are, in
the opinion of management, necessary to present a fair statement of the
financial position and results of operations for the three month periods
ended July 31, 1996 and July 31, 1995. The financial statements should be
read in conjunction with the summary of significant accounting policies and
notes to financial statements included in the Company's Form 10-KSB for the
fiscal year ended April 30, 1996. The results of operations for the three
month periods ended July 31, 1996 and 1995 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 $9,523 of net periodic pension
expense for the quarter ended July 31, 1996 and $1,919 of pension income
for the first three months of Fiscal Year 1996. The decrease 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, 1996, $6,000 had been provided as a reasonable reserve for
uncollectible accounts receivable. This reserve has not changed during the
first quarter of FY 1997.
4. In the prior year first quarter the Company completed the sale of its
Gas investments. 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.
First Quarter Ended
July 31,
1996 1995
Sales of Oil & Gas $ 53,624 $ 59,265
Expenses:
Operating expenses 23,998 42,874
Depreciation (A) 0 313
Amortization of intangible drilling cost (A) 0 10,620
Total operating expenses 23,998 53,807
Income from operations $ 29,626 $ 5,458
Revenue from sale of gas investments 0 283,980
Net investment in gas 0 111,804
Gain on sale of gas investments $ 0 $172,176
(A) prior year quarter includes depreciation and amortization of assets
sold.
5. Property, Plant and Equipment increased $136,000 in the first three
months primarily due to building improvements and equipment purchases.
6. In the second quarter of FY 1996 the company secured a $1,050,000
ten year monthly installment loan maturing in October 2005. This loan
was used to pay off the balance of the prior loan and to finance the
renovation of a portion of Building #7. The loan has a fixed principle
payment each month of $5,833.33 and interest at a floating rate at 2%
above the prime rate. The loan is secured by the assignment of rents and
a first collateral mortgage on Building #7 which is situated on six and
one half acres in St. James NY. The loan is also secured by the guarantees
of Gyrodyne Petroleum Inc. and Flowerfield Properties Inc. The principle
balance of the loan at July 31, 1996 was $997,500. The remainder of the
principle will be paid as follows:
Fiscal Year 1997 $ 52,500
Fiscal Year 1998 70,000
Fiscal Year 1999 70,000
Fiscal Year 2000 70,000
Fiscal Year 2001 70,000
Thereafter till October 2005 665,000
--------
997,500
Vehicle term loan bearing 10.9% interest maturing August 1999 13,095
----------
1,010,595
less current portion 70,000
----------
Long term debt $ 940,595
==========
7. The provisions for current taxes and prior year taxes is based on a
full year forecast of taxable income pro-rated over the entire year. In
the case of losses, an estimated refund is calculated to offset a pre-tax
loss.
8. Included in "Other Assets" at July 31, 1996 and 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. The work on this project is
proceeding on schedule and is expected to be completed prior to October 5th.
9. On August 26, 1995 the Board of Directors granted 11 restricted stock
options to 11 key employees and Officers totaling 25,750 shares, no portion
of which can be exercised before August 26, 1996 or sold before August 26,
1997. On August 26, 1996 options for 7,300 shares became exercisable but as
of that date none were exercised. On August 6, 1996 awards for 2,380 shares
were issued based on the 1994 Option Plan, however no option shares were
exercise under the 1994 Plan. A summary of both plans is as follows;
Stock Options Number of shares
Outstanding at July 30, 1995 35,000
Incentive awards at $9.89 per share 5,203
SAR's at $9.98 5,619
Granted August 26, 1995 at $15.625 25,750
71,572
Less:
Exercised options at $9.89 first year 6,910
Exercised awards at $9.89 first year 3,160
Exercised SAR's at $9.89 first year 1,573
Exercised awards at $9.89 second year 2,380
SAR's surrendered first year 2,535
Incentive kicker surrendered first year 1,573
Options surrendered upon SAR's exercised first year 2,713
SAR's surrendered second year 1,511
--------
Outstanding at August 6, 1996 49,217
========
Exercisable at August 6, 1996 8,254
========
10. In the fourth quarter of FY 1996 the Company adopted a change in the
accounting treatment of its investment in the Callery Judge Grove.
Effective May 1, 1995 the Company changed from the equity method to the
cost method with all previously recorded income or loss remaining as part
of the book value to the investment as of that date. The first quarter of
FY 1996 has been adjusted to reflect this change.
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 three month period were $44,000 over
the same period last year reflecting higher rental rates and a 5% increase
in the occupancy rate. Management expects revenue figures to continue to
show improvement over last year for the balance of the current fiscal year.
As noted in previous reports, the Company has embarked on development of a
master plan for the development of the Flowerfield property. At its July
meeting, the Board of Directors adopted a preliminary Master Plan, facets
of which are now being introduced by Management to public officials for
comment. The Company is also undertaking the selection of a nationally
recognized marketing organization and a public relation firm to further
gauge changes and adjustments to the Master Plan prior to a full-scale
public roll-out. The Company, as reported in its form 10-KSB, has engaged
a consultant as Director of Real Estate Development to coordinate the
various multi-disciplinary efforts and interface with prospective
developers.
Additionally, the Board of Directors was expanded and remuneration increased
to reflect current industry-wide compensation practices. The Board also
elected to receive its fees and incentives in the form of Company stock thus
closely aligning shareholder and management interests. Expenses related to
Board remuneration affect the profit and loss statement although there is no
actual cash outlay other than for re-imbursement of travel expenses.
Reflective of the increased activity, the Company's overall operating
expenses for real estate increased $126,000 in the period to period three
month comparison. Building maintenance accounted for $50,000 of the
increase, a majority of which pertained to renovation costs. A residual
of the severe winter of 1995-96, vehicle and equipment repairs increased
by $17,000.
Professional services edged higher by $26,000 reflecting the engagement of
outside consultants for long range financial planning and land development.
Expenses related to Corporate Governance increased $17,000 attributable to
legal fees for restructuring and an accrual adjustment was acknowledged for
Director's fees of $14,000 for a prior period.
The Aerospace portion of operating expenses were slightly higher then the
prior year mainly due to support services for the two helicopters sold to
Dornier in the prior fiscal year.
As mentioned in Footnote #10 of "FOOTNOTES TO CONSOLIDATED FINANCIAL
STATEMENTS," the Company changed its method of reporting citrus grove
activity from the equity method to the cost method. By passing on the
Grove's new subscription opportunity to contribute additional capital, the
Company's ownership percentage declined to 14.9% from 17.5%. This equity
reduction plus the lack of common date financial statements were the
reasons for the change in accounting method. It should be noted that the
new infusion of cash added to the Grove's net worth essentially mitigated
the effect of possible dilution. The Company has a smaller piece of a
larger pie. For financial reporting purposes, the prior year quarter ended
July 31, 1995, in which a loss of $132,000 had been reported for Grove
income, has been restated on the equity method to zero. The restatement
results in a pre-tax gain of $126,917 for the quarter ended July 31, 1995
vs. the previously reported loss of $5,083.
Oil income in the current year is up $24,000 from the prior year reflecting
lower operating expenses and the total write-off of the remaining tangible
and intangible assets during the prior year.
Interest and dividend income rose in the current year predicated on a larger
investment portfolio which increased due to the receipt of the sale proceeds
of $700,000 from Dornier. Additional borrowing in the later part of fiscal
year 1996 pushed interest expense higher than the prior year. Inclusion of
revised Pension Plan actuarial assumptions and the previously reported
restructuring lead to a net expense.
The current ratio for the period ended July 31, 1996 increased to 4.46:1
from 3.79:1 at April 30, 1996 and up from 2.83:1 at July 31, 1995. The
increase from April 30, 1996 is due to the decrease in accounts payable for
the payment of Real Estate taxes in May 1996. The increase from July 31,
1995 reflects the increase in cash from the helicopter sale to Dornier.
For the three month period ending July 31, 1996, the Company is reporting
an after tax loss of ($74,009) or ($.07) per share as compared to an
adjusted after tax gain of $76,217 or $.08 per share for the same period
last year. Due to the unevenness of expenses incurred for the land
development plan and the anticipated costs associated with completion of
contracted improvements to the real estate purchased in 1994, results from
operations for the current quarter are not necessarily indicative of nor
should they be used to project full year results.
10-QSB
Part II
Item 1-6
Part II Other Information
Items 1 thru 4 are not applicable to the May 1, 1996 thru July 31, 1996
period.
Item 5. Other Information
At the August 24, 1996 Board of Directors meeting the Board of Directors
selected October 25, 1996 at 11:30 AM, at the Company's Flowerfield
Complex, as the time and site for the next Annual Meeting of Stockholders.
In addition, the Board renewed the contract of Mr. Dimitri P. Papadakos for
5 (five) years along with an increase based on the Consumer Price Index.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits required - None
(b) Reports on Form 8-K
A Form 8-K was filed on July 16, 1996 reporting that at the July 13, 1996
Board of Directors meeting, the number of Directors were increased from six
(6) to nine (9) members. The following were elected as Directors of the
Company: John H. Marburger, Philip F. Palmedo, and Steven V. Maroney. The
Company also announced the completion of the sale of two (2) of its
helicopters to Dornier GmbH of Friedrichshafen, Germany.
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: September 12, 1996 SGD/ Dimitri P. Papadakos
Dimitri P. Papadakos
President and Principal Executive Officer
Date: September 12, 1996 SGD/ John A. Rohrs
John A. Rohrs
Treasurer and Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> JUL-31-1996
<CASH> 716,179
<SECURITIES> 189,716
<RECEIVABLES> 115,851
<ALLOWANCES> (6,000)
<INVENTORY> 0
<CURRENT-ASSETS> 1,227,349
<PP&E> 5,496,883
<DEPRECIATION> 3,307,271
<TOTAL-ASSETS> 6,977,390
<CURRENT-LIABILITIES> 275,140
<BONDS> 940,595
0
0
<COMMON> 1,531,086
<OTHER-SE> 2,999,455
<TOTAL-LIABILITY-AND-EQUITY> 6,977,390
<SALES> 495,244
<TOTAL-REVENUES> 495,244
<CGS> 0
<TOTAL-COSTS> 300,671
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,393
<INCOME-PRETAX> (123,717)
<INCOME-TAX> (49,708)
<INCOME-CONTINUING> (74,009)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (74,009)
<EPS-PRIMARY> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
