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 JANUARY 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.)
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: 1,000,551 Common $1 P.V.
as of January 31, 1996
INDEX TO QUARTERLY REPORT
QUARTER ENDED JANUARY 31, 1996
Seq.
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>
January 31,
1996
ASSETS (NOTE 1)
CURRENT ASSETS:
<S> <C>
Cash and cash equivalents $708,579
Short-term investments 189,716
Accounts receivable, less allowance for
doubtful accounts of $6,000 (Note 3) 442,196
Prepaid expenses and other current assets 337,985
----------
Total current assets 1,678,476
INVESTMENT IN CITRUS GROVE PARTNERSHIP 1,245,104
PROPERTY, PLANT AND EQUIPMENT-NET (Note 5) 2,044,737
PREPAID PENSION COSTS (Note 2) 1,818,228
OTHER ASSETS (Note 7) 220,573
----------
TOTAL ASSETS $7,007,118
==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $327,549
Loans payable - short term portion 70,000
Income taxes payable 0
--------
Total Current Liabilities 397,549
LONG TERM LIABILITIES
Loans payable - long term portion 977,136
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 January 31, 1996 (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) (147,703)
----------
7,555,693
Less cost of shares of common stock
held in treasury (Note 1 & 8) (3,051,260)
----------
Total stockholders' equity` 4,504,433
----------
TOTAL LIABILITIES AND STOCKHOLDERS EQUITY $7,007,118
==========
<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)
<TABLE>
<CAPTION>
Nine Months Ended Quarter Ended
January 31, January 31,
REVENUE: 1996 1995 1996 1995
<S> <C> <C> <C> <C>
Rental income $1,382,963 $1,238,947 $479,735 $416,872
Aerospace income (Note 6) 705,500 10,845 700,000 0
--------- --------- --------- -------
Total Revenue from Operations 2,088,463 1,249,792 1,179,735 416,872
--------- --------- --------- -------
COSTS AND EXPENSES:
Cost of maintaining rental property 1,120,513 888,330 399,029 300,421
Aerospace expense 63,005 58,295 22,297 21,801
General and administrative (Note 8) 647,536 544,263 200,120 175,459
--------- --------- -------- -------
Total costs and expenses 1,831,054 1,490,888 621,446 497,681
--------- --------- -------- -------
GROSS OPERATING MARGIN 257,409 (241,096) 558,289 (80,809)
OTHER INCOME AND EXPENSES:
Equity in earnings of Citrus Grove Partnership (340,000) (81,066) (40,000) (27,022)
Equity in earnings of Oil and Gas (Note 4) 24,254 (211,896) 21,103 (15,880)
Gain on sale of Gas Investments (Note 4) 172,176 0 0 0
Interest & Dividend Income 18,450 28,834 7,737 12,659
Pension Income\(Expense) (Note 2) (28,568) 5,758 (9,523) 1,919
Interest Expense (55,059) (34,051) (29,046) (11,684)
Miscellaneous Income\(Expense) (2,997) (6,383) (2,956) 2,233
-------- --------- -------- --------
Total Other Income\(Expense) (211,744) (298,804) (52,685) (37,775)
Income before income tax provision 45,665 (539,900) 505,604 (118,584)
INCOME TAX PROVISION:
Current taxes (Note 6) 29,477 (159,737) 139,168 (42,031)
Deferred taxes 0 0 0 0
--------- --------- --------- ---------
Total tax provision 29,477 (159,737) 139,168 (42,031)
--------- --------- --------- ---------
NET INCOME (LOSS) $16,188 ($380,163) 366,436 ($76,553)
========= ========= ========= =========
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 $0.02 ($0.38) $0.37 ($0.08)
========= ========= ========= =========
<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>
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net earnings $16,188 ($380,163)
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization of oil and gas investments 28,301 80,661
Depreciation and amortization of plant and equipment 55,129 49,124
Pension (income)\expense 28,568 (5,758)
Changes in operating assets and liabilities:
(Increase) decrease in assets:
Accounts receivable (Note 6) (358,331) 12,163
Prepaid expenses and other assets (128,529) 109,150
Other assets 31,605 411
Increase (decrease) in liabilities:
Accounts payable and accrued expenses 81,782 (24,727)
Taxes payable 0 0
--------- --------
Total adjustments (261,475) 221,024
--------- --------
Net cash (used)/provided by operating activities (245,287) (159,139)
CASH FLOWS FROM INVESTING ACTIVITIES:
Decrease in short term investments 111,210 93
Decrease in oil and gas investments 112,405 157,629
Increase in oil and gas investments 0 0
Decrease in citrus grove investments 340,000 81,066
--------- --------
Increase in property, plant and equipment (Note 5) (547,321) (467,932)
--------- --------
Net cash (used)/provided by investment activities 16,294 (229,144)
CASH FLOWS FROM FINANCING ACTIVITIES:
New borrowings 1,266,000 0
Repayment of debt (658,865) (90,000)
Stock option exercise (Note 8) 145,007 0
--------- --------
Net cash from financing activities 752,142 (90,000)
--------- --------
Net increase (decrease) in cash and cash equivalents 523,149 (478,283)
Cash and cash equivalents at beginning of year 185,430 759,678
--------- --------
Cash and cash equivalents at end of period $708,579 $281,395
========= ========
<FN>
See notes to consolidated financial statements
</FN>
</TABLE>
10-QSB
Part 1
Item 1 (a) (4)
FOOTNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The unaudited Consolidated Statements of Income for the nine month
periods ended January 31, 1996 and January 31, 1995 and the Consolidated
Balance Sheet as of January 31, 1996 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 nine month periods ended
January 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 $28,568 of net periodic pension expense
for the period ended January 31, 1996 and $5,758 of net periodic pension
income for the first nine 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 nine months of FY 1996.
4. 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>
Nine months Ended Third Quarter Ended
January 31, January 31,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Sales of Oil & Gas $147,277 $201,618 $45,786 $65,897
-------- -------- -------- --------
Expenses:
Operating expenses 94,122 169,887 15,699 51,226
Depreciation (A) 313 33,496 0 10,099
Amortization of intangible drilling cost (A) 28,588 62,402 8,984 20,452
Slant well write-off 0 147,729 0 0
-------- -------- -------- --------
Total operating expenses 123,023 413,514 24,683 81,777
-------- -------- -------- --------
Income \ (Loss) from operations $24,254 ($211,896) $21,103 ($15,880)
======== ======== ======== ========
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 $547,000 in the first nine months
primarily due to capitalization of renovation costs to Building #7 South for a
new long lease tenant whose occupancy started in September. In the second
quarter of the current fiscal year, 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. To date, in the current year, the Company is
reporting a pre-tax gain, which is due mainly to the $700,000 billing to
Dornier GmbH, in the current quarter, for the sale of two helicopters. As of
January 31, 1996 $350,000 of this billing remains in accounts receivable. In
addition, during the current year, the Company received a tax carryback refund
of $170,888 based on the FY 1995 loss.
7. Included in "Other Assets" at January 31, 1996 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.
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.
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 nine month period were $839,000 higher
than the same period last year and $763,000 higher for the quarter to quarter
comparison. In both cases, this large increase is due to the November 1995
$700,000 billing to Dornier GmbH, during the current quarter, for the sale of
two drone helicopters. The remainder of the increases are due to higher rental
rates based on COLA increases and lease renewals.
As a result of negotiations with Dornier GmbH and in conjunction with the sale
of the two helicopter platforms, a preliminary agreement to modify and replace
the existing technology transfer agreement has been reached. It is
anticipated that a final draft agreement will be concluded in fiscal year
1997. Israel Aircraft Industries, Ltd., on November 6, 1995, extended its
license agreement with the Company for an additional year.
Operating expenses increased on a year-to-date and a quarter-to-quarter basis
$340,000 and $127,000 respectively. The Company's renovation of Building #7
for a child care center coupled with recognition on the income statement of
the net compensation expense of exercised stock options accounted for
$211,000 of the $340,000 increase. This is the first fiscal year in which the
exercise of options under the stockholder approved stock option plan had any
effect on earnings.
The balance of the increase, both year-to-date and quarter-to-quarter of
approximately $125,000 was comprised of higher expenses in the following areas:
staff expense $37,000, primarily due to rate increases and new hires;
maintenance expense $19,000, due to the purchase of replacement oil fuel
tanks; insurance expense $9,000, due to higher rates; real estate taxes $17,000
due to rate increases; depreciation $6,000; equipment repairs $9,000 and
utility costs $17,000, reflecting the severe winter; and professional fees
$20,000, architectural and legal fees for long range planning.
On a year-to-date basis, Aerospace costs included in operating expense
increased by $5,000. This increase is a result of refurbishing helicopters
in anticipation of the sale to Dornier. Partially offsetting the above were
lower costs in ground maintenance and paving due to harsh weather conditions
which precluded scheduled maintenance.
Contrary to Callery-Judge Grove plans to adopt a fiscal year ending September
30, 1995, IRS approval has yet to be granted. Therefore, the Grove will retain
its calendar year close on December 31, 1995. The Grove is still seeking a
fiscal year change in order to better match revenues and expenses to the
natural growing and harvesting season. Based on the above, the Company's
$340,000 year-to-date book loss accrual for nine months should be continued at
essentially the same rate for the balance of our fiscal year. The Grove's
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 improvement in output as the maturation of replanted acreage yields
more harvestable fruit and the cost and income benefits of the new $6.1
million dollar packing plant become fully reflected in operating results.
With the elimination of under-performing gas assets during the first quarter,
petroleum operations returned to profitability. Year-to-date comparisons of
operating results were skewed due to the write-off of the slant well, in the
amount of $148,000, during the prior year.
Interest and Dividend income for both the current nine and three month periods
was lower reflecting a reduced investment portfolio as a result of the October
1994 land purchase for cash.
A swing to a net funds outflow in the Pension Plan is attributable to
increased retiree benefits and a lowering by the U. S. Government of actuarial
interest rate assumptions for all pension plans. Interest expense was higher
for both period comparisons due to new long term financing that was put in
place. Although the amortization period was extended, a larger balance
resulted in a net interest expense increase. Borrowing has been utilized
solely to fund a major portion of renovation projects totaling over
$1.2 million.
The current ratio for the period ended January 31, 1996 decreased to 4.22:1
from 4.44:1 at October 31, 1995. This was up from 2.60:1 at January 31,
1995. The slight decrease from October 31, 1995 is due to an increase in
accounts payable for real estate taxes. The October figures were inflated from
the effects of the refinancing. The year-to-year improvement over January 31,
1995 is a result of an increase in cash and accounts receivable in the current
period associated with the helicopter sale to Dornier.
For the nine month period ending January 31, 1996, the Company is reporting an
after tax gain of $16,188 or $0.02 per share. Results from operations for the
first nine months and particularly 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 November 1, 1995 thru
January 31, 1996 period.
Item 5. Other Information
Mr. Joseph L. Dorn Treasurer, Secretary and Principle Accounting Officer as
well as a member of the Board of Directors retired as of February 1, 1996.
He will remain as a member of the Board of Directors and assist the President
in a consulting capacity when called upon. The Board has not yet named a
replacement to fill the other positions left vacant by his retirement.
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: March 25, 1996
SGD/Dimitri P. Papadakos
- -----------------------------------------
President and Principal Executive Officer
Date: March 25, 1996
SGD/John A. Rohrs
- ---------------------
Controller
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> JAN-31-1996
<CASH> 708,579
<SECURITIES> 189,716
<RECEIVABLES> 448,196
<ALLOWANCES> (6,000)
<INVENTORY> 0
<CURRENT-ASSETS> 1,678,476
<PP&E> 5,303,729
<DEPRECIATION> 3,258,992
<TOTAL-ASSETS> 7,007,118
<CURRENT-LIABILITIES> 397,549
<BONDS> 977,136
<COMMON> 1,531,086
0
0
<OTHER-SE> 2,973,347
<TOTAL-LIABILITY-AND-EQUITY> 7,007,118
<SALES> 2,088,463
<TOTAL-REVENUES> 2,088,463
<CGS> 0
<TOTAL-COSTS> 1,183,518
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 55,059
<INCOME-PRETAX> 45,665
<INCOME-TAX> 29,477
<INCOME-CONTINUING> 16,188
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 16,188
<EPS-PRIMARY> 0.02
<EPS-DILUTED> 0.02
</TABLE>
