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 1, 2000 __ 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 1, 2000 Common Stock, $.01 par value 2,131,531 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 1, 2000 and October 2, 1999 3 Consolidated Statement of Income - Three Months Ended January 1, 2000 and January 2, 1999 4 Consolidated Statement of Cash Flows - Three Months Ended January 1, 2000 and January 2, 1999 5 Notes to Consolidated Financial Statements 7 Item 2 Management Discussion and Analysis 10 PART II - OTHER INFORMATION Item 6 Exhibits and Reports on Form 8-K 11 -2- GODDARD INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS ASSETS January 1, October 2, 2000 1999 (UNAUDITED) (AUDITED) CURRENT ASSETS: Cash and cash equivalents $1,582,888 $1,773,389 Accounts receivable, net of allowances 602,544 478,941 Refundable taxes on income - 33,708 Inventories 2,101,450 1,924,507 Prepaid expenses and taxes 59,614 49,550 Deferred income taxes 83,400 87,000 TOTAL CURRENT ASSETS 4,429,896 4,347,095 PROPERTY, PLANT AND EQUIPMENT, at cost 4,485,544 4,438,959 Less - Accumulated depreciation -3,066,707 - -3,005,849 1,418,837 1,433,110 OTHER ASSETS: Investment 250,000 250,000 Deferred income taxes - long term 89,600 92,000 TOTAL OTHER ASSETS 339,600 342,000 TOTAL ASSETS $6,188,333 $6,122,205 LIABILITIES AND SHAREHOLDERS'EQUITY CURRENT LIABILITIES: Current maturities of capital lease obligations $ 91,000 $ 96,000 Accounts payable 153,799 75,380 Accrued expenses 230,268 291,336 Deferred compensation 69,000 69,000 TOTAL CURRENT LIABILITIES 544,067 531,716 CAPITAL LEASE OBLIGATIONS 14,275 44,222 DEFERRED COMPENSATION 471,683 476,791 SHAREHOLDERS' EQUITY: Common stock - par value $.01 per share, Authorized 3,000,000 shares, issued and outstanding 2,131,531 shares 21,315 21,315 Additional paid-in capital 480,713 480,713 Retained earnings 4,656,280 4,567,448 TOTAL SHAREHOLDERS'EQUITY 5,158,308 5,069,476 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $6,188,333 $6,122,205 -3- GODDARD INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) FOR THE THREE MONTHS ENDED January 1, January 2, 2000 1999 NET SALES $ 969,538 $ 1,434,462 COST OF SALES 584,392 878,056 GROSS PROFIT 385,146 556,406 SELLING AND ADMINISTRATIVE EXPENSES 303,143 317,670 OPERATING PROFIT 82,003 238,736 OTHER INCOME (EXPENSE): Interest expense -12,618 - -6,572 Other income, net 82,147 13,569 TOTAL OTHER INCOME (EXPENSE) 69,529 6,997 INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 151,532 245,733 Provision for income taxes 62,700 100,900 INCOME FROM CONTINUING OPERATIONS 88,832 144,833 INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX - 17,085 NET INCOME $ 88,832 $161,918 EARNINGS PER SHARE: Continuing operations: Basic $ 0.04 $ 0.07 Diluted $ 0.04 $ 0.07 Net Income: Basic $ 0.04 $ 0.08 Diluted $ 0.04 $ 0.08 -4- GODDARD INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Three Months Ended (UNAUDITED) January 1, January 2, 2000 1999 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 88,832 $161,918 Adjustments to reconcile net income to net cash provided by operating activities: Income from discontinued operations - - -17,085 INCOME FROM CONTINUING OPERATIONS 88,832 144,833 Depreciation and amortization 60,858 63,209 Deferred income taxes 6,000 - -4,400 Changes in assets and liabilities: - - - Accounts receivable -123,603 - -37,111 Refundable taxes on income 11,700 90,582 Inventories -176,943 - -55,243 Prepaid expenses and other 11,944 8,451 Accounts payable 78,419 24,004 Accrued expenses -61,068 - -137,246 Accrued environmental - - -4,648 Deferred compensation -5,108 - - NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES -108,969 92,431 CASH FLOWS FROM INVESTING ACTIVITIES: Investment in former subsidiary - - -117,634 Property, plant and equipment additions -46,585 - -48,291 NET CASH USED IN INVESTING ACTIVITIES -46,585 - -165,925 CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of long-term debt -34,947 - -46,922 NET INCREASE (DECREASE) IN CASH -190,501 - -120,416 CASH AND EQUIVALENTS - BEGINNING 1,773,389 149,756 CASH AND EQUIVALENTS - ENDING $1,582,888 $29,340 Supplemental Disclosures of Cash Flow Information CASH PAID DURING THE PERIOD: Interest $ 12,618 $ 19,176 Income taxes $ 15,000 $125,000 -5- GODDARD INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS January 1, 2000 (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 2, 1999 for a summary of significant accounting policies and other disclosures. As a result of the sale of Webstone Company, Inc. (Webstone) (see Note 8), all 1999 financial statements have been restated to reflect Webstones' discontinued operations. 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 1, October 2, 2000 1999 Finished goods $1,784,438 $1,607,495 Work in process 30,646 30,646 Raw materials 286,366 286,366 $2,101,450 $1,924,507 NOTE 4. LONG-TERM OBLIGATIONS At January 1, 2000 capital lease obligations consisted of the following: LONG-TERM CURRENT Capital lease obligations for machinery, payable in monthly installments through 2001, with imputed interest rate of approximately 8.5% $ 14,275 $ 91,000 -6- 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 1, October 2, 2000 1999 Deferred tax asset Deferred compensation $ 216,300 $ 218,300 Capital loss carryforward 167,700 167,700 Inventory valuation 46,200 45,800 Accrued salaries 6,000 6,000 Bad debts 7,200 7,200 443,400 445,000 Depreciation -102,700 - -98,300 340,700 346,700 Less valuation allowance -167,700 - -167,700 $173,000 $179,000 Management has established a valuation allowance against the deferred tax asset attributable to the capital loss carryforward. NOTE 6. ENVIRONMENTAL MATTER Environmental Matters: In 1998, the Company filed a Class "C" Response Action Outcome Statement with the Massachusetts Department of Environmental Protection regarding its facility in Worcester, Massachusetts. Based upon the information presently available, periodic monitoring is required. -7- NOTE 7. EARNING PER SHARE: The following data show the amounts used in computing earnings per share (EPS) from continuing operations and the effects on income and the weighted average number of shares of dilutive potential common stock. Three months ended January 1, 2000 Income Common Shares EPS Basic EPS: Income available to common shareholders $ 88,832 2,131,531 $0.04 Dilutive effect of potential common Stock: Stock options - 10,195 Diluted EPS: Income available to common shareholders after assuming exercise of dilutive securities $ 88,832 2,141,726 $0.04 Three months ended January 2, 1999 Income Common Shares EPS Basic EPS: Income available to common shareholders $144,833 2,126,649 $0.07 Dilutive effect of potential common Stock: Stock options - 12,588 Diluted EPS: Income available to common shareholders after assuming exercise of dilutive securities $144,833 2,139,237 $0.07 Per share amounts attributable to discontinued operations, net of tax, are as follows: January 1, January 2, 2000 1999 Basic $ - $ 0.01 Diluted $ - $ 0.01 -8- NOTE 8. DISCONTINUED OPERATIONS: On July 1, 1999 the Board of Directors of Goddard Valve Corporation approved the sale of Webstone Company, Inc. (Webstone), its wholly-owned subsidiary, to Michael E. Reck, President of Webstone since 1996. The sale was consummated on July 2, 1999. Webstone's discontinued operations for the three months ended January 2, 1999 are as follows: SALES $ 957,709 COST OF SALES 641,666 GROSS PROFIT 316,043 SELLING AND ADMINISTRATIVE Expenses 286,313 INCOME FROM operations 29,730 OTHER INCOME (EXPENSE): Interest expense -1,333 Other income, net 188 TOTAL OTHER EXPENSE -1,145 INCOME BEFORE INCOME TAXES 28,585 PROVISION FOR INCOME TAXES 11,500 NET INCOME $17,085 -9- PART I - FINANCIAL INFORMATION Item 2 - MANAGEMENT DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net sales for the quarter ended January 1, 2000 were $970,000 with net income from continuing operations of $89,000, or $.04 per share. This compared with net sales of $1,434,000 and net income from continuing operations of $145,000, or $.07 per share, for the same period last year. During the quarter ended January 2, 1999, the Company had income from discontinued operations of $17,000, or $.01 per share. New orders received in the quarter ended January 1, 2000 were $1,166,000, slightly below new orders received of $1,221,000 in the same period last year, but 38% higher than orders received in the fourth quarter of fiscal 1999, ended October 2, 1999. The low level of orders received in the fourth quarter was in part responsible for low sales volume in the first quarter ended January 1, 2000. Backlog at January 1, 2000 was $411,000, down from $662,000 reported one year ago, but up from $230,000 at October 2, 1999. The downward trend in orders year-to-year improved from the fourth quarter of last year, although there is no certainty that the year-to- year improvement will continue. Quoting activity is improving, but demand for new separation plants has not yet become significant enough to signal an industry turnaround. Profitability was lower but continued strong despite the significant decline in revenues. Gross profit margins improved to 39.7% from 38.8% in the prior year, while selling general and administrative expenses declined by approximately $15,000. LIQUIDITY AND CAPITAL RESOURCES Historically, the Company has funded operations through earnings and bank borrowings. However, the sale of the Webstone business has enhanced the Company's balance sheet and provides it with additional liquidity. At January 1, 2000 the Company had no long term debt except equipment leases of $105,000 (of which $91,000 is current) and had $1,583,000 in cash and cash equivalents. The Company's line of credit with BankBoston has been temporarily discontinued pending specific requirements for additional capital. During the quarter ended January 1, 2000, operating activities used $109,000 of cash largely to finance higher accounts receivable and inventories. During the same period last year, operating activities generated $92,000 of cash. The Company believes that its working capital and cash position provide sufficient liquidity to handle the normal working capital requirements of its business. -10- 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 1, 2000. -11- 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 15, 2000 GODDARD INDUSTRIES, INC. By:/s/Salvatore J. Vinciguerra -------------------------------- - --- Salvatore J. Vinciguerra, President, Chief Executive Officer and Chief Financial Officer -12-