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 April 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 April 1, 2000 Common Stock, $.01 par value 2,134,431 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 - April 1, 2000 and October 2, 1999 3 Consolidated Statement of Income - Six Months Ended April 1, 2000 and April 3, 1999 4 Consolidated Statement of Cash Flows - Six Months Ended April 1, 2000 and April 3, 1999 5 Notes to Consolidated Financial Statements 6 Item 2 Management Discussion and Analysis 11 PART II - OTHER INFORMATION Item 4 Submission of Matters to a Vote of Security Holders 12 Item 6 Exhibits and Reports on Form 8-K 12 -2- GODDARD INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS April 1, October 2, 2000 1999 (UNAUDITED) AUDITED ASSETS CURRENT ASSETS: Cash and cash equivalents $1,709,174 $1,773,389 Accounts receivable, net of allowances 507,480 478,941 Refundable taxes on income 19,766 33,708 Inventories 2,151,526 1,924,507 Prepaid expenses and taxes 58,430 49,550 Deferred income taxes 83,400 87,000 TOTAL CURRENT ASSETS 4,529,776 4,347,095 PROPERTY, PLANT AND EQUIPMENT, at cost 4,505,245 4,438,959 Less - Accumulated depreciation 3,127,565 - -3,005,849 1,377,680 1,433,110 OTHER ASSETS: Investment 250,000 250,000 Deferred income taxes - long term 86,900 92,000 TOTAL OTHER ASSETS 336,900 342,000 TOTAL ASSETS $6,244,356 $6,122,205 LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Current maturities of capital lease obligations $ 70,700 $ 96,000 Accounts payable 219,247 75,380 Accrued expenses 166,232 291,336 Deferred compensation 69,000 69,000 TOTAL CURRENT LIABILITIES 525,179 531,716 CAPITAL LEASE OBLIGATIONS 5,691 44,222 DEFERRED COMPENSATION 459,846 476,791 SHAREHOLDERS' EQUITY: Common stock - par value $.01 per share, authorized 3,000,000 shares, issued and outstanding 2,134,431 shares at April 1, 2000 and 2,131,531 shares at October 2, 1999 21,344 21,315 Additional paid-in capital 483,398 480,713 Retained earnings 4,748,898 4,567,448 TOTAL SHAREHOLDERS'EQUITY 5,253,640 5,069,476 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $6,244,356 $6,122,205 -3- GODDARD INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) April 1, 2000 April 3, 1999 For The Three For the Six For The Three For The Six Months Ended Months Ended Months Ended Months Ended NET SALES $1,016,845 $1,986,383 $1,335,353 $2,769,815 COST OF SALES 610,781 1,195,173 814,625 1,692,681 GROSS PROFIT 406,064 791,210 520,728 1,077,134 SELLING AND ADMINISTRATIVE EXPENSES 304,711 607,854 303,311 620,981 INCOME FROM OPERATIONS 101,353 183,356 217,417 456,153 OTHER INCOME (EXPENSE): Interest expense -11,780 -24,398 -15,940 - -22,512 Other income, net 66,445 148,592 12,519 26,088 TOTAL OTHER INCOME (EXPENSE) 54,665 124,194 -3,421 3,576 INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 156,018 307,550 213,996 459,729 PROVISION FOR INCOME TAXES Current 54,700 117,400 98,000 198,900 Deferred 8,700 8,700 -8,800 - -8,800 Total income taxes (benefit) 63,400 126,100 89,200 190,100 INCOME FROM CONTINUING OPERATIONS 92,618 181,450 124,796 269,629 INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX - - 45,792 62,877 NET INCOME $ 92,618 $181,450 $170,588 $332,506 EARNINGS PER SHARE Continuing operations: Basic $ 0.04 $ 0.09 $ 0.06 $ 0.13 Diluted $ 0.04 $ 0.08 $ 0.06 $ 0.13 Net Income: Basic $ 0.04 $ 0.09 $ 0.08 $ 0.16 Diluted $ 0.04 $ 0.08 $ 0.08 $ 0.16 -4- GODDARD INDUSTRIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) FOR THE SIX MONTHS ENDED April 1, April 3, 2000 1999 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $181,450 $332,506 Adjustments to reconcile net income to net cash provided by operating activities: Income from discontinued operations - - -62,877 Income from continuing operations 181,450 269,629 Depreciation and amortization 121,716 121,716 Deferred income taxes 8,700 - -8,800 Changes in assets and liabilities: Accounts receivable -28,539 101,369 Refundable taxes on income 13,942 75,281 Inventories -227,019 3,646 Prepaid expenses and other -8,880 - -16,651 Accounts payable 143,867 52,417 Accrued expenses -125,104 - -206,845 Accrued environmental - - -4,648 Deferred compensation -16,945 - - NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 63,188 387,114 CASH FLOWS FROM INVESTING ACTIVITIES: Investment in former subsidiary - - -306,728 Property,plant and equipment additions -66,286 - -67,683 NET CASH USED IN FINANCING ACTIVITIES -66,286 - -374,411 CASH FLOWS FROM FINANCING ACTIVITIES: Repayments of long term debt -63,831 - -93,488 NET INCREASE (DECREASE) IN CASH -66,929 - -80,785 CASH AND EQUIVALENTS - BEGINNING 1,773,389 149,756 CASH AND EQUIVALENTS - ENDING $1,706,460 $ 68,971 Supplemental Disclosures of Cash Flow Information CASH PAID DURING THE PERIOD: Interest $ 24,398 $ 24,528 Income taxes $ 115,000 $165,000 -5- GODDARD INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS April 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 7), 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: April 1, October 2, 2000 1999 Finished goods $1,834,514 $1,607,495 Work in process 30,646 30,646 Raw materials 286,366 286,366 $2,151,526 $1,924,507 NOTE 4. LONG-TERM DEBT At April 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% $ 5,691 $70,700 -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: April 1, October 2, 2000 1999 Deferred tax asset Deferred compensation $ 213,600 $ 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 7,200 440,700 445,000 Depreciation -102,700 - -98,300 $ 338,000 $ 346,700 Less valuation allowance -167,700 - -167,700 $ 170,300 $ 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 Discontinued Operations On July 1, 1999 the Board of Directors of Goddard Valve Corp. 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 are as follows: For the three For the six months ended months ended April 3, 1999 April 3, 1999 Sales $1,103,935 $2,061,644 Cost of Sales 730,280 1,371,946 Gross Profit 373,655 689,698 Selling and administrative expenses 298,613 584,926 Income from operations 75,042 104,772 Other income (expense): Interest expense -723 - -2,056 Other income, net 1,973 2,161 Total other expense 1,250 105 Income before income taxes 76,292 104,877 Provision for income taxes 30,500 42,000 Net income $ 45,792 $ 62,877 -8- NOTE 8. 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. Six Months ended April 1, 2000 Income Common Shares EPS Basic EPS: Income available to common shareholders $181,450 2,131,531 $0.09 Dilutive effect of potential common stock: Stock options - 13,475 Diluted EPS: Income available to common shareholders after assuming exercise of dilutive securities $181,450 2,145,006 $0.08 Three Months ended April 1, 2000 Income Common Shares EPS Basic EPS: Income available to common shareholders $ 92,618 2,126,649 $0.04 Dilutive effect of potential common stock: Stock options - 19,185 Diluted EPS: Income available to common shareholders after assuming exercise of dilutive securities $ 92,618 2,145,834 $0.04 -9- NOTE 8. EARNING PER SHARE: (continued) Six months ended April 3, 1999 Income Common Shares EPS Basic EPS: Income available to common shareholders $269,629 2,131,531 $0.13 Dilutive effect of potential common stock: Stock options 13,475 Diluted EPS: Income available to common shareholders after assuming exercise of dilutive securities $269,629 2,145,006 $0.13 Three months ended April 3, 1999 Income Common Shares EPS Basic EPS: Income available to common shareholders $124,796 2,126,649 $0.06 Dilutive effect of potential common stock: Stock options - 19,185 Diluted EPS: Income available to common shareholders after assuming exercise of dilutive securities $124,796 2,145,834 $0.06 Per share amounts attributable to discontinued operations, net of tax, are as follows: For the six For the three months ended months ended April 3, 1999 April 3, 1999 Basic $ 0.03 $ 0.02 Diluted $ 0.03 $ 0.02 -10- PART I - FINANCIAL INFORMATION Item 2 - MANAGEMENT DISCUSSION AND ANALYSIS RESULTS OF OPERATIONS Net sales for the second quarter ended April 1, 2000 were $1,017,000 with net income from continuing operations of $93,000, or basic earnings of $.04 per share. This compared with net sales of $1,335,000 and net income from continuing operations of $125,000, or basic earnings of $.06 per share, for the same period last year. During last year's second quarter ended April 3, 1999, the Company had income from discontinued operations of $46,000, or $.02 per share. Net sales for the six months ended April 1, 2000 were $1,986,000 with net income from continuing operations of $181,000, or basic earnings of $.09 per share. This compared with net sales of $2,770,000 and net income from continuing operations of $270,000, or basic earnings of $.13 per share, for the same period last year. During the six months ended April 3, 1999, the Company had income from discontinued operations of $63,000, or $.03 per share. New orders received in the three months and six months ended April 1, 2000 were 29% and 18% lower than for the same periods last year, respectively. Backlog at April 1, 2000 was $340,000, down from $688,000 one year ago. The underlying order rate and net sales for both the three months and six months continue at a low level, reflecting the continuing trend in construction projects and equipment supply in the air separation industry. Planning for new construction projects appears to be increasing, but we have not yet seen these plans convert to orders for valves. Gross margins for the quarter and six months improved from 39% to 40%, respectively, while SG&A remained relatively flat for both the quarter and six months. Lower operating profits were entirely the result of lower sales. LIQUIDITY AND CAPITAL RESOURCES At April 1, 2000, the company had $1,709,000 in cash and cash equivalents, no long term debt, and long-term capital lease obligations of only $6,000. Cash reserves are invested in short-term instruments. The Company's line of credit with Fleet Boston has been temporarily discontinued pending specific requirements for additional capital. However, the Company believes that its working capital and cash position provide sufficient liquidity to handle the normal working capital requirements of its business. FORWARD LOOKING INFORMATION Information contained in this Form 10-QSB contains certain "forward looking statements" within the meaning of the Private Securities -11- 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 introducing new products, the failure of the market to accept new products, changes in general economic conditions and conditions in major customer industries such as the industrial gas business. PART II - OTHER INFORMATION Item 4 - Submission of Matters to a Vote of Security Holders The Company held a Special Meeting in Lieu of the Annual Meeting of Stockholders on March 17, 2000. At the meeting, the stockholders approved (a) the election of one Class 1 director to serve until 2003 and until his successor is duly elected and qualified, and (b) an amendment to the Company's 1998 Equity Incentive Plan to increase the number of shares available for issuance to 600,000 shares from 300,000 shares. a) Election of Directors: Nominee For Against, Withheld or Abstained (Including Broker Non-Votes) Saul I. Reck 1,157,657 8,355 b) Amendment to the Company's 1998 Equity Incentive Plan: For Against or Abstentions and Withheld Broker Non-Votes Approval 1,127,354 30,843 7,815 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 April 1, 2000. -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 May 15, 2000 GODDARD INDUSTRIES, INC. By:/s/Salvatore J. Vinciguerra -------------------------------- - --- Salvatore J. Vinciguerra, President -13-