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 December 30, 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 December 30, 2000 Common Stock, $.01 par value 2,157,271 Transitional Small Business Disclosure Format Yes ___ No __X__ GODDARD INDUSTRIES, INC. TABLE OF CONTENTS PAGE PART I - FINANCIAL INFORMATION Item 1 Financial Statements Consolidated Balance Sheet - December 30, 2000 and September 30, 2000 3 Consolidated Statement of Operations - Three Months Ended December 30, 2000 and January 1, 2000 4 Consolidated Statement of Cash Flows - Three Months Ended December 30, 2000 and January 1, 2000 5 Notes to Consolidated Financial Statements 6 Item 2 Management Discussion and Analysis 11 PART II - OTHER INFORMATION Item 6 Exhibits and Reports on Form 8-K 13 -2- GODDARD INDUSTRIES, INC. CONSOLIDATED BALANCE SHEETS December September 30, 30, 2000 2000 ASSETS Unaudited Audited CURRENT ASSETS: Cash and cash equivalents $1,208,186 $1,630,711 Accounts receivable, net of 1,175,626 466,076 allowances Inventories 3,053,058 2,046,476 Refundable taxes on income 91,763 91,763 Prepaid expenses and taxes 74,368 46,920 Deferred income taxes 98,000 98,000 TOTAL CURRENT ASSETS 5,701,001 4,379,946 PROPERTY, PLANT AND EQUIPMENT, at cost 5,243,000 4,569,201 Less - Accumulated depreciation -3,296,587 -3,216,815 1,946,413 1,352,386 OTHER ASSETS: Deferred charges 33,499 150,761 Deferred income taxes - long term 128,868 73,000 Investment 250,000 250,000 Deferred financing charges 61,238 0 Goodwill 2,536,053 0 TOTAL OTHER ASSETS 3,009,658 473,761 TOTAL ASSETS $10,653,072 $6,206,093 LIABILITIES AND SHAREHOLDERS'EQUITY CURRENT LIABILITIES: Current maturities of long-term $374,935 $44,572 debt Accounts payable 534,192 150,040 Accrued expenses 398,305 229,419 Taxes payable 48,148 0 Deferred compensation 71,280 71,280 TOTAL CURRENT LIABILITIES 1,426,860 495,311 LONG-TERM DEBT 3,441,083 0 LONG-SERVICE LEAVE 22,240 0 DEFERRED COMPENSATION 440,801 446,290 SHAREHOLDERS' EQUITY: Common stock - par value $.01 Per share; authorized 3,000,000 Shares, issued and outstanding 2,157,271 shares at December 30, 2000 and 2,142,271 shares at September 21,573 21,423 30, 2000 Additional paid-in capital 495,748 488,398 Accumulated other comprehensive 80,386 0 income Retained earnings 4,724,381 4,754,671 TOTAL SHAREHOLDERS'EQUITY 5,322,088 5,264,492 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $10,653,072 $6,206,093 -3- GODDARD INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) For the For the Three Three Months Months Ended Ended December January 30, 1, 2000 2000 NET SALES $1,394,873 $969,538 COST OF SALES 833,959 560,166 GROSS PROFIT 560,914 409,372 SELLING AND ADMINISTRATIVE EXPENSES 552,370 327,369 INCOME FROM OPERATIONS 8,544 82,003 OTHER INCOME (EXPENSE): Interest expense (71,031) (12,618) Other income, net 21,050 82,147 TOTAL OTHER INCOME (EXPENSE) (49,981) 69,529 INCOME (LOSS) BEFORE TAXES (41,437) 151,532 PROVISION FOR (BENEFIT FROM) INCOME TAXES (11,148) 62,700 NET INCOME (LOSS) ($30,289) $88,832 EARNINGS PER SHARE: Net Income: Basic ($0.01) $0.04 Diluted N/A $0.04 -4- GODDARD INDUSTRIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS For the Three Months Ended (UNAUDITED) December January 30, 1, 2000 2000 CASH FLOWS FROM OPERATING ACTIVITIES: NET INCOME -30,289 88,832 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 92,431 60,858 Deferred income taxes 54,123 6,000 Changes in assets and liabilities: Accounts receivable -133,701 -123,603 Inventories -28,037 -176,943 Income taxes receivable/payable -59,583 11,700 Prepaid expenses and other 19,110 11,944 Accounts payable 69,068 78,419 Accrued expenses -98,192 -61,068 Deferred compensation -5,489 -5,108 NET CASH USED IN OPERATING -158,779 -108,969 ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES: Deferred charges 117,262 0 Property, plant and equipment -13,980 -46,585 additions Financing Fees Deferred -59,997 0 Investment in net assets of subsidiary, -4,084,927 0 net of cash NET CASH USED IN INVESTING - -46,585 ACTIVITIES 4,041,642 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from long term debt 3,725,779 0 Repayments of long term debt -10,400 -34,947 Issuance of common stock 7,500 0 NET CASH PROVIDED BY (USED IN) FINANCING 3,722,879 -34,947 ACTIVITIES EFFECT OF EXCHANGE RATE CHANGES ON 55,017 0 CASH NET INCREASE (DECREASE) IN CASH -422,525 -190,501 CASH AND EQUIVALENTS - BEGINNING 1,630,711 1,773,38 9 CASH AND EQUIVALENTS - ENDING $1,208,186 $1,582,8 88 Supplemental Disclosures of Cash Flow Information CASH PAID DURING THE PERIOD: Interest $71,300 $12,618 Income taxes $0 $15,000 -5- GODDARD INDUSTRIES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 30, 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 September 30, 2000 for a summary of significant accounting policies and other disclosures. Foreign Currency Translation: The assets and liabilities of Mack are translated into U.S. dollars at the rates of exchange in effect at the balance sheet dates, and revenues and expenses are translated at the average rates for the year. Adjustments resulting from these translation are included in Accumulated other comprehensive income. Amortization of Deferred Finance Fees: Deferred finance fees are being amortized on the straight line method over the five to ten year lives of the related debt. Amortization of Goodwill: Goodwill, which represents the excess of the purchase price over the fair value of assets purchased, together with transaction costs associated with the acquisition, is being amortized on a straight line basis over thirty years. NOTE 2. BASIS OF PRESENTATION: The accompanying financial statements include the accounts of Goddard Industries, Inc. (Industries) and its wholly- owned subsidiaries, Goddard Valve Corporation (Goddard Valve), Goddard Management Corporation (Management), and Mack Valves Pty Ltd (Mack) acquired on November 1, 2000, (collectively Company). The results of Mack operations are reported for the period beginning with the date of its acquisition on November 1, 2000. All material intercompany transactions have been eliminated. The information shown in the consolidated financial statements reflects all adjustments that 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: December 30, January 1, 2000 2000 Finished goods $2,277,506 $1,784,438 Work in process 463,905 30,646 Raw materials 311,647 286,366 $3,053,058 $2,101,450 -6- NOTE 4. LONG-TERM DEBT: At December 30, 2000 Long-term debt consisted of the following: LONG-TERM CURRENT Note payable, Fleet National Bank, due in monthly installments of approximately $17,000 plus interest at the bank's prime rate plus 0.50% through October, 2005. $778,167$200,000 Revolving line of credit, Fleet National Bank, bearing interest at the bank's prime rate plus 0.25%, due in February 2003. 1,100,000 - Note payable, National Australia Bank, due in quarterly installments of approximately A$71,000 ($40,000) including interest at 8.85% through November 2005 (Denominated in AUD). 552,912 114,288 Revolving line of credit, National Australia Bank, current rate of 8.55% through October 2005. Commencing November 1, 2005 quarterly payments of principal plus interest in amounts sufficient to amortize the then outstanding balance by October 31, 2010. Interest may not exceed 9.55% for the life of the loan. (Denominated in AUD). 1,000,800 - Capital lease obligations for machinery, with interest imputed at the rate of approximately 8.5% - 28,151 Capital lease obligations for machinery. (Denominated in AUD). 31,444 32,496 $2,563,323$374,935 All of the above bank debt is secured by substantially all assets of the Company. -7- 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: December 30, September 30, 2000 2000 Deferred tax asset Deferred compensation $ 207,000 $ 207,000 Capital loss carryforward 167,700 167,700 Inventory valuation 51,200 51,200 Accrued salaries and long service leave 102,020 7,500 Bad debts 8,100 8,100 Net operation loss carryforward 5,900 - - Warranty reserve 4,448 - - 546,368 441,500 Depreciation -102,800 - -102,800 390,568 338,700 Less valuation allowance -167,700 - -167,700 $222,868 $171,000 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. -8- 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 December 30, 2000 Income Common Shares EPS Basic EPS: Income available to common shareholders ($30,289) 2,145,238 ($.01) Diluted EPS are not applicable for a period in which a loss is reported. 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 NOTE 8. ACQUIRED BUSINESS: On November 1, 2000, the Company acquired substantially all of the assets of Mack Valves Pty. Ltd. (Mack) of Melbourne, Australia for a purchase price of $3,614,900. The acquisition was financed through secured credit facilities furnished by Fleet National Bank and National Australia Bank Limited, totaling approximately $3,668,100. The Company acquired net assets valued at $1,359,500. The excess of purchase price plus transaction costs and exchange loss on hedging contract, over the fair value of the assets acquired (Goodwill) was approximately $2,892,200 and is being amortized on a straight-line basis over 30 years. In addition, contingent consideration of approximately $418,000 in cash and $221,000 in non-qualified stock options will be required if Mack achieves various sales levels during the forthcoming five years. Such payments, if any, will be added to Goodwill and amortized over its remaining life. -9- NOTE 9. SEGMENT INFORMATION: The company conducts operations through two business segments, Goddard Valve and Mack, that are established along the geographic lines of the Western Hemisphere and Asia/Pacific, respectively. Summarized segment financial information for the three months ended December 30, 2000 is as follows: Goddard Valve Mack Total (two months) Sales to external Customers $795,501 $599,372 $1,394,873 Operating profit (loss) ($29,658) $38,202 $8,544 Long-lived Assets $1,319,894 $626,519 $1,946,413 Total assets $6,199,963 $4,453,109 $10,653,072 For the three months ended January 1, 2000, the company conducted its operations through only one segment. -10- PART I - FINANCIAL INFORMATION Item 2 - MANAGEMENT DISCUSSION AND ANALYSIS ACQUISITION OF MACK VALVES PTY LTD On November 1, 2000, the Company acquired substantially all the assets of Mack Valves Pty Ltd of Melbourne, Australia for a price of approximately $3,614,900. In its last full year of operations prior to the acquisition, the revenues of Mack Valve were approximately $4,407,000. (Details of the transaction can be found in Note 8 to the financial statements.) Only two months of Mack Valves' results are included in the Consolidated performance reported herein, whereas the results for this year's first quarter include a full three months of Goddard Valve Corporation, the Company's US subsidiary. The results of last year's first quarter contain only the results of Goddard Valve Corporation, since Mack Valves had not yet been acquired. RESULTS OF OPERATIONS Net sales for the quarter ended December 30, 2000 were $1,395,000 with a net loss $30,000, or $.01 per share. This compared with net sales of $970,000 and net income of $89,000, or $.04 per share, for the same period last year. New orders received in the quarter ended December 30, 2000 were 33% higher than for the same period last year, with the increase substantially because of the addition of Mack Valves. Goddard Valve's orders were 28% lower than the same quarter last year, but were 8% higher than the fourth quarter of 2000. Management believes that Goddard Valve's order intake continues to reflect the industry's low level of equipment order placement, but the increase over the most recent quarter is a promising sign. In addition, during the last year, Goddard Valve concluded contracts with two major industrial gas companies to supply selected valves on a global basis and has been selected to supply a third with a broad range of valves in the North American markets. New orders in the first quarter reflect only small amounts of orders from these contracts. At December 30, 2000, the backlog of orders was 43% higher than at the end of last year's first quarter. The substantial increase is largely because of the addition of the Mack Valve backlog, since Goddard Valve's backlog experienced a decline of 11%. The loss in the first three months of the year compared to last year's profit was a result of a combination of factors including a lower gross profit rate, SG&A expenses which were a higher percent of sales than last year, and the beginning of interest costs and goodwill amortization resulting from the Mack Valves acquisition. The lower gross profit rate was primarily the result of Goddard Valve's higher overhead due to lower volume. SG&A costs are higher at Goddard Valve versus last year because of higher sales management, financial management and Research and Development Costs. -11- LIQUIDITY AND CAPITAL RESOURCES The acquisition of Mack Valves was financed through secured credit facilities amounting to approximately $3,668,100 furnished by Fleet National Bank and National Australia Bank Limited. At December 30, 2000, long term debt equaled $3,441,100. The Company believes that it has sufficient liquidity generated from operations to handle normal working capital and debt service requirements of the business. FORWARD LOOKING INFORMATION Information in this report may contain certain "forward looking statements" within the meaning of the Private Securities 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", "is a promising sign", 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 that 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 to adequately integrate the operations of new acquisitions, 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. -12- 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. (b) On November 15, 2000 the Company filed a Form 8-K regarding its November 1, 2000 purchase of substantially all of the assets of Mack Valves, Pty Ltd. On January 12, 2001 the Company filed a Form 8-K/A to provide financial information regarding the same transaction. -13- 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 13, 2001 GODDARD INDUSTRIES, INC. By:/s/Salvatore J. Vinciguerra -------------------------------- - --- Salvatore J. Vinciguerra, President, Chief Executive Officer and Chief Financial Officer -14-