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-