ABRAMS INDUSTRIES INC - 10-Q Quarterly Report

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

QUARTERLY REPORT

Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934

For the quarter ended July 31, 2003

Commission file number 0-10146

ABRAMS INDUSTRIES, INC.

(Exact name of registrant as specified in its charter)


Georgia		58-0522129

(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer identification No.)

1945 The Exchange, Suite 300, Atlanta, GA 30339-2029

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (770) 953-0304

Former name, former address, former fiscal year, if changed since last report: N/A

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 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 þ No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).

Yes o No þ

The number of shares of $1.00 par value Common Stock of the Registrant outstanding as of August 31, 2003 was 2,914,251.

TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION
	ITEM 1. FINANCIAL STATEMENTS
	ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
	ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
	ITEM 4. CONTROLS AND PROCEDURES
PART II. OTHER INFORMATION
	ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES
EX-31.1(A) SECTION 302 CERTIFICATION OF THE CEO
EX-31.2(B) SECTION 302 CERTIFICATION OF THE CFO
EX-32.1(A) SECTION 906 CERTIFICATION OF THE CEO
EX-32.2(B) SECTION 906 CERTIFICATION OF THE CFO

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ABRAMS INDUSTRIES, INC.

CONSOLIDATED BALANCE SHEETS

(UNAUDITED)


				July 31, 2003			April 30, 2003

ASSETS
CURRENT ASSETS:
	Cash and cash equivalents			$	4,118,649		$	5,157,639
	Receivables (Note 4)				11,960,066			12,902,281
		Less: Allowance for doubtful accounts			(492,715	)		(492,045	)
	Assets of discontinued operations (Note 5)				—			102,146
	Costs and earnings in excess of billings				1,183,893			503,113
	Income tax receivable				171,907			171,907
	Deferred income taxes				607,845			610,980
	Other				798,608			554,396

			Total current assets		18,348,253			19,510,417

INCOME-PRODUCING PROPERTIES, net					42,801,169			43,179,037
PROPERTY AND EQUIPMENT, net					424,532			471,813
OTHER ASSETS:
	Real estate held for future development or sale (Note 10)				3,952,812			3,952,812
	Intangible assets, net (Note 8)				2,242,710			2,335,827
	Goodwill (Note 8)				1,741,831			1,741,831
	Other				2,466,435			2,605,361

				$	71,977,742		$	73,797,098

LIABILITIES AND SHAREHOLDERS’ EQUITY
CURRENT LIABILITIES:
	Trade and subcontractors payables			$	5,943,931		$	6,163,796
	Accrued expenses				2,212,397			1,831,990
	Liabilities of discontinued operations (Note 5)				—			563,584
	Billings in excess of costs and earnings				708,536			682,674
	Bank loans payable				90,000			—
	Current maturities of long-term debt				2,383,389			2,630,282

			Total current liabilities		11,338,253			11,872,326
DEFERRED INCOME TAXES					2,840,509			2,772,132
OTHER LIABILITIES					4,318,332			4,371,374
MORTGAGE NOTES PAYABLE, less current maturities					23,234,752			23,216,407
OTHER LONG-TERM DEBT, less current maturities					10,047,787			10,306,907

			Total liabilities		51,779,633			52,539,146

COMMITMENTS AND CONTINGENCIES (Note 9)
SHAREHOLDERS’ EQUITY:
	Common stock, $1 par value; 5,000,000 shares authorized;
		3,060,239 issued and 2,914,251 outstanding in July 2003, 3,060,239 issued and 2,914,351 outstanding in April 2003			3,060,239			3,060,239
	Additional paid-in capital				2,153,505			2,153,505
	Deferred stock compensation				(10,971	)		(16,598	)
	Retained earnings				15,669,783			16,734,753
	Treasury stock, common shares, 145,988 in July 2003 and 145,888 in April 2003				(674,447	)		(673,947	)

			Total shareholders’ equity		20,198,109			21,257,952

				$	71,977,742		$	73,797,098

See accompanying notes to consolidated financial statements.

ABRAMS INDUSTRIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(UNAUDITED)


				FIRST QUARTER ENDED
				JULY 31,

				2003			2002

REVENUES:
	Construction			$	11,033,045		$	14,428,033
	Rental income				2,725,717			2,571,162
	Energy management				658,804			665,587

					14,417,566			17,664,782
	Interest				5,836			16,007
	Other				14,007			41,528

					14,437,409			17,722,317

COSTS AND EXPENSES:
	Construction				10,619,683			14,245,415
	Rental property operating expenses, excluding interest				1,619,323			1,661,228
	Energy management				403,975			412,020

					12,642,981			16,318,663

	Selling, general and administrative
		Construction			1,045,646			203,465
		Real estate			225,726			204,441
		Energy management			563,727			389,074
		Parent			630,117			634,533

					2,465,216			1,431,513

Interest costs incurred					742,618			735,302

					15,850,815			18,485,478

			LOSS BEFORE INCOME TAXES FROM CONTINUING OPERATIONS		(1,413,406	)		(763,161	)

INCOME TAX BENEFIT					(465,000	)		(298,213	)

			LOSS FROM CONTINUING OPERATIONS		(948,406	)		(464,948	)

DISCONTINUED OPERATIONS (Note 5):
	Earnings from discontinued operations, adjusted for applicable income tax expense of $0 and $6,608, respectively				—			10,779
	Gain on sale of assets of discontinued operations, adjusted for applicable income tax expense of $0 and $372,228, respectively				—			617,987

			EARNINGS FROM DISCONTINUED OPERATIONS		—			628,766

			NET (LOSS) EARNINGS	$	(948,406	)	$	163,818

NET (LOSS) EARNINGS PER SHARE — BASIC AND DILUTED (Note 7):
	From continuing operations			$	(.33	)	$	(.16	)
	From discontinued operations				—			.22

	NET (LOSS) EARNINGS PER SHARE — BASIC AND DILUTED			$	(.33	)	$	.06

DIVIDENDS PER SHARE				$	0.04		$	0.04

WEIGHTED AVERAGE SHARES OUTSTANDING — BASIC AND DILUTED					2,914,271			2,909,115

See accompanying notes to consolidated financial statements.

CONSOLIDATED STATEMENTS OF CASH FLOWS


					FIRST QUARTER ENDED JULY 31,

					2003			2002

Cash flows from operating activities:
			Net (loss) earnings		$	(948,406	)	$	163,818
			Adjustments to reconcile net (loss) earnings to net cash used in operating activities:
				Income from discontinued operations, net of tax		—			(628,766	)
				Depreciation and amortization		606,034			658,120
				Deferred tax benefit		(484,881	)		—
				Recovery of doubtful accounts, net		(670	)		(442,358	)
				Changes in assets and liabilities:
				Receivables, net		877,408			406,130
				Costs and earnings in excess of billings		(680,780	)		(171,316	)
				Other current assets		(244,212	)		(78,723	)
				Other assets		138,926			(31,247	)
				Trade and subcontractors payable		(129,865	)		(429,121	)
				Accrued expenses		380,407			(257,610	)
				Billings in excess of costs and earnings		25,862			85,614
				Other liabilities		(53,042	)		61,600

			Net cash used in operating activities			(513,219	)		(663,859	)

Cash flows from investing activities:
		Additions to income-producing properties, net				(18,773	)		(18,899	)
		Additions to property and equipment, net				(12,540	)		(17,423	)
		Additions to intangible assets				(22,308	)		(73,071	)
		Repayments received on notes receivable				66,147			2,453

			Net cash provided by (used in) investing activities			12,526			(106,940	)

Cash flows from financing activities:
		Debt proceeds				—			4,900,000
		Debt repayments				(516,678	)		(5,048,128	)
		Deferred loan costs paid				—			(107,788	)
		Cash dividends				(116,574	)		(116,363	)

			Net cash used in financing activities			(633,252	)		(372,279	)

Cash flows from discontinued operations:
	Operating activities					94,955			(188,159	)
	Mortgage payoff					—			(12,206,700	)
	Proceeds from sale of property, net of costs of sale					—			13,489,901

			Net cash provided by discontinued operations			94,955			1,095,042

Net decrease in cash and cash equivalents						(1,038,990	)		(48,036	)
Cash and cash equivalents at beginning of period						5,157,639			7,911,205

Cash and cash equivalents at end of period					$	4,118,649		$	7,863,169

Supplemental disclosure of noncash financing activities:
		Issuance of common stock under Stock Award Plan			$	—		$	5,500

See accompanying notes to consolidated financial statements.

ABRAMS INDUSTRIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

JULY 31, 2003, AND APRIL 30, 2003
(UNAUDITED)

NOTE 1. ORGANIZATION AND BUSINESS

Abrams Industries, Inc. and subsidiaries (the “Company”) was organized under Delaware law in 1960. In 1984, the Company changed its state of incorporation from Delaware to Georgia. The Company engages in: (i) commercial construction; (ii) real estate investment and development; and (iii) energy management.

NOTE 2. UNAUDITED STATEMENTS

The accompanying unaudited consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements have been condensed or omitted pursuant to such rules and regulations, although management believes that the accompanying disclosures are adequate to make the information presented not misleading. In the opinion of management, the accompanying financial statements contain all adjustments, consisting of normal recurring accruals, that are necessary for a fair statement of the results for the interim periods presented. These financial statements should be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended April 30, 2003. Results of operations for interim periods are not necessarily indicative of annual results.

Certain reclassifications have been made to the 2003 consolidated financial statements to conform to classifications adopted in 2004.

NOTE 3. SIGNIFICANT ACCOUNTING POLICIES

As of January 31, 2003, the Company adopted the fair value disclosure provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure.” Under SFAS No. 148, the Company is required to disclose the effects on reported net (loss) earnings with respect to stock-based compensation.

For purposes of the required pro forma disclosures, the Company has computed the value of all stock option awards granted for the first quarter ended July 31, 2003, and 2002, using the Black-Scholes option pricing model.

Options to purchase 689,252 shares were outstanding at July 31, 2003, of which 425,252 options were vested. No stock options or stock awards were granted in the quarter ended July 31, 2003, and 609,000 options were granted in the quarter ended July 31, 2002. If the Company had accounted for its stock-based compensation awards in accordance with SFAS No. 123, pro forma results would have been as follows:


		Three Months
		Ended July 31,

		2003			2002

Net (loss) earnings, as reported		$	(948,406	)	$	163,818
Deduct: Total stock-based compensation expense as determined under fair value based method for all awards, net of related tax effects			(45,753	)		(12,256	)

Pro forma net (loss) earnings		$	(994,159	)	$	151,562

Net (loss) earnings per share:
	Basic and diluted — as reported	$	(0.33	)	$	0.06

	Basic and diluted — pro forma	$	(0.34	)	$	0.05

NOTE 4. RECEIVABLES

All net contract and trade receivables are expected to be collected within one year.

NOTE 5. DISCONTINUED OPERATIONS

Effective May 1, 2002, the Company adopted Statement of Financial Accounting Standards (“SFAS”) No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, which requires, among other things, that the operating results of certain income-producing assets, sold subsequent to April 30, 2002, be included in discontinued operations in the statements of operations for all periods presented. On June 28, 2002, the Company sold its shopping center located in Englewood, Florida, and recognized a pretax gain of $990,215. As a result of the sale, the Company’s financial statements have been prepared with the property’s assets and liabilities, results of operations, cash flows, and the gain from the sale shown as discontinued operations. As of July 31, 2003, the Company had no assets that qualified as held for disposition or sale as defined by SFAS No. 144. Summarized financial information for discontinued operations for the three months ended July 31 is as follows:


	Three months ended July 31,

	2003		2002

Results of operations
Revenues	$	—	$	289,173
Operating expenses, including amortization and interest		—		271,786

	$	—	$	17,387

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