SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q |
| QUARTERLY REPORT |
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarter ended October 31, 2003
Commission file number 0-10146
ABRAMS INDUSTRIES, INC.
| Georgia | 58-0522129 | |
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| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer identification No.) |
1945 The Exchange, Suite 300, Atlanta, GA 30339-2029
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 November 30, 2003, was 2,914,051.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ABRAMS INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| October 31, 2003 | April 30, 2003 | ||||||||||
ASSETS |
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CURRENT ASSETS: |
|||||||||||
Cash and cash equivalents |
$ | 3,786,193 | $ | 5,157,639 | |||||||
Receivables (Note 4) |
10,189,078 | 12,902,281 | |||||||||
Less: Allowance for doubtful accounts |
(511,459 | ) | (492,045 | ) | |||||||
Assets of discontinued operations (Note 5) |
— | 102,146 | |||||||||
Costs and earnings in excess of billings |
1,048,216 | 503,113 | |||||||||
Income tax receivable |
171,907 | 171,907 | |||||||||
Deferred income taxes |
607,845 | 610,980 | |||||||||
Other |
756,778 | 554,396 | |||||||||
Total current assets |
16,048,558 | 19,510,417 | |||||||||
INCOME-PRODUCING PROPERTIES, net |
42,541,128 | 43,179,037 | |||||||||
PROPERTY AND EQUIPMENT, net |
383,642 | 471,813 | |||||||||
OTHER ASSETS: |
|||||||||||
Real estate held for future development or sale |
3,952,812 | 3,952,812 | |||||||||
Intangible assets, net (Note 8) |
2,166,427 | 2,335,827 | |||||||||
Goodwill (Note 8) |
1,741,831 | 1,741,831 | |||||||||
Other |
2,587,595 | 2,605,361 | |||||||||
| $ | 69,421,993 | $ | 73,797,098 | ||||||||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
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CURRENT LIABILITIES: |
|||||||||||
Trade and subcontractors payables |
$ | 5,670,891 | $ | 6,163,796 | |||||||
Accrued expenses |
2,236,350 | 1,831,990 | |||||||||
Liabilities of discontinued operations (Note 5) |
— | 563,584 | |||||||||
Billings in excess of costs and earnings |
605,284 | 682,674 | |||||||||
Current maturities of long-term debt |
2,686,874 | 2,630,282 | |||||||||
Total current liabilities |
11,199,399 | 11,872,326 | |||||||||
DEFERRED INCOME TAXES |
2,294,468 | 2,772,132 | |||||||||
OTHER LIABILITIES |
4,420,239 | 4,371,374 | |||||||||
MORTGAGE NOTES PAYABLE, less current maturities |
22,697,555 | 23,216,407 | |||||||||
OTHER LONG-TERM DEBT, less current maturities |
9,781,245 | 10,306,907 | |||||||||
Total liabilities |
50,392,906 | 52,539,146 | |||||||||
COMMITMENTS AND CONTINGENCIES (Note 9) |
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SHAREHOLDERS’ EQUITY: |
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Common stock, $1 par value; 5,000,000 shares authorized; 3,060,239 issued and 2,914,151 outstanding in October 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 |
(6,329 | ) | (16,598 | ) | |||||||
Retained earnings |
14,496,519 | 16,734,753 | |||||||||
Treasury stock, common shares, 146,088 in October
2003 and 145,888 in April 2003 |
(674,847 | ) | (673,947 | ) | |||||||
Total shareholders’ equity |
19,029,087 | 21,257,952 | |||||||||
| $ | 69,421,993 | $ | 73,797,098 | ||||||||
See accompanying notes to consolidated financial statements.
1
ABRAMS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
| SECOND QUARTER ENDED | FIRST SIX MONTHS ENDED | ||||||||||||||||||
| OCTOBER 31, | OCTOBER 31, | ||||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | ||||||||||||||||
REVENUES: |
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Construction |
$ | 10,375,580 | $ | 20,100,576 | $ | 21,408,625 | $ | 34,528,609 | |||||||||||
Rental income |
2,649,560 | 2,616,381 | 5,375,277 | 5,187,543 | |||||||||||||||
Energy management |
716,480 | 732,955 | 1,375,284 | 1,398,542 | |||||||||||||||
| 13,741,620 | 23,449,912 | 28,159,186 | 41,114,694 | ||||||||||||||||
Interest |
4,116 | 19,378 | 9,952 | 35,385 | |||||||||||||||
Other |
47,863 | 840 | 61,870 | 42,368 | |||||||||||||||
| 13,793,599 | 23,470,130 | 28,231,008 | 41,192,447 | ||||||||||||||||
COSTS AND EXPENSES: |
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Construction |
9,997,762 | 19,776,804 | 20,617,445 | 34,022,219 | |||||||||||||||
Rental property operating expenses, excluding interest |
1,678,047 | 1,565,132 | 3,297,370 | 3,226,360 | |||||||||||||||
Energy management |
418,632 | 320,582 | 822,607 | 732,602 | |||||||||||||||
| 12,094,441 | 21,662,518 | 24,737,422 | 37,981,181 | ||||||||||||||||
Selling, general and administrative |
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Construction |
1,251,845 | 711,342 | 2,297,491 | 914,807 | |||||||||||||||
Real estate |
145,046 | 248,629 | 370,772 | 453,070 | |||||||||||||||
Energy management |
638,029 | 454,570 | 1,201,756 | 843,644 | |||||||||||||||
Parent |
525,987 | 550,622 | 1,156,104 | 1,185,155 | |||||||||||||||
| 2,560,907 | 1,965,163 | 5,026,123 | 3,396,676 | ||||||||||||||||
Interest costs incurred |
724,947 | 717,801 | 1,467,565 | 1,453,103 | |||||||||||||||
| 15,380,295 | 24,345,482 | 31,231,110 | 42,830,960 | ||||||||||||||||
LOSS BEFORE INCOME TAXES FROM
CONTINUING OPERATIONS |
(1,586,696 | ) | (875,352 | ) | (3,000,102 | ) | (1,638,513 | ) | |||||||||||
INCOME TAX BENEFIT |
(530,000 | ) | (338,787 | ) | (995,000 | ) | (637,000 | ) | |||||||||||
LOSS FROM CONTINUING OPERATIONS |
(1,056,696 | ) | (536,565 | ) | (2,005,102 | ) | (1,001,513 | ) | |||||||||||
DISCONTINUED OPERATIONS (Note 5): |
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Earnings (loss) from discontinued operations, adjusted
for applicable income tax expense (benefit) of
$0, $(3,195), $0 and $3,413, respectively |
— | (6,017 | ) | — | 4,762 | ||||||||||||||
Gain on sale of assets of discontinued operations,
adjusted for applicable income tax expense of
$0, $0, $0 and $372,228, respectively |
— | — | — | 617,987 | |||||||||||||||
EARNINGS (LOSS) FROM DISCONTINUED OPERATIONS |
— | (6,017 | ) | — | 622,749 | ||||||||||||||
NET LOSS |
$ | (1,056,696 | ) | $ | (542,582 | ) | $ | (2,005,102 | ) | $ | (378,764 | ) | |||||||
NET LOSS PER SHARE - BASIC AND DILUTED (Note 7): |
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From continuing operations |
$ | (.36 | ) | $ | (.18 | ) | $ | (.69 | ) | $ | (.34 | ) | |||||||
From discontinued operations |
— | — | — | .21 | |||||||||||||||
NET LOSS PER SHARE - BASIC AND DILUTED |
$ | (.36 | ) | $ | (.18 | ) | $ | (.69 | ) | $ | (.13 | ) | |||||||
DIVIDENDS PER SHARE |
$ | .04 | $ | .04 | $ | .08 | $ | .08 | |||||||||||
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC AND DILUTED |
2,914,167 | 2,910,148 | 2,914,219 | 2,909,632 | |||||||||||||||
See accompanying notes to consolidated financial statements.
2
CONSOLIDATED STATEMENTS OF CASH FLOWS
| SIX MONTHS ENDED OCTOBER 31, | ||||||||||||
| 2003 | 2002 | |||||||||||
Cash flows from operating activities: |
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Net loss |
$ | (2,005,102 | ) | $ | (378,764 | ) | ||||||
Adjustments to reconcile net loss to net
cash used in operating activities: |
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Income from discontinued operations, net of tax |
— | (622,749 | ) | |||||||||
Depreciation and amortization |
1,210,245 | 1,296,671 | ||||||||||
Deferred tax benefit |
(1,030,922 | ) | — | |||||||||
Recovery of doubtful accounts, net |
(19,414 | ) | (506,386 | ) | ||||||||
Changes in assets and liabilities: |
||||||||||||
Receivables, net |
2,685,884 | (2,006,036 | ) | |||||||||
Costs and earnings in excess of billings |
(545,103 | ) | 163,353 | |||||||||
Other current assets |
(202,382 | ) | (101,826 | ) | ||||||||
Other assets |
17,766 | 86,871 | ||||||||||
Trade and subcontractors payable |
(492,905 | ) | 552,885 | |||||||||
Accrued expenses |
404,360 | 169,813 | ||||||||||
Billings in excess of costs and earnings |
(77,390 | ) | 54,409 | |||||||||
Other liabilities |
48,865 | (92,375 | ) | |||||||||
Net cash used in operating activities |
(6,098 | ) | (1,384,134 | ) | ||||||||
Cash flows from investing activities: |
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Additions to income-producing properties, net |
(154,296 | ) | (36,186 | ) | ||||||||
Additions to property and equipment, net |
(31,819 | ) | (57,414 | ) | ||||||||
Additions to intangible assets |
(61,298 | ) | (165,464 | ) | ||||||||
Repayments received on notes receivable |
66,147 | 4,967 | ||||||||||
Net cash used in investing activities |
(181,266 | ) | (254,097 | ) | ||||||||
Cash flows from financing activities: |
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Debt proceeds |
— | 4,900,000 | ||||||||||
Debt repayments |
(1,045,893 | ) | (5,518,284 | ) | ||||||||
Deferred loan costs paid |
— | (107,788 | ) | |||||||||
Repurchase of common stock |
— | (470 | ) | |||||||||
Cash dividends |
(233,144 | ) | (232,770 | ) | ||||||||
Net cash used in financing activities |
(1,279,037 | ) | (959,312 | ) | ||||||||
Cash flows from discontinued operations: |
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Operating activities |
94,955 | (120,325 | ) | |||||||||
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 | 1,162,876 | ||||||||||
Net decrease in cash and cash equivalents |
(1,371,446 | ) | (1,434,667 | ) | ||||||||
Cash and cash equivalents at beginning of period |
5,157,639 | 7,911,205 | ||||||||||
Cash and cash equivalents at end of period |
$ | 3,786,193 | $ | 6,476,538 | ||||||||
Supplemental disclosure of noncash financing activities: |
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Issuance of common stock under Stock Award Plan |
$ | — | $ | 5,500 | ||||||||
See accompanying notes to consolidated financial statements.
3
ABRAMS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2003, AND APRIL 30, 2003
(UNAUDITED)
NOTE 1. ORGANIZATION AND BUSINESS
Abrams Industries, Inc. (together with its 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 services; (ii) real estate investment and development; and (iii) energy and maintenance 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 fiscal 2003 consolidated financial statements to conform to classifications adopted in fiscal 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 second quarter and six months ended October 31, 2003, and 2002, using the Black-Scholes option pricing model.
Options to purchase 672,252 shares were outstanding at October 31, 2003, of which 425,252 options were vested. No stock options or stock awards were granted in the second quarter or six months ended October 31, 2003. No options were granted in the second quarter ended October 31, 2002, and 609,000 options were granted in the six months ended October 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:
4