Abrams Industries, Inc.
Table of Contents

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
October 31, 2001
  Commission File No.
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, Georgia 30339


(Address of principal executive offices) (Zip Code)

(770) 953-0304


(Registrant’s telephone number, including area code)

N/A


(Former name, former address and former fiscal year, if changed since last report)

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 [X] No [   ]

The number of shares of $1.00 par value Common Stock of the Registrant outstanding as of November 30, 2001, was 2,920,609.

 


TABLE OF CONTENTS

PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED STATEMENTS OF OPERATIONS
CONSOLIDATED STATEMENTS OF CASH FLOWS
NOTES TO CONSOLIDATED 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. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURES


Table of Contents

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ABRAMS INDUSTRIES, INC.
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

                         
            October 31, 2001   April 30, 2001
           
 
ASSETS
               
CURRENT ASSETS
               
 
Cash and cash equivalents (note 3)
  $ 6,146,744     $ 11,448,750  
 
Receivables (note 2)
    22,543,855       15,510,253  
       
Less: Allowance for doubtful accounts
    (973,777 )     (961,461 )
 
Costs and earnings in excess of billings
    1,310,635       1,483,195  
 
Property held for sale (note 5)
    12,864,946       33,404  
 
Deferred income taxes
    864,036       786,460  
 
Other
    944,147       785,799  
 
   
     
 
     
Total current assets
    43,700,586       29,086,400  
 
   
     
 
INCOME-PRODUCING PROPERTIES, net
    26,319,820       26,712,359  
PROPERTY, PLANT AND EQUIPMENT, net
    766,124       1,284,689  
REAL ESTATE HELD FOR FUTURE SALE OR DEVELOPMENT (note 6)
    23,562,661       36,100,308  
OTHER ASSETS
 
Intangible assets, net (note 10)
    2,198,458       1,220,147  
 
Goodwill (notes 9 & 10)
    1,741,831        
 
Other
    3,322,990       3,215,782  
 
   
     
 
 
  $ 101,612,470     $ 97,619,685  
 
   
     
 
LIABILITIES AND SHAREHOLDERS’ EQUITY
               
CURRENT LIABILITIES
               
 
Trade and subcontractors payables
  $ 14,511,706     $ 8,803,760  
 
Billings in excess of costs and earnings
    2,029,497       1,506,766  
 
Accrued expenses
    2,668,946       3,720,661  
 
Net liabilities of discontinued operations (note 3)
          1,903,375  
 
Current maturities of long-term debt (note 5)
    13,831,769       1,709,490  
 
   
     
 
     
Total current liabilities
    33,041,918       17,644,052  
 
   
     
 
DEFERRED INCOME TAXES
    3,495,986       3,372,824  
OTHER LIABILITIES
    4,034,229       3,916,647  
MORTGAGE NOTES PAYABLE, less current maturities (note 5)
    20,351,191       32,915,932  
OTHER LONG-TERM DEBT, less current maturities
    16,841,876       17,264,687  
 
   
     
 
     
Total liabilities
    77,765,200       75,114,142  
 
   
     
 
SHAREHOLDERS’ EQUITY
               
 
Common stock, $1 par value; authorized 5,000,000 shares; 3,049,439 issued and 2,920,709 outstanding in October 2001, 3,041,039 issued and 2,943,303 outstanding in April 2001
    3,049,439       3,041,039  
 
Additional paid-in capital
    2,120,502       2,097,315  
 
Deferred stock compensation
    (36,073 )     (75,094 )
 
Retained earnings
    19,321,772       17,930,914  
 
   
     
 
 
    24,455,640       22,994,174  
       
Less cost of treasury stock
    608,370       488,631  
 
   
     
 
   
Total shareholders’ equity
    23,847,270       22,505,543  
 
   
     
 
 
  $ 101,612,470     $ 97,619,685  
 
   
     
 

See accompanying notes to consolidated financial statements.

 


Table of Contents

ABRAMS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)

                                       
          SECOND QUARTER ENDED   FIRST SIX MONTHS ENDED
          OCTOBER 31,   OCTOBER 31,
         
 
          2001   2000   2001   2000
         
 
 
 
REVENUES
                               
 
Construction
  $ 28,979,970     $ 50,415,128     $ 64,905,126     $ 98,025,853  
 
Real estate
    3,188,194       3,050,763       6,428,045       6,225,186  
 
Energy management
    796,616             1,615,928        
 
   
     
     
     
 
 
    32,964,780       53,465,891       72,949,099       104,251,039  
 
Interest
    43,250       127,132       127,509       256,437  
 
Other
    28,709       11,825       42,623       23,281  
 
   
     
     
     
 
 
    33,036,739       53,604,848       73,119,231       104,530,757  
 
   
     
     
     
 
COSTS AND EXPENSES
                               
 
Applicable to REVENUES—
                               
     
Construction
    28,215,507       46,917,840       63,115,704       92,040,379  
     
Rental property operating expenses, excluding interest
    1,632,269       1,783,143       3,257,585       3,378,008  
     
Energy management
    433,995             849,364        
 
   
     
     
     
 
 
    30,281,771       48,700,983       67,222,653       95,418,387  
 
   
     
     
     
 
 
Selling, general and administrative
Construction
    810,802       1,679,936       1,546,794       2,696,147  
     
Real estate
    105,033       224,365       243,954       640,874  
     
Energy management
    336,767             647,325        
     
Parent
    629,500       643,254       1,355,307       1,270,556  
 
   
     
     
     
 
 
    1,882,102       2,547,555       3,793,380       4,607,577  
 
   
     
     
     
 
 
Interest
    1,117,222       1,285,590       2,269,686       2,578,454  
 
   
     
     
     
 
 
    33,281,095       52,534,128       73,285,719       102,604,418  
 
   
     
     
     
 
EARNINGS (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES
    (244,356 )     1,070,720       (166,488 )     1,926,339  
INCOME TAX EXPENSE
    (98,000 )     421,000       (72,000 )     754,000  
 
   
     
     
     
 
EARNINGS (LOSS) FROM CONTINUING OPERATIONS
    (146,356 )     649,720       (94,488 )     1,172,339  
DISCONTINUED OPERATIONS (note 3)
                               
 
Earnings from discontinued operations, adjusted for applicable income tax expense of $1,056,000, $59,000, $1,056,000, and $81,000, respectively
    1,720,749       92,756       1,720,749       130,237  
 
   
     
     
     
 
NET EARNINGS
  $ 1,574,393     $ 742,476     $ 1,626,261     $ 1,302,576  
 
   
     
     
     
 
NET EARNINGS (LOSS) PER SHARE FROM:
                               
   
Continuing Operations-Basic and Diluted
  $ (.05 )   $ .22     $ (.03 )   $ .40  
   
Discontinued Operations-Basic and Diluted
    .59       .03       .59       .04  
 
   
     
     
     
 
NET EARNINGS PER SHARE-BASIC AND DILUTED
  $ .54     $ .25     $ .56     $ .44  
 
   
     
     
     
 
DIVIDENDS PER SHARE
  $ .04     $ .04     $ .08     $ .08  
 
   
     
     
     
 
WEIGHTED AVERAGE SHARES OUTSTANDING
    2,928,627       2,935,451       2,935,776       2,935,903  
 
   
     
     
     
 

See accompanying notes to consolidated financial statements.

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ABRAMS INDUSTRIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

                         
            SIX MONTHS ENDED OCTOBER 31,
           
            2001   2000
           
 
Cash flows from operating activities:
               
   
Net income
  $ 1,626,261     $ 1,302,576  
   
Adjustments to reconcile net income to net cash used in operating activities:
               
       
Discontinued operations, net of tax
    (1,221,731 )     671,625  
       
Depreciation and amortization
    1,173,143       1,579,338  
       
Changes in assets and liabilities:
               
       
    Receivables, net
    (7,084,517 )     (9,341,189 )
       
    Costs and earnings in excess of billings
    172,560       (2,235,877 )
       
    Other current assets
    124,687       67,494  
       
    Other assets
    (125,429 )     (281,282 )
       
    Trade and subcontractors payable
    5,707,946       5,895,881  
       
    Accrued expenses
    (1,954,330 )     (1,204,993 )
       
    Billings in excess of costs and earnings
    522,731       1,125,601  
       
    Other liabilities
    30,269       101,997  
 
   
     
 
     
Net cash used in operating activities
    (1,028,410 )     (2,318,829 )
 
   
     
 
Cash flows from investing activities:
               
 
Additions to properties, property, plant and equipment, net
    (69,799 )     (276,744 )
 
Changes in intangible assets
    (31,661 )        
 
Acquisition, net of cash acquired
    (2,971,663 )      
 
Repayments received on notes receivable
    67,732       62,464  
 
   
     
 
     
Net cash used in investing activities
    (3,005,391 )     (214,280 )
 
   
     
 
Cash flows from financing activities:
               
 
Debt repayments
    (921,962 )     (603,306 )
 
Repurchase of capital stock
    (110,839 )     (14,833 )
 
Cash dividends
    (235,404 )     (234,908 )
 
   
     
 
     
Net cash used in financing activities
    (1,268,205 )     (853,047 )
 
   
     
 
Net decrease in cash and cash equivalents
    (5,302,006 )     (3,386,156 )
Cash and cash equivalents at beginning of period
    11,448,750       7,268,974  
 
   
     
 
Cash and cash equivalents at end of period
  $ 6,146,744     $ 3,882,818  
 
   
     
 
Supplemental disclosure of noncash investing activities:
               
 
Transfer of Real estate held for future development or sale to Property held for sale
  $ 12,831,542     $  
 
   
     
 
 
Transfer of Property to Real estate held for future development or sale
  $ 321,710     $  
 
   
     
 
Supplemental schedule of cash flow information
    Interest paid, net of amounts capitalized
  $ 2,124,627     $ 2,475,279  
 
   
     
 
 
Income taxes paid (refunded), net
  $ 143,452     $ (198,856 )
 
   
     
 

See accompanying notes to consolidated financial statements.

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ABRAMS INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
OCTOBER 31, 2001, AND APRIL 30, 2001
(UNAUDITED)

NOTE 1. UNAUDITED STATEMENTS

     The accompanying unaudited consolidated financial statements have been prepared by the Company in accordance with generally accepted accounting principles, 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 disclosures are adequate to make the information presented not misleading. In the opinion of management, the accompanying financial statements contain all adjustments, which consist solely of normal recurring accruals, 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 to Shareholders for the year ended April 30, 2001. Results of operations for interim periods are not necessarily indicative of annual results.

NOTE 2. RECEIVABLES

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

NOTE 3. DISCONTINUED OPERATIONS

     During the quarter ended January 31, 2000, the Board of Directors of the Company decided to discontinue the operations of the Manufacturing Segment. The remaining assets and liabilities of the Manufacturing Segment were consolidated and presented as Net liabilities of discontinued operations on the Consolidated Balance Sheet at April 30, 2001, which included a $2.76 million deferred gain, a current liability, related to the amount awarded to the Company in connection with the Georgia World Congress Center Authority’s condemnation of the Company’s former manufacturing facility. The award was under appeal by both parties at April 30, 2001, and was settled in October 2001. Earnings from discontinued operations for the quarter and six-month period ended October 31, 2001, represent the gain related to the condemnation.

     At October 31, 2001, Cash on the Consolidated Balance Sheet includes $526,345 formerly included in discontinued operations.

NOTE 4. OPERATING SEGMENTS

     In May 2001, the Company formed a third operating segment, Energy Management, and subsequently acquired substantially all of the assets of Servidyne Systems, Inc., an energy management and engineering services company. Through this new segment, the Company offers its institutional customers energy efficiency products and engineering services that reduce energy consumption, labor, equipment maintenance, and capital costs in commercial buildings.

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     The table below exhibits selected financial data on a segment basis. Earnings (loss) from continuing operations before income taxes is total revenue less operating expenses of continuing operations, including depreciation and interest. Parent expenses have not been allocated to the subsidiaries.

                                                   
For the Quarter Ended October 31, 2001   Construction   Real Estate   Energy
Management
  Parent   Eliminations   Consolidated
 
 
 
 
 
 
Revenues from unaffiliated customers            
  $ 28,979,970     $ 3,188,194     $ 796,616     $     $     $ 32,964,780  
Interest and other income
    8,092       58,180             48,921       (43,234 )     71,959  
Intersegment revenue
          122,845                   (122,845 )      
 
   
     
     
     
     
     
 
 
Total revenues from continuing operations
  $ 28,988,062     $ 3,369,219     $ 796,616     $ 48,921     $ (166,079 )   $ 33,036,739  
 
   
     
     
     
     
     
 
Earnings (loss) from continuing operations before income taxes  
  $ (107,620 )   $ 519,478     $ 23,600     $ (659,315 )   $ (20,499 )   $ (244,356 )
 
   
     
     
     
     
     
 
 

 
For the Quarter Ended October 31, 2000   Construction   Real Estate   Energy
Management
  Parent   Eliminations   Consolidated
 
 
 
 
 
 
Revenues from unaffiliated customers
  $ 50,415,128     $ 3,050,763     $     $     $     $ 53,465,891  
Interest and other income
    45,303       90,339             3,315             138,957  
Intersegment revenue
          86,649                   (86,649 )      
 
   
     
     
     
     
     
 
 
Total revenues from continuing operations
  $ 50,460,431     $ 3,227,751     $     $ 3,315     $ (86,649 )   $ 53,604,848  
 
   
     
     
     
     
     
 
Earnings (loss) from continuing
operations before income taxes
  $ 1,800,329     $ (66,660 )   $     $ (674,561 )   $ 11,612     $ 1,070,720  
 
   
     
     
     
     
     
 
 

 
For the Six Months Ended October 31, 2001   Construction   Real Estate   Energy
Management
  Parent   Eliminations   Consolidated
 
 
 
 
 
 
Revenues from unaffiliated customers
  $ 64,905,126     $ 6,428,045     $ 1,615,928     $     $     $ 72,949,099  
Interest and other income
    50,598       103,779             106,375       (90,620 )     170,132  
Intersegment revenue
          243,148                   (243,148 )      
 
   
     
     
     
     
     
 
 
Total revenues from continuing operations
  $ 64,955,724     $ 6,774,972     $ 1,615,928     $ 106,375     $ (333,768 )   $ 73,119,231  
 
   
     
     
     
     
     
 
Earnings (loss) from continuing operations before income taxes
  $ 160,054     $ 1,007,786     $ 114,869     $ (1,470,535 )   $ 21,338     $ (166,488 )
 
   
     
     
     
     
     
 
 

 
For the Six Months Ended October 31, 2000   Construction   Real Estate   Energy
Management
  Parent   Eliminations   Consolidated
 
 
 
 
 
 
Revenues from unaffiliated customers
  $ 98,025,853     $ 6,225,186     $     $     $     $ 104,251,039  
Interest and other income
    114,814       158,795             6,109             279,718  
Intersegment revenue
          171,539                   (171,539 )      
 
   
     
     
     
     
     
 
 
Total revenues from continuing operations
  $ 98,140,667     $ 6,555,520     $     $ 6,109     $ (171,539 )   $ 104,530,757  
 
   
     
     
     
     
     
 
Earnings (loss) from continuing operations before income taxes
  $ 3,269,368     $ (38,172 )   $     $ (1,327,532 )   $ 22,675     $ 1,926,339  
 
   
     
     
     
     
     
 

NOTE 5. PROPERTY HELD FOR SALE

     During the quarter ended October 31, 2001, the Company entered into an agreement to sell, at a gain, its shopping center in Englewood, Florida. The Company currently anticipates completing the sale during this fiscal year. As of October 31, 2001, the book basis of the property, $12.5 million, has been reclassified as a current asset in Property held for sale; the related mortgage debt, $12.3 million, has been reclassified as a current liability in Current maturities of long-term debt. The results of operations for the property are summarized below:

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    SECOND QUARTER ENDED   FIRST SIX MONTHS ENDED
    OCTOBER 31,   OCTOBER 31,
   
 
    2001   2000   2001   2000
   
 
 
 
Revenues
  $ 465,433     $ 466,325     $ 931,771     $ 931,565  
Operating expenses, including depreciation for the
quarter and six-month period ended October 31,
2000, and interest
    429,051       491,096       831,879       936,393  
 
   
     
     
     
 
Results of operations
  $ 36,382     $ (24,771 )   $ 99,892     $ (4,828 )
 
   
     
     
     
 

     Also, included in Property held for sale at October 31, 2001, was the book basis of an outlot at the Company’s shopping center in North Ft. Myers, Florida. The outlot was sold at a gain in November 2001.

NOTE 6. REAL ESTATE HELD FOR FUTURE SALE OR DEVELOPMENT

     As of October 31, 2001, the Company’s shopping center, five outlots and expansion land in North Ft. Myers, Florida, were held for sale. The net book value of all of the combined property was $22.1 million. The results of operations for the property are summarized below:

                                 
    SECOND QUARTER ENDED   FIRST SIX MONTHS ENDED
    OCTOBER 31,   OCTOBER 31,
   
 
    2001   2000   2001   2000
   
 
 
 
Revenues
  $ 653,128     $ 636,028     $ 1,304,943     $ 1,282,410  
Operating expenses, including depreciation for the
quarter and six-month period ended October 31,
2000, and interest
    398,077       671,355       805,364       1,260,738  
 
   
     
     
     
 
Results of operations
  $ 255,051     $ (35,327 )   $ 499,579     $ 21,672
 
   
     
     
     
 

NOTE 7. EARNINGS PER SHARE

     Basic earnings per share are computed by dividing net earnings by the weighted average shares outstanding during the reporting period. In May 2001, the Company issued 150,616 incentive stock options with an exercise price of $4.00 per share to certain employees. The options issued are not currently dilutive.

NOTE 8. NEW ACCOUNTING PRONOUNCEMENTS

     During June 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards No. 141, “Business Combinations” (“SFAS 141”). Under the provisions of SFAS 141, all business combinations initiated after June 30, 2001, must be accounted for using the purchase method of accounting. The adoption of SFAS 141 is not expected to have a material impact on the Company’s financial statements.

     Also during June 2001, the FASB issued Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets” (“SFAS 142”). Under the provisions of SFAS 142, there will be no amortization of goodwill and other intangible assets that have indefinite useful lives. Instead, these assets must be tested for impairment annually and when events or changes in

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circumstances indicate that impairment may have occurred. The Company has elected to adopt SFAS 142 as of May 1, 2001, and therefore goodwill and a trademark with an indefinite useful life acquired in the transaction described below have not been amortized.

     During August 2001, the FASB issued Statement of Financial Accounting Standards No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets” (“SFAS 144”). SFAS 144 supercedes FASB Statement No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of.” In addition, SFAS 144 supercedes the accounting and reporting provisions of APB Opinion No. 30, “Reporting the Results of Operations—Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions” for segments of a business to be disposed of. SFAS 144 addresses the treatment of assets held for sale or to be otherwise disposed of, the evaluation of impairment for long-lived assets, and the reporting of discontinued operations. The provisions of SFAS 144 are effective for financial statements issued for fiscal years beginning after December 15, 2001. The Company is currently evaluating the impact of SFAS 144.

NOTE 9. ACQUISITION

     In May 2001, the Company acquired substantially all of the assets and employed all of the personnel of an energy management and engineering services company, Servidyne Systems, Inc., and acquired certain intellectual property from an affiliated company, Servidyne, Incorporated, for approximately $3.1 million, including the costs associated with completing the acquisition, in an all cash transaction (the “Servidyne transaction”). This acquisition was accounted for as a purchase, and accordingly, the purchase price was allocated to the underlying assets acquired and liabilities assumed, based upon their estimated fair market values as of the date of acquisition. The results of operations related to the acquired assets have been included in the Company’s financial statements since May 2001. Servidyne has offered its expertise, products and services to its institutional customers for more than 27 years. In pursuit of growth and improved shareholder returns, the Company will seek opportunities to leverage Servidyne’s reservoir of knowledge in order to assist the now combined customer base in making building infrastructures more efficient.

     The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the date of acquisition:

           
Current assets
  $ 149,163  
Furniture, fixtures and equipment
    13,321  
Intangible assets
    1,200,034  
Goodwill
    1,741,831  
 
   
 
 
Total assets acquired
    3,104,349  
 
   
 
Current liabilities
    (132,686 )
 
   
 
 
Net assets acquired
  $ 2,971,663  
 
   
 

     Of the $1,200,034 of acquired intangible assets, $315,261 was assigned to a registered trademark that is not subject to amortization. The remainder of the intangible assets consists of computer-based work management products (5-year weighted-average useful life) in the amount of $856,113, and other intangible assets of $28,660 (10-year useful life). The weighted-average useful life of all acquired intangible assets subject to amortization is 5 years.

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     The goodwill amount has been assigned to the Energy Management Segment. All of the goodwill is expected to be amortized and deductible for tax purposes.

     The following table displays the consolidated unaudited current results for the quarter and six-month period ended October 31, 2001, and the consolidated unaudited proforma results for the quarter and six-month period ended October 31, 2000, as if the acquisition had been completed on May 1, 2000:

                                                 
            SECOND QUARTER ENDED   FIRST SIX MONTHS ENDED
            OCTOBER 31,   OCTOBER 31,
           
 
            2001           2000   2001   2000
            (actual)           (proforma)   (actual)   (proforma)
           
         
 
 
Revenues
          $ 33,036,739             $ 54,306,167     $ 73,119,231     $ 105,933,395  
Net earnings
          $ 1,574,393             $ 806,202     $ 1,626,261     $ 1,430,028  
Net earnings per share
        $ .54           $ .27     $ .56     $ .49  

NOTE 10. GOODWILL AND OTHER INTANGIBLE ASSETS

     The following table illustrates the treatment of acquired intangible assets as of October 31, 2001:

           
      Gross Carrying
      Amount
     
Amortized intangible assets
       
 
Computer-based work management products
  $ 856,113  
 
Other
    28,660  
 
   
 
 
  $ 884,773  
 
   
 
Unamortized intangible assets
       
 
Goodwill
  $ 1,741,831  
 
Trademark
    315,261  
 
   
 
 
  $ 2,057,092  
 
   
 

     The gross carrying amounts and accumulated amortization for all of the Company’s intangible assets as of October 31, 2001, are as follows:

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    Gross Carrying   Accumulated
    Amount   Amortization
   
 
Amortized intangible assets
   Computer-based work management products
  $ 856,114     $ 95,038  
   Computer software
    304,956       212,549  
   Real estate lease costs
    1,235,283       642,071  
   Deferred loan costs
    819,875       410,600  
   Other
    28,660       1,433  
 
   
     
 
 
  $ 3,244,888     $ 1,361,691  
 
   
     
 
Unamortized intangible assets   
   Goodwill
  $ 1,741,831          
   Trademark
    315,261          
 
   
         
 
  $ 2,057,092          
 
   
         
         
Aggregate amortization expense for all amortized intangible assets:        

       
   For the quarter ended October 31, 2001
  $ 149,473  
   For the six months ended October 31, 2001
  $ 284,462  
         
Estimated amortization expense for all amortized intangible assets:        

       
   For the year ended April 30, 2003
  $ 448,647  
   For the year ended April 30, 2004
  $ 361,346  
   For the year ended April 30, 2005
  $ 289,446  
   For the year ended April 30, 2006
  $ 190,304  
   For the year ended April 30, 2007
  $ 85,184  

     As the acquisition which resulted in the recording of goodwill occurred during the current fiscal year, no goodwill or resulting amortization was recorded in the previous fiscal year, and therefore no proforma amounts are required to provide comparability.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Changes in CONSOLIDATED BALANCE SHEETS between April 30, 2001, and October 31, 2001.

     Accounts receivable increased by $7,033,602, Billings in excess of costs and earnings increased by $522,731, and Trade and subcontractors payable increased by $5,707,946, primarily because of the timing of the submission and payment of invoices for construction work performed.

     Property held for sale increased by $12,831,542 and Real estate held for future development or sale decreased by $12,537,647, primarily as a result of the reclassification of the shopping center in Englewood, Florida, and an outlot at the shopping center in North Ft. Myers, Florida, as contracts have been executed for the sale of these properties. See Note 5 to the Consolidated Financial Statements.

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     Accrued expenses decreased by $1,051,715, primarily due to the payment of year-end accruals.

     Current maturities of long-term debt increased by $12,122,279 and Mortgage notes payable decreased by $12,564,741, primarily due to the reclassification of the mortgage debt related to the shopping center in Englewood, Florida, in connection with its planned sale, as discussed above.

Results of operations of second quarter and first six months of fiscal 2002 compared to second quarter and first six months of fiscal 2001.

REVENUES from Continuing Operations

     For the second quarter 2002, Consolidated REVENUES from continuing operations, including Interest income and Other income, and net of intersegment eliminations, were $33,036,739, compared to $53,604,848 for the second quarter 2001, a decrease of 38%. For the first six months of fiscal 2002, Consolidated REVENUES from continuing operations were $73,119,231, compared to $104,530,757 for the first six months of fiscal 2001, a decrease of 30%.

     The figures in Chart A are Segment revenues from continuing operations, net of Intersegment eliminations, and do not include Interest income or Other income.

CHART A
REVENUE FROM CONTINUING OPERATIONS SUMMARY BY SEGMENT
(Dollars in Thousands)

                                                                 
    Second Quarter Ended                   Six Months Ended                
    October 31   Amount   Percent   October 31,   Amount   Percent
   
  Increase   Increase  
  Increase   Increase
    2001   2000   (Decrease)   (Decrease)   2001   2000   (Decrease)   (Decrease)
   
 
 
 
 
 
 
 
Construction(1)
  $ 28,980     $ 50,415     $ (21,435 )     (43 )   $ 64,905     $ 98,026     $ (33,121 )     (34 )
Real Estate
    3,188       3,051       137       4       6,428       6,225       203       3  
Energy Management(2)
    797             797             1,616             1,616        
   
   
   
       
   
   
   
 
  $ 32,965     $ 53,466     $ (20,501 )     (38 )   $ 72,949     $ 104,251     $ (31,302 )     (30 )
   
   
   
       
   
   
   

NOTES TO CHART A

(1)   REVENUES for the second quarter and first six months 2002 were lower than those of the same periods of 2001, primarily due to a reduction in the number of construction jobs available, which is the result of a decrease or elimination of current capital spending by most of the Construction Segment’s existing customers. The Company anticipates this trend will continue in the short-term. During fiscal 2002, however, the Construction Segment has added several new institutional customers who already have awarded jobs to the Company, as it continues its efforts to expand and diversify its customer base.
 
(2)   The Energy Management Segment was formed in May 2001. See Note 9 to the Consolidated Financial Statements.

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     The following table indicates the backlog of contracts and rental income for the next twelve months by industry segment.

                   
      October 31,
     
      2001   2000
     
 
Construction (1)
  $ 23,890,000     $ 43,877,000  
Real Estate-rental income (2)
    9,761,000       11,255,000  
Real Estate-sales
    15,465,000        
Energy Management (3)
    555,000        
 
   
     
 
 
Total Backlog
  $ 49,671,000     $ 55,132,000  
 
   
     
 


(1)   See Note 1 to Chart A above.
 
(2)   Backlog decreased due to the anticipated sale of the Englewood, Florida, shopping center. See Note 5 to the Consolidated Financial Statements.
 
(3)   Any Energy Management contracts that can be cancelled with less than one year’s notice are not included in backlog. As of October 31, 2001, such contracts total $1.229 million in potential revenue over the next twelve months, assuming cancellation provisions are not invoked.

COSTS AND EXPENSES: Applicable to REVENUES from Continuing Operations

     As a percentage of total Segment REVENUES from Continuing Operations (See Chart A) for the second quarter 2002 and 2001, the total applicable COSTS AND EXPENSES (See Chart B) were 92% and 91%, respectively. As a percentage of total Segment REVENUES from Continuing Operations (See Chart A) for the first six months 2002 and 2001, the total applicable COSTS AND EXPENSES were 92% for both periods.

  The figures in Chart B are net of Intersegment eliminations.

CHART B
COSTS AND EXPENSES APPLICABLE TO REVENUES
FROM CONTINUING OPERATIONS SUMMARY BY SEGMENT
(Dollars in Thousands)

                                                                 
                    Percent of Segment                   Percent of Segment
                    Revenues For                   Revenues For
    Second Quarter Ended   Second Quarter Ended   Six Months Ended   Six Months Ended
    October 31,   October 31,   October 31,   October 31,
   
 
 
 
    2001   2000   2001   2000   2001   2000   2001   2000
   
 
 
 
 
 
 
 
 
                                                           
 
Construction(1)
  $ 28,216     $ 46,918       97       93     $ 63,116     $ 92,040       97       94  
Real Estate
    1,632       1,783       51       58       3,258       3,378       51       54  
Energy Management(2)
    434             54             849             53        
   
   
           
   
       
 
  $ 30,282     $ 48,701       92       91     $ 67,223     $ 95,418       92       92  
   
   
           
   
       

NOTES TO CHART B

(1)   The increase in the percentage of COSTS AND EXPENSES: Applicable to REVENUES for second quarter and first six months 2002 compared to the same period of 2001 was primarily

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    attributable to intense competitive pressure on margins, which is a result of a significant decrease in the number of potentially available construction jobs due to the decline or absence of current capital spending by the Company’s customers. In addition, costs have increased due to certain subcontractors’ defaults on their contractual obligations.
 
(2)   The Energy Management Segment was formed in May 2001. See Note 9 to the Consolidated Financial Statements.

SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
FROM CONTINUING OPERATIONS

     For the second quarter 2002 and 2001, Selling, general and administrative expenses from continuing operations, net of intersegment eliminations, were $1,882,102 and $2,547,555, respectively. As a percentage of Consolidated REVENUES from Continuing Operations, these expenses were 6% and 5%, respectively. For the first six months 2002 and 2001, Selling, general and administrative expenses from continuing operations, net of intersegment eliminations, were $3,793,380 and $4,607,577, respectively. As a percentage of Consolidated REVENUES from Continuing Operations, these expenses were 5% and 4%, respectively. In reviewing Chart C, the reader should recognize that the volume of revenues generally will affect the amounts and percentages. The percentages in Chart C are based upon expenses as they relate to Segment REVENUES from Continuing Operations (Chart A), except that Parent and Total expenses relate to Consolidated REVENUES from Continuing Operations.

CHART C
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
FROM CONTINUING OPERATIONS BY SEGMENT
(Dollars in Thousands)

                                                                 
                    Percent of Segment                   Percent of Segment
                    Revenues For                   Revenues For
    Second Quarter Ended   Second Quarter Ended   Six Months Ended   Six Months Ended
    October 31,   October 31,   October 31,   October 31,
   
 
 
 
    2001   2000   2001   2000   2001   2000   2001   2000
   
 
 
 
 
 
 
 
Construction(1)
  $ 811     $ 1,680       3       3     $ 1,547     $ 2,696       2       3  
Real Estate(2)
    105       225       3       7       244       641       4       10  
Energy Management(3)
    337             42             647             40        
Parent
    629       643       2       1       1,355       1,271       2       1  
   
   
           
   
       
 
  $ 1,882     $ 2,548       6       5     $ 3,793     $ 4,608       5       4  
   
   
           
   
       

NOTES TO CHART C

(1)   On a dollar basis, Selling, general and administrative expenses were lower for second quarter and first six months 2002 compared to the same periods of 2001 primarily because of a decrease in incentive compensation costs.
 
(2)   On a dollar and percentage basis, Selling, general and administrative expenses were lower for second quarter and first six months 2002 compared to the same periods of 2001 primarily due to a decrease in personnel costs associated with the Company’s outsourcing of its asset and property management functions.

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(3)   The Energy Management Segment was formed in May 2001. See Note 9 to the Consolidated Financial Statements.

Liquidity and capital resources.

     Between April 30, 2001, and October 31, 2001, working capital decreased by $783,680. Operating activities used cash of $1,028,410. Investing activities used cash of $3,005,391. Financing activities used cash of $1,268,205.

     At October 31, 2001, the Company and its subsidiaries had available unsecured committed lines of credit totaling $12,000,000, of which none was outstanding, $11,500,000 was available, and $500,000 was reserved for a letter of credit issued as security for a mortgage loan on an Income-producing property. The letter of credit has been extended until November 2002, at which time it may be used to pay down the mortgage loan if certain leasing requirements are not attained.

Cautionary statement regarding forward-looking statements.

     Certain statements contained or incorporated by reference in this Quarterly Report on Form 10-Q, including without limitation statements containing the words “believes,” “anticipates,” “expects,” and words of similar import, are forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements involve known and unknown risks, uncertainties and other matters which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or uncertainties expressed or implied by such forward-looking statements. Many such risks, uncertainties and other matters are beyond the Company’s control. They include, but are not limited to: the possibility of not achieving projected backlog revenues or not realizing earnings from such revenues; the potential impact of factors beyond the control of the Company on future revenues and costs; changes in laws and regulations, including changes in accounting standards; the timing and amount of earnings recognition related to the possible sale of real estate properties held for sale; delays in customer orders; the timing and amount of possible refinancings related to real estate properties; the level and volatility of interest rates; the potential loss of a significant customer; and the deterioration in the financial stability of an anchor tenant, significant subcontractor or significant customer.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     As of October 31, 2001, in connection with the contract to sell the Company’s shopping center in Englewood, Florida (See Note 5 to the Company’s Consolidated Financial Statements), approximately $12.3 million of related fixed rate debt would be repaid in the current fiscal year upon the completion of the sale. As of April 30, 2001, approximately $12.2 million of this debt was expected to mature in fiscal 2003.

     In October 2001, the maturity dates of the loans related to the Company’s shopping center in North Ft. Myers, Florida, and office building in Atlanta, Georgia, were extended to February 2003. Prior to that date, the Company plans to refinance the office building loan and sell the shopping center or refinance its loan.

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     There have been no other material changes since April 30, 2001.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     At the Company’s Annual Meeting, held on August 22, 2001, the shareholders voted upon and approved the Nominees for the Board of Directors. The voting was as follows:

                 
DIRECTORS   VOTES FOR   VOTES WITHHELD

 
 
Alan R. Abrams
    2,660,408       14,900  
David L. Abrams
    2,660,408       14,900  
Edward M. Abrams
    2,660,408       14,900  
J. Andrew Abrams
    2,660,408       14,900  
Paula Lawton Bevington
    2,660,308       15,000  
Gilbert L. Danielson
    2,660,408       14,900  
Melinda S. Garrett
    2,660,308       15,000  
Robert T. McWhinney, Jr.
    2,660,408       14,900  
B. Michael Merritt
    2,660,308       15,000  
L. Anthony Montag
    2,660,408       14,900  
Felker W. Ward, Jr.
    2,660,308       15,000  

PART II. OTHER INFORMATION

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a)   The Registrant has filed the following report on Form 8-K during the quarter ended October 31, 2001:
 
    Form 8-K filed October 30, 2001, to report Changes in Registrant’s Certifying Accountant.

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SIGNATURES

     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

     
    ABRAMS INDUSTRIES, INC.
              (Registrant)
 
     
 
Date: December 12, 2001   /s/ Alan R. Abrams

Alan R. Abrams
Chief Executive Officer
 
     
 
Date: December 12, 2001   /s/ Melinda S. Garrett

Melinda S. Garrett
Chief Financial Officer

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