##### 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 January 31, 2006
 Commission file number 0-10146
 ABRAMS INDUSTRIES, INC.
  Georgia
    
    58-0522129(State or other jurisdiction of
    
    (I.R.S. Employer identification No.)incorporation or organization)
 1945 The Exchange, Suite 300, Atlanta, GA 30339-2029
 (770) 953-0304
 N/A
  þ o
  Large
accelerated filer o
    
    Accelerated Filer o
    
    Non-accelerated filer þ
  o þ




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TABLE OF CONTENTS  PART I. FINANCIAL INFORMATIONITEM 1. FINANCIAL STATEMENTSITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKITEM 4. CONTROLS AND PROCEDURESPART II. OTHER INFORMATIONITEM 6. EXHIBITSSIGNATURESEX-31.(A) SECTION 302, CERTIFICATION OF THE CEOEX-31.(B) SECTION 302, CERTIFICATION OF THE CFOEX-32.(A) SECTION 906, CERTIFICATION OF THE CEOEX-32.(B) SECTION 906, CERTIFICATION OF THE CFO    Table of Contents  
  
 ITEM
1. FINANCIAL STATEMENTS
 ABRAMS INDUSTRIES, INC.
 January 31, 2006
    
    
    April 30, 2005ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    4,248,730
    
    
    $
    1,402,645Restricted cash
    
    
    
    
    
    
    8,272,399Short-term investment
    
    
    2,000,000
    
    
    
    2,000,000Receivables (Note 4)
    
    
    2,753,740
    
    
    
    2,721,051Less: Allowance for doubtful accounts
    
    
    (12,701
    )
    
    
    (69,801
    )Assets of discontinued operations (Note 5)
    
    
    30,393
    
    
    
    142,981Costs and earnings in excess of billings
    
    
    252,612
    
    
    
    312,781Deferred income taxes
    
    
    558,327
    
    
    
    552,953Note receivables
    
    
    767,691
    
    
    
    Other
    
    
    779,595
    
    
    
    851,953Total current assets
    
    
    11,378,387
    
    
    
    16,186,962INCOME-PRODUCING PROPERTIES, net
    
    
    20,810,317
    
    
    
    20,693,372PROPERTY AND EQUIPMENT, net
    
    
    897,556
    
    
    
    836,227ASSETS OF DISCONTINUED OPERATIONS (Note 5)
    
    
    
    
    
    
    4,174,138OTHER ASSETS:Real estate held for future development or sale
    
    
    3,087,710
    
    
    
    3,692,731Intangible assets, net (Note 8)
    
    
    3,041,143
    
    
    
    2,794,558Goodwill (Note 8)
    
    
    5,458,717
    
    
    
    5,458,717Notes
receivable (Note 9)
    
    
    3,516,306
    
    
    
    23,500Other
    
    
    3,642,532
    
    
    
    3,206,967$
    51,832,668
    
    
    $
    57,067,172LIABILITIES
AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Trade and subcontractors payables
    
    $
    1,117,634
    
    
    $
    885,824Accrued expenses
    
    
    1,753,539
    
    
    
    1,789,502Accrued incentive compensation
    
    
    
    
    
    
    1,089,369Liabilities of discontinued operations (Note 5)
    
    
    57,890
    
    
    
    326,188Billings in excess of costs and earnings
    
    
    388,795
    
    
    
    526,512Current maturities of long-term debt
    
    
    1,145,074
    
    
    
    1,119,365Total current liabilities
    
    
    4,462,932
    
    
    
    5,736,760DEFERRED INCOME TAXES
    
    
    3,331,289
    
    
    
    3,460,151OTHER LIABILITIES
    
    
    1,814,083
    
    
    
    1,602,243LIABILITIES OF DISCONTINUED OPERATIONS (Note 5)
    
    
    
    
    
    
    2,831,091MORTGAGE NOTES PAYABLE, less current maturities
    
    
    20,054,077
    
    
    
    20,736,098OTHER LONG-TERM DEBT, less current maturities
    
    
    1,490,500
    
    
    
    1,787,418Total liabilities
    
    
    31,152,881
    
    
    
    36,153,761COMMITMENTS AND CONTINGENCIES (Note 10)SHAREHOLDERS EQUITY:Common stock, $1 par value; 5,000,000 shares authorized;3,694,436 issued and 3,531,390 outstanding at January 31,
2006

(including 335,203 shares issued on October 11, 2005, as a stock
dividend),
3,357,601 issued and 3,209,113 outstanding at April 30, 2005
    
    
    3,694,436
    
    
    
    3,357,601Additional paid-in capital
    
    
    4,800,028
    
    
    
    3,067,982Deferred stock compensation
    
    
    (2,823
    )
    
    
    (14,162
    )Retained earnings (Note 7)
    
    
    12,962,028
    
    
    
    15,186,932Treasury stock, common shares;163,046 at January 31, 2006, and 148,488 at April 30, 2005
    
    
    (773,882
    )
    
    
    (684,942
    )Total shareholders equity
    
    
    20,679,787
    
    
    
    20,913,411$
    51,832,668
    
    
    $
    57,067,172
 See accompanying notes to consolidated financial statements.
 1




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##### Table of Contents



ABRAMS INDUSTRIES, INC.
 THIRD QUARTER ENDED
    
    
    FIRST NINE MONTHS ENDEDJANUARY 31,
    
    
    JANUARY 31,2006
    
    
    2005
    
    
    2006
    
    
    2005REVENUES:Energy and facilities solutions
    
    $
    971,079
    
    
    $
    839,864
    
    
    $
    2,865,031
    
    
    $
    2,670,159Energy services
    
    
    1,925,207
    
    
    
    2,478,420
    
    
    
    5,894,848
    
    
    
    6,434,818Rental income
    
    
    1,540,032
    
    
    
    1,415,138
    
    
    
    4,584,054
    
    
    
    6,778,2264,436,318
    
    
    
    4,733,422
    
    
    
    13,343,933
    
    
    
    15,883,203Interest
    
    
    42,953
    
    
    
    20,612
    
    
    
    141,044
    
    
    
    59,172Other
    
    
    64,959
    
    
    
    6,635
    
    
    
    318,830
    
    
    
    42,6994,544,230
    
    
    
    4,760,669
    
    
    
    13,803,807
    
    
    
    15,985,074COSTS AND EXPENSES:Energy and facilities solutions
    
    
    517,160
    
    
    
    466,942
    
    
    
    1,519,684
    
    
    
    1,500,700Energy services
    
    
    1,126,728
    
    
    
    1,668,661
    
    
    
    3,394,013
    
    
    
    4,528,388Rental property operating expenses, excluding interest
    
    
    1,014,922
    
    
    
    981,195
    
    
    
    2,978,542
    
    
    
    3,233,6482,658,810
    
    
    
    3,116,798
    
    
    
    7,892,239
    
    
    
    9,262,736Selling, general and administrativeEnergy and facilities solutions
    
    
    581,952
    
    
    
    621,510
    
    
    
    1,669,539
    
    
    
    1,720,473Energy services
    
    
    548,468
    
    
    
    494,414
    
    
    
    1,634,104
    
    
    
    1,616,105Real estate
    
    
    179,905
    
    
    
    185,473
    
    
    
    628,997
    
    
    
    1,128,780Parent
    
    
    759,749
    
    
    
    626,969
    
    
    
    2,395,344
    
    
    
    2,227,6912,070,074
    
    
    
    1,928,366
    
    
    
    6,327,984
    
    
    
    6,693,049Extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    218,071Interest costs incurred
    
    
    411,313
    
    
    
    431,947
    
    
    
    1,197,680
    
    
    
    1,388,5985,140,197
    
    
    
    5,477,111
    
    
    
    15,417,903
    
    
    
    17,562,454GAIN ON SALES OF REAL ESTATE, net of costs
    
    
    184,026
    
    
    
    191,126
    
    
    
    726,156
    
    
    
    191,126LOSS FROM
CONTINUING OPERATIONS

BEFORE INCOME TAXES
    
    
    (411,941
    )
    
    
    (525,316
    )
    
    
    (887,940
    )
    
    
    (1,386,254
    )INCOME TAX BENEFIT
    
    
    (156,538
    )
    
    
    (249,583
    )
    
    
    (337,417
    )
    
    
    (556,270
    )LOSS FROM CONTINUING OPERATIONS
    
    
    (255,403
    )
    
    
    (275,733
    )
    
    
    (550,523
    )
    
    
    (829,984
    )DISCONTINUED OPERATIONS:(Loss) earnings from discontinued operations, adjusted
for applicable income tax (benefit) expense of $(62,205),
$23,531, $(101,934), and $12,855, respectively
    
    
    (101,495
    )
    
    
    27,493
    
    
    
    (166,315
    )
    
    
    (2,370
    )Gain on sale of discontinued operations, adjusted
for applicable income tax expense of $521,230,
$0, $521,230, and $0, respectively
    
    
    850,428
    
    
    
    
    
    
    
    850,428
    
    
    
    EARNINGS
(LOSS) FROM DISCONTINUED OPERATIONS
    
    
    748,933
    
    
    
    27,493
    
    
    
    684,113
    
    
    
    (2,370
    )NET EARNINGS (LOSS)
    
    $
    493,530
    
    
    $
    (248,240
    )
    
    $
    133,590
    
    
    $
    (832,354
    )NET EARNINGS (LOSS) PER SHARE  BASIC AND DILUTED:From continuing operations
    
    $
    (.07
    )
    
    $
    (.08
    )
    
    $
    (.15
    )
    
    $
    (.24
    )From discontinued operations
    
    
    .21
    
    
    
    .01
    
    
    
    .19
    
    
    
    NET EARNINGS
(LOSS) PER SHARE  
BASIC AND DILUTED
    
    $
    .14
    
    
    $
    (.07
    )
    
    $
    .04
    
    
    $
    (.24
    )DIVIDENDS PER SHARE
    
    $
    .04
    
    
    $
    .04
    
    
    $
    .11
    
    
    $
    .25WEIGHTED
AVERAGE SHARES OUTSTANDING  
BASIC AND DILUTED
    
    
    3,531,409
    
    
    
    3,528,878
    
    
    
    3,531,003
    
    
    
    3,525,026
 See accompanying notes to consolidated financial statements.
 2




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##### Table of Contents



ABRAMS INDUSTRIES, INC.
 Additional
    
    DeferredCommon Stock
    
    Paid-In
    
    Stock
    
    Retained
    
    TreasuryShares
    
    Amount
    
    Capital
    
    Compensation
    
    Earnings
    
    Stock
    
    TotalBALANCES at April 30, 2003
    
    
    3,060,239
    
    
    
    3,060,239
    
    
    
    2,153,505
    
    
    
    (16,598
    )
    
    
    16,734,753
    
    
    
    (673,947
    )
    
    
    21,257,952Net loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,850,126
    )
    
    
    
    
    
    
    (1,850,126
    )Common stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common stock issued
    
    
    267,389
    
    
    
    267,389
    
    
    
    810,369
    
    
    
    (41,700
    )
    
    
    
    
    
    
    
    
    
    
    1,036,058Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    31,443
    
    
    
    
    
    
    
    (5,836
    )
    
    
    25,607Cash
dividends declared - $.16 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (471,964
    )
    
    
    
    
    
    
    (471,964
    )BALANCES at April 30, 2004
    
    
    3,327,628
    
    
    
    3,327,628
    
    
    
    2,963,874
    
    
    
    (26,855
    )
    
    
    14,412,663
    
    
    
    (679,783
    )
    
    
    19,997,527Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,800,358
    
    
    
    
    
    
    
    1,800,358Common stock acquired
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Common stock issued
    
    
    29,973
    
    
    
    29,973
    
    
    
    104,108
    
    
    
    (39,175
    )
    
    
    
    
    
    
    
    
    
    
    94,906Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51,868
    
    
    
    
    
    
    
    (5,159
    )
    
    
    46,709Cash dividends declared - $.32 per share
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,026,089
    )
    
    
    
    
    
    
    (1,026,089
    )BALANCES at April 30, 2005
    
    
    3,357,601
    
    
    
    3,357,601
    
    
    
    3,067,982
    
    
    
    (14,162
    )
    
    
    15,186,932
    
    
    
    (684,942
    )
    
    
    20,913,411Net earnings
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    133,590
    
    
    
    
    
    
    
    133,590Common stock issued
    
    
    900
    
    
    
    900
    
    
    
    3,555
    
    
    
    (4,455
    )
    
    
    
    
    
    
    
    
    
    
    Stock compensation expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,794
    
    
    
    
    
    
    
    (1,376
    )
    
    
    14,418Stock option exercise
    
    
    732
    
    
    
    732
    
    
    
    2,196
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,928Cash dividends declared -
$.11 per share (adjusted
for subsequent stock
dividend)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (384,560
    )
    
    
    
    
    
    
    (384,560
    )Stock dividend declared -
10% at market value
on date declared
    
    
    335,203
    
    
    
    335,203
    
    
    
    1,726,295
    
    
    
    
    
    
    
    (1,973,934
    )
    
    
    (87,564
    )
    
    
    BALANCES at January 31, 2006
    
    
    3,694,436
    
    
    $
    3,694,436
    
    
    $
    4,800,028
    
    
    $
    (2,823
    )
    
    $
    12,962,028
    
    
    $
    (773,882
    )
    
    $
    20,679,787
 See
accompanying notes to consolidated financial statements.
 3




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##### Table of Contents



ABRAMS INDUSTRIES, INC.
 NINE MONTHS ENDEDJANUARY 31,2006
    
    
    2005CONTINUING OPERATIONS:Cash flows from operating activities:Net earnings (loss)
    
    $
    133,590
    
    
    $
    (832,354
    )(Earnings) loss from discontinued operations, net of tax
    
    
    (684,113
    )
    
    
    2,370Adjustments to reconcile net loss to net
cash used in operating activities:Gains on
sale of real estate, net of costs
    
    
    (726,156
    )
    
    
    (191,126
    )Depreciation and amortization
    
    
    1,012,919
    
    
    
    1,336,339Deferred tax benefit
    
    
    (134,236
    )
    
    
    (613,868
    )(Recovery
of) provision for doubtful accounts, net
    
    
    (57,100
    )
    
    
    52,298Extinguishment of debt
    
    
    
    
    
    
    218,071Changes in assets and liabilities:Receivables
    
    
    (31,909
    )
    
    
    5,386Costs and earnings in excess of billings
    
    
    60,169
    
    
    
    140,034Note receivables
    
    
    (510,497
    )
    
    
    Other current assets
    
    
    87,427
    
    
    
    (216,497
    )Other assets
    
    
    (134,305
    )
    
    
    (323,355
    )Trade and subcontractors payable
    
    
    229,237
    
    
    
    283,671Accrued expenses
    
    
    (107,809
    )
    
    
    (169,650
    )Accrued incentive compensation
    
    
    (1,089,369
    )
    
    
    Billings in excess of costs and earnings
    
    
    (137,717
    )
    
    
    188,677Other liabilities
    
    
    (67,136
    )
    
    
    13,336Net cash used in operating activities
    
    
    (2,157,005
    )
    
    
    (106,668
    )Cash flows from investing activities:Release of restricted cash held in escrow
    
    
    8,272,399
    
    
    
    Proceeds from sale of real estate
    
    
    881,177
    
    
    
    515,000Proceeds from maturity of short-term investment
    
    
    
    
    
    
    200,000Additions to income-producing properties, net
    
    
    (640,715
    )
    
    
    (362,452
    )Additions to property and equipment, net
    
    
    (190,059
    )
    
    
    (450,482
    )Additions to intangible assets, net
    
    
    (649,754
    )
    
    
    (363,101
    )Acquisition, net of cash acquired
    
    
    
    
    
    
    (183,224
    )Net cash provided by (used in) investing activities
    
    
    7,673,048
    
    
    
    (644,259
    )Cash flows from financing activities:Debt restructuring
    
    
    
    
    
    
    (1,974,042
    )Debt principal repayments
    
    
    (932,448
    )
    
    
    (690,196
    )Deferred loan costs paid
    
    
    
    
    
    
    (50,000
    )Cash received on stock option exercise
    
    
    2,928
    
    
    
    Cash dividends
    
    
    (384,560
    )
    
    
    (897,773
    )Net cash used in financing activities
    
    
    (1,314,080
    )
    
    
    (3,612,011
    )DISCONTINUED OPERATIONS:Operating activities
    
    
    (554,697
    )
    
    
    1,739,325Investing activities
    
    
    2,048,866
    
    
    
    (71,745
    )Financing activities
    
    
    (2,850,047
    )
    
    
    (177,088
    )Net cash (used in) provided by discontinued operations
    
    
    (1,355,878
    )
    
    
    1,490,492Net increase (decrease) in cash and cash equivalents
    
    
    2,846,085
    
    
    
    (2,872,446
    )Cash and cash equivalents at beginning of period
    
    
    1,402,645
    
    
    
    6,379,679Cash and cash equivalents at end of period
    
    $
    4,248,730
    
    
    $
    3,507,233Supplemental disclosure of noncash financing activities:Issuance of common stock under Stock Award Plan
    
    $
    4,455
    
    
    $
    7,500
 See accompanying notes to consolidated financial statements.
 4




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##### Table of Contents





ABRAMS INDUSTRIES, INC.


NOTE 1. ORGANIZATION AND BUSINESS




NOTE 2. UNAUDITED STATEMENTS






NOTE 3. SIGNIFICANT ACCOUNTING POLICIES


Accounting for Stock-Based Compensation Accounting for Stock-Based Compensation  Transition and Disclosure




5



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##### Table of Contents



Quarter
    
    Nine MonthsEnded January 31,
    
    Ended January 31,2006
    
    2005
    
    2006
    
    2005Net earnings (loss), as reported
    
    $
    493,530
    
    
    $
    (248,240
    )
    
    $
    133,590
    
    
    $
    (832,354
    )Add: Stock-based compensation
    
    
    4,913
    
    
    
    13,887
    
    
    
    21,000
    
    
    
    48,568Deduct: Total stock-based compensation
expense as determined under fair value
based method for all awards, net of
related tax effects
    
    
    (20,184
    )
    
    
    (31,622
    )
    
    
    (78,869
    )
    
    
    (138,904
    )Add: Forfeitures, net of related tax effects
    
    
    
    
    
    
    1,128
    
    
    
    9,659
    
    
    
    47,663Pro forma net earnings (loss)
    
    $
    478,259
    
    
    $
    (264,847
    )
    
    $
    85,380
    
    
    $
    (875,027
    )Net earnings (loss) per share:Basic and diluted  as reported
    
    $
    0.14
    
    
    $
    (0.07
    )
    
    $
    0.04
    
    
    $
    (0.24
    )Basic and diluted  pro forma
    
    $
    0.14
    
    
    $
    (0.08
    )
    
    $
    0.02
    
    
    $
    (0.25
    )
   NOTE 4. RECEIVABLES
  NOTE 5. DISCONTINUED OPERATIONS
 Construction Segment
 Real Estate Sales of Income-Producing Properties  Accounting for the
Impairment or
 6




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##### Table of Contents

====================================================================================================================================

Disposal of Long-Lived Assets
  Third Quarter Ended
    
    Nine Months EndedJanuary 31,
    
    January 31,2006
    
    2005
    
    2006
    
    2005REVENUES:Construction
    
    $
    
    
    
    $
    
    
    
    $
    40
    
    
    $
    145,513Rental properties
    
    
    178,634
    
    
    
    552,472
    
    
    
    513,103
    
    
    
    1,513,655Total revenues
    
    
    178,634
    
    
    
    552,472
    
    
    
    513,143
    
    
    
    1,659,168COSTS AND EXPENSES:Construction cost and expenses
    
    
    
    
    
    
    
    
    
    
    (25,964
    )
    
    
    114,734Rental property operating expenses,
including depreciation
    
    
    111,708
    
    
    
    406,706
    
    
    
    386,058
    
    
    
    1,060,357Interest expense and prepayment fees
    
    
    201,380
    
    
    
    113,409
    
    
    
    319,983
    
    
    
    343,266Construction selling, general & administrative
    
    
    29,246
    
    
    
    (18,667
    )
    
    
    101,315
    
    
    
    130,326Total costs and expenses
    
    
    342,334
    
    
    
    501,448
    
    
    
    781,392
    
    
    
    1,648,683(Loss) earnings from discontinued operations
    
    
    (163,700
    )
    
    
    51,024
    
    
    
    (268,249
    )
    
    
    10,485Income tax (benefit) expense
    
    
    (62,205
    )
    
    
    23,531
    
    
    
    (101,934
    )
    
    
    12,855(Loss) earnings from discontinued operations, net of tax
    
    
    (101,495
    )
    
    
    27,493
    
    
    
    (166,315
    )
    
    
    (2,370
    )Gain on sale from real estate
    
    
    1,371,658
    
    
    
    
    
    
    
    1,371,658
    
    
    
    Income tax expense
    
    
    521,230
    
    
    
    
    
    
    
    521,230
    
    
    
    Gain on sale from real estate, net of tax
    
    
    850,428
    
    
    
    
    
    
    
    850,428
    
    
    
    Earnings (loss) from discontinued operations, net of tax
    
    $
    748,933
    
    
    $
    27,493
    
    
    $
    684,113
    
    
    $
    (2,370
    )
 7




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##### Table of Contents



Balances atAssets of
discontinued operations
    
    January 31, 2006
    
    April 30, 2005Receivables, net
    
    $
    
    

    
    $
    101,257Other current assets
    
    
    30,393
    
    
    
    41,724Income-producing properties
    
    
    
    
    
    
    3,720,273Intangible assets
    
    
    
    
    
    
    369,714Other assets
    
    
    
    
    
    
    84,151$
    30,393
    
    
    $
    4,317,119
 Balances atLiabilities
of discontinued operations
    
    January 31, 2006
    
    April 30, 2005Trade and subcontractors payables
    
    $
    26,721
    
    
    $
    76,723Accrued expenses
    
    
    31,169
    
    
    
    194,123Current maturities of long-term debt
    
    
    
    
    
    
    55,342Mortgage notes payable
    
    
    
    
    
    
    2,831,091$
    57,890
    
    
    $
    3,157,279
 NOTE 6. OPERATING SEGMENTS
  8




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##### Table of Contents



Energy andFor the Quarter Ended January 31, 2006
    
    Facilities Solutions
    
    Energy Services
    
    Real Estate
    
    Parent
    
    Eliminations
    
    Consolidated(1)Revenues from unaffiliated
customers
    
    $
    971,079
    
    
    $
    1,925,207
    
    
    $
    1,540,032
    
    
    $
    
    
    
    $
    
    
    
    $
    4,436,318Interest and other income
    
    
    205
    
    
    
    24,340
    
    
    
    254,811
    
    
    
    10,948
    
    
    
    (182,392
    )
    
    
    107,912Intersegment revenue
    
    
    
    
    
    
    
    
    
    
    134,613
    
    
    
    
    
    
    
    (134,613
    )
    
    
    Total revenues from
continuing operations
    
    $
    971,284
    
    
    $
    1,949,547
    
    
    $
    1,929,456
    
    
    $
    10,948
    
    
    $
    (317,005
    )
    
    $
    4,544,230Net earnings (loss)(2)
    
    $
    (147,771
    )
    
    $
    76,852
    
    
    $
    1,106,748
    
    
    $
    (547,322
    )
    
    $
    3,497
    
    
    $
    492,004
 Energy and
    
    
    
    
    
    Real EstateFor the Quarter Ended January 31, 2005
    
    Facilities Solutions
    
    Energy Services
    
    (1)
    
    Parent
    
    Eliminations
    
    ConsolidatedRevenues from unaffiliated
customers
    
    $
    839,864
    
    
    $
    2,478,420
    
    
    $
    1,415,138
    
    
    $
    
    
    
    $
    
    
    
    $
    4,733,422Interest and other income
    
    
    
    
    
    
    (8,100
    )
    
    
    88,008
    
    
    
    6,717
    
    
    
    (59,378
    )
    
    
    27,247Intersegment revenue
    
    
    14,867
    
    
    
    
    
    
    
    113,599
    
    
    
    
    
    
    
    (128,466
    )
    
    
    Total revenues from
continuing operations
    
    $
    854,731
    
    
    $
    2,470,320
    
    
    $
    1,616,745
    
    
    $
    6,717
    
    
    $
    (187,844
    )
    
    $
    4,760,669Net (loss) earnings (2)
    
    $
    (192,317
    )
    
    $
    109,093
    
    
    $
    266,944
    
    
    $
    (550,941
    )
    
    $
    111,550
    
    
    $
    (255,671
    )
 Energy and
    
    
    
    
    
    Real EstateFor the Nine Months Ended January 31, 2006
    
    Facilities Solutions
    
    
    Energy Services
    
    
    (1)
    
    Parent
    
    Eliminations
    
    ConsolidatedRevenues from unaffiliated
customers
    
    $
    2,865,031
    
    
    $
    5,894,848
    
    
    $
    4,584,054
    
    
    $
    
    
    
    $
    
    
    
    $
    13,343,933Interest and other income
    
    
    1,938
    
    
    
    33,870
    
    
    
    827,428
    
    
    
    24,588
    
    
    
    (427,950
    )
    
    
    459,874Intersegment revenue
    
    
    
    
    
    
    
    
    
    
    396,506
    
    
    
    
    
    
    
    (396,506
    )
    
    
    Total revenues from
continuing operations
    
    $
    2,866,969
    
    
    $
    5,928,718
    
    
    $
    5,807,988
    
    
    $
    24,588
    
    
    $
    (824,456
    )
    
    $
    13,803,807Net earnings (loss)(2)
    
    $
    (405,211
    )
    
    $
    313,081
    
    
    $
    1,901,083
    
    
    $
    (1,631,518
    )
    
    $
    (3,838
    )
    
    $
    173,597
 Energy and
    
    
    
    
    
    Real EstateFor the Nine Months Ended January 31, 2005
    
    Facilities Solutions
    
    Energy Services
    
    (1)
    
    Parent
    
    Eliminations
    
    ConsolidatedRevenues from unaffiliated
customers
    
    $
    2,670,159
    
    
    $
    6,434,818
    
    
    $
    6,778,226
    
    
    $
    
    
    
    $
    
    
    
    $
    15,883,203Interest and other income
    
    
    
    
    
    
    3,025
    
    
    
    236,415
    
    
    
    21,923
    
    
    
    (159,492
    )
    
    
    101,871Intersegment revenue
    
    
    14,867
    
    
    
    
    
    
    
    371,352
    
    
    
    
    
    
    
    (386,219
    )
    
    
    Total revenues from
continuing operations
    
    $
    2,685,026
    
    
    $
    6,437,843
    
    
    $
    7,385,993
    
    
    $
    21,923
    
    
    $
    (545,711
    )
    
    $
    15,985,074Net (loss) earnings (2)
    
    $
    (410,899
    )
    
    $
    (50,897
    )
    
    $
    1,291,694
    
    
    $
    (1,854,624
    )
    
    $
    262,962
    
    
    $
    (761,764
    )
 9




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##### Table of Contents



(1)
    
    The Company is in the business of creating long-term value by periodically realizing gains
through the sale of income-producing properties. The Real Estate Segments net earnings
include results from income-producing properties that are reflected as discontinued
operations pursuant to SFAS 144, including gains on the sale of those properties.(2)
    
    The Company has changed its measurement of profit or loss previously disclosed from net
earnings (loss) from continuing operations before income taxes to net earnings (loss). The
chief executive officer uses this measurement to analyze each Segments operating
performance.
  Quarter Ended
    
    
    Nine Months EndedJanuary 31,
    
    
    January 31,2006
    
    
    2005
    
    
    2006
    
    
    2005Consolidated Segment net earnings (loss)
    
    $
    492,004
    
    
    $
    (255,671
    )
    
    $
    173,597
    
    
    $
    (761,764
    )Discontinued Construction Segment net earnings (loss)
    
    
    1,526
    
    
    
    80,716
    
    
    
    (40,007
    )
    
    
    (70,590
    )Eliminations related to Construction Segment
    
    
    
    
    
    
    (73,285
    )
    
    
    
    
    
    
    Consolidated net earnings (loss)
    
    $
    493,530
    
    
    $
    (248,240
    )
    
    $
    133,590
    
    
    $
    (832,354
    )
 NOTE 7. EARNINGS (LOSS) PER SHARE
   10




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NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS
  Gross Carrying
    
    
    AccumulatedAmount
    
    
    AmortizationAmortized intangible assets:Proprietary facility management
software applications
    
    $
    2,253,051
    
    
    $
    774,614Computer software
    
    
    415,085
    
    
    
    391,719Real estate lease costs
    
    
    1,184,633
    
    
    
    715,443Customer relationships
    
    
    218,000
    
    
    
    90,833Deferred loan costs
    
    
    751,547
    
    
    
    535,984Other
    
    
    55,608
    
    
    
    36,895$
    4,877,924
    
    
    $
    2,545,488Unamortized intangible assets:Trademark
    
    $
    708,707
    
    
    $
    Goodwill
    
    $
    5,458,717
    
    
    $
    
 Aggregate amortization expense for all amortized intangible assetsFor the three months ended January 31, 2006
    
    $
    145,068For the nine months ended January 31, 2006
    
    
    394,833For the three months ended January 31, 2005
    
    
    136,817For the nine months ended January 31, 2005
    
    
    408,652
  NOTE 9. DISPOSITIONS
    11




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##### Table of Contents



NOTE 10. COMMITMENTS AND CONTINGENCIES
  NOTE 11. SUBSEQUENT EVENT
   12




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##### Table of Contents



ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
     Results of operations of the third quarter and first nine months of fiscal 2006, compared to
the third quarter and first nine months of fiscal 2005
    CHART A
 Third Quarter Ended
    
    
    Amount
    
    
    Percent
    
    
    Nine Months Ended
    
    
    Amount
    
    
    PercentJanuary 31,
    
    
    Increase
    
    
    Increase
    
    
    January 31,
    
    
    Increase
    
    
    Increase2006
    
    
    2005
    
    
    (Decrease)
    
    
    (Decrease)
    
    
    2006
    
    
    2005
    
    
    (Decrease)
    
    
    (Decrease)Energy and Facilities
Solutions(1)
    
    $
    971
    
    
    $
    840
    
    
    $
    131
    
    
    
    16
    
    
    $
    2,865
    
    
    $
    2,670
    
    
    $
    195
    
    
    
    7Energy Services (2)
    
    
    1,925
    
    
    
    2,478
    
    
    
    (553
    )
    
    
    (22
    )
    
    
    5,895
    
    
    
    6,435
    
    
    
    (540
    )
    
    
    (8
    )Real Estate (3)
    
    
    1,540
    
    
    
    1,415
    
    
    
    125
    
    
    
    9
    
    
    
    4,584
    
    
    
    6,778
    
    
    
    (2,194
    )
    
    
    (32
    )$
    4,436
    
    
    $
    4,733
    
    
    $
    (297
    )
    
    
    (6
    )
    
    $
    13,344
    
    
    $
    15,883
    
    
    $
    (2,539
    )
    
    
    (16
    )
 13




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##### Table of Contents



NOTES TO CHART A
 (1)
    
    Energy and Facilities Solutions revenues from continuing operations increased $131,000 or
16% for the third quarter of fiscal 2006, and $195,000 or 7% for the first nine months of
fiscal 2006, compared to the same periods in fiscal 2005, primarily due to:
 (a)
    
    an increase in revenues related to energy engineering services of
approximately $102,000 and $93,000, in the third quarter of fiscal 2006 and for the
first nine months of fiscal 2006, respectively; and(b)
    
    an increase in revenues related to the installation of the Companys
proprietary facility management software applications of approximately $63,000 and
$151,000, in the third quarter and for the first nine months of fiscal 2006,
respectively.
 (2)
    
    Energy Services revenues from continuing operations decreased $553,000 or 22% for the third
quarter of fiscal 2006, compared to the same period in fiscal 2005, because the fiscal 2005
period included revenues from two large contracts in the education and government sector.Energy Services revenues from continuing operations decreased $540,000 or 8% for the first
nine months of fiscal 2006, compared to the same period in fiscal 2005, primarily due to:
 (a)
    
    revenues from two large contracts in fiscal 2005 in the education and
government sector;
  (b)
    
    the recognition of approximately $660,000 in revenues in the first
quarter of fiscal 2006 from a consulting services contract that was substantially
performed in prior periods and did not have any associated costs and expenses (See
Chart B).
 (3)
    
    Real estate revenues from continuing operations increased $125,000 or 9% for the third
quarter of fiscal 2006, compared to the same period in fiscal 2005, primarily due to an
increase in rental income in fiscal 2006 related to increased occupancy.Real estate revenues from continuing operations decreased $2,194,000 or 32% for the first
nine months of fiscal 2006, compared to the same period in fiscal 2005, primarily due to:
 (a)
    
    an increase in rental income in fiscal 2006 of approximately $202,000 related to increased occupancy;
  (b)
    
    one-time rental revenues of $2,250,000 in fiscal 2005 from the
termination of the Companys leaseback interest in a shopping center in Minneapolis,
Minnesota, in September 2004; whereas there were no rental revenues from a leaseback
termination in the first nine months of fiscal 2006; and
 (c)
    
    a decrease in leaseback income of approximately $141,000 related to the
leaseback termination mentioned in (b) above.
 14




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##### Table of Contents



January 31,2006
    
    
    2005Energy and Facilities Solutions (a)
    
    $
    3,108,000
    
    
    $
    2,634,000Energy Services (b)
    
    
    2,299,000
    
    
    
    4,439,000Real Estate (c)
    
    
    5,920,000
    
    
    
    6,009,000Less: Intersegment eliminations
    
    
    (544,000
    )
    
    
    (528,000
    )Total Backlog
    
    $
    10,783,000
    
    
    $
    12,554,000
 
 (a)
    
    The increase in backlog is primarily due to an increase in energy engineering service
contracts. Backlog includes contracts that can be cancelled with less than one years notice,
and assumes cancellations provisions will not be invoked. The cancellation rate for such
contracts in the previous twelve months was approximately 9%.
 (b)
    
    The decrease in backlog is primarily due to one large order included in the prior period in
the retail sector and one smaller contract in the prior period in the education and government
sector.
 (c)
    
    Revenues from any contract to sell real estate in which the prospective buyer is not
materially at risk are not included in backlog. As of January 31, 2006, backlog does not
include a contract to sell, at a gain, a tract of land in North Fort
Myers, Florida, and a contract to sell, at a gain, the Companys
leaseback interest in a shopping center located in Bayonet Point,
Florida. See Note
11 to the consolidated financial statements.
 
   CHART B
 
 Percent of Segment
    
    
    
    
    
    
    
    
    
    
    Percent of SegmentRevenues for
    
    
    
    
    
    
    
    
    
    
    Revenues forThird Quarter Ended
    
    
    Third Quarter Ended
    
    
    Nine Months Ended
    
    
    Nine Months EndedJanuary 31,
    
    
    January 31,
    
    
    January 31,
    
    
    January 31,2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Energy and Facilities
Solutions (1)
    
    $
    517
    
    
    $
    467
    
    
    
    53
    
    
    
    56
    
    
    $
    1,520
    
    
    $
    1,501
    
    
    
    53
    
    
    
    56Energy Services (2)
    
    
    1,127
    
    
    
    1,669
    
    
    
    59
    
    
    
    67
    
    
    
    3,394
    
    
    
    4,528
    
    
    
    58
    
    
    
    70Real Estate (3)
    
    
    1,015
    
    
    
    981
    
    
    
    66
    
    
    
    69
    
    
    
    2,978
    
    
    
    3,234
    
    
    
    65
    
    
    
    48$
    2,659
    
    
    $
    3,117
    
    
    
    60
    
    
    
    66
    
    
    $
    7,892
    
    
    $
    9,263
    
    
    
    59
    
    
    
    58
 15




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##### Table of Contents



NOTES TO CHART B
 (1)
    
    The change in the percentage of costs and expenses applicable to revenues from continuing
operations of the Energy and Facilities Solutions Segment for all periods presented is
primarily due to:
 (a)
    
    changes in the mix of services and products; and(b)
    
    improved operational efficiencies related to energy engineering services.
 (2)
    
    On a dollar basis, costs and expenses from continuing operations decreased $542,000 or 32%
for the third quarter of fiscal 2006 and $1,134,000 or 25% for the first nine months of fiscal
2006, compared to the same periods of fiscal 2005, primarily due to a corresponding decrease
in installation contract revenues.On a percentage basis, costs and expenses decreased for the third quarter of fiscal 2006,
compared to the same period of fiscal 2005, primarily due to improved operational efficiencies
on lighting installations.On a percentage basis, costs and expenses decreased for the first nine months of fiscal 2006,
compared to the same period of fiscal 2005, primarily due to:
 (a)
    
    improved operational efficiencies on lighting installations; and(b)
    
    the recognition of revenue from a consulting services contract in the
first quarter of fiscal 2006, that had no associated cost and expense in the first
nine months of fiscal 2006.
 (3)
    
    On a dollar basis, cost and expenses from continuing operations decreased $256,000 or 8% for
the first nine months of fiscal 2006, compared to the same period of fiscal 2005, primarily
due to:
 (a)
    
    the absence of lease costs of $103,000 in the first nine months of fiscal
2006 related to the termination of the Companys leaseback interest in a shopping center
located in Minneapolis, Minnesota, in September 2004; and(b)
    
    a decrease in depreciation expense of approximately $99,000 related to
one of the owned shopping centers being fully depreciated in fiscal 2006.
 On a percentage basis, costs and expenses from continuing operations are higher for the first
nine months of fiscal 2006, primarily due to the absence of the rental revenues of $2,250,000
that was included in last years first nine months of fiscal 2005, that resulted from the
termination of the Companys leaseback interest in the shopping center in Minneapolis,
Minnesota, in the second quarter ended October 31, 2004; the cost of the sale was $42,115.
 
  16




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##### Table of Contents



CHART C
 
 Percent of Segment
    
    
    
    
    
    
    
    
    
    
    Percent of SegmentRevenues for
    
    
    
    
    
    
    
    
    
    
    Revenues forThird Quarter Ended
    
    
    Third Quarter Ended
    
    
    Nine Months Ended
    
    
    Nine Months EndedJanuary 31,
    
    
    January 31,
    
    
    January 31,
    
    
    January 31,2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005
    
    
    2006
    
    
    2005Energy and Facilities
Solutions
    
    $
    582
    
    
    $
    622
    
    
    
    60
    
    
    
    74
    
    
    $
    1,670
    
    
    $
    1,720
    
    
    
    58
    
    
    
    64Energy Services
    
    
    548
    
    
    
    494
    
    
    
    28
    
    
    
    20
    
    
    
    1,634
    
    
    
    1,616
    
    
    
    28
    
    
    
    25Real Estate (1)
    
    
    180
    
    
    
    185
    
    
    
    12
    
    
    
    13
    
    
    
    629
    
    
    
    1,129
    
    
    
    14
    
    
    
    17Parent
    
    
    760
    
    
    
    627
    
    
    
    17
    
    
    
    13
    
    
    
    2,395
    
    
    
    2,228
    
    
    
    18
    
    
    
    14$
    2,070
    
    
    $
    1,928
    
    
    
    47
    
    
    
    41
    
    
    $
    6,328
    
    
    $
    6,693
    
    
    
    47
    
    
    
    42
 NOTES TO CHART C
 (1)
    
    On a dollar and percentage basis, SG&A expenses from continuing operations are $500,000 or
44% lower for the first nine months of fiscal 2006, compared to the same period of fiscal
2005, primarily due to the legal costs and a net settlement cost that were expensed in fiscal
2005, due to the conclusion of arbitration proceedings.
 Gain on sales of real estate, net of costs
    Liquidity and capital resources
  (a)
    
    an increase in note receivables of approximately $510,000 primarily
related to services performed on a consulting contract;(b)
    
    cash payments of $1,089,000 related to the incentive compensation
generated by the successful achievement of Company-wide earnings and performance
goals in fiscal 2005; and(c)
    
    current year losses from continuing operations
 17




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##### Table of Contents



(a)
    
    the release of approximately $8,272,000 previously held in escrow for the
purpose of purchasing a replacement property as part of an Internal Revenue Code
Section 1031 federal tax deferred exchange for the Companys former shopping center
located in Cincinnati, Ohio, which was sold in February 2005, and the Companys
former shopping center located in Jackson, Michigan, which was sold in April 2005,
as the Company did not purchase replacement properties;(b)
    
    proceeds of approximately $881,000 from the sale of two outparcels located in North
Fort Myers, Florida, that were sold at gains in October 2005, and the sale of a 4.7
acre tract of land located in Louisville, Kentucky, that was sold at a gain in
December 2005;
  (c)
    
    additions to income-producing properties of approximately $641,000 primarily related to
tenant and building improvements; and(d)
    
    additions to intangible assets of approximately $650,000 primarily related to software
development costs for one of the Companys proprietary software solutions.
     Cautionary statement regarding forward-looking statements
  18




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Critical Accounting Policies
  Revenue
recognition
   19




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Income-producing properties and property and equipment
     Valuation of goodwill and other intangible assets
  20




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Income
taxes
  Discontinued
Operations
 Accounting for the Impairment or Disposal of Long- Lived Assets,
 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
  
 ITEM 4. CONTROLS AND PROCEDURES
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ITEM 6. EXHIBITS
 31(a)
    
    Certification of Chief Executive Officer, pursuant to Rules 13a-14(a)/15d-14(a)31(b)
    
    Certification of Chief Financial Officer, pursuant to
Rules 13a-14(a)/15d-14(a)32(a)
    
    Certification of Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes Oxley Act 200232(b)
    
    Certification of Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted
Pursuant to Section 906 of the Sarbanes Oxley Act 2002
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ABRAMS INDUSTRIES, INC.(Registrant)Date:
March 15,
2006
    /s/ Alan R. AbramsAlan R. AbramsChief Executive Officer Date:
March 15,
2006
    /s/ Mark J. ThomasMark J. ThomasChief Financial Officer 23