##### 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, 2005
 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
  o 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSITEM 5. OTHER INFORMATIONITEM 6. EXHIBITSSIGNATURESEX-10.(I) SUMMARY DESCRIPTION OF ANNUAL INCENTIVE BONUS PLANEX-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.
 October 31, 2005
    
    April 30, 2005ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    $
    6,634,651
    
    
    $
    1,402,645Restricted cash
    
    
    
    
    
    
    8,272,399Short-term investment
    
    
    2,000,000
    
    
    
    2,000,000Receivables (Note 4)
    
    
    2,010,550
    
    
    
    2,721,831Less: Allowance for doubtful accounts
    
    
    (19,760
    )
    
    
    (69,801
    )Assets of discontinued operations (Note 5)
    
    
    3,155
    
    
    
    103,632Costs and earnings in excess of billings
    
    
    266,359
    
    
    
    312,781Deferred income taxes
    
    
    552,953
    
    
    
    552,953Note receivables
    
    
    882,267
    
    
    
    23,500Other
    
    
    1,047,490
    
    
    
    867,022Total current assets
    
    
    13,377,665
    
    
    
    16,186,962INCOME-PRODUCING PROPERTIES, net
    
    
    24,296,167
    
    
    
    24,413,645PROPERTY AND EQUIPMENT, net
    
    
    893,399
    
    
    
    836,227OTHER ASSETS:Real estate held for future development or sale
    
    
    3,167,721
    
    
    
    3,692,731Intangible assets, net (Note 8)
    
    
    3,371,747
    
    
    
    3,164,272Goodwill (Note 8)
    
    
    5,458,717
    
    
    
    5,458,717Other
    
    
    3,727,443
    
    
    
    3,314,618$
    54,292,859
    
    
    $
    57,067,172LIABILITIES AND SHAREHOLDERS EQUITYCURRENT LIABILITIES:Trade and subcontractors payables
    
    $
    961,853
    
    
    $
    888,397Accrued expenses
    
    
    1,499,727
    
    
    
    1,861,348Accrued incentive compensation
    
    
    456,402
    
    
    
    1,089,369Liabilities of discontinued operations (Note 5)
    
    
    97,289
    
    
    
    196,427Billings in excess of costs and earnings
    
    
    191,248
    
    
    
    526,512Current maturities of long-term debt
    
    
    1,188,133
    
    
    
    1,174,707Total current liabilities
    
    
    4,394,652
    
    
    
    5,736,760DEFERRED INCOME TAXES
    
    
    3,177,700
    
    
    
    3,460,151OTHER LIABILITIES
    
    
    1,663,373
    
    
    
    1,602,243MORTGAGE NOTES PAYABLE, less current maturities
    
    
    23,083,209
    
    
    
    23,567,189OTHER LONG-TERM DEBT, less current maturities
    
    
    1,663,250
    
    
    
    1,787,418Total liabilities
    
    
    33,982,184
    
    
    
    36,153,761COMMITMENTS AND CONTINGENCIES (Note 10)SHAREHOLDERS EQUITY:Common stock, $1 par value; 5,000,000 shares authorized;
3,694,436 issued and 3,545,738 outstanding at
October 31, 2005
(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
    
    
    (6,048
    )
    
    
    (14,162
    )Retained earnings
    
    
    12,508,071
    
    
    
    15,186,932Treasury stock, common shares;148,698 at October 31, 2005, and 148,488 at April
30, 2005
    
    
    (685,812
    )
    
    
    (684,942
    )Total shareholders equity
    
    
    20,310,675
    
    
    
    20,913,411$
    54,292,859
    
    
    $
    57,067,172
 See accompanying notes to consolidated financial statements.
 1




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##### Table of Contents



ABRAMS INDUSTRIES, INC.
 SECOND QUARTER ENDED
    
    
    FIRST SIX MONTHS ENDEDOCTOBER 30,
    
    
    OCTOBER 30,2005
    
    
    2004
    
    
    2005
    
    
    2004REVENUES:Energy and facilities solutions
    
    $
    969,604
    
    
    $
    940,084
    
    
    $
    1,893,952
    
    
    $
    1,830,295Energy services
    
    
    1,874,731
    
    
    
    1,993,530
    
    
    
    3,969,641
    
    
    
    3,956,398Rental income
    
    
    1,685,444
    
    
    
    3,932,511
    
    
    
    3,379,406
    
    
    
    5,670,841Real estate sales
    
    
    1,154,254
    
    
    
    
    
    
    
    1,154,254
    
    
    
    5,684,033
    
    
    
    6,866,125
    
    
    
    10,397,253
    
    
    
    11,457,534Interest
    
    
    51,928
    
    
    
    9,810
    
    
    
    98,152
    
    
    
    38,628Other
    
    
    240,960
    
    
    
    30,057
    
    
    
    254,021
    
    
    
    36,0645,976,921
    
    
    
    6,905,992
    
    
    
    10,749,426
    
    
    
    11,532,226COSTS AND EXPENSES:Energy and facilities solutions
    
    
    492,253
    
    
    
    552,869
    
    
    
    1,002,524
    
    
    
    1,033,758Energy services
    
    
    1,278,681
    
    
    
    1,378,490
    
    
    
    2,267,285
    
    
    
    2,859,727Rental property operating expenses, excluding interest
    
    
    1,135,412
    
    
    
    1,275,168
    
    
    
    2,228,264
    
    
    
    2,549,948Cost of real estate sold
    
    
    612,124
    
    
    
    
    
    
    
    612,124
    
    
    
    3,518,470
    
    
    
    3,206,527
    
    
    
    6,110,197
    
    
    
    6,443,433Selling, general and administrativeEnergy and facilities solutions
    
    
    541,614
    
    
    
    460,031
    
    
    
    1,087,587
    
    
    
    1,098,963Energy services
    
    
    530,741
    
    
    
    481,658
    
    
    
    1,085,636
    
    
    
    1,121,691Real estate
    
    
    186,873
    
    
    
    583,218
    
    
    
    452,157
    
    
    
    945,808Parent
    
    
    736,043
    
    
    
    904,294
    
    
    
    1,635,595
    
    
    
    1,600,7221,995,271
    
    
    
    2,429,201
    
    
    
    4,260,975
    
    
    
    4,767,184Extinguishment of debt
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    218,071Interest costs incurred
    
    
    472,865
    
    
    
    499,475
    
    
    
    904,970
    
    
    
    1,077,3925,986,606
    
    
    
    6,135,203
    
    
    
    11,276,142
    
    
    
    12,506,080(LOSS) EARNINGS BEFORE INCOME TAXES FROM
CONTINUING OPERATIONS
    
    
    (9,685
    )
    
    
    770,789
    
    
    
    (526,716
    )
    
    
    (973,854
    )INCOME TAX (BENEFIT) EXPENSE
    
    
    (3,680
    )
    
    
    310,757
    
    
    
    (200,152
    )
    
    
    (349,595
    )(LOSS) EARNINGS FROM CONTINUING OPERATIONS
    
    
    (6,005
    )
    
    
    460,032
    
    
    
    (326,564
    )
    
    
    (624,259
    )DISCONTINUED OPERATIONS:(Loss) earnings from discontinued operations, adjusted
for applicable income tax (benefit) expense of $(10,362),
$34,881, $(20,456), and $32,232, respectively
    
    
    (16,909
    )
    
    
    61,308
    
    
    
    (33,376
    )
    
    
    40,145NET (LOSS) EARNINGS
    
    $
    (22,914
    )
    
    $
    521,340
    
    
    $
    (359,940
    )
    
    $
    (584,114
    )NET (LOSS) EARNINGS PER SHARE  BASIC AND DILUTED:From continuing operations
    
    $
    (.00
    )
    
    $
    .13
    
    
    $
    (.09
    )
    
    $
    (.18
    )From discontinued operations
    
    
    (.01
    )
    
    
    .02
    
    
    
    (.01
    )
    
    
    .01NET (LOSS) EARNINGS PER SHARE  BASIC AND DILUTED
    
    $
    (.01
    )
    
    $
    .15
    
    
    $
    (.10
    )
    
    $
    (.17
    )DIVIDENDS PER SHARE
    
    $
    .04
    
    
    $
    .04
    
    
    $
    .07
    
    
    $
    .22WEIGHTED AVERAGE SHARES OUTSTANDING  BASIC AND DILUTED
    
    
    3,545,418
    
    
    
    3,541,913
    
    
    
    3,545,049
    
    
    
    3,537,356
 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 loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (359,940
    )
    
    
    
    
    
    
    (359,940
    )Common stock issued
    
    
    900
    
    
    
    900
    
    
    
    3,555
    
    
    
    (4,455
    )
    
    
    
    
    
    
    
    
    
    
    Stock compensation
expense
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,569
    
    
    
    
    
    
    
    (870
    )
    
    
    11,699Stock option exercise
    
    
    732
    
    
    
    732
    
    
    
    2,196
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,928Cash dividends
declared 
$.0726 per share
(adjusted
for subsequent stock
dividend)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (257,423
    )
    
    
    
    
    
    
    (257,423
    )Stock dividend
declared 
10% at market value
on date declared
    
    
    335,203
    
    
    
    335,203
    
    
    
    1,726,295
    
    
    
    
    
    
    
    (2,061,498
    )
    
    
    
    
    
    
    BALANCES at October 31, 2005
    
    
    3,694,436
    
    
    $
    3,694,436
    
    
    $
    4,800,028
    
    
    $
    (6,048
    )
    
    $
    12,508,071
    
    
    $
    (685,812
    )
    
    $
    20,310,675
 See accompanying notes to consolidated financial statements.
 3




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##### Table of Contents



ABRAMS INDUSTRIES, INC.
 SIX MONTHS ENDEDOCTOBER 30,2005
    
    
    2004CONTINUING OPERATIONS:Cash flows from operating activities:Net loss
    
    $
    (359,940
    )
    
    $
    (584,114
    )Loss (earnings) from discontinued operations, net of tax
    
    
    33,376
    
    
    
    (40,145
    )Adjustments to reconcile net loss to net
cash (used in) provided by operating activities:Gain on sale of real estate
    
    
    (542,130
    )
    
    
    Depreciation and amortization
    
    
    790,935
    
    
    
    1,011,336Deferred tax benefit
    
    
    (282,451
    )
    
    
    (333,325
    )(Recovery of) provison for doubtful accounts, net
    
    
    (50,041
    )
    
    
    9,190Extinguishment of debt
    
    
    
    
    
    
    218,071Changes in assets and liabilities:Receivables
    
    
    711,281
    
    
    
    (593,466
    )Costs and earnings in excess of billings
    
    
    46,422
    
    
    
    232,306Note receivables
    
    
    (623,031
    )
    
    
    Other current assets
    
    
    (180,468
    )
    
    
    (284,356
    )Other assets
    
    
    (198,561
    )
    
    
    (303,504
    )Trade and subcontractors payable
    
    
    73,456
    
    
    
    630,058Accrued expenses
    
    
    (361,621
    )
    
    
    (187,204
    )Accrued incentive compensation
    
    
    (632,967
    )
    
    
    Billings in excess of costs and earnings
    
    
    (335,264
    )
    
    
    711,124Other liabilities
    
    
    61,130
    
    
    
    180,736Net cash (used in) provided by operating activities
    
    
    (1,849,874
    )
    
    
    666,707Cash flows from investing activities:Release of restricted cash held in escrow
    
    
    8,272,399
    
    
    
    Proceeds from sale of real estate
    
    
    617,140
    
    
    
    Additions to income-producing properties, net
    
    
    (355,897
    )
    
    
    (205,447
    )Additions to property and equipment, net
    
    
    (148,158
    )
    
    
    (400,581
    )Additions to intangible assets, net
    
    
    (474,143
    )
    
    
    (253,955
    )Acquisition, net of cash acquired
    
    
    
    
    
    
    (178,315
    )Net cash provided by (used in) investing activities
    
    
    7,911,341
    
    
    
    (1,038,298
    )Cash flows from financing activities:Debt restructuring
    
    
    
    
    
    
    (1,974,042
    )Debt repayments
    
    
    (542,929
    )
    
    
    (478,212
    )Deferred loan costs paid
    
    
    
    
    
    
    (50,000
    )Cash received on stock option exercise
    
    
    2,928
    
    
    
    Cash dividends
    
    
    (257,423
    )
    
    
    (769,456
    )Net cash used in financing activities
    
    
    (797,424
    )
    
    
    (3,271,710
    )DISCONTINUED OPERATIONS:Operating activities
    
    
    (32,037
    )
    
    
    1,764,506Investing activities
    
    
    
    
    
    
    (47,472
    )Financing activities
    
    
    
    
    
    
    (89,156
    )Net cash (used in) provided by discontinued operations
    
    
    (32,037
    )
    
    
    1,627,878Net increase (decrease) in cash and cash equivalents
    
    
    5,232,006
    
    
    
    (2,015,423
    )Cash and cash equivalents at beginning of period
    
    
    1,402,645
    
    
    
    6,379,679Cash and cash equivalents at end of period
    
    $
    6,634,651
    
    
    $
    4,364,256Supplemental 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
    
    Six MonthsEnded October 31,
    
    Ended October 31,2005
    
    2004
    
    2005
    
    2004Net (loss) earnings, as reported
    
    $
    (22,914
    )
    
    $
    521,340
    
    
    $
    (359,940
    )
    
    $
    (584,114
    )Add: Stock-based compensation
    
    
    6,654
    
    
    
    16,273
    
    
    
    16,057
    
    
    
    34,680Deduct: Total stock-based compensation
expense as determined under fair value
based method for all awards, net of
related tax effects
    
    
    (28,013
    )
    
    
    (33,674
    )
    
    
    (58,655
    )
    
    
    (107,668
    )Add: Forfeitures, net of related tax effects
    
    
    7,073
    
    
    
    25,271
    
    
    
    9,659
    
    
    
    46,534Pro forma net (loss) earnings
    
    $
    (37,200
    )
    
    $
    529,210
    
    
    $
    (392,879
    )
    
    $
    (610,568
    )Net (loss) earnings per share:Basic and diluted  as reported
    
    $
    (0.01
    )
    
    $
    0.15
    
    
    $
    (0.10
    )
    
    $
    (0.17
    )Basic and diluted  pro forma
    
    $
    (0.01
    )
    
    $
    0.15
    
    
    $
    (0.11
    )
    
    $
    (0.17
    )
  NOTE 4. RECEIVABLES
  NOTE 5. DISCONTINUED OPERATIONS
 Construction
Segment
  Real
Estate Sales of Income-Producing Properties
 Accounting for the
Impairment or Disposal of Long-Lived Assets
 6




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##### Table of Contents



Second Quarter Ended
    
    Six Months EndedOctober 31,
    
    October 31,2005
    
    2004
    
    2005
    
    2004REVENUES:Construction
    
    $
    
    
    
    $
    11
    
    
    $
    40
    
    
    $
    145,513Rental properties
    
    
    19,796
    
    
    
    362,980
    
    
    
    19,796
    
    
    
    653,362Total revenues
    
    
    19,796
    
    
    
    362,991
    
    
    
    19,836
    
    
    
    798,875COSTS AND EXPENSES:Construction cost and expenses
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    114,734Rental property operating expenses,
including depreciation and interest
    
    
    6,741
    
    
    
    225,706
    
    
    
    6,640
    
    
    
    462,771Construction selling, general & administrative
    
    
    40,326
    
    
    
    41,096
    
    
    
    67,028
    
    
    
    148,993Total costs and expenses
    
    
    47,067
    
    
    
    266,802
    
    
    
    73,668
    
    
    
    726,498(Loss) earnings from discontinued operations
    
    
    (27,271
    )
    
    
    96,189
    
    
    
    (53,832
    )
    
    
    72,377Income tax (benefit) expense
    
    
    (10,362
    )
    
    
    34,881
    
    
    
    (20,456
    )
    
    
    32,232(Loss) earnings from discontinued operations, net of tax
    
    $
    (16,909
    )
    
    $
    61,308
    
    
    $
    (33,376
    )
    
    $
    40,145
 Balances atAssets of discontinued operations
    
    October 31, 2005
    April 30, 2005Receivables, net
    
    $
    
    
    
    $
    100,477Other current assets
    
    
    3,155
    
    
    
    3,155$
    3,155
    
    
    $
    103,632
 Balances atLiabilities of discontinued operations
    
    October 31, 2005
    
    April 30, 2005Trade and subcontractors payables
    
    $
    28,747
    
    
    $
    74,150Accrued expenses
    
    
    68,542
    
    
    
    122,277$
    97,289
    
    
    $
    196,427
 NOTE 6. OPERATING SEGMENTS
  7




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##### Table of Contents



For the Quarter Ended
    
    Energy and
    
    
    
    
    
    Real EstateOctober 31, 2005
    
    Facilities Solutions
    
    Energy Services
    
    (1)
    
    Parent
    
    Eliminations
    
    ConsolidatedRevenues from unaffiliated
customers
    
    $
    969,604
    
    
    $
    1,874,731
    
    
    $
    2,839,698
    
    
    $
    
    
    
    $
    
    
    
    $
    5,684,033Interest and other income
    
    
    1,418
    
    
    
    9,530
    
    
    
    418,506
    
    
    
    9,010
    
    
    
    (145,576
    )
    
    
    292,888Intersegment revenue
    
    
    
    
    
    
    
    
    
    
    134,705
    
    
    
    
    
    
    
    (134,705
    )
    
    
    Total revenues from
continuing operations
    
    $
    971,022
    
    
    $
    1,884,261
    
    
    $
    3,392,909
    
    
    $
    9,010
    
    
    $
    (280,281
    )
    
    $
    5,976,921Net (loss) earnings (2)
    
    $
    (126,613
    )
    
    $
    (55,994
    )
    
    $
    661,738
    
    
    $
    (468,243
    )
    
    $
    (8,799
    )
    
    $
    2,089
 For the Quarter Ended
    
    Energy and
    
    
    
    
    
    Real EstateOctober 31, 2004
    
    Facilities Solutions
    
    Energy Services
    
    (1)
    
    Parent
    
    Eliminations
    
    ConsolidatedRevenues from unaffiliated
customers
    
    $
    940,084
    
    
    $
    1,993,530
    
    
    $
    3,932,511
    
    
    $
    
    
    
    $
    
    
    
    $
    6,866,125Interest and other income
    
    
    
    
    
    
    11,125
    
    
    
    73,278
    
    
    
    8,121
    
    
    
    (52,657
    )
    
    
    39,867Intersegment revenue
    
    
    
    
    
    
    
    
    
    
    121,864
    
    
    
    
    
    
    
    (121,864
    )
    
    
    Total revenues from
continuing operations
    
    $
    940,084
    
    
    $
    2,004,655
    
    
    $
    4,127,653
    
    
    $
    8,121
    
    
    $
    (174,521
    )
    
    $
    6,905,992Net (loss) earnings (2)
    
    $
    (72,162
    )
    
    $
    7,388
    
    
    $
    1,387,925
    
    
    $
    (832,987
    )
    
    $
    54,743
    
    
    $
    544,907
 For the Six Months Ended
    
    Energy and
    
    
    
    
    
    Real EstateOctober 31, 2005
    
    Facilities Solutions
    
    Energy Services
    
    (1)
    
    Parent
    
    Eliminations
    
    ConsolidatedRevenues from unaffiliated
customers
    
    $
    1,893,952
    
    
    $
    3,969,641
    
    
    $
    4,533,660
    
    
    $
    
    
    
    $
    
    
    
    $
    10,397,253Interest and other income
    
    
    1,733
    
    
    
    9,530
    
    
    
    572,828
    
    
    
    13,640
    
    
    
    (245,558
    )
    
    
    352,173Intersegment revenue
    
    
    
    
    
    
    
    
    
    
    261,893
    
    
    
    
    
    
    
    (261,893
    )
    
    
    Total revenues from
continuing operations
    
    $
    1,895,685
    
    
    $
    3,979,171
    
    
    $
    5,368,381
    
    
    $
    13,640
    
    
    $
    (507,451
    )
    
    $
    10,749,426Net (loss) earnings (2)
    
    $
    (257,440
    )
    
    $
    236,229
    
    
    $
    794,335
    
    
    $
    (1,084,196
    )
    
    $
    (7,335
    )
    
    $
    (318,407
    )
 For the Six Months Ended
    
    Energy and
    
    
    
    
    
    Real EstateOctober 31, 2004
    
    Facilities Solutions
    
    Energy Services
    
    (1)
    
    Parent
    
    Eliminations
    
    ConsolidatedRevenues from unaffiliated
customers
    
    $
    1,830,295
    
    
    $
    3,956,398
    
    
    $
    5,670,841
    
    
    $
    
    
    
    $
    
    
    
    $
    11,457,534Interest and other income
    
    
    
    
    
    
    11,125
    
    
    
    148,475
    
    
    
    15,206
    
    
    
    (100,114
    )
    
    
    74,692Intersegment revenue
    
    
    11,535
    
    
    
    
    
    
    
    246,218
    
    
    
    
    
    
    
    (257,753
    )
    
    
    Total revenues from
continuing operations
    
    $
    1,841,830
    
    
    $
    3,967,523
    
    
    $
    6,065,534
    
    
    $
    15,206
    
    
    $
    (357,867
    )
    
    $
    11,532,226Net (loss) earnings (2)
    
    $
    (218,582
    )
    
    $
    (159,990
    )
    
    $
    1,024,749
    
    
    $
    (1,303,683
    )
    
    $
    151,412
    
    
    $
    (506,094
    )
 8




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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
(loss) earnings from continuing operations before income taxes to net (loss) earnings. The
chief executive officer uses this measurement to analyze each Segments operating
performance.  Quarter Ended
    
    Six Months EndedOctober 31,
    

October 31,2005
    
    2004
    
    2005
    
    2004Consolidated Segment net (loss) earnings
    
    $
    2,089
    
    
    $
    544,907
    
    
    $
    (318,407
    )
    
    $
    (506,094
    )Discontinued Construction Segment net loss
    
    
    (25,003
    )
    
    
    (44,110
    )
    
    
    (41,533
    )
    
    
    (151,306
    )Eliminations related to Construction Segment
    
    
    
    
    
    
    20,543
    
    
    
    
    
    
    
    73,286Consolidated net (loss) earnings
    
    $
    (22,914
    )
    
    $
    521,340
    
    
    $
    (359,940
    )
    
    $
    (584,114
    )
 NOTE 7. (LOSS) EARNINGS PER SHARE
   9




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NOTE 8. GOODWILL AND OTHER INTANGIBLE ASSETS
  Gross Carrying
    
    
    AccumulatedAmount
    
    
    AmortizationAmortized intangible assets:Proprietary facility management
software applications
    
    $
    2,124,956
    
    
    $
    693,713Computer software
    
    
    417,210
    
    
    
    386,077Real estate lease costs
    
    
    1,615,672
    
    
    
    801,770Customer relationships
    
    
    218,000
    
    
    
    79,933Deferred loan costs
    
    
    751,547
    
    
    
    525,527Other
    
    
    55,608
    
    
    
    32,933$
    5,182,993
    
    
    $
    2,519,953Unamortized intangible assets:Trademark
    
    $
    708,707
    
    
    $
    Goodwill
    
    $
    5,458,717
    
    
    $
    
 Aggregate amortization expense for all amortized intangible assetsFor the three months ended October 31, 2005
    
    $
    143,139For the six months ended October 31, 2005
    
    
    266,319For the three months ended October 31, 2004
    
    
    161,293For the six months ended October 31, 2004
    
    
    318,508
 NOTE 9. DISPOSITIONS
   NOTE 10. COMMITMENTS AND CONTINGENCIES
  10




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NOTE 11. SUBSEQUENT EVENT
   11




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
     Results of operations of the second quarter and first six months of fiscal 2006, compared to
the second quarter and first six months of fiscal 2005
    CHART A
 Second Quarter Ended
    
    Amount
    
    Percent
    
    Six Months Ended
    
    Amount
    
    PercentOctober 31,
    
    Increase
    
    Increase
    
    October 31,
    
    Increase
    
    Increase2005
    
    2004
    
    (Decrease)
    
    (Decrease)
    
    2005
    
    2004
    
    (Decrease)
    
    (Decrease)Energy and Facilities
Solutions
    
    $
    970
    
    
    $
    940
    
    
    $
    30
    
    
    
    3
    
    
    $
    1,894
    
    
    $
    1,830
    
    
    $
    64
    
    
    
    3Energy Services (1)
    
    
    1,875
    
    
    
    1,994
    
    
    
    (119
    )
    
    
    (6
    )
    
    
    3,970
    
    
    
    3,956
    
    
    
    14
    
    
    
    0Real Estate (2)
    
    
    2,840
    
    
    
    3,933
    
    
    
    (1,093
    )
    
    
    (28
    )
    
    
    4,534
    
    
    
    5,671
    
    
    
    (1,137
    )
    
    
    (20
    )$
    5,685
    
    
    $
    6,867
    
    
    $
    (1,182
    )
    
    
    (17
    )
    
    $
    10,398
    
    
    $
    11,457
    
    
    $
    (1,059
    )
    
    
    (9
    )
 12




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##### Table of Contents



NOTES TO CHART A
 (1)
    
    Revenues for the Energy Services Segment for the first six months of fiscal 2006 include
the recognition of approximately $593,000 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 cost and expense (See Chart B).
 (2)
    
    Real estate revenues from continuing operations decreased $1,093,000 or 28% for the second
quarter of fiscal 2006, and $1,137,000 or 20% for the first six months of fiscal 2006,
compared to the same periods in fiscal 2005, primarily due to:
 (a)
    
    rental revenues in fiscal 2005 included revenues of $2,250,000 from the
sale 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
sale in the first six months of fiscal 2006;
  (b)
    
    the sale of land (two outparcels) located in North Fort Myers, Florida,
for $1,154,000, in October 2005. There was no sale of land in the first six months
of fiscal 2005.
  October 31,2005
    
    
    2004Energy and Facilities Solutions (a)
    
    $
    2,821,000
    
    
    $
    2,572,000Energy Services (b)
    
    
    2,469,000
    
    
    
    4,396,000Real Estate (c)
    
    
    6,602,000
    
    
    
    6,509,000Less: Intersegment eliminations
    
    
    (540,000
    )
    
    
    (524,000
    )Total Backlog
    
    $
    11,352,000
    
    
    $
    12,953,000
 
 (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 contract included in the prior period
in the education and government sector.
 (c)
    
    The increase in real estate backlog primarily relates to an increase in occupancy rates at
leased properties. Revenues from any contract in which the prospective buyer is not
materially at risk are not included in backlog. As of October 31, 2005, backlog does not
include a contract to sell, at a gain, the Companys professional medical office building located in
Douglasville, Georgia. Backlog also
does not include a contract  to sell, at a gain, a 4.7 acre tract of land in Louisville, Kentucky. See Note 11 to the consolidated financial statements.
 
  13




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CHART B
 Percent of Segment
    
    
    
    
    
    
    
    
    
    
    Percent of SegmentRevenues for
    
    
    
    
    
    
    
    
    
    
    Revenues forSecond Quarter Ended
    
    
    Second Quarter Ended
    
    
    Six Months Ended
    
    
    Six Months EndedOctober 31,
    
    
    October 31,
    
    
    October 31,
    
    
    October 31,2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Energy and Facilities
Solutions (1)
    
    $
    492
    
    
    $
    553
    
    
    
    51
    
    
    
    59
    
    
    $
    1,003
    
    
    $
    1,034
    
    
    
    53
    
    
    
    57Energy Services (2)
    
    
    1,279
    
    
    
    1,378
    
    
    
    68
    
    
    
    69
    
    
    
    2,267
    
    
    
    2,860
    
    
    
    57
    
    
    
    72Real Estate (3)
    
    
    1,747
    
    
    
    1,275
    
    
    
    62
    
    
    
    32
    
    
    
    2,840
    
    
    
    2,550
    
    
    
    63
    
    
    
    45$
    3,518
    
    
    $
    3,206
    
    
    
    62
    
    
    
    47
    
    
    $
    6,110
    
    
    $
    6,444
    
    
    
    59
    
    
    
    56
 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)
    
    an increase in margins on energy engineering services and proprietary
facility management software applications due to improved operational efficiencies.
 (2)
    
    On a dollar basis, costs and expenses from continuing operations decreased $593,000 or 21%
for the first six months of fiscal 2006, compared to the same period of fiscal 2005, primarily
due to a corresponding decrease in installation contract revenues.On a percentage basis, costs and expenses decreased for the first six months of fiscal 2006,
primarily due to:
 (a)
    
    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
six months of fiscal 2006; and(b)
    
    an increase in margins on installation contract revenues due to improved
operational efficiencies.
 (3)
    
    On a dollar basis, costs and expenses from continuing operations increased $472,000 or 37%
for the second quarter of fiscal 2006, and $290,000 or 11% for the first six months of fiscal
2006, compared to the same periods of fiscal 2005, primarily due to:
 (a)
    
    the cost of sales of land of $612,000, resulting from the sale of two
outparcels located in North Fort Myers, Florida, in October 2005; there were no land
sales in the first six months of fiscal 2005;
  (b)
    
    the absence of lease costs of $30,000 and $98,000, in the second quarter
and first six months of fiscal 2006, respectively, related to the leaseback interest
in a shopping center located in Minneapolis, Minnesota, that was sold in September
2004;(c)
    
    a decrease in common area maintenance and operating expenses of $41,000
and $85,000, in the second quarter and first six months of fiscal 2006,
respectively; and
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(d)
    
    a decrease in depreciation and amortization of $41,000 and $81,000 in the
second quarter and first six months of fiscal 2006, respectively.
  
  CHART C
 Percent of Segment
    
    
    
    
    
    
    
    
    
    
    Percent of SegmentRevenues for
    
    
    
    
    
    
    
    
    
    
    Revenues forSecond Quarter Ended
    
    
    Second Quarter Ended
    
    
    Six Months Ended
    
    
    Six Months EndedOctober 31,
    
    
    October 31,
    
    
    October 31,
    
    
    October 31,2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Energy and Facilities
Solutions (1)
    
    $
    542
    
    
    $
    460
    
    
    
    56
    
    
    
    49
    
    
    $
    1,088
    
    
    $
    1,099
    
    
    
    57
    
    
    
    60Energy Services (2)
    
    
    531
    
    
    
    482
    
    
    
    28
    
    
    
    24
    
    
    
    1,086
    
    
    
    1,122
    
    
    
    27
    
    
    
    28Real Estate (3)
    
    
    187
    
    
    
    583
    
    
    
    7
    
    
    
    15
    
    
    
    452
    
    
    
    946
    
    
    
    10
    
    
    
    17Parent
    
    
    736
    
    
    
    904
    
    
    
    13
    
    
    
    13
    
    
    
    1,636
    
    
    
    1,601
    
    
    
    16
    
    
    
    14$
    1,996
    
    
    $
    2,429
    
    
    
    35
    
    
    
    35
    
    
    $
    4,262
    
    
    $
    4,768
    
    
    
    41
    
    
    
    42
 NOTES TO CHART C
 (1)
    
    On a dollar basis, SG&A expenses from continuing operations increased $82,000 or 18% for the
second quarter of 2006, compared to the same period of fiscal 2005, primarily due to an
increase in personnel related costs.
 (2)
    
    On a dollar and percentage basis, SG&A expenses from continuing operations increased $49,000
or 10% for the second quarter of 2006, compared to the same period of fiscal 2005, primarily
due to an increase in unallocated project development costs associated with a delay in
contracts being awarded.
 (3)
    
    On a dollar and percentage basis, SG&A expenses from continuing operations decreased $396,000
or 68% for the second quarter of fiscal 2006 and $494,000 or 52% for the first six
 15




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months of
fiscal 2006, compared to the same periods of fiscal 2005, primarily due to the legal costs and
a net settlement cost that was expensed in fiscal 2005, due to the conclusion of arbitration
proceedings.
 Liquidity and capital resources
  (a)
    
    an increase in note receivables of approximately $623,000 related to
services performed on a consulting contract;(b)
    
    the cash payment of $620,000, representing 58% of the incentive
compensation generated by the successful achievement of Company-wide earnings and
performance goals in fiscal 2005;(c)
    
    a net decrease in trade and subcontractors payables, accrued expenses and
billings in excess of costs and earnings of $562,000 due to the timing and
submission of payments;(d)
    
    an increase in other current assets of approximately $180,000 related to
insurance prepayments and real estate tax prepayments; and(e)
    
    losses from continuing operations;
  (f)
    
    a decrease in gross receivables and costs and earnings in excess of
billings of approximately $758,000.
  (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 $617,000 from the sale of two outparcels located in North
Fort Myers, Florida, that were sold at gains in October 2005;
  (c)
    
    approximately $356,000 in tenant and building improvements; and(d)
    
    additions to intangible assets of $474,000 primarily related to software
development costs for one of the Companys proprietary software solutions.
    16




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Cautionary statement regarding forward-looking statements
    Critical Accounting Policies
  Revenue recognition
  17




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Income-producing properties and property and equipment
     Valuation of goodwill and other intangible assets
  18




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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
    19




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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
  DIRECTORS
    
    VOTES FOR
    
    VOTES WITHHELDAlan R. Abrams
    
    2,986,014
    
    1,200David L. Abrams
    
    2,984,239
    
    2,975J. Andrew Abrams
    
    2,984,614
    
    2,600Samuel E. Allen
    
    2,965,888
    
    21,326Gilbert L. Danielson
    
    2,985,139
    
    2,075Melinda S. Garrett
    
    2,984,139
    
    3,075Robert T. McWhinney, Jr.
    
    2,986,914
    
    300Felker W. Ward, Jr.
    
    2,964,113
    
    23,101
 
 ITEM 5. OTHER INFORMATION
    20




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ITEM 6. EXHIBITS
 10(i)
    
    Summary Description of Annual Incentive Bonus Plan31(a)
    
    Certification of Chief Executive Officer, pursuant Rules 13a-14(a)/15d-14(a)31(b)
    
    Certification of Chief Financial Officer, pursuant 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
 21




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ABRAMS INDUSTRIES, INC.
               (Registrant)Date: December 15, 2005
    /s/ Alan R. AbramsAlan R. AbramsChief Executive OfficerDate: December 15, 2005
    /s/ Mark J. ThomasMark J. ThomasChief Financial Officer 22