SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarter ended September 30, 1997
Commission File Number 2-15966
TAYCO DEVELOPMENTS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW YORK 16-0835557
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
100 TAYLOR DRIVE, NORTH TONAWANDA, NEW YORK 14120-0748
Address of principal executive offices Zip Code
Registrant's telephone number, including area code - 716-694-0877
Indicate by check mark whether the registrant (1) has filed all
annual, quarterly, and other reports required to be filed with all
the Commission and (2) has been subject to the filing requirements
for at least the past 90 days.
Yes X No
Indicate the number of shares outstanding, of each of the Issuer's
classes of common stock as of the close of the period covered by
this report.
CLASS Outstanding at September 30, 1997
Common Stock 990,213
($.05 par value)
FORM 10-QSB
TAYCO DEVELOPMENTS, INC. - INDEX
PART I - FINANCIAL INFORMATION
PAGE NO.
Item 1. Financial Statements
Balance Sheets 3
September 30, 1997, and June 30, 1997
Statement of Income for three months 4
ended September 30, 1997 and
September 30, 1996
Statement of Cash Flows for three months 5
ended September 30, 1997 and
September 30, 1996
Notes to Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of 7
the Financial Condition and Results of
Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to Vote of Security 10
Holders
Item 5. Other Information 10
Item 6. Exhibits 10
SIGNATURES 11
FORM 10-QSB
TAYCO DEVELOPMENTS, INC. - BALANCE SHEET
ASSETS 9/30/97 6/30/97
Current
Cash $ 35,534 $ 24,006
Receivables - Affiliates, Current 71,518 63,303
Prepaid Other Expenses 11,070 20,108
Total Current Assets 118,122 107,417
Investments - Affiliate, at Equity 1,414,381 1,389,971
Furniture and Equipment - at Cost 71,771 71,771
Less: Accumulated Depreciation 59,839 58,639
1,426,313 1,403,103
Other Assets
Patents, Net 122,744 114,400
Receivables - Affiliates, Long-term - 0 - - 0 -
Cash Value - Life Insurance, Net 49,104 49,104
Total Other Assets 171,848 163,504
TOTAL ASSETS $ 1,716,283 $ 1,674,024
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Payables - Trade $ - 0 - $ - 0 -
Payables - Affiliate - 0 - - 0 -
Current Portion of Long Term Debt 29,163 29,163
Accrued Income Taxes 1,279 3,350
Accrued Expenses 12,873 11,069
Total Current Liabilities 43,315 43,582
Long-term Debt 42,935 50,563
Stockholders' Equity
Common Stock, par value $.05
per share, 1,000,000 shares
authorized, 990,213 issued 49,696 49,696
Paid - In Capital 670,605 670,605
Retained Earnings 915,361 865,207
1,635,662 1,585,508
Less: Cost of Treasury Stock
3,709 shares at Cost 5,629 5,629
Total Stockholders' Equity 1,630,033 1,579,879
$ 1,716,283 $ 1,674,024
FORM 10-QSB
TAYCO DEVELOPMENTS, INC.
CONSOLIDATED CONDENSED STATEMENT OF INCOME
THREE MONTHS ENDED SEPTEMBER 30
1997 1996
NET SALES
Royalties $ 32,714 $ 45,521
Research and Development 75,612 60,153
Total Revenues 108,326 105,674
EXPENSES
Research and Development 35,602 29,828
Selling, General Administrative 33,030 30,399
Amortization - Patents 3,750 2,250
Total Expenses 72,382 62,477
Operating Income 35,944 43,197
OTHER INCOME/(EXPENSE) 800 270
Income Before Provision for Income
Taxes and Equity in Net Income
of Affiliates 36,744 43,467
Provision for Income Taxes 11,000 14,150
Net Income before Equity in
Net Income of Affiliates 25,744 29,317
Equity in Net Income of Affiliates 24,410 19,067
Net Income $ 50,154 $ 48,384
Net Income per Share $ .05 $ .05
FORM 10-QSB
TAYCO DEVELOPMENTS, INC.
STATEMENT OF CASH FLOW
THREE MONTHS ENDED SEPTEMBER 30
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 50,154 $ 29,317
Adjustments to Reconcile
Net Income/to Net
Net Cash Provided by Operating
Activities:
Amortization - Patents 3,750 2,250
Equity in Net Income of Affiliates (24,410) - 0 -
Changes in:
Receivables - Affiliates (8,215) 26,557
Prepaid Expenses 9,038 (10,079)
Payables - Trade - 0 - - 0 -
- Affiliates - 0 - - 0 -
Accrued Income Taxes (2,071) (7,623)
Accrued Expenses 1,804 (9,585)
Amounts due to Stockholder (7,628) (7,194)
Net Property, Plant & Equipment 1,200 (9,649)
Net Cash Provided by Operating
Activities 23,622 13,994
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Patents (12,094) (14,171)
Net Increase in Cash 11,528 (177)
Cash Balance, Beginning of Period 24,006 23,473
Cash Balance, End of Period $ 35,534 $ 23,296
FORM 10-QSB
TAYCO DEVELOPMENTS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENT
1. In opinion of the Company, the accompanying unaudited
consolidated condensed financial statements contain all
adjustments necessary to present fairly the financial position
as of September 30, 1997 and the results of operations for the
three months ended.
2. There is no provision nor shall there be any provision for
profit sharing, dividends, or any other benefits of any nature
at any time for this fiscal year.
3. For the three month period ended September 30, 1997, the
profit was divided by 990,213 to calculate the earnings per
share.
4. The results of operations for the three month period ended
September 30, 1997, are not necessarily indicative of the
results to be expected for the full year.
FORM 10-QSB
TAYCO DEVELOPMENTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is Management's discussion and analysis of
certain significant factors which have affected the Company's
earnings during the periods included in the accompanying
consolidated condensed statements of income.
The Private Securities Litigation Reform Act of 1995 provides
a "safe harbor" for forward-looking statements. Certain matters
discussed in this section and elsewhere in this report are forward-
looking statements. As such, these statements involve risks and
uncertainties including, but not limited to, economic conditions,
product demand and industry capacity, competition, pricing
pressures, the need for the Company to keep pace with customer
needs and technological developments, and other factors.
A summary of the period to period changes in the principal
items included in the consolidated statements of income is shown
below:
Comparisons of three months ended
September 30, 1997 vs. September 30, 1996
Increase (Decrease)
Royalties ($ 12,807)
Research and Development Revenue 15,459
R&D Expense 5,774
SG&A 2,631
Amortization 1,500
Operating Income (7,253)
Other Income (Expense) 530
Income Before Taxes and Equity in Affiliates (6,723)
Provision for Taxes (3,150)
Equity in Affiliates 5,343
Net Income 1,770
FORM 10-QSB
TAYCO DEVELOPMENTS, INC.
MANAGEMENT'S DISCUSSION (CONT'D)
Total Revenues and Net Income improved in the first quarter of
Fiscal Year 1998 ("QI98") compared to QI97, due primarily to higher
R&D billings and Income from Affiliates.
In QI98, Total Revenues were $108,326, approximately 2.5%
higher than the QI97 Revenues of $105,674. A $13,000 decline in
Royalties was more than offset by a $15,000 improvement in R&D
billings. Midway through QI98, the Company's Management adjusted
(for the first time in six years)the rate charged to the Company's
primary customer, its affiliate, Taylor Devices. This adjustment
helped generate the improved R&D income in QI98 and should continue
to do so for the remainder of FY98.
Total expenses rose from $62,477 in QI97 to $72,382 in QI98.
This increase was largely attributable to the timely recognition of
expenses related to the annual shareholders meeting, increased
accrual figures for patent amortization, internal royalties and
workers compensation expenses.
Operating Income for QI98 was $35,944, compared to $43,197 in
QI97, due primarily to the higher reported expense level. Equity
in the Net Income of Affiliates improved by about 28% from the QI97
figure of $19,067 to $25,744 in QI98. This improvement, along with
a lower Provision for Income Taxes, helped produce a Net Income of
$50,154 for QI98, a 3.6% increase over the QI97 figure of $48,384.
Earnings per share for both periods rounded to $.05.
The Company's Balance Sheet remains in a very stable
condition. The only activity of note is the continuing reduction
of the Company's only long term debt which is scheduled to be paid
in full in approximately three years.
The Company's staff continues to be occupied on a number of
projects from the pre-development stage to the final design phase.
In the early phases is a Government project involving laser
communication satellites and a program for a new generation of
attack submarines being managed by the Electric Boat Corporation.
Two projects are currently in a testing phase. One is a conversion
of a defense/military guidance isolation system to
civilian/commercial usage. The other involves isolation techniques
for motion simulators, being performed in conjunction with an
aerospace corporate partner in a teaming arrangement. In QI98, the
FORM 10-QSB
TAYCO DEVELOPMENTS, INC.
MANAGEMENT'S DISCUSSION (CONT'D)
Company's Engineers succeeded in obtaining design approval for an
additional COTS (Commercial Off The Shelf) unit supplied to a major
defense contractor. This approval, leading to production and
delivery by Devices, will probably produce some royalty income in
FY98. The joint development aerospace/defense effort referred to
in recent filings appears to be proceeding to the small production
run phase. In the meantime, the contractor has continued to fund
the project on an R&D basis, producing revenue for both the Company
and its affiliate.
At this point in FY98, Management believes that the Company
will experience financial results similar to the good ones produced
in FY97. Royalty income decreases will likely be offset by
increased R&D billings, and the affiliate is anticipating results
similar to its FY97. The Company's Engineering staff utilization
rate remains strong, and Management will continue to direct the
staff towards those projects that appear most likely to produce
revenue for the affiliate and patents for the Company.
FORM 10-QSB
TAYCO DEVELOPMENTS, INC.
PART II - OTHER INFORMATION
ITEM 1 Legal Proceedings
The Company is not currently engaged in any litigation.
ITEM 2 Changes in Securities - None
ITEM 3 Defaults Upon Senior Securities - None
ITEM 4 Submission of Matters to Vote of Securities Holders
- -
None
ITEM 5 Other Information - None
ITEM 6 Exhibits - None
FORM 10-QSB
TAYCO DEVELOPMENTS, INC.
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.
TAYCO DEVELOPMENTS, INC.
(Registrant)
By /S/ Douglas P. Taylor Date 11/10/97
Douglas P. Taylor
Chairman of the Board of Directors
President
(Principal Executive Officer)
AND
By /S/ Kenneth G. Bernstein Date 11/10/97
Kenneth G. Bernstein
Chief Accounting Officer
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