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 December 31, 1996
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 December 31, 1996
Common Stock ($.05 par value) 990,213
FORM 10-QSB
TAYCO DEVELOPMENTS, INC. - INDEX
PART I - FINANCIAL INFORMATION
PAGE NO.
Item 1. Financial Statements
Balance Sheets 3
December 31, 1996, and June 30, 1996
Statement of Income for three months 4
and six months ended December 31, 1996
and December 31, 1995
Statement of Cash Flows for six months 5
ended December 31, 1996 and December 31, 1995
Notes to Consolidated Condensed Financial 6
Statements
Item 2. Management's Discussion and Analysis of the 7
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
Holders 10
Item 5. Other Information 10
Item 6. Exhibits 10
SIGNATURES 11
FORM 10-QSB
TAYCO DEVELOPMENTS, INC. - BALANCE SHEET
ASSETS 12/31/96 6/30/96
Current
Cash $ 26,049 $ 23,473
Receivables - Affiliates, Current 56,692 83,606
Prepaid Other Expenses 10,659 3,231
Total Current Assets 93,400 110,310
Investments - Affiliate, at Equity 1,297,853 1,242,524
Furniture and Equipment - at Cost 71,770 61,821
Less: Accumulated Depreciation 54,750 54,150
1,314,873 1,250,195
Other Assets
Patents, Net 115,014 97,927
Receivables - Affiliates, Long-term -0- -0-
Cash Value - Life Insurance, Net 43,777 43,777
Total Other Assets 158,791 141,704
TOTAL ASSETS $1,567,064 $1,502,209
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Payables - Trade $ -0- $ -0-
Payables - Affiliate -0- -0-
Current Portion of Long Term Debt 27,803 27,803
Accrued Income Taxes 3,537 18,747
Accrued Expenses 15,973 25,116
Total Current Liabilities 47,313 71,666
Long-term Debt 67,932 82,314
Stockholders' Equity
Common Stock, par value $.05
per share, 1,000,000 shares
authorized, 990,213 issued
and outstanding 49,696 49,696
Paid - In Capital 670,605 670,605
Retained Earnings 737,147 633,557
1,457,448 1,353,858
Less: Cost of Treasury Stock 3,709 shares
at Cost 5,629 5,629
Total Stockholders' Equity 1,451,819 1,348,229
Total Liabilities and Stockholders'
Equity $1,567,064 $1,502,209
FORM 10-QSB
TAYCO DEVELOPMENTS, INC.
CONSOLIDATED CONDENSED STATEMENT OF INCOME
Six Months Three Months
Ended 12/31 Ended 12/31
1996 1995 1996 1995
NET SALES
Royalties $ 89,893 $ 49,295 $ 44,372 $ 21,286
Research and Development 118,830 135,590 58,677 64,227
Total Revenues 208,723 184,885 103,049 85,513
EXPENSES
Research and Development 62,350 57,811 32,522 28,119
Selling, General
Administrative 66,812 58,354 36,413 31,529
Amortization - Patents 4,500 4,500 2,250 2,250
Total Expenses 133,662 120,665 71,185 61,898
Operating Income 75,061 64,220 31,864 23,615
OTHER INCOME/(EXPENSE) (500) 2,570 (770) (1,600)
Income Before Provision for
Income Taxes and Equity in
Net Income of Affiliates 74,561 66,790 31,094 22,015
Provision for Income Taxes 26,300 21,000 12,150 8,500
Net Income before Equity in
Net Income of Affiliates 48,261 45,790 18,944 13,515
Equity in Net Income of
Affiliates 55,329 88,480 36,262 47,028
Net Income $103,590 $134,270 $55,206 $60,543
Net Income per Share $ .105 $ .136 $ .056 $ .061
FORM 10-QSB
TAYCO DEVELOPMENTS, INC.
STATEMENT OF CHANGES IN FINANCIAL POSITION
SIX MONTHS ENDED DECEMBER 31
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 103,590 $ 134,270
Adjustments to Reconcile Net
Income to Net Cash Provided by
Operating Activities:
Amortization - Patents 4,500 4,500
Equity in Net Income of Affiliates (55,329) (97,674)
Changes in:
Receivables - Affiliates 26,914 3,644
Prepaid Expenses (7,428) (6,052)
Payables - Trade -0- 2,633
- Affiliates -0- (3,261)
Net PPE (9,349) -0-
Accrued Income Taxes (15,210) (9,518)
Accrued Expenses (9,143) (1,635)
Amounts due to Stockholder (14,382) (15,324)
Net Cash Provided by Operating
Activities 24,163 11,583
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Patents (21,587) (9,868)
Net Increase in Cash 2,576 1,715
Cash Balance, Beginning of Period 23,473 24,981
Cash Balance, End of Period $ 26,049 $ 26,696
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 December 31, 1996 and December 31, 1995 and the results
of operations for the three months and six months then 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 and six month periods ended December 31, 1996
and December 31, 1995, the profit was divided by 990,213 to
calculate the earnings per share.
4. The results of operations for the three and six month periods
ended December 31, 1996, 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. These forward-looking statements involve risks
and uncertainties including, but not limited to, economic
conditions, product demand and industry capacity, competition, and
other risks.
A summary of the period to period changes in the principal
items included in the consolidated statements of income is shown
below:
Comparisons of six months ended
December 31, 1996 vs. December 31, 1995
Increase (Decrease)
Royalties $ 40,598
Research and Development Revenue (16,760)
R&D Expense 4,539
SG&A 8,458
Amortization -0-
Operating Income 10,841
Other Income (Expense) (3,070)
Income Before Taxes and Equity in
Affiliates 7,771
Provision for Taxes 5,300
Equity in Affiliates (33,151)
Net Income ($30,680)
FORM 10-QSB
TAYCO DEVELOPMENTS, INC.
MANAGEMENT'S DISCUSSION (CONT'D)
For the second quarter of fiscal year 1997 (QII97) and the
year-to-date at December 31, 1996, the Company produced the second
best Net Income figures since it began filing 10-QSBs. Although
they were lower than the figures for the previous year's periods,
the decrease reflected, as anticipated, the reduced equity earnings
from the operations of the Company's affiliate.
RESULTS FOR THE SIX MONTHS ENDED DECEMBER 31, 1996
Royalty revenues increased by $40,598 (82%) in the first half
of fiscal year 1997 (FY97) reflecting the product mix of the
Company's affiliate, Taylor Devices, Inc. (Devices). Research
and Development revenue declined by $16,760 (12%) as the Company's
engineers allocated additional time to internal projects. Net
revenue increased by $23,838, a 12.8% increase over FY96. Expenses
increased by about 10% from $120,665 in FY96 to $133,662 in FY97.
This difference reflects increased travel and training expense for
the professional staff and the adjusted distribution of internal
royalties discussed in the previous 10-QSB filing. Operating
Income rose by $10,841 (16.8%). Equity in the Net Income of
Affiliates decreased by $33,241 as Devices, while experiencing
improved revenues (over FY96), has fully used the tax benefits it
enjoyed in FY95 and FY96. Net Income for the period was $103,590
down $30,680 from the previous year. The Net Income of $103,590
represents the second best results at December 31 since the Company
began filing 10-QSBs.
RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 1996
Operating results in the second quarter of fiscal year 1997
(QII97) paralleled those of the year-to-date figures. Royalties
increased from $21,286 in QII96 to $44,372 (108%) due to Devices'
product mix. Research and Development revenue decreased from
$64,227 to $58,677 (8%), resulting in an increase in Total Revenues
of $17,536 (20%). Total Expenses increased from $61,898 to
$71,185, as explained in the above paragraph. Operating Income
rose by $8,249 (34%) to $31,864 in QII97. For QII97, the Equity in
the Net Income of Affiliates was $36,262, which is $10,766 (22%)
lower than the figure reported for QII96. The nature of this
FORM 10-QSB
TAYCO DEVELOPMENTS, INC.
MANAGEMENT'S DISCUSSION (CONT'D)
decrease was also addressed in the previous paragraph. Net Income
for QII97 was $55,206 a decrease of about 8% from QII96, but still
the second best second quarter since the Company was restructured
in 1991.
REMAINDER OF FISCAL YEAR 1997
At the half-way point of FY97, the Company is in good
condition and is looking forward to producing another set of very
good financial figures at the end of the year. The Company's basic
operating fundamentals remain sound and its affiliate, Devices, is
anticipating strong results for its FY97. The Company's financial
position continues to be stable. By the end of FY97, the Company
will have fulfilled its financial obligation with respect to its
former affiliate, Tayco Technology, and experience a modest
positive gain in its cash flow. In the quarter just ended, the
Company's engineers developed techniques which expanded the
functionality of Devices' shock isolators for military applications
using Commercial Off the Shelf (COTS) electronics. This has
already resulted in a significant sales opportunity for Devices and
could eventually produce significant royalty income for the
Company. As of the writing of this report, the Company has been
awarded or is seeking funding for further research into electro-rheological
technology and innovations in seismic isolation. Based on the first half
results, Devices' good prospects, and continuing demand for the Company's
services from Devices and third parties, Management believes FY97 will
produce good financial results and help lay the foundation for continued
good results in the near future.
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
1. The Annual Meeting of Shareholders was held on
November 8, 1996 and the Company had 990,213 shares
outstanding at the record date of September 20, 1996. A total
of 866,917 proxies were cast . Management's proposed slate of
Directors received the following voting results:
VOTES
WITHHELD VOTES
/AGAINST FOR
Douglas P. Taylor 155,464 711,453
David A. Lee 90 866,827
Joseph P. Gastel 155,464 711,453
Paul L. Tuttobene 90 866,827
Janice M. Nicely 90 866,827
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 2/15/97
Douglas P. Taylor
Chairman of the Board of Directors
President
(Principal Executive Officer)
AND
By /s/Kenneth G. Bernstein Date 2/15/97
Kenneth G. Bernstein
Chief Accounting Officer
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