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, 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 December 31, 1997
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, 1997, and June 30, 1997
Statement of Income for three months 4
and six months ended December 31, 1997
and December 31, 1996
Statement of Cash Flows for six months 5
ended December 31, 1997 and December 31, 1996
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 12/31/97 6/30/97
Current
Cash $ 27,450 $ 24,006
Receivables - Affiliates, Current 84,793 63,303
Prepaid Other Expenses 8,419 20,108
Total Current Assets 120,662 107,417
Investments - Affiliate, at Equity 1,445,861 1,389,971
Furniture and Equipment - at Cost 73,390 71,771
Less: Accumulated Depreciation 61,039 58,639
1,458,212 1,403,103
Other Assets
Patents, Net 131,171 114,400
Receivables - Affiliates, Long-term -0- -0-
Cash Value - Life Insurance, Net 49,104 49,104
Total Other Assets 180,275 163,504
TOTAL ASSETS $1,759,149 $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 7,121 3,350
Accrued Expenses 5,137 11,069
Total Current Liabilities 41,421 43,582
Long-term Debt 35,307 50,563
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 967,749 865,207
1,688,050 1,585,508
Less: Cost of Treasury Stock 3,709 shares
at Cost 5,629 5,629
Total Stockholders' Equity 1,682,421 1,579,879
Total Liabilities and Stockholders'
Equity $1,759,149 $1,674,024
FORM 10-QSB
TAYCO DEVELOPMENTS, INC.
CONSOLIDATED CONDENSED STATEMENT OF INCOME
Six Months Three Months
Ended 12/31 Ended 12/31
1997 1996 1997 1996
NET SALES
Royalties $ 62,663 $ 89,893 $ 29,949 $ 44,372
Research and Development 151,786 118,830 76,174 58,677
Total Revenues 214,449 208,723 106,123 103,049
EXPENSES
Research and Development 70,164 62,350 34,562 32,522
Selling, General
Administrative 70,733 66,812 37,703 36,413
Amortization - Patents 7,500 4,500 3,750 2,250
Total Expenses 148,397 133,662 76,015 71,185
Operating Income 66,052 75,061 30,108 31,864
OTHER INCOME/(EXPENSE) 600 (500) (200) (770)
Income Before Provision for
Income Taxes and Equity in
Net Income of Affiliates 66,652 74,561 29,908 31,094
Provision for Income Taxes 20,000 26,300 9,000 12,150
Net Income before Equity in
Net Income of Affiliates 46,652 48,261 20,908 18,944
Equity in Net Income of
Affiliates 55,890 55,329 31,480 36,262
Net Income $102,542 $103,590 $52,388 $55,206
Net Income per Share $ .104 $ .105 $ .053 $ .056
FORM 10-QSB
TAYCO DEVELOPMENTS, INC.
STATEMENT OF CHANGES IN FINANCIAL POSITION
SIX MONTHS ENDED DECEMBER 31
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 102,542 $ 103,590
Adjustments to Reconcile Net
Income to Net Cash Provided by
Operating Activities:
Amortization - Patents 7,000 4,500
Equity in Net Income of Affiliates (55,890) (55,329)
Changes in:
Receivables - Affiliates (21,490) 26,914
Prepaid Expenses 11,689 (7,428)
Payables - Trade -0- -0-
- Affiliates -0- -0-
Net PPE 781 (9,349)
Accrued Income Taxes 3,771 15,210
Accrued Expenses (5,932) (9,143)
Amounts due to Stockholder (15,256) (14,382)
Net Cash Provided by Operating
Activities 27,215 24,163
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Patents (23,771) (21,587)
Net Increase in Cash 3,444 2,576
Cash Balance, Beginning of Period 24,006 23,473
Cash Balance, End of Period $ 27,450 $ 26,049
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, 1997 and December 31, 1996 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, 1997
and December 31, 1996, 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, 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. 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, 1997 vs. December 31, 1996
Increase (Decrease)
Royalties $(27,230)
Research and Development Revenue 32,956
R&D Expense 7,814
SG&A 3,921
Amortization 3,000
Operating Income (9,099)
Other Income (Expense) (1,100)
Income Before Taxes and Equity in
Affiliates (7,909)
Provision for Taxes 6,300
Equity in Affiliates 561
Net Income $ (1,048)
FORM 10-QSB
TAYCO DEVELOPMENTS, INC.
MANAGEMENT'S DISCUSSION (CONT'D)
Revenues and income remained stable for both the six and three
month periods ending December 31, 1997 as revenues from Research
and Development activities offset lower Royalty revenues and higher
expenses.
SIX MONTHS YEAR-TO-DATE
For the six months year-to-date at 12/31/97 (98YTD), the
Company reported Research and Development revenues of $151,786,
compared to $118,830 for the same period in Fiscal Year 1997
(97YTD). This increase was due to the rate increase instituted in
QI98 and to a higher amount of hours charged to the Company's
affiliate, Taylor Devices, by the Company's engineers. Revenue
from Royalties declined in 98YTD as the product mix in Devices'
shipments shifted. Royalties were $89,893 for 98YTD compared to
$62,663 in 97YTD. For the combined revenue sources, the total of
$214,449 for YTD98 was up from the figure of $208,723 for YTD97.
Total Expenses increased to $148,397 for YTD98 versus $133,662
in YTD97. Factors contributing to this change were: a higher rate
for workers compensation coverage (the result of a 1997 audit), a
higher accrual rate for patent amortization to better reflect the
activity level, and routine increases associated with personnel
costs.
Operating income for YTD98 was $66,652 compared to $74,561 in
YTD97. Equity in the Net Income of Affiliates was almost identical
for the two periods - $55,890 for YTD98 versus $55,329 for YTD97.
Net Income for YTD98 was $102,542, approximately $1,000 less than
the figure of $103,590 for YTD97.
THREE MONTHS ENDED DECEMBER 31, 1997
Results for the second quarter of FY98 (98QII) were similar to
the comparable period from the prior year, 97QII. Total Revenues
increased to $106,123 in 98QII from $103,049 in 97QII as the same
factors impacting the six month results (see above section) applied
to the three month period. Likewise, the increase in Total
Expenses, from $71,185 in 97QII to $76,015 for 98QII was generated
by the same items referenced in the above section. Net Income for
FORM 10-QSB
TAYCO DEVELOPMENTS, INC.
MANAGEMENT'S DISCUSSION (CONT'D)
98QII, reflecting higher revenues, higher expenses and moderately
decreased Income from Affiliate, was $52,388 compared to $55,206
for 97QII.
The Company's Balance Sheet shows no significant or unexpected
changes for either the three or six month periods, reflecting a
continued stability.
The Company's engineering staff continue to be engaged in a
number of projects Management believes have the potential for
generating significant future revenues. A relatively lengthy
effort to improve a machine gun buffer is apparently nearing a
successful conclusion, as is a more recent project to develop an
isolation system for the steel mill crane cabs. There continues to
be slow but steady progress on the military/aerospace guidance
system isolation project which is now in its fifth year. The
customer has placed a small pre-production run order with Devices.
The timing and the size of the next order are largely dependent on
the results of some upcoming flight tests. A project with
applications in both the civilian and military markets, isolation
of a lightweight navigation system, commenced in the second
quarter.
At the halfway point of Fiscal Year 1998, Management is of the
opinion that, barring an unforeseen event of some significance, the
Company's overall operating results will continue to parallel last
year's, as will those of the Affiliate. The combination is
anticipated to produce another good year 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
1. The Annual Meeting of Shareholders was held on
October 30, 1997 and the Company had 990,213 shares
outstanding at the record date of September 23, 1997. A total
of 861,911 proxies were cast . Management's proposed slate of
Directors received the following voting results:
VOTES
WITHHELD VOTES
/AGAINST FOR
Douglas P. Taylor 107,186 754,450
David A. Lee 275 860,229
Joseph P. Gastel 107,186 754,450
Paul L. Tuttobene 275 860,229
Janice M. Nicely 275 860,229
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 2/4/98
Douglas P. Taylor
Chairman of the Board of Directors
President
(Principal Executive Officer)
AND
By /s/Kenneth G. Bernstein Date 2/4/98
Kenneth G. Bernstein
Chief Accounting Officer
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<PERIOD-END> DEC-31-1997
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