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 March 31, 1999
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 March 31, 1999
Common Stock ($.05 par value) 990,213
<PAGE>
FORM 10-QSB
TAYCO DEVELOPMENTS, INC. - INDEX
PART I - FINANCIAL INFORMATION
PAGE NO.
Item 1. Financial Statements
Balance Sheets 3
March 31, 1999, and June 30, 1998
Statement of Income for three months and 4
nine months ended March 31, 1999 and
March 31, 1998
Statement of Cash Flows for nine months 5
ended March 31, 1999 and March 31, 1998
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 11
Item 2. Changes in Securities 11
Item 3. Submission of Matters to Vote of Security 11
Holders
Item 4. Other Information 11
Item 5. Exhibits 11
SIGNATURES 12
<PAGE>
FORM 10-QSB
TAYCO DEVELOPMENTS, INC. - BALANCE SHEET
ASSETS 3/31/99 6/30/98
Current
Cash $ 34,067 $ 25,063
Receivables - Affiliates, Current 153,069 123,745
Prepaid Other Expenses 7,532 4,422
Total Current Assets 194,668 153,230
Investments - Affiliate, at Equity 1,624,226 1,517,311
Furniture and Equipment - at Cost 73,389 73,389
Less: Accumulated Depreciation 64,808 62,108
1,632,807 1,528,592
Other Assets
Patents, Net 129,073 131,089
Receivables - Affiliates, Long-term - 0 - - 0 -
Cash Value - Life Insurance, Net 56,780 56,780
Total Other Assets 185,853 187,869
TOTAL ASSETS $ 2,013,328 $ 1,869,691
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Payables - Trade $ - 0 - $ - 0 -
Payables - Affiliate - 0 - - 0 -
Current Portion of Long Term Debt 23,656 33,437
Accrued Income Taxes 6,622 4,543
Accrued Expenses 12,693 17,375
Total Current Liabilities 42,971 55,355
Long-term Debt - 0 - 14,411
Deferred Income Taxes 3,100 3,100
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 1,252,585 1,082,153
1,972,886 1,802,454
Less: Cost of Treasury Stock
3,709 shares at Cost 5,629 5,629
Total Stockholders' Equity 1,967,257 1,796,825
$ 2,013,328 $ 1,869,691
<PAGE>
FORM 10-QSB
TAYCO DEVELOPMENTS, INC.
CONSOLIDATED CONDENSED STATEMENT OF INCOME
Nine Months Three Months
Ended 3/31 Ended 3/31
1999 1998 1999 1998
NET SALES
Royalties $128,507 104,028 $53,706 41,365
Research and Development 179,005 227,105 45,387 75,319
Total Revenues 307,512 331,133 99,093 116,684
EXPENSES
Research and Development 106,376 106,872 32,612 36,708
Selling, General
Administrative 101,390 103,585 26,102 32,852
Amortization - Patents 11,700 11,250 3,900 3,750
Total Expenses 219,466 221,707 62,614 73,310
Operating Income 88,046 109,426 36,479 43,374
OTHER INCOME/(EXPENSE) 2,471 1,640 212 1,040
Income Before Provision for
Income Taxes and Equity in
Net Income of Affiliates 90,517 111,066 36,691 44,414
Provision for Income Taxes 27,000 33,000 10,800 13,000
Net Income before Equity in
Net Income of Affiliates 63,517 78,066 25,891 31,414
Equity in Net Income of
Affiliates 106,915 93,117 38,265 37,227
Net Income $170,432 171,183 $64,156 68,641
Net Income per Share $ .172 .173 $ .065 .069
<PAGE>
FORM 10-QSB
TAYCO DEVELOPMENTS, INC.
STATEMENT OF CHANGES IN FINANCIAL POSITION
NINE MONTHS ENDED MARCH 31
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 170,432 $ 171,183
Adjustments to Reconcile
Net Income to Net Cash
Provided by Operating
Activities:
Amortization - Patents 9,000 7,650
Equity in Net Income of Affiliates (106,915) (93,117)
Changes in:
Receivables - Affiliates (29,324) (52,375)
Prepaid Expenses (3,110) 14,069
Payables - Trade - 0 - - 0 -
- Affiliates - 0 - - 0 -
Accrued Income Taxes 2,079 8,656
Accrued Expenses (4,682) (1,054)
Amounts due to Stockholder (24,192) (22,858)
Net Cash Provided by Operating
Activities 13,288 32,154
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Patents/PPE (4,284) (27,928)
Net Increase in Cash 9,004 4,226
Cash Balance, Beginning of Period 25,063 24,006
Cash Balance, End of Period $ 34,067 $ 28,232
<PAGE>
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 March 31, 1999 and March 31, 1998 and the results of
operations for the three months and nine 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. To calculate the earnings per share for the three and nine
month periods ended March 31, 1999 and March 31, 1998, the
profit was divided by the outstanding shares of 990,213.
4. The results of operations for the three and nine month periods
ended March 31, 1999, are not necessarily indicative of the
results to be expected for the full year.
<PAGE>
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, which are
not historical facts, 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 nine months ended
March 31, 1999 vs. March 31, 1998
Increase (Decrease)
Royalties $ 24,479
Research and Development Revenue (48,100)
R&D Expense (496)
SG&A (2,195)
Amortization 450
Operating Income (21,380)
Other Income (Expense) 831
Income Before Taxes and Equity in Affiliates (20,549)
Provision for Taxes (6,000)
Equity in Affiliates 13,978
Net Income (571)
<PAGE>
FORM 10-QSB
TAYCO DEVELOPMENTS, INC.
MANAGEMENT'S DISCUSSION (CONT'D)
Financial results remained steady and positive for the nine
month period ending March 31, 1999 as the Company continues to
focus increasingly on internal research efforts.
NINE MONTH RESULTS
For the nine month period ending March 31, 1999, total
Revenues were $307,512 compared to $331,133 for the same period in
Fiscal Year 1998. A $24,479 increase in royalties, attributable to
increased shipments by the Company's affiliate, Taylor Devices
("Devices"), was offset by a decline in Research and Development
("R&D") revenues. As referenced in earlier reports, the Company's
engineering staff, while continuing to support Devices' efforts,
continues to direct an increasing proportion of its time to
internal projects, which will be described later in this section.
Total Expense performance improved for this period totaling
$219,466 versus $221,707 for the same period in 1998. Savings in
administrative areas such as insurance and professional fees offset
increases in personnel related areas. Equity in the Net Income of
Affiliates showed a 14.8% increase of $93,117 for this period in
1998 to $106,915 in 1999 as Devices continued to post improved
results for its fiscal year. Improved Income from Affiliates
offset the results from Internal Operations as Net Income for the
same period, of $170,432 or $.172 per share in 1999 is compared to
$171,183 or $.173 for 1998.
THREE MONTH RESULTS
Results for the three months ending March 31, 1999 paralleled
the full-year results described above. Revenues went from $116,684
in the comparable period for 1998 to $99,093 in 1999, the net
result of improved Royalties of $53,706 vs. $41,365 and diminished
R&D Income of $45,387 vs. $75,319. Operating Expenses improved
from a level of $73,310 in the third quarter of 1998 to $62,604 in
1999, reflecting the savings referenced in the paragraph above.
There were no significant changes in the Other Income category,
Estimated Tax Rate or Equity in the Net Income of Affiliates. Net
Income for the current period was $64,156 or $.065 per share
compared to $68,641 or $.069 per share for the same period in 1998.
<PAGE>
FORM 10-QSB
TAYCO DEVELOPMENTS, INC.
MANAGEMENT'S DISCUSSION (CONT'D)
REMAINDER OF FY99
Management believes the Company is on track for another year
of solid financial results and technical progress. The Company's
affiliate, Devices', is currently completing the initial orders
utilizing the Company's toggle-brace technology and the potential
for additional orders remains positive. Since the last filing, a
major aerospace/defense contractor has received the required
approvals on a new navigation system utilizing the Company's
technology and has placed a pre-production order with Devices.
There is also activity outside of the aerospace/defense market.
Work is proceeding on isolation systems protecting large but
fragile pieces of equipment while in transit. The Company's
engineers are also reporting steady progress with respect to the
development of Tayco's new flat damper technology.
With the Company and its affiliate, Devices, projecting good
results for the Fiscal Year 1999, and with the Company's technical
and financial operations remaining in a strong, stable condition,
Management believes that final results for Fiscal Year 1999 will be
positive and similar to those posted in Fiscal Year 1998.
YEAR 2000 DISCLOSURE
Certain statements included in this discussion regarding the
Company's Year 2000 (Y2K) compliance are forward looking
statements. These include management's best estimates for
completion dates for certain priorities. Specific factors that
might cause material differences include, but are not limited to
the ability to locate and correct, if needed, any relevant software
and embedded components or the compliance of third parties. The
Company's assessments of the effects of Y2K on the Company are
based, in part, upon the information received from third parties
and the Company's reliance on such information. Consequently, the
risk that inaccurate information has been supplied by a third party
upon which the Company may rely, must be considered as a risk
factor that could affect the Company's Y2K efforts.
The Company is continuing to address and analyze its situation
with respect to Y2K issues. As previously reported, the Company's
primary software is an off-the-shelf, widely used, product designed
to accommodate the Y2K problem. Should a failure occur, it could
result in some unknown level of inconvenience until the software is
modified or replaced. The Company's computers have been tested for
functionality after January 1, 2000, and modifications were made
where required.
The Company's transfer agent and SEC filing agent, Taylor Devices,
Inc., notified the Company of a potential information technology
(IT) problem with their shareholder communications system. They
have hired an outside computer programing consultant to implement
a new program that will meet Y2K requirements. The program was
installed during the first quarter of calendar 1999 and Devices
anticipates final testing by 1999 fiscal year end.
Management believes the Company is substantially Y2K compliant with
respect to its sales, administration, and general operations.
However, there can be no guarantee that the systems of other
companies on which the Company's systems may rely on will be
converted on a timely basis or that a failure to convert by another
company, or a conversion that is incompatible with the Company
systems would not have a material impact on the Company. The
Company believes that all areas could temporarily function by
manual methods of operation.
At this time, management is unaware of any Y2K problems other than
a universal disruption of power, communications, transportation,
banking, etc. that could have a significant impact on the Company's
operation.
<PAGE>
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<PAGE>
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 5/07/99
Douglas P. Taylor
Chairman of the Board of Directors
President
(Principal Executive Officer)
AND
By /s/Kenneth G. Bernstein Date 5/07/99
Kenneth G. Bernstein
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> MAR-31-1999
<CASH> 34,067
<SECURITIES> 0
<RECEIVABLES> 153,069
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 194,668
<PP&E> 73,389
<DEPRECIATION> 64,808
<TOTAL-ASSETS> 2,013,328
<CURRENT-LIABILITIES> 42,971
<BONDS> 0
0
0
<COMMON> 49,696
<OTHER-SE> 1,917,561
<TOTAL-LIABILITY-AND-EQUITY> 2,013,328
<SALES> 179,005
<TOTAL-REVENUES> 307,512
<CGS> 217,666
<TOTAL-COSTS> 217,666
<OTHER-EXPENSES> (2,471)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,800
<INCOME-PRETAX> 90,517
<INCOME-TAX> 27,000
<INCOME-CONTINUING> 63,517
<DISCONTINUED> 0
<EXTRAORDINARY> 106,915
<CHANGES> 0
<NET-INCOME> 170,432
<EPS-PRIMARY> .172
<EPS-DILUTED> .172
</TABLE>
