SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549
FORM 10-QSB/A
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarter ended September 30, 1998
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, 1998
Common Stock 990,213
($.05 par value)
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FORM 10-QSB/A
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, 1998 vs. September 30, 1997
Increase (Decrease)
Royalties $ 4,912
Research and Development Revenue (9,710)
R&D Expense 1,385
SG&A 632
Amortization 150
Operating Income (6,965)
Other Income (Expense) 26
Income Before Taxes and Equity in Affiliates (6,939)
Provision for Taxes (2,000)
Equity in Affiliates 8,055
Net Income 3,116
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FORM 10-QSB/A
TAYCO DEVELOPMENTS, INC.
MANAGEMENT'S DISCUSSION (CONT'D)
Improved Royalty and Income from Affiliates offset reduced R&D
revenue, as Net Income improved by 6% in the first quarter of
Fiscal Year 1999.
In the first quarter of Fiscal Year 1999 (QI99), total
revenues were $103,528, compared to $108,326 in the first quarter
of Fiscal Year 1998 (QI98). An increase in Royalty Revenues was
more than offset by a decrease in R&D income as the Company's
engineers spent proportionately more time on internal developmental
and analytical projects. The nature of certain of these projects
is discussed later in this section.
Total expenses changed from $72,382 in QI98 to $74,549 in QI99
due almost entirely to personnel related expenses and an increased
amortization accrual rate. Operating income for QI99 was $28,979
versus $35,944 for QI98 due primarily to the lowered R&D income
figure.
Equity in the Net Income of Affiliates improved from $24,410
in QI98 to $32,465 in QI99 as the Company's affiliate, Taylor
Devices, reported higher earnings based on improved gross margins.
Net Income for QI99 was $53,270 and $.054 per share, an improvement
of 6.2% over the QI98 figures of $50,154 and $.051 per share.
The Company's balance sheet reflects the continuing stability
of the operations with the only item of note being the steadily
declining amount due as long-term debt, which now has about 16
months to go until it is paid off in full.
As mentioned above, the Company's engineers spent
proportionately more time on developmental projects in QI99 than in
most past quarters. Most of the efforts were for the
aerospace/defense market. There were continuing efforts on the
flat damper project which is in the modeling and procurement
stages. This unit has the potential to become a component in
military cabinets being built under COTS (Commercial Off-the-Shelf)
directives with the possibility of a requirement for substantial
quantities over an extended period of time. Another developmental
effort was the generation of software code to optimize the
placement of the current generation of tension/compression dampers
in military cabinetry. Two additional separate efforts focused on
potential use of company technology in submarines: semi-active
dampers for deck isolation and tension/compression units for shock
isolation of critical steering/guidance components. The final
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FORM 10-QSB/A
TAYCO DEVELOPMENTS, INC.
MANAGEMENT'S DISCUSSION (CONT'D)
aerospace/defense developmental effort revolved around the design
parameters for tension/compression dampers for a new generation of
larger sea-to-air defensive missiles.
Based partly on the good results of QI99, Management believes that
Fiscal Year 1999 will produce good financial results consistent
with those of the past few years. The single largest unknown
variable, the Equity Income from the Company's affiliates, appears
at this time to be on track for these anticipated stable results.
In the coming months, Management will continue to keep the
Company's efforts balanced between projects offering short-term and
long-term benefits to the Company.
YEAR 2000 DISCLOSURE
The Company is aware of issues the year 2000 ("Y2K") presents.
Management has reviewed all software, hardware and
telecommunications systems with an outside consultant to determine
whether any of the Company's information technology ("IT") systems
were in need of conversion. The Company's IT systems have been
purchased within the last few years and generally uses
"off-the-shelf" software. Being relatively new, all systems are
believed to be Y2K compliant. The recent updating has resulted in
fewer expenses to anticipate for future Y2K project needs. The
historical and estimated costs of any portion of the Y2K project
have been and are expected to remain minimal.
The Company's transfer agent and SEC filing agent, Taylor Devices,
Inc. notified the Company of a potential IT problem with respect to
the method used to communicate with clearing houses, depositories
and the SEC. At this time, the Company has been assured that an
upgraded system should be in place by midyear of calendar 1999.
The Company will continue to monitor the progress.
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.
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FORM 10-QSB/A
TAYCO DEVELOPMENTS, INC.
MANAGEMENT'S DISCUSSION (CONT'D)
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.
