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, 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 December 31, 1998
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
December 31, 1998, and June 30, 1998
Statement of Income for three months 4
and six months ended December 31, 1998
and December 31, 1997
Statement of Cash Flows for six months 5
ended December 31, 1998 and December 31, 1997
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
<PAGE>
FORM 10-QSB
TAYCO DEVELOPMENTS, INC. - BALANCE SHEET
ASSETS 12/31/98 6/30/98
Current
Cash $ 30,985 $ 25,063
Receivables - Affiliates, Current 131,558 123,745
Prepaid Other Expenses 7,665 4,422
Total Current Assets 170,208 153,230
Investments - Affiliate, at Equity 1,585,961 1,517,311
Furniture and Equipment - at Cost 73,389 73,389
Less: Accumulated Depreciation 63,908 62,108
1,595,442 1,528,592
Other Assets
Patents, Net 127,159 131,089
Receivables - Affiliates, Long-term -0- -0-
Cash Value - Life Insurance, Net 56,780 56,780
Total Other Assets 183,939 187,869
TOTAL ASSETS $1,949,589 $1,869,691
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Payables - Trade $ -0- $ -0-
Payables - Affiliate -0- -0-
Current Portion of Long Term Debt 31,720 33,437
Accrued Income Taxes 6,500 4,543
Accrued Expenses 5,168 17,375
Total Current Liabilities 43,388 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
and outstanding 49,696 49,696
Paid - In Capital 670,605 670,605
Retained Earnings 1,188,429 1,082,153
1,908,730 1,802,454
Less: Cost of Treasury Stock 3,709
Shares at Cost 5,629 5,629
Total Stockholders' Equity 1,903,101 1,796,825
Total Liabilities and Stockholders'
Equity $1,949,589 $1,869,691
<PAGE>
FORM 10-QSB
TAYCO DEVELOPMENTS, INC.
CONSOLIDATED CONDENSED STATEMENT OF INCOME
Six Months Three Months
Ended 12/31 Ended 12/31
1998 1997 1998 1997
NET SALES
Royalties $ 74,801 $ 62,663 $ 37,175 $ 29,949
Research and Development 133,618 151,786 67,716 76,174
Total Revenues 208,419 214,449 104,891 106,123
EXPENSES
Research and Development 73,764 70,164 36,777 34,562
Selling, General
Administrative 75,288 70,733 41,626 37,703
Amortization - Patents 7,800 7,500 3,900 3,750
Total Expenses 156,852 148,397 82,303 76,015
Operating Income 51,567 66,052 22,588 30,108
OTHER INCOME/(EXPENSE) 2,259 600 1,433 (200)
Income Before Provision for
Income Taxes and Equity in
Net Income of Affiliates 53,826 66,652 24,021 29,908
Provision for Income Taxes 16,200 20,000 7,200 9,000
Net Income before Equity in
Net Income of Affiliates 37,626 46,652 16,821 20,908
Equity in Net Income of
Affiliates 68,650 55,890 36,185 31,480
Net Income $106,276 $102,542 $53,006 $52,388
Net Income per Share $ .107 $ .104 $ .054 $ .053
<PAGE>
FORM 10-QSB
TAYCO DEVELOPMENTS, INC.
STATEMENT OF CASH FLOW
SIX MONTHS ENDED DECEMBER 31
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 106,276 $ 102,542
Adjustments to Reconcile Net
Income to Net Cash Provided by
Operating Activities:
Amortization - Patents 6,000 7,000
Equity in Net Income of Affiliates (68,650) (55,890)
Changes in:
Receivables - Affiliates ( 7,813) ( 21,490)
Prepaid Expenses ( 3,243) 11,689
Payables - Trade -0- -0-
- Affiliates -0- -0-
Accrued Income Taxes 1,957 3,771
Accrued Expenses (12,207) ( 5,932)
Amounts due to Stockholder (16,128) (15,256)
Net Property, Plant & Equipment 1,800 781
Net Cash Provided by Operating
Activities 7,992 27,215
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of Patents ( 2,070) (23,771)
Net Increase in Cash 5,922 3,444
Cash Balance, Beginning of Period 25,063 24,006
Cash Balance, End of Period $ 30,985 $ 27,450
<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 December 31, 1998 and December 31, 1997 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, 1998
and December 31, 1997, 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, 1998, 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 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, 1998 vs. December 31, 1997
Increase (Decrease)
Royalties $ 12,138
Research and Development Revenue (18,168)
R&D Expense 3,600
SG&A 4,555
Amortization 300
Operating Income (14,485)
Other Income (Expense) 1,659
Income Before Taxes and Equity in
Affiliates (12,826)
Provision for Taxes ( 3,800)
Equity in Affiliates 12,760
Net Income $ 3,734
<PAGE>
FORM 10-QSB
TAYCO DEVELOPMENTS, INC.
MANAGEMENT'S DISCUSSION (CONT'D)
SIX MONTHS YEAR-TO-DATE
For the first six months of Fiscal Year 1999 (YTD99), the
Company posted improved Net Income as higher Income From Affiliates
more than offset a reduction in internally generated income. Total
Revenues declined from $214,449 for the first six months of Fiscal
Year 1998 (YTD98) to $208,419, the net result of improved Royalties
and lower Research and Development billings. The reduced R&D
billings are a direct reflection of the Company's efforts to
concentrate on patent-producing internal projects. Total expenses
increased in YTD99 to $156,852 from $148,397 in YTD98, an increase
which also resulted from costs for materiel and personnel
attributable to the increased emphasis on internal projects. With
the tax rate remaining stable between the two periods being
compared, Net Income before Equity in Net Income of Affiliates for
YTD99 was $37,626 compared to $46,652 for YTD98.
Equity in Net Income of Affiliates improved to $68,650 in
YTD99 from $55,890 for YTD98 as the Company's affiliate, Taylor
Devices, posted improved results based primarily on higher realized
gross margins. At 12/31/98, the Company reported Net Income of
$106,276 and $.107 per share, a 3.6 percent improvement over
$102,542 and $.104 for YTD98.
THREE MONTHS ENDED DECEMBER 31, 1998
For the second quarter of Fiscal Year 1999 (QII99), the
results and discussion items are almost identical to the six month
period compared above. Total Revenues for the period came to
$104,891, down slightly from the $106,123 reported for the second
quarter of Fiscal Year 1998 (QII98), the net result of improved
Royalties and lower R&D revenues. Total Expenses for the period
amounted to $82,303, up from $76,015 in QII98 due to the same
factors referenced in the section above. With no change in the tax
rate between the two periods, the Net Income before Equity in Net
Income of Affiliates for QII99 was $16,821 compared to $20,908 for
QII98. Equity in Net Income of Affiliates improved from $31,480 in
QII98 to $36,185 for QII99. Net Income and Earnings Per Share
improved slightly in QII99 to $53,006 and $.054 from $52,388 and
$.053 in QII98.
<PAGE>
FORM 10-QSB
TAYCO DEVELOPMENTS, INC.
MANAGEMENT'S DISCUSSION (CONT'D)
The Company's engineers have focused on a number of
potentially favorable projects in Fiscal Year 1999, primarily in
the defense/aerospace and infrastructure market sectors. Primary
among them are: a new concept for a commercial off-the-shelf (COTS)
damping system using four tension/compression (T/C) units instead
of the current two; development of T/C units for use in missile
cannisters; cost-plus, time and material type efforts for an
experiment scheduled for a 1999 Space Shuttle mission; improved
isolation for navigation devices, and adaptations of current
products to meet the requirements of a large-scale bridge project
located off-shore.
At the mid-way point of Fiscal Year 1999, Management
anticipates that results for the full year will continue to be
positive.
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 mid year 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 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.
FORM 10-QSB
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.
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 5, 1998 and the Company had 990,213 shares
outstanding at the record date of September 23, 1998. A total
of 862,124 proxies were cast . Management's proposed slate of
Directors received the following voting results:
VOTES
WITHHELD VOTES
/AGAINST FOR
Douglas P. Taylor 12,043 850,081
David A. Lee 11,812 850,312
Joseph P. Gastel 10,542 851,582
Paul L. Tuttobene 11,812 850,312
Janice M. Nicely 10,365 851,759
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 2/10/99
Douglas P. Taylor
Chairman of the Board of Directors
President
(Principal Executive Officer)
AND
By /s/Kenneth G. Bernstein Date 2/10/99
Kenneth G. Bernstein
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> DEC-31-1998
<CASH> 30,985
<SECURITIES> 0
<RECEIVABLES> 131,558
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 170,208
<PP&E> 73,389
<DEPRECIATION> 63,908
<TOTAL-ASSETS> 1,949,589
<CURRENT-LIABILITIES> 31,720
<BONDS> 0
0
0
<COMMON> 49,696
<OTHER-SE> 1,853,405
<TOTAL-LIABILITY-AND-EQUITY> 1,949,589
<SALES> 133,618
<TOTAL-REVENUES> 208,419
<CGS> 154,852
<TOTAL-COSTS> 154,852
<OTHER-EXPENSES> (2,259)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,000
<INCOME-PRETAX> 53,826
<INCOME-TAX> 16,200
<INCOME-CONTINUING> 37,626
<DISCONTINUED> 0
<EXTRAORDINARY> 68,650
<CHANGES> 0
<NET-INCOME> 106,276
<EPS-PRIMARY> .107
<EPS-DILUTED> .107
</TABLE>
