UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended March 31, 1996 Commission File Number 33-87024C
- ----------------------------------- --------------------------------
TAYLOR INVESTMENT CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota 41-1373372
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation organization)
43 Main Street SE, Suite 506
Minneapolis, MN 55414
(Address of principal executive offices)
Issuer's telephone number, including area code: (612)331-6929
Not applicable
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) or the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes __X__ No _____
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
Common Stock, $.01 Par Value - 481,343 shares as of March 31, 1996
TAYLOR INVESTMENT CORPORATION
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements:
Consolidated Balance Sheets
March 31, 1996 and December 31, 1995 (Unaudited).............. 3
Consolidated Statements of Operations
Three months ended March 31, 1996 and 1995 (Unaudited)........ 4
Consolidated Statements of Cash Flows
Three months ended March 31, 1996 and 1995 (Unaudited)........ 5
Notes to Consolidated Financial Statements (Unaudited)........ 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations................. 7
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders...........10
Signatures....................................................11
<TABLE>
<CAPTION>
TAYLOR INVESTMENT CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
- ---------------------------------------------------------------------------------------------------------
MARCH 31, 1996 DECEMBER 31,1995
<S> <C> <C>
ASSETS
INVENTORY - Principally land held for sale $12,134,370 $11,255,151
CONTRACTS AND MORTGAGES RECEIVABLE 7,371,550 8,026,145
INVESTMENT IN JOINT VENTURE 48,994 53,633
OTHER ASSETS:
Cash 656,111 435,966
Notes receivable from officer 250,000 250,000
Tax increment financing receivable 724,153 735,131
Other receivables 339,145 196,492
Prepaid expenses 281,750 158,703
Income taxes receivable 178,800
Land, buildings, and equipment, less accumulated depreciation of
$353,005 and $257,000, respectively 1,006,264 611,742
Loan acquisition costs and debt issuance costs, less accumulated
amortization of $81,696 and $73,691, respectively 496,681 511,249
----------- -----------
Total other assets 3,932,904 2,899,283
----------- -----------
$23,487,818 $22,234,212
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LINES OF CREDIT $ 6,396,146 $ 7,213,084
NOTES PAYABLE 5,222,363 2,417,590
CONTRACTS AND MORTGAGES PAYABLE 670,202 1,004,290
SENIOR SUBORDINATED DEBT 3,990,000 3,990,000
OTHER LIABILITIES:
Accounts payable 179,667 255,705
Accrued liabilities 377,757 551,817
Income taxes payable 63,670 63,670
Deposits on land sales and purchase agreements 75,497 39,915
----------- -----------
Total other liabilities 696,591 911,107
DEFERRED INCOME TAXES 1,405,359 1,467,851
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; 10,000,000 shares authorized;
481,343 and 483,343 shares issued and outstanding, respectively 4,813 4,833
Additional paid-in capital 666,725 668,841
Retained earnings 4,435,619 4,556,616
----------- -----------
Total stockholders' equity 5,107,157 5,230,290
----------- -----------
$23,487,818 $22,234,212
=========== ===========
See notes to unaudited consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
TAYLOR INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
- -----------------------------------------------------------------------------------
1996 1995
<S> <C> <C>
REVENUES:
Sales $ 3,763,288 $ 3,211,493
Interest income on contracts receivable 239,660 206,461
Equity in earnings (loss) of 50% owned subsidiary,
and joint venture (4,638) (3,144)
Other revenue 119,144 115,893
----------- -----------
Total revenue 4,117,454 3,530,703
EXPENSES:
Cost of sales 2,330,071 1,695,496
Selling, general, and administrative 1,554,364 1,302,610
Interest expense 393,224 327,751
----------- -----------
Total costs and expenses 4,277,659 3,325,857
(LOSS) INCOME BEFORE INCOME TAXES (160,205) 204,846
(BENEFIT) PROVISION FOR INCOME TAXES (62,492) 89,024
----------- -----------
NET (LOSS) INCOME $ (97,713) $ 115,822
=========== ===========
NET (LOSS) INCOME PER COMMON AND COMMON
EQUIVALENT SHARE $ (0.20) $ 0.24
=========== ===========
AVERAGE NUMBER OF COMMON AND
COMMON EQUIVALENT SHARES 482,328 483,312
=========== ===========
</TABLE>
See notes to unaudited consolidated financial statements.
<TABLE>
<CAPTION>
TAYLOR INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
- ---------------------------------------------------------------------------------------------------------------
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net (loss) income $ (97,713) $ 115,822
Adjustments to reconcile net (loss) income to net cash provided
by operating activities:
Depreciation and amortization 63,601 21,767
Loss on sale of assets 1,804
Deferred income taxes (62,493) (160,976)
Equity in loss of 50% owned subsidiary and joint venture 4,638 3,144
Contracts and mortgages receivables funded (652,003) (1,120,199)
Payments on contracts receivable 1,306,598 850,272
Decrease in inventory - land held for sale 2,140,608 616,726
(Increase) decrease in other receivables (131,675) 17,018
Increase in income tax receivable (178,800)
Increase in prepaid expenses (89,297) (106,631)
Increase in all other assets (45,000) (115,873)
(Decrease) increase in accounts payable (76,035) 35,243
Decrease in accrued liabilities (174,061) (67,800)
Increase in deposits on land sales and purchase agreements 35,582 14,776
----------- -----------
2,143,467 (12,533)
----------- -----------
Net cash provided by (used in) operating activities 2,045,754 103,289
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (161,924) (80,080)
Proceeds from sale of property and equipment 2,500
----------- -----------
Net cash used in investing activities (159,424) (80,080)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on lines of credit (2,030,415) (713,963)
Proceeds from notes payable (note 3) 1,213,477
Proceeds from issuance of senior subordinated debt 1,340,000
Repayment of notes, contracts, and mortgage payables (823,827) (737,786)
Retirement of common stock (25,420)
Payment of senior subordinated debt (10,000)
----------- -----------
Net cash used in financing activities (1,666,185) (121,749)
----------- -----------
INCREASE (DECREASE) IN CASH 220,145 (98,540)
CASH AT BEGINNING OF PERIOD 435,966 288,108
----------- -----------
CASH AT END OF PERIOD $ 656,111 $ 189,568
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 387,491 $ 318,217
=========== ===========
Income taxes $ 178,800 $ 250,000
=========== ===========
Noncash financing activity - inventory and equipment
purchased with notes and contracts payable $ 3,294,512 $ 423,054
=========== ===========
Noncash financing activity - debt issuance costs paid from
senior subordinated debt proceeds $ 160,000
===========
</TABLE>
See notes to consolidated financial statements
TAYLOR INVESTMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. The consolidated balance sheets as of March 31, 1996 and December 31,
1995, the consolidated statements of operations for the three months ended
March 31, 1996 and 1995, and the consolidated statements of cash flows for
the three months ended March 31, 1996 and 1995 have been prepared by the
management of Taylor Investment Corporation without audit. In the opinion
of management, these consolidated financial statements reflect all
adjustments (consisting of normal, recurring adjustments) necessary to
present fairly the financial position of Taylor Investment Corporation at
March 31, 1996 and the results of operations and cash flow for all periods
presented.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. Therefore, these
statements should be read in conjunction with the Company's consolidated
financial statements and notes thereto included in the Company's 1995 Form
10-KSB.
The results of operations for interim periods are not necessarily
indicative of results which will be realized for the full year.
2. On March 12, 1996 and March 13, 1996, the Company closed on the sales of
mortgages receivable with recourse in the amounts of $529,403 and
$783,974, respectively, with put options on the five year anniversary of
the sales. The sales were priced at a premium, with servicing retained by
the Company. The Company anticipates subsequent sales of contracts and
mortgages receivable during 1996. These sales of mortgage receivables will
be accounted for as loans because the agreements contain put options under
which the Company may be required to repurchase the mortgage receivables.
Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
Comparison of the Three-Month Periods Ended March 31, 1996 and 1995.
Sales were $3,763,288, including $1,052,134 in sales of shell homes,
condominiums and townhomes, ("structures") for the quarter ended March 31, 1996,
an increase of $551,795 from the same period in 1995. Land sales of $2,711,154
decreased by $327,259 from the same period in 1995, primarily due to the cold
weather and significant snowfall in January and February, which made it
difficult to show lots. Structure sales increased by $879,054, primarily due to
the increase in construction and sale of shell cabins.
Gross profit was $1,433,217 or 38.1%, for the quarter ended March 31, 1996
compared to $1,515,997, or 47.2%, for the same period in 1995. The gross profit
margin on land sales was 42.6% for 1996 and 48.6% for 1995. Gross profit margin
on land sales decreased primarily due to the emphasis of selling lots at lower
margins that had been in inventory for more than one year. The gross profit
margin on structure sales was 26.5% for 1996 and 22.3% for 1995. The increase in
gross profit margins is attributable to timeshare sales. Timeshare sales
averaged a gross profit margin of 66.4% and other structures sales resulted in
gross profit margins of 14.4% during the first quarter of 1996.
Interest income was $239,660 and $206,461 for the first quarter of 1996 and
1995, respectively. The 16.1% increase in interest income is attributable to the
increased level of contracts and mortgages receivable, which was $7,371,550 as
of March 31, 1996 compared to $7,098,996 at March 31, 1995, and to higher rates
charged on timeshare sales. Other revenue, consisting of real estate closing and
documentation fees and resort management fees, was $119,144 for the first
quarter in 1996, compared to $115,893 for the same period in 1995. The slight
increase is due to an increase in rental revenue at the Laurentian resort.
Selling, general and administrative expenses of $1,554,365 were 41.3% of sales
for the first quarter of 1996. These expenses were $1,302,610, or 40.6% of
sales, for the same period in 1995. The 0.7% increase in selling, general and
administrative is attributable to an increase in marketing expenses.
Interest expense for the quarter ended March 31, 1996 increased $65,473, or
20.0% from the same period in 1995 due to an increase in debt to finance
inventory.
Income tax (benefit) expense for the first three months of 1996 and 1995, was
(39.0%) and 43.5%, respectively, of income before income taxes. Income tax
expense is based on the Company's estimated annual income tax rate which
includes state income taxes.
LIQUIDITY AND CAPITAL RESOURCES
The Company generates cash flow from operations as land inventory is sold and
collections are made on its contracts and mortgages receivable. Taylor's primary
use of cash flow is for financing its ongoing acquisition of land and the
subsequent customer mortgage financing. Secondarily, the Company uses cash to
reduce the aggregate amounts outstanding under its Credit Agreement, notes and
mortgages payable. The following table sets forth the Company's net cash flows
for operating, inventory and financing activities for three months ended March
31, 1996, and 1995.
<TABLE>
<CAPTION>
Three months ended Three months ended
March 31, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
Net cash provided by (used in):
Operating activities $2,045,754 $103,289
Investing activities (159,424) (80,080)
Financing activities (1,666,185) (121,749)
----------- ---------
Net increase (decrease) in cash $220,145 $(98,540)
</TABLE>
Cash provided by operating activities for the first quarter of 1996 and 1995 was
$2,045,754 and $103,289, respectively. The principal sources of cash flow for
the first three months of 1996 was cash received from sales of land and
structures, as well as, payments collected on contracts and mortgages receivable
exceeding those funded during the period. For the same period in 1995, the
source of cash flow was primarily net income. Cash used in investing activities
was $159,424 and $80,080 for the three months ended March 31, 1996 and 1995,
respectively.
Sources of financing as of March 31, 1996 and December 31, 1995 are detailed in
the following table:
<TABLE>
<CAPTION>
SOURCES OF FINANCING
March 31, 1996 Percentage December 31, 1995 Percentage
<S> <C> <C> <C> <C>
Lines of Credit $6,396,146 39.3% $7,213,084 49.3%
Notes Payable(1) 5,222,363 32.1% 2,417,590 16.5%
Mortgages Payable 670,202 4.1% 1,004,290 6.9%
Subordinated Debt 3,990,000 24.5% 3,990,000 27.3%
--------- ----- --------- -----
Total Debt $16,278,711 100.0% $14,624,964 100.0%
</TABLE>
The balance of notes payable was $5,222,363 and $2,417,590 for March 31, 1996
and December 31, 1995, respectively. The large increase in the balance of notes
payable was attributable to the issuance of notes payable of $1,213,476 in
connection with the sale of contract and mortgages receivable which was recorded
as a financing transaction and to increased financing to acquire inventory.
(1) Notes payable include the Diversified Business Credit, Inc. real estate
line of credit in the amounts of $1,124,892 and $314,030 as of March 31,
1996 and December 31, 1995, respectively.
As of March 31, 1996 contracts and mortgages receivable outstanding were
approximately $7.4 million compared to $8.0 million as of December 31, 1995.
This decrease is a result of payments collected on contracts and mortgages
receivable that exceeded those funded during the period. Cash sales for the
first three months in 1996 and 1995, as a percentage of total sales, were 82.7%
and 65.4%, respectively.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Not applicable
Item 2. Changes in Securities
Not applicable
Item 3. Defaults in Senior Securities
Not applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
Item 5. Other Information
Not applicable
Item 6. Exhibits and Reports on From 8-K
(a) Exhibits.
Not applicable
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter
covered by this report.
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.
Taylor Investment Corporation
(Registrant)
Dated: May 10, 1996 /S/ Philip C. Taylor
-----------------------------
Philip C. Taylor
President, Chief Executive Officer and Director
(principal executive officer)
Dated: May 10, 1996 /S/ Joel D. Kaul
-------------------------
Joel D. Kaul
Chief Financial Officer
(principal financial and accounting officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 656,111
<SECURITIES> 0
<RECEIVABLES> 8,863,648
<ALLOWANCES> 0
<INVENTORY> 12,134,370
<CURRENT-ASSETS> 0
<PP&E> 1,359,269
<DEPRECIATION> 353,005
<TOTAL-ASSETS> 23,487,818
<CURRENT-LIABILITIES> 0
<BONDS> 3,990,000
0
0
<COMMON> 4,813
<OTHER-SE> 5,102,344
<TOTAL-LIABILITY-AND-EQUITY> 23,487,818
<SALES> 3,763,288
<TOTAL-REVENUES> 4,117,454
<CGS> 2,330,071
<TOTAL-COSTS> 2,330,071
<OTHER-EXPENSES> 1,947,588
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 393,224
<INCOME-PRETAX> (160,205)
<INCOME-TAX> (62,492)
<INCOME-CONTINUING> (97,713)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (97,713)
<EPS-PRIMARY> .20
<EPS-DILUTED> .20
</TABLE>
