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, 1997 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 - 484,129 shares as of March 31, 1997
TAYLOR INVESTMENT CORPORATION
INDEX
PART I. FINANCIAL INFORMATION Page No.
--------
Item 1. Financial Statements:
Consolidated Balance Sheets
March 31, 1997 and December 31, 1996 (unaudited)........... 3
Consolidated Statements of Operations
Three month periods ended March 31,
1997 and 1996 (unaudited).................................. 4
Consolidated Statements of Stockholders' Equity (unaudited) 5
Consolidated Statements of Cash Flows
Three months ended March 31, 1997 and 1996 (unaudited)..... 6
Notes to Consolidated Financial Statements (unaudited)..... 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.............. 8
Part II....................................................11
Signatures.................................................12
<TABLE>
<CAPTION>
TAYLOR INVESTMENT CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
- --------------------------------------------------------------------------------------------------------------
MARCH 31, 1997 DECEMBER 31, 1996
<S> <C> <C>
ASSETS
INVENTORY - Principally land held for sale $14,037,497 $14,137,556
CONTRACTS AND MORTGAGES RECEIVABLE 8,391,545 9,389,611
INVESTMENT IN JOINT VENTURE 52,273 50,729
OTHER ASSETS:
Cash 252,436 615,054
Notes receivable from officer 250,000 250,000
Tax increment financing receivable 662,725 702,627
Other receivables 335,351 257,912
Income taxes receivable 65,540
Prepaid expenses 333,040 200,993
Land, buildings, and equipment, less accumulated depreciation of
$561,647 and $501,940, respectively 901,704 903,741
Loan acquisition costs and debt issuance costs, less accumulated
amortization of $156,722 and $136,491, respectively 479,569 499,801
----------- -----------
Total other assets 3,214,825 3,495,668
----------- -----------
$25,696,140 $27,073,564
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LINES OF CREDIT $ 5,650,944 $ 5,995,646
NOTES PAYABLE 8,204,252 8,571,571
CONTRACTS AND MORTGAGES PAYABLE 377,557 253,781
SENIOR SUBORDINATED DEBT 3,990,000 3,990,000
OTHER LIABILITIES:
Accounts payable 270,685 365,746
Accrued liabilities 413,047 470,333
Deposits on land sales and purchase agreements 96,734 67,353
----------- -----------
Total other liabilities 780,466 903,432
DEFERRED INCOME TAXES 1,316,097 1,593,713
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; 10,000,000 shares authorized;
484,129 and 488,884 shares issued and outstanding, respectively 4,841 4,889
Additional paid-in capital 724,885 766,650
Retained earnings 4,647,098 4,993,882
----------- -----------
Total stockholders' equity 5,376,824 5,765,421
----------- -----------
$25,696,140 $27,073,564
=========== ===========
</TABLE>
See notes to consolidated financial statements (unaudited).
<TABLE>
<CAPTION>
TAYLOR INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
- -----------------------------------------------------------------------------------------
1997 1996
<S> <C> <C>
REVENUES:
Sales $ 2,621,505 $ 3,763,288
Interest income on contracts receivable 225,632 239,660
Equity in earnings (loss) of 50% owned joint venture 1,544 (4,638)
Other revenue 106,103 119,144
----------- -----------
Total revenue 2,954,784 4,117,454
EXPENSES:
Cost of sales 1,768,123 2,330,071
Selling, general, and administrative 1,244,246 1,554,364
Interest expense 473,098 393,224
----------- -----------
Total costs and expenses 3,485,467 4,277,659
LOSS BEFORE INCOME TAX BENEFIT (530,683) (160,205)
INCOME TAX BENEFIT (212,273) (62,492)
----------- -----------
NET LOSS $ (318,410) $ (97,713)
=========== ===========
NET LOSS PER COMMON SHARE $ (0.66) $ (0.20)
=========== ===========
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 484,129 482,328
=========== ===========
See notes to consolidated financial statements (unaudited).
</TABLE>
<TABLE>
<CAPTION>
TAYLOR INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (UNAUDITED)
- -----------------------------------------------------------------------------------------------------------------------
Common Stock Additional
----------------------- Paid-in Retained
Shares Amount Capital Earnings Total
<S> <C> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1996 488,884 $ 4,889 $ 766,650 $ 4,993,882 $5,765,421
Repurchase of common stock (4,755) (48) (41,765) (28,374) (70,187)
Net loss (318,410) (318,410)
----------- ----------- ----------- ----------- ----------
BALANCES AT MARCH 31, 1997 484,129 $ 4,841 $ 724,885 $ 4,647,098 $5,376,824
=========== =========== =========== =========== ==========
See notes to consolidated financial statements (unaudited).
</TABLE>
<TABLE>
<CAPTION>
TAYLOR INVESTMENT CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997 AND 1996
- -------------------------------------------------------------------------------------------------------------------
1997 1996
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (318,410) $ (97,713)
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization 84,514 63,601
Loss on sale of assets 1,804
Deferred income taxes (277,616) (62,493)
Equity in (earnings) loss of 50% owned joint venture (1,544) 4,638
Contracts and mortgages receivables funded (997,443) (652,003)
Payments on contracts receivable 1,995,509 1,306,598
Decrease in inventory - land held for sale 2,045,543 2,140,608
Increase in other receivables (37,537) (131,675)
Decrease (Increase) in income tax receivable 65,540 (178,800)
Increase in prepaid expenses (132,047) (89,297)
Increase in all other assets 0 (45,000)
Decrease in accounts payable (95,061) (76,035)
Decrease in accrued liabilities (57,286) (174,061)
Increase in deposits on land sales and purchase agreements 29,381 35,582
----------- -----------
2,621,953 2,143,467
----------- -----------
Net cash provided by operating activities 2,303,543 2,045,754
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (62,245) (161,924)
Proceeds from sale of property and equipment 2,500
----------- -----------
Net cash used in investing activities (62,245) (159,424)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on lines of credit (344,702) (2,030,415)
Proceeds from notes payable 1,213,477
Repayment of notes, contracts, and mortgage payables (2,189,027) (823,827)
Retirement of common stock (70,187) (25,420)
----------- -----------
Net cash used in financing activities (2,603,916) (1,666,185)
----------- -----------
(DECREASE) INCREASE IN CASH (362,618) 220,145
CASH AT BEGINNING OF PERIOD 615,054 435,966
----------- -----------
CASH AT END OF PERIOD $ 252,436 $ 656,111
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 465,385 $ 387,491
=========== ===========
Income taxes received (paid) $ 65,540 $ (178,800)
=========== ===========
Noncash financing activity - inventory and equipment
purchased with notes and contracts payable $ 1,945,484 $ 3,294,512
=========== ===========
</TABLE>
See notes to consolidated financial statements (unaudited).
TAYLOR INVESTMENT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. The consolidated balance sheets as of March 31, 1997 and December 31, 1996,
and the condensed consolidated statements of operation for the three month
periods ended March 31, 1997 and 1996 and the condensed consolidated
statements of cash flows for the three months ended March 31, 1997 and 1996
have been prepared by the management of Taylor Investment Corporation
without audit. In the opinion of management, these condensed 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, 1997 and the results of
operations and cash flows 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 1996 Form 10-KSB.
The results of operations for the interim periods are not necessarily
indicative of results which will be realized for the full year.
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, 1997 AND 1996.
Sales of $2,621,505, including sales of shell and turn-key homes, condominiums
and townhomes, ("structures") of $396,769, for the quarter ended March 31, 1997
decreased by $1,141,783 from the same period in 1996. Land sales of $2,224,736
decreased by $486,418 from the same period in 1996, and structure sales declined
by $655,365. The decline in land sales is largely attributable to severe winter
weather conditions in the first quarter. Structure sales were below sales levels
of one year ago due to sales at the Company's townhome development in
Alexandria, Minnesota. Timeshare sales are also below sales for the same period
in 1996. This is principally due to lower inventory levels in 1997 compared to
1996.
Gross profit was $853,382, or 32.6%, for the quarter ended March 31, 1997
compared to $1,433,217, or 38.1%, for the same period in 1996. The gross profit
margin on land sales was 35.4% in 1997 compared to 42.6%. Gross profit margins
remain at low levels due primarily to programs aimed at liquidating aged
inventory, as well as the Company's aggressive efforts in pricing inventory to
stimulate sales. The gross profit margins of structures for 1997 were 16.4%
compared to 26.5% in 1996. The decline is attributable to fewer sales of the
higher margin timeshare product.
Selling, general and administrative expenses of $1,244,245 were 47.5% of sales
for the first quarter of 1997, compared to $1,554,365, or 41.3%, for the same
period in 1996. The 6.2% increase in these expenses as a percent of sales is
attributable to coverage of fixed charges with lower levels of sales. Fixed
charges have decreased over prior years by $310,120 as a result of the Company
restructuring its compensation program.
Interest expense was $473,098 and $393,224 for the quarter ended March 31, 1997
and 1996, respectively. The increase of 20.3% is due to the increase in debt
incurred to finance inventory growth to $14,037,497 at March 31, 1997 from
$12,134,370 at March 31, 1996.
Income tax benefit for the first three months of 1997 and 1996 was 40.0% and
39.0%, respectively. Income tax expense is based on the Company's estimated
annual income tax rate which includes state income taxes.
LIQUIDITY AND CAPITAL RESOURCES
Cash flow is generated from operations as land inventory is sold and collections
are made on contracts and mortgages receivable. The primary use of cash flow is
for financing the Company's ongoing acquisition of land and 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 operations,
investing and financing activities for the three months ended March 31, 1997 and
1996.
<TABLE>
<CAPTION>
Three months ended Three months ended
March 31, 1997 March 31, 1996
----------- -----------
<S> <C> <C>
Net cash provided by (used in):
Operating activities $ 2,303,543 $ 2,045,754
Investing activities (62,245) (159,424)
Financing activities (2,603,916) (1,666,185)
----------- -----------
Net increase (decrease) in cash $ (362,618) $ 220,145
</TABLE>
Sources of financing as of March 31, 1997 and December 31, 1996 are detailed in
the following table:
SOURCES OF FINANCING
<TABLE>
<CAPTION>
March 31, 1997 Percentage December 31, 1996 Percentage
----------- ------ ----------- ------
<S> <C> <C> <C> <C>
Lines of Credit $ 5,650,944 31.0% $ 5,995,646 31.9%
Notes Payable(1) 8,204,252 45.0 8,571,571 45.6
Mortgages Payable 377,557 2.1 253,781 1.3
Subordinated Debt 3,990,000 21.9 3,990,000 21.2
----------- ------ ----------- ------
Total Debt $18,222,753 100.0% $18,810,998 100.0%
- --------
(1) Notes payable include the Diversified Business Credit, Inc. real estate line
of credit in the amounts of $1,200,620 and $1,286,347 as of March 31, 1997 and
December 31, 1996, respectively.
</TABLE>
The balance of notes payable was $8,204,252 and $8,571,571 for March 31, 1997
and December 31, 1996, respectively. The decrease in debt is due to a nominal
decline in inventory of approximately $100,000, and due to a repayment of debt
from collections of notes and mortgages receivable.
As of March 31, 1997 contracts and mortgages receivable outstanding were
approximately $8.4 million compared to $9.4 million as of December 31, 1996. The
decrease in the portfolio is due to increased payoffs by customers whose
accounts were beginning to accrue interest under the program of "no payments, no
interest for 90 days."
Based on expected cash generated from operations, inventory management and the
above financing sources available, management believes it has adequate sources
of financing to fund its cash requirements for the remainder of 1997.
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 Form 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 14, 1997 /S/ Philip C. Taylor
-----------------------------------------------
Philip C. Taylor
President, Chief Executive Officer and Director
(principal executive officer)
Dated: May 14, 1997 /S/ Joel D. Kaul
-----------------------------------------------
Joel D. Kaul
Vice President and Chief Operating Officer
Dated: May 14, 1997 /S/ Mark E. Ties
-----------------------------------------------
Mark E. Ties
Vice President and Chief Financial Officer
(principal financial officer)
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 252,436
<SECURITIES> 0
<RECEIVABLES> 9,639,621
<ALLOWANCES> 0
<INVENTORY> 14,037,497
<CURRENT-ASSETS> 0
<PP&E> 1,463,351
<DEPRECIATION> 561,647
<TOTAL-ASSETS> 25,696,140
<CURRENT-LIABILITIES> 0
<BONDS> 3,990,000
0
0
<COMMON> 4,841
<OTHER-SE> 5,371,983
<TOTAL-LIABILITY-AND-EQUITY> 25,696,140
<SALES> 2,621,505
<TOTAL-REVENUES> 2,954,784
<CGS> 1,768,123
<TOTAL-COSTS> 1,768,123
<OTHER-EXPENSES> 1,717,344
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 473,098
<INCOME-PRETAX> (530,683)
<INCOME-TAX> (212,273)
<INCOME-CONTINUING> (318,410)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (318,410)
<EPS-PRIMARY> (.66)
<EPS-DILUTED> (.66)
</TABLE>
