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, 1998 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, 1998
<PAGE>
TAYLOR INVESTMENT CORPORATION
INDEX
PART I. FINANCIAL INFORMATION Page No.
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
March 31, 1998 (unaudited) and December 31, 1997 ...................3
Condensed Consolidated Statements of Operations
Three month periods ended March 31,
1998 and 1997 (unaudited)...........................................4
Condensed Consolidated Statements of Cash Flows Three months
ended March 31, 1998 and 1997 (unaudited)...... ....................5
Notes to Condensed Consolidated Financial Statements (unaudited)....6
Item 2. Management's Discussion and Analysis of
Results of Operation and Financial Condition .......................7
Part II............................................................10
Signatures.........................................................11
<PAGE>
TAYLOR INVESTMENT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, 1998 DECEMBER 31, 1997
----------- -----------
<S> <C> <C>
ASSETS
INVENTORY - Principally land held for sale $11,941,079 $12,231,884
CONTRACTS AND MORTGAGES RECEIVABLE 9,474,184 9,094,999
INVESTMENT IN JOINT VENTURE 43,152 60,645
OTHER ASSETS:
Cash 262,515 648,760
Notes receivable from officer 256,010 250,000
Tax increment financing receivable 677,813 692,562
Other receivables 196,636 92,240
Income taxes receivable 314,296 314,296
Prepaid expenses 190,257 136,483
Land, buildings, and equipment, less accumulated depreciation of
$648,014 and $579,114, respectively 702,592 747,325
Loan acquisition costs and debt issuance costs, less accumulated amortization of
$236,147 and $215,917, respectively 400,145 420,375
----------- -----------
Total other assets 3,000,265 3,302,041
----------- -----------
$24,458,680 $24,689,569
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LINES OF CREDIT $ 5,726,906 $ 5,932,225
NOTES PAYABLE 7,039,802 7,028,377
CONTRACTS AND MORTGAGES PAYABLE 277,674 406,948
SENIOR SUBORDINATED DEBT 3,990,000 3,990,000
OTHER LIABILITIES:
Accounts payable 223,171 351,907
Accrued liabilities 338,775 349,635
Deposits on land sales and purchase agreements 47,685 25,572
----------- -----------
Total other liabilities 609,631 727,114
DEFERRED INCOME TAXES 1,628,254 1,544,708
COMMITMENTS AND CONTINGENCIES 0 0
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value; 10,000,000 shares authorized;
484,129 shares issued and outstanding 4,841 4,841
Additional paid-in capital 740,136 740,136
Retained earnings 4,441,436 4,315,220
----------- -----------
Total stockholders' equity 5,186,413 5,060,197
----------- -----------
$24,458,680 $24,689,569
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements (unaudited).
<PAGE>
TAYLOR INVESTMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1997
THREE MONTHS ENDED
MARCH 31,
--------------------------
1998 1997
REVENUES:
Sales $ 3,932,358 $ 2,621,505
Interest income on contracts receivable 283,764 225,632
Equity in earnings of 50% owned joint venture 17,507 1,544
----------- -----------
Other revenue 48,380 106,103
----------- -----------
Total revenue 4,282,009 2,954,784
----------- -----------
EXPENSES:
Cost of sales 2,314,522 1,768,123
Selling, general, and administrative 1,287,993 1,244,246
Interest expense 469,732 473,098
----------- -----------
Total costs and expenses 4,072,247 3,485,467
INCOME (LOSS) BEFORE INCOME TAXES 209,762 (530,683)
INCOME TAX EXPENSE (BENEFIT) 83,546 (212,273)
----------- -----------
NET INCOME (LOSS) $ 126,216 $ (318,410)
=========== ===========
BASIC AND DILUTED NET INCOME (LOSS)
PER COMMON SHARE OUTSTANDING $ 0.26 $ (0.66)
=========== ===========
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 484,129 484,129
=========== ===========
See notes to condensed consolidated financial statements (unaudited).
<PAGE>
TAYLOR INVESTMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 126,215 $ (318,410)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 89,130 84,514
Deferred income taxes 83,546 (277,616)
Equity in (earnings) loss of 50% owned joint venture (17,507) (1,544)
Contracts and mortgages receivables funded (1,401,954) (997,443)
Payments on contracts and mortgages receivable 1,022,769 1,995,509
Decrease in inventory - land held for sale 1,553,845 2,045,543
(Increase) in other receivables (95,657) (37,537)
Increase (decrease) in income tax receivable -- 65,540
Increase in prepaid expenses (53,774) (132,047)
Increase in other liabilities (10,860)
Increase (decrease) in accounts payable,accrued liabilities, and income taxes payable (128,736) (152,347)
Increase in deposits on land sales and purchase agreements 22,113 29,381
----------- -----------
1,062,915 2,621,953
----------- -----------
Net cash provided by operating activities 1,189,130 2,303,543
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (24,167) (62,245)
Proceeds from distribution of joint venture 35,000 --
----------- -----------
Net cash used in investing activities 10,833 (62,245)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net payments on lines of credit (205,319) (344,702)
Repayment of notes, contracts, and mortgage payables (1,380,889) (2,189,027)
Retirement of common stock -- (70,187)
----------- -----------
Net cash used in financing activities (1,586,208) (2,603,916)
----------- -----------
DECREASE IN CASH (386,245) (362,618)
CASH AT BEGINNING OF PERIOD 648,760 615,054
----------- -----------
CASH AT END OF PERIOD $ 262,515 $ 252,436
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 475,678 $ 465,385
=========== ===========
Income taxes $ -- $ 65,540
=========== ===========
Noncash financing activity - inventory and equipment
purchased with notes and contracts payable $ 1,263,040 $ 1,945,484
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements (unaudited).
<PAGE>
TAYLOR INVESTMENT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
1. The condensed consolidated balance sheets as of March 31, 1998 and
December 31, 1997, and the condensed consolidated statements of operation
for the three month periods ended March 31, 1998 and 1997 and the
statements of cash flow 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, 1998
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 1997 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.
2. In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 130, "Reporting Comprehensive
Income", which was adopted by the Company beginning January 1, 1998. SFAS
No.130 requires the disclosure of comprehensive income and its components
in the general-purpose financial statements. The adoption of the Company
of SFAS No. 130 did not have a material effect on the Company's financial
statements for the three months ended March 31, 1998 or 1997.
<PAGE>
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, 1998 AND 1997.
Sales of $3,932,358, including sales of shell and turn-key homes, condominiums
and townhomes, ("structures") of $698,660, for the quarter ended March 31, 1998
increased by $1,310,853 from the same period in 1997. Land sales of $3,233,698
increased by $1,008,962 from the same period in 1997, and structure sales
increased by $301,891. The increase in land sales is largely attributable to
mild winter weather conditions in the first quarter.
Gross profit was $1,617,836, or 41.1%, for the quarter ended March 31, 1998
compared to $853,382, or 32.6%, for the same period in 1997. The gross profit
margin on land sales was 46.7% in 1998 compared to 35.4%. The gross profit
margins increase is due primarily to the sale of high margin inventory at the
Jasper, GA office. The gross profit margin on sales of structures showed a small
decline, in 1998 to 15.3% from 16.4% in 1997.
Selling, general and administrative expenses of $1,287,993 were 32.8% of sales
for the first quarter of 1998, compared to $1,244,246, or 47.5%, for the same
period in 1997. The 14.7% decrease in these expenses as a percent of sales is
attributable to managements efforts to control expenses, as well as a larger
sales base.
For the quarter ended March 31, 1998, interest income was $58,132 higher than
for the same period in 1997 due to an increase in the average balance of
contracts and mortgages receivable. Other revenues of $48,380 for the first
quarter of 1998 decreased from $106,103 for the same period in 1997. The
decrease in other revenue is attributable to management fees received in 1997,
for the Resort Hospitality. The company discontinued management of the resort on
November 1 ,1997.
Interest expense was $469,732 and $473,098 for the quarters ended March 31, 1998
and 1997, respectively.
Income tax expense, as a percentage of income, for the first three months of
1998 was 39.8% and the income tax benefit for 1997 was 40.0%. Income taxes are
based on the Company's estimated annual income tax rate which includes state
income taxes.
<PAGE>
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, 1998 and
1997.
Three months ended Three months ended
March 31, 1998 March 31, 1997
----------- -----------
Net cash provided by (used in):
Operating activities $ 1,189,130 $ 2,303,543
Investing activities 10,833 (62,245)
Financing activities (1,586,208) (2,603,916)
----------- -----------
Net increase (decrease) in cash $ (386,245) $ (362,618)
Sources of financing as of March 31, 1998 and December 31, 1997 are detailed in
the following table:
SOURCES OF FINANCING
March 31, 1998 Percentage December, 31, 1997 Percentage
-------------- ---------- ------------------ ----------
Lines of Credit $ 5,726,906 33.62% $ 5,932,225 34.18%
Notes Payable(1) 7,039,802 41.33 7,028,377 40.49
Mortgages Payable 277,674 1.63 406,948 2.34
Subordinated Debt 3,990,000 23.42 3,990,000 22.99
----------- ------ ----------- ------
$17,034,382 100.00% $17,357,550 100.00%
=========== ====== =========== ======
Total debt declined $323,168 from December 31, 1997, due to: 1) repayment of
debt from collections of contracts and mortgages receivable and 2) a decline in
inventory of $290,805. As of March 31, 1998, contracts and mortgages receivable
were $9,474,184 compared to $9,094,999 as of December 31, 1997. The increase in
the portfolio is due to more customers taking advantage of the company's
financing programs.
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 1998.
- --------
Notes payable include the real estate line of credit in the amounts of
$1,351,812 and $1,592,221 as of March 31, 1998 and December 31, 1997,
respectively.(1)
<PAGE>
SAFE HARBOR DISCLOSURE - Various forms filed by the Company with the Securities
and Exchange Commission, including the Company's Form 10-KSB and Form 10-QSB,
and other written documents and oral statements released by the Company, may
contain forward-looking statements. Forward-looking statements generally use
words such as "expect," "anticipate," "believe," "project," "should,"
"estimate," and similar expressions, and reflect the Company's expectations
concerning the future. Such statements are based upon currently available
information, but various risks and uncertainties may cause the Company's actual
results to differ materially from those expressed in these statements. Among the
factors which management believes could affect the Company's operating results
are the following:
* Changing economic conditions, including economic downturns or
recessions and rising interest rates;
* The ability of the company to maintain and enhance its market
position relative to its competitors, to realize productivity, and
to continue to control expenses;
* The availability of suitable tracts of undeveloped land in proximity
to the marketplace;
* Changes in zoning and subdivision regulations;
* The availability and cost of financing;
* Continuity of management.
<PAGE>
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.
<PAGE>
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 13, 1998 /S/ Philip C. Taylor
Philip C. Taylor
President, Chief Executive Officer and Director
(principal executive officer)
Dated: May 13, 1998 /S/ Joel D. Kaul
Joel D. Kaul
Vice President and Chief Operating Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 262,515
<SECURITIES> 0
<RECEIVABLES> 10,918,939
<ALLOWANCES> 0
<INVENTORY> 11,941,079
<CURRENT-ASSETS> 0
<PP&E> 1,350,606
<DEPRECIATION> 648,014
<TOTAL-ASSETS> 24,458,680
<CURRENT-LIABILITIES> 0
<BONDS> 3,990,000
0
0
<COMMON> 4,841
<OTHER-SE> 5,181,571
<TOTAL-LIABILITY-AND-EQUITY> 24,144,384
<SALES> 3,932,358
<TOTAL-REVENUES> 4,282,009
<CGS> 2,314,522
<TOTAL-COSTS> 2,314,522
<OTHER-EXPENSES> 1,757,725
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 469,732
<INCOME-PRETAX> 209,762
<INCOME-TAX> 83,546
<INCOME-CONTINUING> 126,216
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 126,216
<EPS-PRIMARY> 0.26
<EPS-DILUTED> 0.26
</TABLE>
