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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the period ended June 30, 2000 Commission File Number 33-87024C
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TAYLOR INVESTMENT CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota 41-1373372
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(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
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(Former name, former address and former fiscal year, if changed since
last report.)
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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 June 30, 2000
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TAYLOR INVESTMENT CORPORATION
INDEX
PART I. FINANCIAL INFORMATION Page No.
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Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
June 30, 2000 (unaudited) and December 31, 1999 ................... 3
Condensed Consolidated Statements of Income
Three and six months ended June 30,
2000 and 1999 (unaudited).......................................... 4
Condensed Consolidated Statements of Cash Flows
Six months ended June 30, 2000 and 1999 (unaudited)................ 5
Notes to Condensed Consolidated Financial Statements (unaudited)... 6
Item 2. Management's Discussion and Analysis of
Results of Operations and Financial Condition...................... 7
Part II............................................................ 11
Signatures......................................................... 12
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TAYLOR INVESTMENT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
(Unaudited)
JUNE 30, 2000 DECEMBER 31, 1999
<S> <C> <C>
ASSETS
INVENTORY - Principally land held for sale $ 15,677,814 $ 9,938,693
CONTRACTS AND MORTGAGES RECEIVABLE 9,544,572 8,694,934
INVESTMENT IN JOINT VENTURE 290,148 6,713
OTHER ASSETS:
Cash 291,669 969,309
Tax increment financing receivable 558,997 568,977
Other receivables 281,163 252,511
Prepaid expenses and earnest money deposits 400,936 342,602
Funds held by trustee 42,500 40,500
Land, buildings, and equipment, less accumulated
depreciation of $960,943 and $869,594, respectively 357,630 399,474
Loan acquisition costs and debt issuance costs, less
accumulated amortization of $373,958 and $332,480,
respectively 272,062 291,470
-------------- --------------
Total other assets 2,204,957 2,864,843
-------------- --------------
$ 27,717,491 $ 21,505,183
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
LINES OF CREDIT $ 7,317,101 $ 3,797,508
NOTES PAYABLE 7,624,269 4,725,779
CONTRACTS AND MORTGAGES PAYABLE 304,548 46,041
SENIOR SUBORDINATED DEBT 3,599,000 3,680,000
OTHER LIABILITIES:
Accounts payable 166,995 365,619
Accrued liabilities 608,119 925,259
Deposits on land sales and purchase agreements 38,953 47,615
-------------- --------------
Total other liabilities 814,067 1,338,493
DEFERRED INCOME TAXES 331,466 374,032
COMMITMENTS AND CONTINGENCIES
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 6,982,063 6,798,353
-------------- --------------
Total stockholders' equity 7,727,040 7,543,330
-------------- --------------
$ 27,717,491 $ 21,505,183
============== ==============
</TABLE>
See notes to condensed consolidated financial statements (unaudited).
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TAYLOR INVESTMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
THREE AND SIX MONTHS ENDED JUNE 30, 2000 AND 1999
<TABLE>
<CAPTION>
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THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
2000 1999 2000 1999
--------------------------------- ---------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Sales $ 6,368,525 $ 5,030,732 $ 11,541,635 $ 8,696,639
Interest income on contracts receivable 248,549 231,040 498,663 487,879
Equity in (loss) earnings of joint ventures (49,951) 13,671 (49,565) 9,940
Other revenue 160,235 145,496 253,359 178,486
-------------- -------------- -------------- --------------
Total revenue 6,727,358 5,420,939 12,244,092 9,372,944
COSTS AND EXPENSES:
Cost of sales 3,345,140 2,567,032 6,076,721 4,552,263
Selling, general, and administrative 2,159,679 1,839,644 3,992,565 3,114,459
Interest expense 358,223 345,294 696,586 727,021
-------------- -------------- -------------- --------------
Total costs and expenses 5,863,042 4,751,970 10,765,872 8,393,743
NET INCOME $ 864,316 $ 668,969 $ 1,478,220 $ 979,201
============== ============== ============== ==============
NET INCOME PER COMMON SHARE
OUTSTANDING $ 1.79 $ 1.38 $ 3.05 $ 2.02
============== ============== ============== ==============
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 484,129 484,129 484,129 484,129
============== ============== ============== ==============
</TABLE>
See notes to condensed consolidated financial statements (unaudited).
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TAYLOR INVESTMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------
2000 1999
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,478,220 $ 979,201
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 150,955 157,788
Gain on sale of assets (907) --
Deferred income taxes (42,566) (156,047)
Equity in loss (earnings) of joint ventures 49,565 (9,940)
Contracts and mortgages receivables funded (3,341,690) (2,489,897)
Payments on contracts receivable 2,492,052 3,438,639
Decrease in inventory - land held for sale 915,570 2,837,834
Increase in other receivables (18,672) (33,269)
Decrease in income tax payable -- (241,664)
Increase in prepaid expenses (58,334) (67,734)
Decrease in accounts payable (198,624) (26,457)
Decrease in accrued liabilities (317,140) (243,475)
(Decrease) increase in deposits on land sales
and purchase agreements (8,662) 891
-------------- --------------
Net cash provided by operating activities 1,099,767 4,145,870
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of land, buildings and equipment (70,226) (90,655)
Proceeds from sale of land, buildings and equipment 3,500 --
Investment in and advances to joint ventures (333,000) --
Proceeds from distribution of joint venture -- 12,000
Increase in funds held by trustee (2,000) (1,000)
-------------- --------------
Net cash used in investing activities (401,726) (79,655)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings on lines of credit 3,519,593 39,828
Repayment of notes, contracts, and mortgage payables (3,497,694) (3,912,593)
Loan acquisition costs (22,070) (23,224)
Repayment of senior subordinated debt (81,000) (75,000)
Distributions to shareholders (1,294,510) (300,159)
-------------- --------------
Net cash used in financing activities (1,375,681) (4,271,148)
-------------- --------------
DECREASE IN CASH (677,640) (204,933)
CASH AT BEGINNING OF PERIOD 969,309 433,717
-------------- --------------
CASH AT END OF PERIOD $ 291,669 $ 228,784
============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 736,817 $ 744,936
============== ==============
Income taxes $ 42,566 $ 397,711
============== ==============
Noncash financing activity - inventory and equipment
purchased with notes, contracts and mortgages payable $ 6,654,691 $ 2,263,502
============== ==============
</TABLE>
See notes to condensed consolidated financial statements (unaudited).
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TAYLOR INVESTMENT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
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1. The accompanying condensed consolidated balance sheet for December 31, 1999
was derived from the audited consolidated balance sheet as of that date.
The condensed consolidated balance sheet as of June 30, 2000 and the
condensed consolidated statements of income for the three and six months
ended June 30, 2000 and 1999 and the condensed consolidated statements of
cash flow for the six months ended June 30, 2000 and 1999 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 June 30, 2000 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 1999 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. Investment in Joint Venture - In March 2000, the Company formed a joint
venture established to acquire and develop specific parcels of land. The
Company made an initial investment of $333,000 and advanced the joint
venture an additional $250,000, which has been subsequently repaid. The
Company has a 33% equity interest in the joint venture and is accounting
for the joint venture under the equity method. As of June 30, 2000, net
loss of $49,951 for the joint venture, is included in net income.
3. Revenue Recognition - In December 1999, the Securities and Exchange
Commission (SEC) issued Staff Accounting Bulleting (SAB) No. 101 "Revenue
Recognition in Financial Statement." SAB No. 101 summaries certain of the
SEC staff's views in applying generally accepted accounting principles to
selected revenue recognition issues. SAB No. 101 is to be implemented by
the Company no later than the fourth quarter of fiscal 2000. The Company is
currently reviewing SAB No. 101 and its effects on the financial
statements, but does not expect it to have a significant effect on its
financial positions or results of its operations.
6 of 12
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Item 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
RESULTS OF OPERATIONS
COMPARISON OF THE THREE-MONTH PERIODS ENDED JUNE 30, 2000 AND 1999.
Sales of $6,368,525 including structure sales of $248,329, for the quarter ended
June 30, 2000, increased by $1,337,793 from the same period in 1999. The
increase in land sales is attributable to the increase in inventory and related
sales in the Company's offices located in the northern states.
Gross profit was $3,023,385, or 47.5%, for the quarter ended June 30, 2000
compared to $2,463,700, or 49.0%, for the same period in 1999. The gross profit
margin on land sales was 48.8% in 2000 compared to 51.3% in 1999. The decrease
in gross profit margin on land is due to a few sales of aged inventory at
reduced prices.
Selling, general and administrative expenses of $2,159,679 were 33.9% of sales
for the second quarter of 2000, compared to $1,839,643 or 36.6%, for the same
period in 1999. The primary reasons for the decrease in these expenses, as a
percent of sales, are increasing sales and managements continued efforts to
control expenses.
For the quarter ended June 30, 2000, interest income was $17,509 higher, than
for the same period in 1999, due to an increase in the average balance of, and
the interest rate charged on, contracts and mortgages receivable.
Other revenues of $160,235 for the second quarter of 2000 increased from
$145,496 for the same period in 1999. The increase in other revenue is
attributable to a $125,000 administrative fee collected in April, 2000, from the
joint venture the Company formed in the first quarter of 2000, offset by
declining marketing fees collected on sales of property owned by an unaffiliated
company.
Interest expense was $358,223 and $345,294 for the quarters ended June 30, 2000
and 1999, respectively. The increase is due to a 2.3 million dollar increase in
average debt and rising interest rates in the second quarter of 2000, compared
to the same period in 1999, and is offset by an increase in capitalized interest
resulting from a greater number of large financed projects with longer
development periods.
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<PAGE>
COMPARISON OF THE SIX-MONTH PERIODS ENDED JUNE 30, 1999 AND 1998.
Sales for the six months ended June 30, 2000 were $11,541,635 an increase of
$2,844,996 compared to the same period in 1999. Land sales of $11,293,305
increased by $3,295,341 from the same period in 1999, due primarily to Company's
focus on growth in it's new and established offices. Sales of structures
declined $450,345 due to the planned reduction of this product.
Gross profit for the first six months of 2000 was $5,464,914, or 47.4%, compared
to $4,144,376 or 47.7% for the same period in 1999. The gross profit on land
sales was 48.1% and 51.0% for the six months ended June 30, 2000 and 1999,
respectively. The 2.9% decrease in gross profit on land is primarily due to a
few sales of aged inventory at reduced prices.
For the first six months of 2000, selling, general and administrative expenses
were $3,992,656, or 34.6% of sales, compared to $3,114,459, or 35.8% of sales in
1999. The primary reasons for this decrease in expenses, as a percent of sales,
are increasing sales and managements continued efforts to control expenses.
Interest income of $498,663 for the first six months of 2000 was $10,784 higher
than for the same period in 1999, due to an increase in the average balance of,
and the interest rate charged on, contracts and mortgages receivable.
Other revenue for the first six months of 2000 was $253,359, compared to
$178,486 for the same period in 1999. The increase in other revenue is
attributable to a $125,000 administrative fee collected in April, 2000, from the
joint venture the Company formed in the first quarter of 2000, offset by
declining marketing fees collected on sales of property owned by an unaffiliated
company.
Interest expense decreased $30,435 in the first six months of 2000, compared to
1999, despite an increase in the average debt and rising interest rates. The
decrease is the result of an increase in capitalized interest resulting from a
greater number of large financed projects with longer development periods.
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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 from operations,
investing and financing activities for the six months ended June 30, 2000 and
1999.
<TABLE>
<CAPTION>
Six months ended Six months ended
June 30, 2000 June 30, 1999
------------- -------------
<S> <C> <C>
Net cash provided by (used in):
Operating activities $ 1,099,767 $ 4,145,870
Investing activities (401,726) (79,655)
Financing activities (1,375,681) (4,271,148)
-----------------------------------
Net decrease in cash $ (677,640) $ (204,933)
</TABLE>
Sources of financing as of June 30, 2000 and December 31, 1999 are detailed in
the following table:
SOURCES OF FINANCING
<TABLE>
<CAPTION>
June 30, 2000 Percentage December 31, 1999 Percentage
------------- ---------- ----------------- ----------
<S> <C> <C> <C> <C>
Lines of credit $ 7,317,101 38.8% $ 3,797,508 31.0%
Notes payable(1) 7,624,269 40.5 4,725,779 38.6
Contracts and mortgages payable 304,548 1.6 46,041 0.4
Senior subordinated debt 3,599,000 19.1 3,680,000 30.0
----------------------------------------------------------
$18,844,918 100.0% $12,249,328 100.0%
==========================================================
</TABLE>
Total debt increased $6,595,590 from December 31, 1999, to finance the Company's
inventory level. As of June 30, 2000, contracts and mortgages receivable were
$9,544,572 compared to $8,694,934 as of December 31, 1999. The increase in the
portfolio is due to increased sales activity.
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 2000.
------------------------------
(1) Notes payable include the real estate line of credit in the amounts of
$1,250,870 and $1,606,429 as of June 30, 2000 and December 31, 1999,
respectively.
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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.
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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.
Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter covered by
this report.
11 of 12
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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
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(Registrant)
Dated: August 10, 2000 /s/ Philip C. Taylor
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Philip C. Taylor
President, Chief Executive Officer and Director
(principal executive officer)
Dated: August 10, 2000 /s/ Joel D. Kaul
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Joel D. Kaul
Vice President and Chief Operating Officer
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