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, 2000 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, 2000
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TAYLOR INVESTMENT CORPORATION
INDEX
PART I. FINANCIAL INFORMATION Page No.
--------
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
March 31, 2000 (unaudited) and December 31, 1999...................3
Condensed Consolidated Statements of Income Three months ended
March 31, 2000 and 1999
(unaudited)........................................................4
Condensed Consolidated Statements of Cash Flows Three months
ended March 31, 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...........................................................10
Signatures........................................................11
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TAYLOR INVESTMENT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
(Unaudited)
MARCH 31, 2000 DECEMBER 31, 1999
<S> <C> <C>
ASSETS
INVENTORY - Principally land held for sale $13,147,290 $ 9,938,693
CONTRACTS AND MORTGAGES RECEIVABLE 8,729,427 8,694,934
INVESTMENT IN AND ADVANCES TO JOINT VENTURES 590,099 6,713
OTHER ASSETS:
Cash 320,599 969,309
Notes receivable from shareholders 40,000 --
Tax increment financing receivable 552,075 568,977
Other receivables 166,266 252,511
Prepaid expenses and earnest money deposits 438,986 342,602
Funds held by trustee 81,000 40,500
Land, buildings, and equipment, less accumulated
depreciation of $922,661 and $869,594, respectively 366,367 399,474
Loan acquisition costs and debt issuance costs, less accumulated
amortization of $351,299 and $332,480, respectively 281,424 291,470
----------- -----------
Total other assets 2,246,717 2,864,843
----------- -----------
$24,713,533 $21,505,183
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LINES OF CREDIT $ 5,440,738 $ 3,797,508
NOTES PAYABLE 6,336,462 4,725,779
CONTRACTS AND MORTGAGES PAYABLE 44,348 46,041
SENIOR SUBORDINATED DEBT 3,680,000 3,680,000
OTHER LIABILITIES:
Accounts payable 544,248 365,619
Accrued liabilities 637,961 925,259
Deposits on land sales and purchase agreements 258,871 47,615
----------- -----------
Total other liabilities 1,441,080 1,338,493
DEFERRED INCOME TAXES 361,374 374,032
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 6,664,554 6,798,353
----------- -----------
Total stockholders' equity 7,409,531 7,543,330
----------- -----------
$24,713,533 $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 MONTHS ENDED MARCH 31, 2000 AND 1999
- ----------------------------------------------------------------------------
THREE MONTHS ENDED
MARCH 31,
REVENUES: 2000 1999
--------------------------
Sales $ 5,173,110 $ 3,665,907
Interest income on contracts receivable 250,114 256,839
Equity in earnings (loss) of joint ventures 386 (3,731)
Other revenue 93,124 32,990
----------- -----------
Total revenue 5,516,735 3,952,005
COSTS AND EXPENSES:
Cost of sales 2,731,580 1,985,231
Selling, general, and administrative 1,832,886 1,274,815
Interest 338,364 381,727
----------- -----------
Total costs and expenses 4,902,830 3,641,773
NET INCOME $ 613,905 $ 310,232
=========== ===========
NET INCOME PER COMMON SHARE
OUTSTANDING $ 1.27 $ 0.64
=========== ===========
AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 484,129 484,129
=========== ===========
See notes to condensed consolidated financial statements (unaudited).
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TAYLOR INVESTMENT CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2000 AND 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
2000 1999
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 613,904 $ 310,232
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 73,479 78,901
Loss on sale of assets 49 --
Deferred income taxes (12,658) (86,335)
Equity in (earnings) loss of joint ventures (386) 3,731
Contracts and mortgages receivables funded (1,491,732) (1,169,061)
Payments on contracts and mortgages receivable 1,457,239 1,914,916
(Increase) decrease in inventory - land held for sale (45,497) 1,888,921
Decrease (increase) in other receivables 103,147 (120,180)
Decrease in income tax payable -- (241,664)
Increase in prepaid expenses (96,384) (29,554)
Increase in accounts payable 178,629 88,567
Decrease in accrued liabilities (287,298) (215,416)
Increase in deposits on land sales and purchase agreements 211,256 78,881
----------- -----------
Net cash provided by operating activities 703,748 2,501,939
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of land, buildings and equipment (21,602) (27,199)
Investment in and advances to joint ventures (583,000) --
Increase in funds held by trustee (40,500) (37,500)
Loan (made to) payment from shareholders (40,000) 50,000
----------- -----------
Net cash used in investing activities (685,102) (14,699)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) on lines of credit 1,643,230 (73,018)
Repayment of notes, contracts, and mortgage payables (1,554,110) (2,183,062)
Loan acquisition costs (8,773) (23,224)
Distributions to shareholders (747,703) (300,159)
----------- -----------
Net cash used in financing activities (667,356) (2,579,463)
----------- -----------
DECREASE IN CASH (648,710) (92,223)
CASH AT BEGINNING OF PERIOD 969,309 433,717
----------- -----------
CASH AT END OF PERIOD $ 320,599 $ 341,494
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 238,804 $ 369,376
=========== ===========
Income taxes $ 12,658 $ 327,999
=========== ===========
Noncash financing activity - inventory and equipment
purchased with notes contracts and mortgages payable $ 3,163,100 $ 2,049,750
=========== ===========
</TABLE>
See notes to condensed consolidated financial statements (unaudited).
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TAYLOR INVESTMENT CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
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 March 31, 2000 and the
condensed consolidated statements of income for the three months ended
March 31, 2000 and 1999 and the condensed consolidated statements of cash
flows for the three months ended March 31, 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 March 31, 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 is included in the balances sheet in
"Investment in and Advance to Joint Ventures". The advance 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. No
amounts are included in net income for the joint venture, as operations did
not begin until after March 31, 2000.
3. Debt Covenants - As of March 31, 2000, the Company was not in compliance
with the "Net Book Worth" covenant under its line of credit. The Company
has subsequently obtained a written waiver of the covenant from its
creditor. The Company does not expect to have future events of
non-compliance on this covenant.
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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 MARCH 31, 2000 AND 1999.
Sales of $5,173,110 for the quarter ended March 31, 2000 increased by $1,507,203
from the same period in 1999. Land sales of $5,173,109 increased by $1,995,013
from the same period in 1999, and structure sales decreased by $487,810. The
increase in land sales is due primarily to the growing sales in the Company's
offices located in the southern states. The decrease in structure sales is
attributable to the planned reduction of this product.
Gross profit was $2,441,530 or 47.2% of sales, for the quarter ended March 31,
2000 compared to $1,680,676 or 45.8% of sales, for the same period in 1999. The
gross profit margin on land sales was 47.3% of sales in 2000 compared to 50.6%
in 1999. The decrease in gross profit margin on land is due to a few large sales
of low-margin, aged inventory in the first quarter of 2000.
Selling, general and administrative expenses of $1,832,886 were 35.4% of sales
for the first quarter of 2000, compared to $1,274,815, or 34.8%, for the same
period in 1999. The small increase in these expenses, as a percent of sales, is
attributable to the increase in advertising costs in the newer, southern
offices, compared to the established offices in the Midwest.
Despite a decrease in the average balance of contracts and mortgages receivable,
interest income for the quarter ended March 31, 2000, remained consistent with
the same period in 1999, due to an increase in interest rates.
Other revenue of $93,124 for the first quarter of 2000 increased from $32,990
for the same period in 1999. The increase in other revenue is attributable to
marketing fees collected on sales of property owned by an unaffiliated company.
Interest expense for the quarter ended March 31, 2000 was $338,364, compared to
$381,727 for the same period in 1999. The decrease is due to a reduction in the
average debt balance.
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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 for operations,
investing and financing activities for the three months ended March 31, 2000 and
1999.
Three months ended Three months ended
March 31, 2000 March 31, 1999
-------------- --------------
Net cash provided by (used in):
Operating activities $ 703,748 $2,501,939
Investing activities (685,102) (14,699)
Financing activities (667,356) (2,579,463)
----------------------------------------
Net decrease in cash $ (648,710) $ (92,223)
========================================
Sources of financing as of March 31, 2000 and December 31, 1999 are detailed in
the following table:
SOURCES OF FINANCING
<TABLE>
<CAPTION>
March 31, 2000 Percentage December, 31, 1999 Percentage
-------------- ---------- ------------------ ----------
<S> <C> <C> <C> <C>
Lines of credit $ 5,440,738 35.1% $ 3,797,508 31.0%
Notes payable(1) 6,336,462 40.9 4,725,779 38.6
Contracts and
mortgages payable 44,348 0.3 46,041 0.4
Senior subordinated debt 3,680,000 23.7 3,680,000 30.0
--------------------------------------------------------------
$15,501,548 100.0% $12,249,328 100.0%
==============================================================
</TABLE>
Total debt increased $3,252,220 from December 31, 1999, to finance the Company's
inventory level. As of March 31, 2000, contracts and mortgages receivable were
$8,729,427 compared to $8,619,402 as of December 31, 1999.
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
$1,352,534 and $1,606,429 as of March 31, 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:
o Changing economic conditions, including economic downturns or recessions
and rising interest rates;
o 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;
o The availability of suitable tracts of undeveloped land in proximity to the
marketplace;
o Changes in zoning and subdivision regulations;
o The availability and cost of financing;
o 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.
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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
----------------------------------------
(Registrant)
Dated: May 11, 2000 /S/ Philip C. Taylor
----------------------------------------
Philip C. Taylor
President, Chief Executive Officer and Director
(principal executive officer)
Dated: May 11, 2000 /S/ Joel D. Kaul
----------------------------------------
Joel D. Kaul
Vice President and Chief Operating Officer
11 of 11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 320,599
<SECURITIES> 0
<RECEIVABLES> 8,826,519
<ALLOWANCES> 97,092
<INVENTORY> 13,147,290
<CURRENT-ASSETS> 0
<PP&E> 1,289,028
<DEPRECIATION> 922,661
<TOTAL-ASSETS> 24,713,533
<CURRENT-LIABILITIES> 0
<BONDS> 15,501,548
0
0
<COMMON> 4,841
<OTHER-SE> 7,404,690
<TOTAL-LIABILITY-AND-EQUITY> 24,713,533
<SALES> 5,173,110
<TOTAL-REVENUES> 5,516,734
<CGS> 2,731,580
<TOTAL-COSTS> 4,902,830
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 338,364
<INCOME-PRETAX> 613,904
<INCOME-TAX> 0
<INCOME-CONTINUING> 613,904
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 613,904
<EPS-BASIC> 1.27
<EPS-DILUTED> 1.27
</TABLE>
