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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 September 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 September 30, 2000
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<PAGE>
TAYLOR INVESTMENT CORPORATION
INDEX
PART I. FINANCIAL INFORMATION Page No.
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Item 1. Financial Statements:
Condensed Consolidated Balance Sheets
September 30, 2000 (unaudited) and December 31, 1999................3
Condensed Consolidated Statements of Income
Three and nine months ended September 30,
2000 and 1999 (unaudited)...........................................4
Condensed Consolidated Statements of Cash Flows
Nine months ended September 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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<PAGE>
TAYLOR INVESTMENT CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
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<TABLE>
<CAPTION>
(Unaudited)
SEPTEMBER 30, 2000 DECEMBER 31, 1999
<S> <C> <C>
ASSETS
INVENTORY - Principally land held for sale $ 18,111,498 $ 9,938,693
CONTRACTS AND MORTGAGES RECEIVABLE 9,760,274 8,694,934
INVESTMENT IN JOINT VENTURES 416,111 6,713
OTHER ASSETS:
Cash 52,415 969,309
Tax increment financing receivable 544,465 568,977
Other receivables 392,677 252,511
Prepaid expenses and earnest money deposits 387,811 342,602
Funds held by trustee 85,000 40,500
Land, buildings, and equipment, less accumulated
depreciation of $1,020,608 and $869,594, respectively 405,007 399,474
Loan acquisition costs and debt issuance costs, less accumulated
amortization of $395,612 and $332,480, respectively 250,408 291,470
-------------- --------------
Total other assets 2,117,783 2,864,843
-------------- --------------
$ 30,405,666 $ 21,505,183
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY
LINES OF CREDIT $ 7,318,054 $ 3,797,508
NOTES PAYABLE 9,263,920 4,725,779
CONTRACTS AND MORTGAGES PAYABLE 290,109 46,041
SENIOR SUBORDINATED DEBT 3,599,000 3,680,000
OTHER LIABILITIES:
Accounts payable 453,539 365,619
Accrued liabilities 649,226 925,259
Deposits on land sales and purchase agreements 72,725 47,615
-------------- --------------
Total other liabilities 1,175,490 1,338,493
DEFERRED INCOME TAXES 289,893 374,032
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 7,724,223 6,798,353
-------------- --------------
Total stockholders' equity 8,469,200 7,543,330
-------------- --------------
$ 30,405,666 $ 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 NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
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<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
2000 1999 2000 1999
----------------------------- -----------------------------
<S> <C> <C> <C> <C>
REVENUES:
Sales $ 8,499,075 $ 6,035,276 $ 20,040,710 $ 14,731,915
Interest income on contracts receivable 272,733 259,343 771,396 747,222
Equity in (loss) earnings of joint ventures (41,037) 48,268 (90,602) 58,208
Other revenue 44,799 136,721 298,158 315,206
------------ ------------ ------------ ------------
Total revenue 8,775,570 6,479,608 21,019,662 15,852,551
COSTS AND EXPENSES:
Cost of sales 4,612,199 3,490,701 10,688,920 8,042,964
Selling, general, and administrative 2,299,420 1,831,781 6,291,985 4,946,240
Interest expense 376,824 343,342 1,073,410 1,070,362
------------ ------------ ------------ ------------
Total costs and expenses 7,288,443 5,665,824 18,054,315 14,059,566
NET INCOME $ 1,487,127 $ 813,784 $ 2,965,347 $ 1,792,985
============ ============ ============ ============
NET INCOME PER COMMON SHARE
OUTSTANDING $ 3.07 $ 1.68 $ 6.13 $ 3.70
============ ============ ============ ============
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)
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
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<TABLE>
<CAPTION>
2000 1999
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 2,965,347 $ 1,792,985
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 232,274 235,652
Gain on sale of assets (907) (4,343)
Deferred income taxes (84,139) (215,604)
Equity in loss (earnings) of joint ventures 90,602 (58,208)
Contracts and mortgages receivables funded (5,547,850) (3,775,156)
Payments on contracts receivable 4,482,510 4,757,478
Decrease in inventory - land held for sale 2,784,495 4,547,115
(Increase) decrease in other receivables (115,654) 5,395
Decrease in income tax payable -- (241,664)
Increase in prepaid expenses (45,209) (135,203)
Increase in accounts payable 87,920 22,397
Decrease in accrued liabilities (276,033) (202,497)
Increase in deposits on land sales and purchase agreements 25,110 31,353
-------------- --------------
Net cash provided by operating activities 4,598,466 6,759,700
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of land, buildings and equipment (142,179) (103,658)
Proceeds from sale of land, buildings and equipment 3,500 10,000
Investment in and advances to joint ventures (500,000) --
Proceeds from distribution of joint venture -- 62,000
Increase in funds held by trustee (44,500) (39,500)
-------------- --------------
Net cash used in investing activities (683,179) (71,158)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (payments) on lines of credit 3,520,546 (1,028,892)
Repayment of notes, contracts, and mortgage payables (6,210,180) (5,570,263)
Loan acquisition costs (22,070) (23,224)
Repayment of senior subordinated debt (81,000) (75,000)
Distributions to shareholders (2,039,477) (300,159)
-------------- --------------
Net cash used in financing activities (4,832,181) (6,997,538)
-------------- --------------
DECREASE IN CASH (916,894) (308,996)
CASH AT BEGINNING OF PERIOD 969,309 433,717
-------------- --------------
CASH AT END OF PERIOD $ 52,415 $ 124,721
============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 1,271,196 $ 1,085,599
============== ==============
Income taxes $ 84,139 $ 457,268
============== ==============
Noncash financing activity - inventory and equipment
purchased with notes, contracts and mortgages payable $ 10,992,389 $ 3,270,902
============== ==============
</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 September 30, 2000 and the
condensed consolidated statements of income for the three and nine months
ended September 30, 2000 and 1999 and the condensed consolidated statements
of cash flows for the nine months ended September 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 September 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. In
September 2000, the Company made an additional investment into the joint
venture of $167,000, increasing the total investment to $500,000. The
Company has a 33% equity interest in the joint venture and is accounting
for the joint venture under the equity method. As of September 30, 2000,
net loss of $90,520 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
completing its review of 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.
4. Derivative Instruments - In June 1998 the Financial Accounting Standards
Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No.
133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES, which
will be effective for the Company beginning January 1, 2001. SFAS No. 133
requires companies to record derivative instruments on the balance sheet at
fair market value and recognize fluctuations in fair value either in
earnings or as a component of other comprehensive income, depending on the
nature of the derivative instrument. The Company does not expect that this
standard will materially affect its financial position and results of
operations.
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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 SEPTEMBER 30, 2000 AND 1999.
Sales of $8,499,075, including structure sales of $182,500, for the quarter
ended September 30, 2000 increased by $2,463,799 from the same period in 1999.
Land sales of $8,316,575 increased by $2,417,661 from the same period in 1999.
The increase in land sales is attributable to the increase in prime inventory in
the midwest offices and a new office opened in 1999, in the southern states,
which is now established and generating more sales in 2000.
Gross profit was $3,886,876 or 45.7 %, for the quarter ended September 30, 2000
compared to $2,544,575 or 42.2%, for the same period in 1999. The gross profit
margin on land sales was 46.3% in 2000 compared to 43.9% in 1999. The increase
in gross profit margin on land is due to the continuous efforts to monitor and
reduce development costs on new properties.
Selling, general and administrative expenses of $2,299,420 were 27.1% of sales
for the third quarter of 2000, compared to $1,831,781 or 30.4%, 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 September 30, 2000, interest income of $272,733, increased
by $13,390, from the same period in 1999. This is due to an increase in the
average balance of contracts and mortgages receivable.
For the quarter ended September 30, 2000, equity in (loss) earnings of joint
venture was a net loss of $41,037. This is due to net losses incurred in
conjunction with the joint venture the Company established in 2000 to acquire
and develop specific parcels of land. (See Note 2)
Other revenue of $44,799, for the third quarter of 2000 decreased by $91,922 for
the same period in 1999. The decrease in other revenue is attributable to the
reduction of marketing fees collected on sales of property owned by an
unaffiliated company.
Interest expense was $376,824 and $343,342 for the quarters ended September 30,
2000 and 1999, respectively. The increase is due to the increase in average debt
and is partially offset by an increase in capitalized interest, resulting from a
greater number of large financed projects, which require longer periods of time
before becoming available for market.
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COMPARISON OF THE NINE-MONTH PERIODS ENDED SEPTEMBER 30, 2000 AND 1999.
Sales for the nine months ended September 30, 2000 were $20,040,710, an increase
of $5,308,795 or 36.0%, compared to the same period in 1999. Land sales of
$19,609,880 increased by $5,713,002 from the same period in 1999, due primarily
to the increase in inventory and the company's focus on growth in its new and
established offices. Sales of structures declined $404,207 due to the planned
reduction of this product.
Gross profit for the first nine months of 2000 was $9,351,790, or 46.7%,
compared to $6,688,951 or 45.4% for the same period in 1999. The increase in
gross profit is due to continuous efforts to monitor and reduce development
costs and obtain superior quality inventory in 2000.
For the first nine months of 2000, selling, general and administrative expenses
were $6,291,985 or 31.4% of sales, compared to $4,946,240, or 33.6% of sales in
1999. The decrease in expenses, as a percent of sales, is due to increasing
sales and managements continued efforts to control expenses.
Interest income of $771,396 for the first nine months of 2000 was $24,174 higher
than for the same period in 1999. This is due to an increase in the average
balance of contracts and mortgages receivable.
For the quarter ended September 30, 2000, equity in (loss) earnings of joint
venture was a net loss of $90,602. This is due to net losses incurred in
conjunction with the joint venture the Company established in 2000 to acquire
and develop specific parcels of land. (See Note 2)
Other revenue for the first nine months of 2000 decreased by $17,048, compared
to the same period in 1999, due to the reduction of marketing fees collected on
sales of property owned by an unaffiliated company.
Interest expense for the first nine months of 2000 remained consistent, compared
to the first nine months of 1999, despite the increase in average debt, due to
an increase in capitalized interest resulting from a greater number of large
financed projects, which require longer periods of time before becoming
available for market.
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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 operating, investing
and financing activities for the nine months ended September 30, 2000 and 1999.
<TABLE>
<CAPTION>
Nine months ended Nine months ended
September 30, 2000 September 30, 1999
------------------ ------------------
<S> <C> <C>
Net cash provided by (used in):
Operating activities $ 4,598,466 $ 6,759,700
Investing activities (683,179) (71,158)
Financing activities (4,832,181) (6,997,538)
---------------------------------------
Net decrease in cash $ (916,894) $ (308,996)
</TABLE>
The principal sources of cash flow for the first nine months of 2000 and 1999
were cash received from sales of land and structures.
Sources of financing as of September 30, 2000 and December 31, 1999 are detailed
in the following table:
SOURCES OF FINANCING
<TABLE>
<CAPTION>
September 30, 2000 Percentage December 31, 1999 Percentage
------------------ ---------- ----------------- ----------
<S> <C> <C> <C> <C>
Lines of credit $ 7,318,054 35.7% $ 3,797,508 31.0%
Notes payable(1) 9,263,920 45.3 4,725,779 38.6
Contracts and mortgages payable 290,109 1.4 46,041 0.4
Senior subordinated debt 3,599,000 17.6 3,680,000 30.0
-------------------------------------------------------------------
$20,471,083 100.0% $12,249,328 100.0%
===================================================================
</TABLE>
Total debt increased $8,221,755 from December 31, 1999, to finance the Company's
inventory level. As of September 30, 2000, contracts and mortgages receivable
were $9,760,274 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 includes the real estate line of credit in the amounts of
$2,383,591 and $1,606,429 as of September 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.
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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: November 10, 2000 /S/ Philip C. Taylor
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Philip C. Taylor
President, Chief Executive Officer and Director
(principal executive officer)
Dated: November 10, 2000 /S/ Joel D. Kaul
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Joel D. Kaul
Vice President and Chief Operating Officer
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