SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarter ended August 31, 1998
Commission File Number 0-3498
TAYLOR DEVICES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
NEW YORK 16-0797789
(State or other Jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
90 TAYLOR DRIVE, NORTH TONAWANDA, NEW YORK 14120-0748
Address of principal executive offices Zip Code
Registrant's telephone number, including area code - 716-694-0800
Indicate by check mark whether the registrant (1) has filed all
annual, quarterly, and other reports required to be filed with all
the Commission and (2) has been subject to the filing requirements
for at least the past 90 days.
Yes X No
Indicate the number of shares outstanding, of each of the Issuer's
classes of common stock as of the close of the period covered by
this report.
CLASS Outstanding at August 31, 1998
Common Stock 2,771,925
(2-1/2 cents par value)
FORM 10-QSB
TAYLOR DEVICES, INC. - INDEX
PART I - FINANCIAL INFORMATION
PAGE NO.
Item 1. Financial Statements
Consolidated Condensed Balance Sheets 3
August 31, 1998, and May 31, 1998
Consolidated Condensed Statements of Income 4
for three months ended August 31, 1998 and
August 31, 1997
Consolidated Statement of 5
Cash Flows - three months ended
August 31, 1998 and August 31, 1997
Notes to Consolidated Condensed Financial 6
Statements
Item 2. Management's Discussion and Analysis of the 7
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 9
Item 2. Changes in Securities 9
Item 3. Defaults upon Senior Securities 9
Item 4. Submission of Matters to Vote of Security
Holders 9
Item 5. Other Information 9
Item 6. Exhibits and Report on Form 8-K 9
SIGNATURES 10
<PAGE>
FORM 10-QSB
TAYLOR DEVICES, INC. - CONSOLIDATED BALANCE SHEET
ASSETS 8/31/98 5/31/98
Current
Cash $ 1,471,832 $ 1,696,506
Funds Held By Trustee - 0 - 113,193
Trade Accounts Receivable 1,848,006 1,613,087
Inventories 3,055,451 3,032,239
Prepaid and Refundable Income Taxes 113,105 65,308
Prepaid Expenses 26,467 111,400
Total Current Assets $ 6,514,861 $ 6,631,733
Investments - Affiliate, at equity 228,492 222,392
Property and Equipment - Net 2,921,259 2,917,808
Other Assets
Other 441,368 347,744
Total Other Assets $ 441,368 $ 347,744
TOTAL ASSETS $10,105,980 $10,119,677
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Current Portion of Long Term Debt $ 626,381 $ 327,287
Payables - Trade 921,623 1,226,035
Affiliate-Current 129,527 117,349
Construction-in-Progress - 0 - - 0 -
Accrued Income Tax 149,171 165,481
Accrued Expenses 301,742 476,857
Advanced Payments - Customers 759,903 756,659
Total Current Liabilities $ 2,888,347 $ 3,069,668
Non Current
Long Term Debt $ 1,990,635 $ 1,952,724
Deferred Income Tax - 0 - 20,900
Total Non Current Liabilities $ 1,990,635 $ 1,973,624
Minority Stockholders' Interest $ 269,728 $ 264,436
STOCKHOLDERS' EQUITY
Common Stock, par value $.025 a
share, authorized 8,000,000 shares $ 69,298 $ 69,129
Paid - In Capital 2,587,354 2,562,654
Retained Earnings 2,383,771 $ 2,263,319
Less: Cost of Treasury Stock:
28,432 & 28,432 shares respectively 83,153 83,153
TOTAL STOCKHOLDERS' EQUITY $ 4,957,270 $ 4,811,949
TOTAL LIABILITIES & STOCKHOLDERS' $10,105,980 $10,119,677
EQUITY
FORM 10-QSB
TAYLOR DEVICES, INC.
CONSOLIDATED CONDENSED STATEMENT OF INCOME
THREE MONTHS ENDED AUGUST 31
1998 1997
NET SALES $2,513,757 $2,497,912
COST OF PRODUCT SOLD 1,628,250 1,746,589
Gross Profit $ 885,507 $ 751,323
EXPENSES
Selling and Administrative 657,453 579,362
Profit (loss) from Operations $ 228,054 $ 171,961
OTHER INCOME/(EXPENSE)
Rental - Affiliates $ 2,500 $ 2,500
Miscellaneous 8,653 1,367
Interest (53,566) (33,309)
NET OTHER $ (42,413) $ (29,442)
NET INCOME BEFORE
PROVISION FOR TAXES $ 185,641 $ 142,519
Provision for Income Taxes 65,997 54,425
INCOME BEFORE EQUITY IN EARNINGS
OF AFFILIATES 119,644 88,094
EQUITY IN EARNINGS OF AFFILIATES 6,100 7,590
NET INCOME BEFORE MINORITY
STOCKHOLDERS' INTEREST $ 125,744 $ 95,684
Minority Stockholders' Interest 5,292 5,292
NET INCOME $ 120,452 $ 90,392
Earnings Per Share $ .04 $ .03
<PAGE>
FORM 10-QSB
TAYLOR DEVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED AUGUST 31
1998 1997
Cash Flows From Operating Activities $120,452 $ 90,392
Net income
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 65,580 65,280
Equity in net income of affiliate (6,100) (20,190)
Increase in cash value - life insurance -0- -0-
Deferred income taxes (47,797) -0-
Tax benefit - stock option plan -0- -0-
Minority stockholder's interest 5,292 5,292
Common stock issued, charged to
compensation expense, net -0- -0-
Interest income - funds held by trustee
Changes in:
Receivables (220,670) (405,063)
Inventories (23,212) 140,157
Prepaid expenses 150,241 (1,251)
Payables - trade (254,412) (262,387)
Payables - affiliates 12,178 33,304
Advance payments, customers 3,244 20,479
Accrued income taxes (16,310) (65,992)
Accrued expenses (75,835) (11,677)
Net cash provided by operating
activities (287,349) (411,656)
Cash Flows From Investing Activities
Acquisition of property and equipmet (69,031) (32,445)
Proceeds from sale of tax free money fund
held by trustee -0- -0-
Cash received from trustee -0- -0-
Cash remitted to trustee (149,443) (30,000)
Net cash used for investing activities (218,474) (62,445)
Cash Flows From Financing Activities
Financing costs paid -0- -0-
Borrowings - bank demand notes 300,000 -0-
Repayments - bank demand notes -0- -0-
- long-term debt (43,890) (52,842)
Proceeds from issuance of common stock
- employee stock purchase plan 25,039 18,191
- exercise of stock options -0- 21,187
Net cash used for financing activities 281,149 (13,464)
Net increase/(decrease) in cash and
cash equivalents (224,674) (487,565)
Cash and Cash Equivalents Balance at
Beginning of Year 1,696,506 1,096,456
Cash and Cash Equivalents Balance at
End of Period 1,471,832 608,891
<PAGE>
FORM 10-QSB
TAYLOR DEVICES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENT
1. In opinion of the Company, the accompanying unaudited
consolidated condensed financial statements contain all
adjustments necessary to present fairly the financial position
as of August 31, 1998 and May 31, 1998 and the results of
operations for the three months ended August 31, 1998 and
August 31, 1997 and changes in financial position for the
three months then ended.
2. There is no provision nor shall there be any provisions for
profit sharing, dividends, or any other benefits of any nature
at any time for this fiscal year.
3. For the three month period ended August 31, 1998, the profit
was divided by 2,771,925 (less 28,432 Treasury shares) to
calculate the earnings per share. For the three month period
ended August 31, 1997, the profit was divided by 2,749,667
(less 28,442 Treasury shares) to calculate the earnings per
share.
4. The results of operations for the three month period ended
August 31, 1998 are not necessarily indicative of the results
to be expected for the full year.
<PAGE>
FORM 10-QSB
TAYLOR DEVICES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The Private Securities Litigation Reform Act of 1995 provides a
"safe harbor" for forward-looking statements. Certain matters
discussed in this section and elsewhere in this Report, which are
not historical facts, are forward-looking statements. As such,
these statements involve risks and uncertainties including, but not
limited to, economic conditions, product demand and industry
capacity, competition, pricing pressures, the need for the Company
to keep pace with customer needs and technological developments,
and other factors.
The following is Management's discussion and analysis of certain
significant factors which have affected the Company's earnings
during the periods included in the accompanying consolidated
condensed statements of income.
A summary of the period to period changes in the principal items
included in the consolidated statements of income is shown below:
Comparisons of three months ended
August 31, 1998 - August 31, 1997
Increase (decrease)
Net Sales $ 15,845
Cost of Sales (118,339)
Selling, General and
Administrative Expenses 78,091
Other Expenses - 0 -
Other Income 7,286
Interest Expense 20,257
Net Profit Before Tax and
Minority Shareholders' Interest 43,122
Provision for Income Tax 11,572
Net Profit Before Equity in
Earnings of Affiliates 31,550
Equity in Earnings of Affiliates (1,490)
Minority Stockholders' Interest - 0 -
Net Income $ 30,060
<PAGE>
FORM 10-QSB
TAYLOR DEVICES, INC.
MANAGEMENT'S DISCUSSION (CON'T)
In the first quarter of Fiscal Year 1999 (QI99), the Company
experienced a significantly improved gross margin performance which
helped generate a 33% improvement in Net Income on an essentially
level sales volume.
In QI99, the Company's shipment mix, consisting of proportionately
more repeat defense orders and seismic progress billings than the
comparable period in Fiscal Year 1998 (QI98), produced a gross
margin figure of $885,507, or 35.2% of the sales figure of
$2,513,757. In QI98, shipments of $2,497,912 produced a gross
margin figure of $751,323, or 30.1%. Selling, General and
Administrative (SGA) costs increased to $657,453 in QI99 from
$579,362 due primarily to the royalty and commission costs
associated with the differing product mix. Operating Income
improved from the QI98 figure of $171,961 to $228,054 in QI99.
Net Other expenses increased to $42,413 in QI99 from the figure of
$29,442 for QI98 as a result of the interest expense on the loans
taken out in mid FY98 to finance the construction of the new
seismic test/assembly structure. Pretax income improved from
$142,519 for QI98 to $185,641 in QI99. With the impact of
Affiliate Income and Minority Shareholder Interest remaining stable
between the two periods, the reported Net Income for QI99 was
$120,452 and $.04 per share compared to $90,392 and $.03 per share
in QI98.
The increasing proportion of seismic orders in the product mix
continues to impact the Company's balance sheet. The Inventory
remains at a relatively high level as a few large shipments
continue to be delayed by design alterations and customer delivery
changes. Receivables also experienced an increase due, in part, to
contractual retainages held by customers until final product
installation. The cash balance remains at a very favorable level,
due in large measure to the continuing receipt of progress and
advanced payments on certain larger seismic orders.
The Company's management continues to monitor trends in the seismic
protection market. An effort is currently underway to apply
increased product standardization in response to shorter, strictly
enforced delivery dates and competitive pressures from
manufacturers of similar and competing products.
Although delays in order placement and changes in delivery
schedules are common occurrences, based on the current trend of
mid-sized, short turn-around time orders that are the most
prevalent in the seismic market, Management believes that revenues
and income should approximate or exceed last year's levels.
<PAGE>
FORM 10-QSB
TAYLOR DEVICES, INC.
PART II - OTHER INFORMATION
ITEM 1 Legal Proceedings
The Company is not currently engaged in any litigation.
ITEM 2 Changes in Securities - None
ITEM 3 Defaults Upon Senior Securities - None
ITEM 4 Submission of Matters to Vote of Securities Holders
- -
None
ITEM 5 Other Information
In the period 6/1/98 to 8/31/98, the Company's reported
total of outstanding shares increased by 6,795 as
itemized below:
1. Employee Stock Ownership Plan 6,795
ITEM 6 Exhibits and Reports of Form 8-K - None
<PAGE>
FORM 10-QSB
TAYLOR DEVICES, INC.
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 DEVICES, INC.
(Registrant)
By /s/ Douglas P. Taylor Date 10/06/98
Douglas P. Taylor
Chairman of the Board of Directors
President
(Principal Executive Officer)
AND
By /s/ Kenneth G. Bernstein Date 10/06/98
Kenneth G. Bernstein
Treasurer &
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-END> AUG-31-1998
<CASH> 1,471,832
<SECURITIES> 0
<RECEIVABLES> 1,880,006
<ALLOWANCES> 32,000
<INVENTORY> 3,055,451
<CURRENT-ASSETS> 6,514,861
<PP&E> 6,155,522
<DEPRECIATION> 3,234,263
<TOTAL-ASSETS> 10,105,980
<CURRENT-LIABILITIES> 2,888,347
<BONDS> 1,432,069
69,298
0
<COMMON> 0
<OTHER-SE> 4,887,972
<TOTAL-LIABILITY-AND-EQUITY> 10,105,980
<SALES> 2,513,757
<TOTAL-REVENUES> 2,513,757
<CGS> 1,628,250
<TOTAL-COSTS> 2,285,703
<OTHER-EXPENSES> (11,153)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 53,566
<INCOME-PRETAX> 185,641
<INCOME-TAX> 65,997
<INCOME-CONTINUING> 119,644
<DISCONTINUED> 0
<EXTRAORDINARY> 808
<CHANGES> 0
<NET-INCOME> 120,452
<EPS-PRIMARY> .044
<EPS-DILUTED> .042
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