SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549
FORM 10-QSB/A
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)
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FORM 10-QSB/A
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
FORM 10-QSB/A
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
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FORM 10-QSB/A
TAYLOR DEVICES, INC.
MANAGEMENT'S DISCUSSION (CON'T)
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.
YEAR 2000 DISCLOSURE
The Company is continuing to address the year 2000 ("Y2K") issues.
A committee is assigned to review the Company's internal and
external software, hardware and telecommunications systems for Y2K
readiness as well as assessing both historical and estimated
expenses necessary to bring these systems into Y2K compliance. To
determine whether any of the Company's information technology
("IT") systems were in need of conversion, an inventory and
analysis were made of all internal areas with the assistance of the
Company's outside computer consultants. The Company's IT systems
have been purchased within the last few years and being relatively
new the Company believes these systems to be Y2K compliant. The
previous updating is resulting in fewer expenses to consider for
future Y2K project needs. It is found that the Company mainly uses
"off-the-shelf" software that is widely used and is designed to
accommodate Y2K requirements. Non-IT systems do not appear to be
critical to the Company's operation.
The Company has identified a potential problem with respect to its
shareholder program. Since the Company acts as its own transfer
agent, the company must be able to communicate with clearing
houses, depositories and the SEC. An outside consultant has been
hired to recommend modifications and improvements to the system for
it to function in the Y2K environment. Costs for outside
consultants, hardware and software, both historically and
estimated, are found to be minimal and have been included in the
FY99 figures. It is anticipated that the upgraded system should be
in place by midyear of calender 1999 at an estimated cost of
$10,000.
Management believes the Company is substantially Y2K compliant with
respect to its sales, administration, and general operations.
However, there can be no guarantee that the systems of other
companies on which the Company's system may rely on will be
converted on a timely basis or that a failure to convert by another
company or a conversion that is incompatible with the Company's
systems would not have a material impact on the Company. The
Company believes that most of its departments could temporarily
function by manual methods of operation should there be an
unforeseen Y2K problem.
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FORM 10-QSB/A
TAYLOR DEVICES, INC.
MANAGEMENT'S DISCUSSION (CON'T)
Employees are aware of possible impacts the Y2K rollover may bring
and their input can make the Company's Y2K efforts more effective
and improve its effectiveness. Continuous monitoring of the
Company's systems with the assistance of outside consultants will
be ongoing. Expenses for Y2K have been and are expected to remain
minimal and historical expenses for the Y2K project are hard to
identify as the Company's systems have been updated prior to the
issue. There is no special tracking system in place for the
Company to determine the internal and direct costs the Y2K project
will incur, but anticipate that it should be minimal as well.
Based on its current assessment, management believes that Y2K
compliance will not have a material adverse impact on the future
operation of the Company and is unaware of Y2K problems other than
a universal disruption of power, communications, transportation,
banking, etc. that could have a significant impact on the Company's
operation.
