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 February 28, 1999
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 February 28, 1999
Common Stock 2,789,595
(2-1/2 cents par value)
<PAGE>
FORM 10-QSB
TAYLOR DEVICES, INC. - INDEX
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets 3
February 28, 1999, and May 31, 1998.
Consolidated Condensed Statements of Income 4
for nine months ended February 28, 1999 and
February 28, 1998, and three months ended
February 28, 1999 and February 28, 1998.
Consolidated Condensed Statement of 5
Cash Flows - nine months ended
February 28, 1999 and February 28, 1998.
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 12
Item 2. Changes in Securities 12
Item 3. Defaults upon Senior Securities 12
Item 4. Submission of Matters to Vote of Security 12
Holders
Item 5. Other Information 12
Item 6. Exhibits and Report on Form 8-K 12
SIGNATURES 13
<PAGE>
FORM 10-QSB
TAYLOR DEVICES, INC.
CONSOLIDATED BALANCE SHEET
ASSETS 02/28/99 5/31/98
Current
Cash $ 726,359 $ 1,696,506
Funds Held By Trustee - 0 - 113,193
Trade Accounts Receivable 2,185,483 1,613,087
Inventories 3,095,547 3,032,239
Prepaid and Refundable Income Taxes 25,635 65,308
Prepaid Expenses 22,759 111,400
Total Current Assets $ 6,055,783 $ 6,631,733
Investments - Affiliate, at equity 238,692 222,392
Property and Equipment - Net 2,855,228 2,917,808
Other Assets
Other 525,594 347,744
Total Other Assets $ 525,594 $ 347,744
TOTAL ASSETS $ 9,675,297 $10,119,677
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Current Portion of Long Term Debt $ 316,706 $ 327,287
Payables - Trade 856,159 1,226,035
Affiliate-Current 158,001 117,349
Construction-in-Progress - 0 - - 0 -
Accrued Income Tax 183,668 165,481
Accrued Expenses 619,309 476,857
Advanced Payments - Customers 244,457 756,659
Total Current Liabilities $ 2,378,300 $ 3,069,668
Non Current
Long Term Debt $ 1,729,131 $ 1,952,724
Deferred Income Tax 20,900 20,900
Total Non Current Liabilities $ 1,750,031 $ 1,973,624
Minority Stockholders' Interest $ 275,020 $ 264,436
STOCKHOLDERS' EQUITY
Common Stock, par value $.025 a
share, authorized 8,000,000 shares $ 70,584 $ 69,129
Paid - In Capital 2,652,471 2,562,654
Retained Earnings 2,632,044 2,263,319
Less: Cost of Treasury Stock:
28,432 shares 83,153 83,153
TOTAL STOCKHOLDERS' EQUITY $ 5,271,946 $ 4,811,949
TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY $ 9,675,297 $10,119,677
FORM 10-QSB
TAYLOR DEVICES, INC.
CONSOLIDATED CONDENSED STATEMENT OF INCOME
NINE MONTHS THREE MONTHS
ENDED FEBRUARY 28 ENDED FEBRUARY 28
1999 1998 1999 1998
NET SALES $8,115,916 $7,437,578 $2,764,142 $2,264,101
COST OF PRODUCT
SOLD 5,138,419 4,942,775 1,677,447 1,382,570
Gross Profit 2,977,497 2,494,083 1,086,695 881,531
EXPENSES
Selling and Admin-
istrative 2,155,859 1,874,419 786,775 637,353
Profit(loss)from
Operations 821,638 620,384 299,920 244,178
OTHER INCOME/(EXPENSE)
Rental - Affiliates 7,500 7,500 2,500 2,500
Miscellaneous 14,173 5,091 579 1,484
Interest (141,270) (107,883) (39,546) (40,667)
NET OTHER (119,597) (95,292) (36,467) (36,683)
NET INCOME BEFORE
PROVISION FOR TAXES 702,041 525,092 263,453 207,495
Provision for
Income Taxes 240,284 160,585 85,389 49,885
INCOME BEFORE EQUITY IN
EARNINGS OF
AFFILIATES 461,757 364,507 178,064 157,610
EQUITY IN EARNINGS OF
AFFILIATES 16,300 15,645 6,300 5,265
NET INCOME BEFORE
MINORITY STOCK -
HOLDERS' INTEREST 478,058 380,152 184,364 162,875
Minority
Stockholders
Interest 18,060 17,110 (7,476) 6,526
NET INCOME $ 459,997 $ 363,042 $ 176,888 $ 156,349
Earnings Per Share $ .165 $ .131 $ .063 $ .056
<PAGE>
FORM 10-QSB
TAYLOR DEVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED FEBRUARY 28
1999 1998
Cash Flows From Operating Activities
Net income $ 459,997 $ 363,042
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 230,640 205,840
Equity in net income of affiliate (16,300) (15,645)
Increase in cash value - life insurance 0 0
Deferred income taxes (39,673) 0
Tax benefit - stock option plan 0 0
Minority stockholder's interest 10,584 17,110
Common stock issued, charged to
compensation expense, net 0 0
Interest income -
funds held by trustee 0 0
Changes in:
Receivables (572,396) (796,416)
Inventories (63,308) (31,478)
Prepaid expenses 88,641 2,044
Payables - trade (369,876) (171,204)
Payables - affiliates 40,652 41,477
Advance payments, customers (701,978) 321,227
Accrued income taxes 18,187 (33,470)
Accrued expenses 142,452 (243,629)
Net cash provided by operating
activities (772,378) (341,102)
Cash Flows From Investing Activities
Acquisition of property and equipment (168,060) (638,487)
Proceeds from sale of tax free money fund
held by trustee 0 0
Cash received from trustee 0 0
Cash remitted to trustee 113,193 108,041
Net cash used for investing
activities (54,867) (530,446)
Cash Flows From Financing Activities
Financing costs paid 0 0
Borrowings - bank demand notes 300,000 520,000
Repayments - bank demand notes (300,000) (160,000)
- long term debt (234,174) 556,060
Proceeds from issuance of common stock
- employee stock purchase plan 71,522 47,856
- exercise of stock options 19,750 21,187
Net cash used for financing activities (142,902) 985,103
Net increase/(decrease) in cash and
cash equivalents (970,147) 113,555
Cash and Cash Equivalents Balance at
Beginning of Year 1,696,506 1,096,456
Cash & Cash Equivalents Balance at
End of Period $ 726,359 $1,210,011
FORM 10-QSB
TAYLOR DEVICES, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENT
1. In the opinion of the Company, the accompanying unaudited
consolidated condensed financial statements contain all
adjustments necessary to present fairly the financial
position as of February 28, 1999 and May 31, 1998 and the
results of operations for the three months and nine months
ended February 28, 1999 and February 28, 1998 and changes in
financial position for the nine 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. To calculate the earnings per share for the nine month
period ended February 28, 1999, the profit was divided by
2,789,595 shares outstanding. For the nine month period
ended February 28, 1998, the profit was divided by 2,733,447
shares outstanding to calculate the earnings per share.
4. The results of operations for the nine month period ended
February 28, 1999 are not necessarily indicative of the
results to be expected for the full year.
FORM 10-QSB
TAYLOR DEVICES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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.
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 risks.
A summary of the period to period changes in the principal
items included in the consolidated statements of income is shown
below:
Comparisons of nine months ended
February 28, 1999 - February 28, 1998
Increase (decrease)
Net Sales $ 678,338
Cost of Sales 195,644
Selling, General and 281,440
Administrative Expenses
Other Expenses - 0 -
Other Income 9,082
Interest Expense 33,387
Net Profit Before Tax and 176,949
Minority Shareholders' Interest
Provision for Income Tax 76,699
Net Profit Before Equity in 97,250
Earnings of Affiliates
Equity in Earnings of Affiliates 835
Minority Stockholders' Interest 950
Net Income 96,955
<PAGE>
FORM 10-QSB
TAYLOR DEVICES, INC.
MANAGEMENT'S DISCUSSION (CON'T)
For the nine month period ending February 28, 1999 the
Company reported record shipments of $8,115,916. Continued
favorable gross margin performance combined with the higher
shipment volume offset increased Selling, General and
Administrative expenses, producing in a Net Income Figure of
$459,997.
RESULTS FOR THE NINE MONTHS YEAR-TO-DATE
Shipments for the nine month year to date period ending
February 28, 1999 (YTD99) were $8,115,916, the highest nine month
total recorded in the Company's history. The figure is 9.1%
higher than the previous record, set in Fiscal Year 1998 (YTD98).
All three primary segments of the Company's business -
Industrial,Seismic and Aerospace/Defense - made strong
contributions to the shipments figure. Gross Margin for YTD99
was $5,138,419 and 36.7% of sales compared to $4,942,775 and
33.6% for YTD98. Management believes this improvement is
attributable to its continuing efforts at standardization in the
seismic product line, improving margins on long term delivery
items and better profit estimation on progress bill projects
nearing completion.
Selling, General and Administrative (SGA) expenses increased
to $2,155,859 and 26.4% of sales from $1,874,419 and 25.21%. The
change was caused primarily by higher commission and royalty
rates related to the product mix and legal and administrative
expenses generated by the Company's efforts to protect its
stockholders' rights. Operating Income for YTD99 was $821,368
and 10.12% of net sales, up from $620,384 and 8.35% in YTD98.
Net Other Expense increased to $119,597 for YTD99 from
$95,292 for YTD98 as interest expenses from the Company's capital
improvements in Fiscal Year 1998 made their impact. Income
Before Equity in Earnings of Affiliates improved from $364,507
and 4.9% in YTD98 to $461,757 and 5.7% in YTD99. With no
significant change in the net impact of the Company's affiliates
for the two periods under discussion, the reported Net Incomes
for the two periods were: $459,997 and 5.7% for YTD99; and
$363,042 and 4.9% for YTD98. Earnings per share improved by 25.9%
in YTD99, from $.131 to $.165.
FORM 10-QSB
TAYLOR DEVICES, INC.
MANAGEMENT'S DISCUSSION (CON'T)
RESULTS FOR THE THIRD QUARTER
For the three month period ending February 28, 1999 (99Q3)
Net Sales of $2,764,142 represented a 22% increase over the
$2,264,101 in net sales reported for the three month period
ending February 28, 1998 (98Q3). This improvement is
attributable to several factors, including customer delivery
schedules and the functionality of the Company's seismic assembly
and test facility. As was noted in the section above, all
segments - Industrial, Seismic and Aerospace Defense -
participated in the higher volume of shipments. Gross Margin for
99Q3 was $1,086,695 and 39.3% of Sales which has improved from
$881,531 and 38.9% for 98Q3. The 99Q3 SGA expenses totaled
$786,775 or 28.5% and in 98Q3, figures of $244,178 or 28.2%.
Operating Income in 99Q3 was $299,920 and 10.8% of Sales,
compared to the 98Q3 figures of $244,178 and 10.8%. Net
Other Expenses stayed essentially constant between the two
periods as did the net impact of the affiliates. Net Income for
99Q3 was $176,888 and $.063 per share improving from the 98Q3
figures of $156,349 and $.056.
OTHER
The Company's Balance Sheet continues to reflect a strong
and stable performance by the Company. The Company's sales and
engineering staffs are making progress on a number of potentially
significant projects. Major technical progress has been made on
the flat damper project which will now proceed to an intensive
testing phase. A current OEM product has been modified to
function as an end-of-travel buffer in motion simulation
equipment and the Company believes it will be participating in
the construction of a major sports/entertainment stadium on the
West Coast. Other opportunities have appeared in the
aerospace/defense market. With respect to vibration isolation of
navel navigation systems, the Company is currently pursuing
opportunities along two tracks: designing protection for smaller
navigation systems and developing the technology required to meet
more stringent vibration noise levels. The potential for
significant business exists for these products, particularly if
the Navy implements a retro-fit program on existing vessels.
Based on year to date results and projections of fourth
quarter performance, Management believes Fiscal Year 1999 results
will approach and possibly exceed those achieved in Fiscal Year
1998.<PAGE>
FORM 10-QSB
TAYLOR DEVICES, INC.
MANAGEMENT'S DISCUSSION (CON'T)
YEAR 2000 DISCLOSURE
Certain statements included in this discussion regarding the
Company's Year 2000 compliance are forward looking statements.
These include management's best estimates for completion dates
for various phases and priorities, testing to be performed, costs
to be spent for compliance, either by the Company or third
parties. These forward looking statements are subject to various
factors which may materially affect the Company's efforts in that
regard. Specific factors that might cause material differences
include, but are not limited to, the availability and cost of
personnel trained in this area, the ability to locate and
correct, if needed, any relevant software and embedded
components, the compliance of critical vendors, and similar
uncertainties. The Company's assessments of the effects of Year
2000 on the Company are based, in part, upon the information
received from third parties and the Company's reliance on such
information, if and when received. Consequently, the risk that
inaccurate information has been supplied by third parties, and
upon which the Company may rely,must be considered as a risk
factor that could affect the Company's Year 2000 efforts. The
Company is attempting to reduce such risks by utilizing an
organized approach, extensive testing and allowance of ample
contingency time to address issues identified by tests.
The Company is continuing to address and analyze its
situation with respect to the Year 2000 (Y2K) problem. As
previously reported, the Company's primary integrated
manufacturing/accounting software is an "off-the-shelf" widely
used product designed to accommodate the Y2K problem. Should
they fail, it could result in some unknown level of inconvenience
until they are adapted or replaced. All the Company's computers
and servers have been tested for functionality after January 1,
2000, and if required, modifications were made. In QII of Fiscal
Year 1999, the Company identified a potential problem with
respect to its shareholder software. Since it acts as its own
Stock Transfer Agent and Agent for Tayco, the company must be
able to perform functions for its shareholders and communicate
with clearing houses, depositories and the SEC.
An outside computer programming consultant has been hired to
implement a new program to meet Y2K requirements. The upgraded
system will be in place by Fiscal Year end. The Company's
purchasing department has contacted key vendors to determine if
any of them anticipate experiencing significant Y2K problems
enabling the Company to assess the risk, if any, from their lack
of preparedness. The Company will continue to make assessments
throughout the year. The Company feels it could temporarily
FORM 10-QSB
TAYLOR DEVICES, INC.
MANAGEMENT'S DISCUSSION (CON'T)
function by using manual methods of operation should their be an
unforseen Y2K problem.
Certain key items are being scheduled for deliveries late in
calender year 1999 in order to minimize the impact of any
potential problems. The Company has external communication links
with its payroll service, government contract service, the SEC
filing system, and has less vital information links with its
bank, credit report service and other institutions.
Investigation of the functionality of these links are also being
addressed. At this time, management is unaware of any Y2K
problems, other than those that are beyond our control; these
being the responsibility of the federal and state governments, or
other corporate entities.
The Y2K committee continues to monitor the progress and
costs of any required modifications for the upcoming months. To
date, the Company has not incurred material costs to analyze or
correct Y2K problem areas, nor does it foresee any.
Consequently, the Company does not anticipate the need for the
establishment of any system to trace costs incurred by this
effort.
<PAGE>
FORM 10-QSB
TAYLOR DEVICES, INC.
PART II - OTHER INFORMATION
ITEM 1 Legal Proceedings
- none.
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 of 6/1/98 to 2/28/99, the
Company's reported total of outstanding shares
increased by 58,197, as itemized below:
1. Employee Stock Ownership Plan 27,197
2. Director Stock Option Plan 31,000
58,197
The Company has returned to its treasury, 5,300
shares of its Common Stock purchased on the open
market as follows:
1. 1/12/99 - 1,000 shares @ $2 1/4
2. 1/13/99 - 1,000 shares @ $2 3/8
3. 1/14/99 - 1,000 shares @ $2 1/2
4. 1/20/99 - 1,500 shares @ $2 3/4
5. 2/10/99 - 800 shares @ $2 9/16
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: 4/09/98
Douglas P. Taylor
Chairman of the Board of Directors
President
(Principal Executive Officer)
AND
By /s/ Kenneth G. Bernstein Date: 4/09/98
Kenneth G. Bernstein
Chief Accounting Officer
Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1999
<PERIOD-END> FEB-28-1999
<CASH> 726,359
<SECURITIES> 0
<RECEIVABLES> 2,217,483
<ALLOWANCES> 32,000
<INVENTORY> 3,095,487
<CURRENT-ASSETS> 6,055,783
<PP&E> 6,162,151
<DEPRECIATION> 3,306,923
<TOTAL-ASSETS> 9,675,197
<CURRENT-LIABILITIES> 2,378,300
<BONDS> 1,227,820
0
0
<COMMON> 70,584
<OTHER-SE> 5,201,362
<TOTAL-LIABILITY-AND-EQUITY> 9,675,297
<SALES> 8,115,916
<TOTAL-REVENUES> 8,115,916
<CGS> 5,138,419
<TOTAL-COSTS> 2,155,859
<OTHER-EXPENSES> (21,673)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 141,270
<INCOME-PRETAX> 702,041
<INCOME-TAX> 240,284
<INCOME-CONTINUING> 461,757
<DISCONTINUED> 0
<EXTRAORDINARY> (1,760)
<CHANGES> 0
<NET-INCOME> 459,997
<EPS-PRIMARY> .165
<EPS-DILUTED> .159
</TABLE>
