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, 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 August 31, 1999
Common Stock 2,785,233
(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
for three months ended August 31, 1998 and
August 31, 1997 4
Consolidated Statement of
Cash Flows - three months ended
August 31, 1998 and August 31, 1997 5
Notes to Consolidated Condensed Financial
Statements 6
Item 2. Management's Discussion and Analysis of the
Financial Condition and Results of Operations 7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults upon Senior Securities 10
Item 4. Submission of Matters to Vote of Security
Holders 10
Item 5. Other Information 10
Item 6. Exhibits and Report on Form 8-K 10
SIGNATURES 11
<PAGE>
FORM 10-QSB
TAYLOR DEVICES, INC. - CONSOLIDATED BALANCE SHEET
ASSETS 8/31/99 5/31/99
Current
Cash $ 672,556 $ 1,248,640
Funds Held By Trustee - 0 - 112,575
Trade Accounts Receivable 2,817,282 2,426,780
Inventories 2,939,403 3,041,014
Prepaid and Refundable Income Taxes 130,300 130,300
Prepaid Expenses 26,002 76,185
Total Current Assets $ 6,585,543 $ 7,035,494
Investments - Affiliate, at equity 258,484 253,584
Property and Equipment - Net 2,637,839 2,705,563
Other Assets
Other 346,132 356,084
Total Other Assets $ 346,132 $ 356,084
TOTAL ASSETS $ 9,827,998 $10,350,725
LIABILITIES AND STOCKHOLDERS' EQUITY
Current
Current Portion of Long Term Debt $ 331,083 $ 336,612
Payables - Trade 660,799 746,900
Affiliate-Current 221,912 183,700
Construction-in-Progress - 0 - - 0 -
Accrued Income Tax 229,831 373,127
Accrued Expenses 444,728 560,226
Advanced Payments - Customers 210,000 452,340
Billings in Excess of Costs and
Estimated Earnings 111,500 139,166
Total Current Liabilities $ 2,209,853 $ 2,792,071
Non Current
Long Term Debt $ 1,547,565 $ 1,629,022
Deferred Income Tax 53,700 53,700
Total Non Current Liabilities $ 1,601,265 $ 1,682,722
Minority Stockholders' Interest $ 298,304 $ 292,404
STOCKHOLDERS' EQUITY
Common Stock, par value $.025 a
share, authorized 8,000,000 shares $ 71,192 $ 70,922
Paid - In Capital 2,706,740 2,678,017
Retained Earnings 3,115,548 $ 2,974,991
5,893,480 5,723,930
Less: Cost of Treasury Stock:
62,424 & 28,432 shares respectively (174,904) (140,402)
TOTAL STOCKHOLDERS' EQUITY $ 5,718,576 $ 5,583,528
TOTAL LIABILITIES & STOCKHOLDERS' $ 9,827,998 $10,350,725
EQUITY
FORM 10-QSB
TAYLOR DEVICES, INC.
CONSOLIDATED CONDENSED STATEMENT OF INCOME
THREE MONTHS ENDED AUGUST 31
1999 1998
NET SALES $2,561,345 $2,513,757
COST OF PRODUCT SOLD 1,606,282 1,628,250
Gross Profit $ 955,063 $ 885,507
EXPENSES
Selling and Administrative $ 707,035 657,453
Profit (loss) from Operations $ 248,028 $ 228,054
OTHER INCOME/(EXPENSE)
Rental - Affiliates $ 2,500 $ 2,500
Miscellaneous 1,449 8,653
Interest (34,820) (53,566)
NET OTHER (30,871) $ (42,413)
NET INCOME BEFORE
PROVISION FOR TAXES $ 217,157 $ 185,641
Provision for Income Taxes 75,600 65,997
INCOME BEFORE EQUITY IN EARNINGS
OF AFFILIATES 141,557 119,644
EQUITY IN EARNINGS OF AFFILIATES 4,900 6,100
NET INCOME BEFORE MINORITY
STOCKHOLDERS' INTEREST $ 146,457 $ 125,744
Minority Stockholders' Interest 5,900 5,292
NET INCOME $ 140,557 $ 120,452
Earnings Per Share $ .05 $ .04
<PAGE>
FORM 10-QSB
TAYLOR DEVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED AUGUST 31
1999 1998
Cash Flows From Operating Activities
Net income $140,557 $120,452
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 81,180 65,580
Equity in net income of affiliate (4,900) (6,100)
Increase in cash value - life insurance -0- -0-
Deferred income taxes -0- (47,797)
Tax benefit - stock option plan -0- -0-
Minority stockholder's interest 5,900 5,292
Common stock issued, charged to
compensation expense, net -0- -0-
Interest income - funds held by trustee
Changes in:
Receivables (390,502) (220,670)
Inventories 101,611 (23,212)
Prepaid expenses 50,183 150,241)
Payables - trade (86,101) (254,412)
Payables - affiliates 38,212 12,178
Advance payments, customers (260,054) 3,244
Accrued income taxes (143,296) (16,310)
Accrued expenses (115,498) (75,835)
Net cash provided by operating activities (582,708) (287,349)
Cash Flows From Investing Activities
Acquisition of property and equipment (13,456) (69,031)
Proceeds from sale of tax free money fund
held by trustee -0- -0-
Cash received from trustee -0- -0-
Cash remitted to trustee 112,575 (149,443)
Net cash used for investing activities 99,119 (218,474)
Cash Flows From Financing Activities
Financing costs paid -0- -0-
Borrowings - bank demand notes -0- 300,000
Repayments - bank demand notes -0- -0-
- long-term debt (86,986) (43,890)
Proceeds from issuance of common stock
- employee stock purchase plan 28,993 25,039
- exercise of stock options (34,502) -0-
Net cash used for financing activities (92,495) 281,149
Net increase/(decrease) in cash and
cash equivalents (576,084) (224,674)
Cash and Cash Equivalents Balance at
Beginning of Year 1,248,640 1,696,506
Cash and Cash Equivalents Balance at End of
Period 672,556 1,471,832
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, 1999 and May 31, 1999 and the results of
operations for the three months ended August 31, 1999 and
August 31, 1998 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, 1999, the profit
was divided by 2,785,233 to calculate the earnings per share.
For the three month period ended August 31, 1998, the profit
was divided by 2,743,493 to calculate the earnings per share.
4. The results of operations for the three month period ended
August 31, 1999 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, 1999 - August 31, 1998
Increase (decrease)
Net Sales $ 47,588
Cost of Sales (21,968)
Selling, General and
Administrative Expenses 49,582
Other Expenses - 0 -
Other Income 7,204
Interest Expense 18,746
Net Profit Before Tax and
Minority Shareholders' Interest 31,516
Provision for Income Tax 9,603
Net Profit Before Equity in
Earnings of Affiliates 21,913
Equity in Earnings of Affiliates (1,200)
Minority Stockholders' Interest 608
Net Income $ 20,105
FORM 10-QSB
TAYLOR DEVICES, INC.
MANAGEMENT'S DISCUSSION
In the First Quarter of Fiscal Year 2000, continuing good
gross margin performance led to a 12% improvement in net income
from a 1.9% increase in shipments.
Net Sales for QI00 totaled $2,561,345, a 1.9% increase over
the QI99 figure of $2,513,757, with the product mix impacted
significantly by completed and progress billings for seismic
protection projects. These shipments, representing the highest QI
figure in the Company's history, produced $955,063 (37.3% of net
sales) of Gross Margin, compared to $885,507 (35.2%) for QI99.
Selling General and Administrative expenses were recorded at
$707,035 (27.6% of net sales), up from $657,453 (26.2%)in FY99,
driven in part by higher commission costs associated with seismic
shipments.
Net Other expenses improved from $42,414 in QI99 to $30,871,
due primarily to a drop in reported interest expenses. The Company
has not incurred any significant new debt in the past 21 months,
and the continuing favorable interest rates and declining loan
balances helped produce this improvement. Pre-Tax Income for QI00
was $217,157, an increase of $31,516 over the FY99 figure of
$185,641. As in FY99, the net impact of the Equity Earnings and
Minority Stockholders' Interest was minimal, resulting in Net
Income of $140,557 in QI00, up from $120,452 for QI99. For the
respective periods, Earnings Per Share were $.050 and $.043.
The Company's Balance Sheet remains in a strong condition
while staring to reflect a different pattern than previously
experienced with respect to advanced and progress payments by
seismic customers. As indicated primarily in the Cash and Trade
Accounts Receivable lines of the Balance Sheet, a higher proportion
of seismic shipments have been made without requiring the customers
to remit funds in the early stages of their orders. This trend has
developed to some extent because of competitive conditions in the
market and the Company's increasing ability to accept these terms.
The projects impacting the balance sheet are, by and large, civic
projects with little chance of turning into collection problems.
For the remainder of Fiscal Year 2000, Management anticipates
that the Company will receive and ship a number of new seismic
protection orders to supplement the steady base of commercial and
defense shipments. However, the size and timing of these orders
cannot be predicted with any degree of certainty and at this point,
Management believes that FY00 will be similar in performance to
that experienced in FY98 and FY99.
YEAR 2000 DISCLOSURE
Certain statements included in this discussion regarding the
Company's Year 2000 ("Y2K") compliance are forward looking
statements. These include Management's best estimates for
completion dates for various phrases and priorities, testing to be
performed, and 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
Y2K 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 Y2K 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.
As previously reported, the Company's primary integrated
manufacturing/accounting software is an "off-the-shelf", widely
used product designed to function in the Y2K environment, but
failure could conceivably result in some unknown level of
inconvenience, until adapted or replaced. All Company computers
and servers have been tested for functionality after January 1,
2000.
Hardware and software modifications and improvements have been
made throughout the Company. In order to help the Company assess
risks from third-party lack of preparedness, the Company's
purchasing department has contacted key vendors to determine if any
of them anticipate experiencing significant Y2K problems. These
assessments are believed to be 98% completed. The Company will
continue to make assessments throughout 1999.
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, most of which have informed the
Company to be Y2K ready. Investigation of the functionality of
these links is ongoing.
The Company does not anticipate any need to establish a system
to trace costs incurred by the Y2K effort. At this time,
Management is unaware of any Y2K problems, other than those that
are beyond its control. The Company believes that it can function
temporarily, if need be, by using manual methods of operation
should an unforeseen Y2K problem occur.
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 6/1/99 to 8/31/99, the Company's
outstanding shares increased by 10,778 which are
purchases by the employees from the Employee Stock
Purchase Plan.
From January 12, 1999 to August 31,1999, the Company has
returned to its treasury, 28,682 shares of its Common Stock
purchased on the open market according to the plan filed on
8-K dated January 5, 1999 and expiring December 31, 1999.
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
Douglas P. Taylor
Chairman of the Board of Directors
President
(Principal Executive Officer)
AND
By /s/ Kenneth G. Bernstein Date
Kenneth G. Bernstein
Treasurer &
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-END> AUG-31-1999
<CASH> 672,556
<SECURITIES> 0
<RECEIVABLES> 2,889,282
<ALLOWANCES> 72,000
<INVENTORY> 2,939,403
<CURRENT-ASSETS> 6,155,243
<PP&E> 6,062,188
<DEPRECIATION> 3,417,746
<TOTAL-ASSETS> 9,827,998
<CURRENT-LIABILITIES> 1,688,941
<BONDS> 1,131,004
0
0
<COMMON> 71,192
<OTHER-SE> 5,646,384
<TOTAL-LIABILITY-AND-EQUITY> 9,827,998
<SALES> 2,513,757
<TOTAL-REVENUES> 2,513,757
<CGS> 1,606,282
<TOTAL-COSTS> 2,313,317
<OTHER-EXPENSES> (3,949)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 34,820
<INCOME-PRETAX> 217,157
<INCOME-TAX> 75,600
<INCOME-CONTINUING> 141,557
<DISCONTINUED> 0
<EXTRAORDINARY> (1,000)
<CHANGES> 0
<NET-INCOME> 146,457
<EPS-BASIC> .053
<EPS-DILUTED> .050
</TABLE>
