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For quarter ended November 30, 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 incorporation or organization | (I.R.S. Employer 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 November 30, 1999 | |
| Common Stock (2-1/2 cents par value) | 2,773,931 |
| PART I- | FINANCIAL INFORMATION | ||
| Item 1. | Financial Statements | ||
| Consolidated Condensed Balance Sheets November 30, 1999, and May 31, 1999 --------------------- Page 3 | |||
| Consolidated Condensed Statements of Income for six months ended November 30, 1999 and November 30, 1998, and three months ended November 30, 1999 and November 30, 1998 --------------------- Page 4 | |||
| Consolidated Condensed Statement of Cash Flows - six months ended November 30, 1999 and November 30, 1998 --------------------- Page 5 | |||
| Notes to Consolidated Condensed Financial Statements --------------------- Page 6 | |||
| Item 2. | Management's Discussion and Analysis of the Financial Condition and Results of Operations --------------------- Page 7 | ||
| PART II- | OTHER INFORMATION | ||
| Item 1. | Legal Proceedings --------------------- Page 11 | ||
| Item 2. | Changes in Securities --------------------- Page 11 | ||
| Item 3. | Defaults upon Senior Securities --------------------- Page 11 | ||
| Item 4. | Submission of Matters to Vote of Security Holders --------------------- Page 11 | ||
| Item 5. | Other Information --------------------- Page 11 | ||
| Item 6. | Exhibits and Report on Form 8-K --------------------- Page 11 | ||
SIGNATURES --------------------- Page 12
| ASSETS | 11/30/99 | 5/31/99 |
| Current | ||
| Cash | $ 540,489 | $ 1,248,640 |
| Funds Held By Trustee | - 0 - | 112,575 |
| Trade Accounts Receivable | 2,841,278 | 2,426,780 |
| Inventories | 3,123,676 | 3,041,014 |
| Prepaid and Refundable Income Taxes | 130,300 | 130,300 |
| Prepaid Expenses | 24,706 | 76,185 |
| Total Current Assets | $ 6,660,449 | $ 7,035,494 |
| Investments - Affiliate, at equity | 266,589 | 253,584 |
| Property and Equipment - Net | 2,601,586 | 2,705,563 |
| Other Assets | ||
| Other | 522,190 | 356,084 |
| Total Other Assets | $ 522,190 | $ 356,084 |
| TOTAL ASSETS | $10,050,814 | $10,350,725 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| Current | ||
| Current Portion of Long Term Debt | $ 325,554 | $ 336,612 |
| Payables - Trade | 913,130 | 746,900 |
| Affiliate-Current | 231,561 | 183,700 |
| Construction-in-Progress | - 0 - | - 0 - |
| Accrued Income Tax | 91,874 | 373,127 |
| Accrued Expenses | 515,199 | 560,226 |
| Advanced Payments - Customers | 243,634 | 452,340 |
| Billings in Excess of Costs and
Estimated Earnings |
175,000 | 139,166 |
| Total Current Liabilities | $ 2,495,952 | $ 2,792,071 |
| Non Current | ||
| Long Term Debt | $ 1,397,828 | $ 1,629,022 |
| Deferred Income Tax | 53,700 | 53,700 |
| Total Non Current Liabilities | $ 1,451,528 | $ 1,682,722 |
| Minority Stockholders' Interest | $ 307,518 | $ 292,404 |
| STOCKHOLDERS' EQUITY | ||
| Common Stock, par value $.025 a
share, authorized 8,000,000 shares |
$ 71,452 | $ 70,922 |
| Paid - In Capital | 2,737,555 | 2,678,017 |
| Retained Earnings | 3,216,658 | 2,974,991 |
| 6,025,665 | 5,723,930 | |
| Less: Cost of Treasury Stock 84,154 shares | (229,849) | (140,402) |
| TOTAL STOCKHOLDERS' EQUITY | $ 5,795,816 | $ 5,583,528 |
| TOTAL LIABILITIES & STOCKHOLDERS'
EQUITY |
$10,050,814 | $10,350,725 |
| 1999 | 1998 | 1999 | 1998 | |
| NET SALES | $4,858,664 | $5,351,774 | $2,297,319 | $2,838,017 |
| COST OF PRODUCT SOLD | 3,070,402 | 3,460,972 | 1,464,120 | 1,832,722 |
| Gross Profit | 1,788,262 | 1,890,802 | 833,199 | 1,005,295 |
| EXPENSES | ||||
| Selling and Administrative | 1,367,429 | 1,369,084 | 660,394 | 711,631 |
| Profit (loss) from Operations | 420,833 | 521,718 | 172,805 | 293,664 |
| OTHER INCOME/(EXPENSE) | ||||
| Rental - Affiliates | 5,000 | 5,000 | 2,500 | 2,500 |
| Miscellaneous | 7,457 | 13,594 | 6,008 | 4,941 |
| Interest | (71,014) | (101,724) | (36,194) | (48,158) |
| NET OTHER | (58,557) | (83,130) | (27,686) | (40,717) |
| NET INCOME BEFORE
PROVISION FOR TAXES |
362,276 | 438,588 | 145,119 | 252,947 |
| Provision for Income
Taxes |
118,500 | 154,895 | 42,900 | 88,898 |
| INCOME BEFORE EQUITY IN
EARNINGS OF AFFILIATES |
243,776 | 283,693 | 102,219 | 164,049 |
| EQUITY IN EARNINGS OF
AFFILIATES |
13,005 | 10,000 | 8,105 | 3,900 |
| NET INCOME BEFORE
MINORITY
STOCKHOLDERS' INTEREST |
256,781 | 293,693 | 110,324 | 167,949 |
| Minority Stockholders'
Interest |
15,114 | 10,584 | 9,214 | 5,292 |
| NET INCOME | $ 241,667 | $ 283,109 | $ 101,110 | $ 162,657 |
| Earnings Per Share | 8.7¢ | 10.3¢ | 3.7¢ | 5.9¢ |
|
SIX MONTHS ENDED NOVEMBER 30 | ||
| 1999 | 1998 | |
| Cash Flows From Operating Activities | $241,667 | $283,109 |
| Net Income | ||
| Adjustments to reconcile net income to net
cash provided by operating activities: |
||
| Depreciation and amortization | 162,630 | 152,160 |
| Equity in net income of affiliate | (13,005) | (10,000) |
| Increase in cash value - life insurance | - 0 - | - 0 - |
| Deferred income taxes | - 0 - | - 0 - |
| Tax benefit - stock option plan | - 0 - | - 0 - |
| Minority stockholder's interest | 15,114 | 10,584 |
| Common stock issued, charged to compensation
expense, net |
- 0 - | - 0 - |
| Interest income - funds held by trustee | - 0 - | - 0 - |
| Changes in: | ||
| Receivables | (414,498) | (449,737) |
| Inventories | (82,662) | (57,107) |
| Prepaid expenses | 51,479 | 36,290 |
| Payables - trade | 166,230 | (267,674) |
| Payables - affiliates | 47,861 | 15,276 |
| Advance payments, customers | (338,978) | 116,080 |
| Accrued income taxes | (281,253) | (14,605) |
| Accrued expenses | (45,027) | 145,736 |
| Net cash provided by operating activities | (490,442) | (39,888) |
| Cash Flows From Investing Activities | ||
| Acquisition of property and equipment | (58,653) | (97,190) |
| 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 | (68,057) |
| Net cash used for investing activities | 53,922 | (165,247) |
| Cash Flows From Financing Activities | ||
| Financing costs paid | - 0 - | - 0 - |
| Borrowings - bank demand notes | - 0 - | - 0 - |
| Repayments - bank demand notes | - 0 - | (300,000) |
| - long-term debt | (242,252) | ( 78,950) |
| Proceeds from issuance of common stock | ||
| - employee stock purchase plan | 60,068 | 49,957 |
| - acquisition of treasury stock | (89,447) | - 0 - |
| Net cash used for financing activities | (271,631) | (328,993) |
| Net increase/(decrease) in cash and cash
equivalents |
(708,151) | (534,128) |
| Cash and Cash Equivalents Balance at
Beginning of Year |
1,248,640 | 1,696,506 |
| Cash and Cash Equivalents Balance at End of Period | 540,489 | 1,162,378 |
| 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 November 30, 1999 and May 31, 1999 and the results of operations for the three months and six months ended November 30, 1999 and November 30, 1998 and changes in financial position for the six 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 six month period ended November 30, 1999, the profit was divided by 2,773,931, which is net of the Treasury shares, to calculate the earnings per share. For the six month period ended November 30, 1998, the profit was divided by 2,757,543 to calculate the earnings per share, which is net of the Treasury shares. |
| 4. | The results of operations for the six month period ended November 30, 1999 are not necessarily indicative of the results to be expected for the full year. |
| Net Sales | $(493,100) | ||
| Cost of Sales | (390,570) | ||
| Selling, General and Administrative Expenses | (1,655) | ||
| Other Expenses | - 0 - | ||
| Other Income | (6,137) | ||
| Interest Expense | (30,710) | ||
| Net Profit Before Tax and Minority Shareholders' Interest | (76,312) | ||
| Provision for Income Tax | (36,395) | ||
| Net Profit Before Equity in Earnings of Affiliates | (39,917) | ||
| Equity in Earnings of Affiliates | 3,005 | ||
| Minority Stockholders' Interest | (4,530) | ||
| Net Income | (41,442) | ||
In the first six months of FY2000, the Company produced improved gross margins on shipments and experienced substantial success in obtaining new orders. The Company's backlog at the time of this report exceeds $12,000,000 and includes significant foreign orders.
SIX MONTH PERIOD (all figures compared are six months y-t-d FY2000 vs. six months y-t-d FY1999)
For the six months of Fiscal Year 2000 ending 11/30/99, shipments were $4,858,664, compared to $5,351,774 in the same time frame in the previous fiscal year. The difference is largely attributable to a shift in the product mix in the backlog as production runs for certain items ended and efforts were shifted to projects with extended delivery requirements.
Gross Margin for the six months was $1,788,262 or 36.8% of sales compared to $1,890,802 and 35.3% for the previous fiscal year. The Gross Margin % improvement reflects the higher proportion of seismic products in the mix, which is also reflected in the Selling, General and Administrative figures. S G & A for the current year was $1,367,429, compared to $1,369,084 for the previous fiscal year, as seismic related sales, commission costs and Y2K compliance costs consumed most of the variable S G & A cost savings that are typically associated with periods of reduced shipments.
Net other Expenses improved by about $25,000, from $83,130 for the previous year to $58,557 for the current year, primarily reflecting lowered interest expense as the Company has taken on no new significant debt for almost two years and continues to pay down existing debt. For the first six months of Fiscal Year 2000, Net Income before Provision for Taxes was $362,276, compared to $438,588 for the previous fiscal year's six month period. After the application of a tax provision and the impact of the affiliate and minority shareholder interest figures, Net Income for the period was $241,667 and $.087 per share compared to $283,109 and $.103 for the previous year's period.
SECOND QUARTER (all figures being compared are for the second quarter of FY2000 vs. the second quarter of FY1999)
Shipments for the current period were $2,297,319 compared to $2,838,017 as discussed in the section above. Gross Margin for the period was $833,199 and 36.2% of shipments, compared to $1,005,295 and 35.4% for the previous period, reflecting, as mentioned above, the favorable impact of the high proportion of seismic products in the product mix. S G & A expense was $660,394, 28.8% of shipments compared to $711,631 and 25.1% for the previous year's performance.
Net Other Expense was lower, as explained in the section above, as interest expense declined noticeably bringing the figure for the current period to $27,686 compared to $40,717. After provisions for taxes and the impact of the affiliated and minority shareholder interest figures, Net Income for the period was $101,110 and $.037 per share compared to $162,657 and $.059 a share for the second quarter of FY99.
The Company's Balance Sheet continues to reflect the Company's strong condition while also reflecting a shift in its operating environment. Accounts Receivable remains at a relatively high level, as a consequence of the progress billing cycle, and Inventories rose slightly, reflecting effort on the improved backlog. The Company continues to meet its funding requirements through the generation of profits and existing lines of credit and does not anticipate having to seek additional sources of funds in the current fiscal year or the near future.
At the halfway point of FY2000, Management anticipates that the Company will continue to pursue numerous sales opportunities in the seismic and aerospace/defense sectors and maintain or improve the current backlog position. Shipments are expected to continue to carry a favorable gross margin and, overall, results for FY2000 are expected to approximate those of FY1999.
YEAR 2000
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 performed, and costs 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, correct or replace any relevant software and embedded components, the compliance of critical vendors, and similar uncertainties. The risks that inaccurate information being 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.
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.
The Company has completed hardware and software modifications and improvements throughout and the Company's computers and servers have been tested for functionality after January 1, 2000.
Throughout FY99 and presently, the purchasing department has contacted key vendors to determine if any of them anticipate experiencing significant Y2K problems. These assessments are believed to be completed.
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 compliant. Investigation of the functionality of these links is ongoing.
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 | |||
| 1. | The Annual Meeting of Shareholders was held on October 22, 1999. Results are as follows: | |||
| A. | Class 1 Director of the Company was elected to serve a three year term expiring in 2002 as follows: | |||
| Joseph P. Gastel - 2,122,024 shares voted for and 16,848 shares were withheld. | ||||
| B. | To adopt a 1999 Taylor Devices, Inc. Employee Stock Purchase Plan. A total of 2,095,348 shares voted for the Plan; 30,642 shares voted against and 4,268 shares abstained. | |||
| ITEM 5 | Other Information | |||
| For the period 9/1/99 to 11/30/99, changes in the Company's outstanding shares are as follows: | ||||
| A. | An increase of 10,428 shares, for purchases of Company stock by employee's from the Employee's Stock Purchase Plan. | |||
| B. | A reduction of 21,730 shares which were returned to the treasury from open market purchases by the Company. Treasury shares at 11/30/99 are 84,154. | |||
| ITEM 6 | Exhibits and Reports of Form 8-K - None | |||
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 | January 12, 1999 | |
| Douglas P. Taylor
Chairman of the Board of Directors
President (Principal Executive Officer) |
AND
| By | /s/Kenneth G. Bernstein | Date | January 12, 1999 | |
| Kenneth G. Bernstein
Chief Accounting Officer
Treasurer |
|
|