TAYLOR DEVICES INC

Previous wording

For the six months ended November 30, 2023(All figures discussed are for the six months ended November 30, 2023 as compared to the six months ended November 30, 2022).

Current wording

For the nine months ended February 29, 2024(All figures discussed are for the nine months ended February 29, 2024 as compared to the nine months ended February 28, 2023).

Previous wording

The Company's consolidated results of operations showed a 3% increase in net revenues and an increase in net income of 49%. Revenues recorded in the current period for long-term projects (“Project(s)”) were 1% less than the level recorded in the prior year. The Company had 29 Projects in process during the current period as compared to 35 during the same period last year. Revenues recorded in the current period for other-than long-term projects (non-projects) were 14% more than the level recorded in the prior year. Total sales within the U.S. increased 13% from the same period last year. Total sales to Asia decreased 37% from the same period of the prior year. Sales increases were recorded over the same period last year to customers in aerospace / defense (77%) with decreases to customers involved in construction of buildings and bridges (-36%) and to industrial customers (-30%). The increase in aerospace / defense sales is due, in part, to a combination of providing production hardware on several legacy programs and new development programs.

Current wording

The Company's consolidated results of operations showed a 10% increase in net revenues and an increase in net income of 55%. Revenues recorded in the current period for long-term projects (“Project(s)”) were 5% more than the level recorded in the prior year. The Company had 34 Projects in process during the current period as compared to 45 during the same period last year. Revenues recorded in the current period for other-than long-term projects (non-projects) were 19% more than the level recorded in the prior year. Total sales within the U.S. increased 21% from the same period last year. Total sales to Asia decreased 53% from the same period of the prior year. Sales increases were recorded over the same period last year to customers in aerospace / defense (88%) with decreases to customers involved in construction of buildings and bridges (-35%) and to industrial customers (-18%). The increase in aerospace / defense sales is due, in part, to a combination of providing production hardware on several legacy programs and new development programs.

Previous wording

The gross profit as a percentage of net revenue of 45% in the current period is five percentage points greater than the same period of the prior year (40%). Management continues to work with suppliers to obtain more visibility of conditions affecting their respective markets. These actions combined with benefits from the Company’s continuous improvement initiatives and increased volume have helped to improve the gross margin as a percentage of revenue over the prior year.

Current wording

The gross profit as a percentage of net revenue of 46% in the current period is five percentage points greater than the same period of the prior year (41%). Management continues to work with suppliers to obtain more visibility of conditions affecting their respective markets. These actions combined with benefits from the Company’s continuous improvement initiatives and increased volume have helped to improve the gross margin as a percentage of revenue over the prior year.

Previous wording

At November 30, 2022, the Company had 139 open sales orders in our backlog with a total sales value of $18.1 million. At November 30, 2023, the Company has 141 open sales orders in our backlog, and the total sales value is $35.5 million. The Company expects to recognize revenue for the majority of the backlog during the 2024 and 2025 fiscal years.

Current wording

At February 28, 2023, the Company had 125 open sales orders in our backlog with a total sales value of $27.8 million. At February 29, 2024, the Company has 131 open sales orders in our backlog, and the total sales value is $30.2 million. The Company expects to recognize revenue for the majority of the backlog during the 2024 and 2025 fiscal years.

Previous wording

Net revenue by geographic region, as a percentage of total net revenue for the six-month periods ended November 30, 2023 and November 30, 2022, is as follows:

Current wording

Net revenue by geographic region, as a percentage of total net revenue for the nine-month periods ended February 29, 2024 and February 28, 2023, is as follows:

Previous wording

Research and development costs declined 69% from the prior year due to the completion of the Taylor Damped Moment Frame project.

Current wording

Research and development costs declined 64% from the prior year due to the completion of the Taylor Damped Moment Frame™ project.

Previous wording

Selling, general and administrative expenses increased by 18% from the prior year. This increase is primarily due to increased employee compensation costs including incentive compensation.

Current wording

Selling, general and administrative expenses increased by 18% from the prior year. This change is primarily due to increased employee compensation costs including incentive compensation.

Previous wording

The above factors resulted in an operating income of $3,973,000 for the six months ended November 30, 2023, 35% more than the $2,935,000 in the same period of the prior year.

Current wording

The above factors resulted in an operating income of $6,966,000 for the nine months ended February 29, 2024, 47% more than the $4,740,000 in the same period of the prior year.

Previous wording

The Company's consolidated results of operations showed a 1% decrease in net revenues and $0.4 million increase in net income. Revenues recorded in the current period for Projects were 5% less than the level recorded in the prior year. The Company had 16 Projects in process during the current period as compared to 28 during the same period last year. Revenues recorded in the current period for other-than long-term construction projects (non-projects) were 4% more than the level recorded in the prior year. Total sales within the U.S. increased 17% from the same period last year. Total sales to Asia decreased 75% from the same period of the prior year. Sales increases were recorded over the same period last year to customers in aerospace / defense (79%) with decreases to customers involved in construction of buildings and bridges (-41%) and to industrial customers (-40%). The circumstances affecting the fluctuations in revenue levels are as identified in the year-to-date comparisons, above.

Current wording

The Company's consolidated results of operations showed a 24% increase in net revenues and $1.0 million increase in net income. Revenues recorded in the current period for Projects were 20% more than the level recorded in the prior year. The Company had 16 Projects in process during the current period as compared to 29 during the same period last year. Revenues recorded in the current period for other-than long-term construction projects (non-projects) were 30% more than the level recorded in the prior year. Total sales within the U.S. increased 36% from the same period last year. Total sales to Asia decreased 99% from the same period of the prior year. Sales increases were recorded over the same period last year to customers in aerospace / defense (108%) and industrial customers (13%) with a decrease to customers involved in construction of buildings and bridges (-33%). The circumstances affecting the fluctuations in revenue levels are as identified in the year-to-date comparisons, above.

Previous wording

The gross profit as a percentage of net revenue of 47% in the current period is five percentage points higher than the same period of the prior year (42%). The Company has been able to increase sales prices to recover more of the increased costs for materials and labor that were incurred over the past year. Management continues to work with suppliers to obtain more visibility of conditions affecting their respective markets. These actions combined with benefits from the Company’s continuous improvement initiatives and increased volume have helped to improve the gross margin as a percentage of revenue over the prior year.

Current wording

The gross profit as a percentage of net revenue of 47% in the current period is four percentage points higher than the same period of the prior year (43%). The Company has been able to increase sales prices to recover more of the increased costs for materials and labor that were incurred over the past year. Management continues to work with suppliers to obtain more visibility of conditions affecting their respective markets. These actions combined with benefits from the Company’s continuous improvement initiatives and increased volume have helped to improve the gross margin as a percentage of revenue over the prior year.

Previous wording

Research and development costs declined 73% from the prior year due to the completion of the Taylor Damped Moment Frame project.

Current wording

Research and development costs declined 43% from the prior year due to the completion of the Taylor Damped Moment Frame™ project.

Previous wording

Selling, general and administrative expenses increased 16% from the prior year. This increase is primarily due to increased employee compensation costs including incentive compensation.

Current wording

Selling, general and administrative expenses increased 17% from the prior year. This change is primarily due to increased employee compensation costs including incentive compensation.

Previous wording

The above factors resulted in an operating income of $2,054,000 for the three months ended November 30, 2023, better than the $1,756,000 in the same period of the prior year.

Current wording

The above factors resulted in an operating income of $2,993,000 for the three months ended February 29, 2024, better than the $1,805,000 in the same period of the prior year.

Previous wording

The Company expenses stock options using the fair value recognition provisions of the FASB ASC. The Company recognized $301,000 and $128,000 of compensation cost for the six-month periods ended November 30, 2023 and 2022.

Current wording

The Company expenses stock options using the fair value recognition provisions of the FASB ASC. The Company recognized $301,000 and $128,000 of compensation cost for the nine-month periods ended February 29, 2024 and February 28, 2023.

Previous wording

A summary of changes in the stock options outstanding during the six-month period ended November 30, 2023 is presented below:

Current wording

A summary of changes in the stock options outstanding during the nine-month period ended February 29, 2024 is presented below:

Previous wording

Capital expenditures for the six months ended November 30, 2023 were $545,000 compared to $1,391,000 in the same period of the prior year. As of November 30, 2023, the Company has commitments for capital expenditures totaling $225,000 during the next twelve months. The Board of Directors is evaluating additional capital expenditures to expand capacity.

Current wording

Capital expenditures for the nine months ended February 29, 2024 were $755,000 compared to $2,383,000 in the same period of the prior year. In addition, the Company acquired Pumpkin™ Mounts intellectual property during the quarter for $300,000. As of February 29, 2024, the Company has commitments for capital expenditures totaling $337,000 during the next twelve months. The Board of Directors is evaluating additional capital expenditures to expand capacity.

Previous wording

NOTE: Inventory turnover is annualized for the six-month period ended November 30, 2023.

Current wording

NOTE: Inventory turnover is annualized for the nine-month period ended February 29, 2024.

Previous wording

Inventory, at $6,857,000 as of November 30, 2023, is $916,000 more than the prior year-end level of $5,941,000. Approximately 84% of the current inventory is work in process, 4% is finished goods, and 12% is raw materials.

Current wording

Inventory, at $6,678,000 as of February 29, 2024, is $737,000 more than the prior year-end level of $5,941,000. Approximately 85% of the current inventory is work in process, 3% is finished goods, and 12% is raw materials.

Previous wording

Maintenance and other inventory represent stock that is estimated to have a product life cycle in excess of twelve months. This stock represents certain items the Company is required to maintain for service of products sold and items that are generally subject to spontaneous ordering. This inventory is particularly sensitive to technological obsolescence in the near term due to its use in industries characterized by the continuous introduction of new product lines, rapid technological advances and product obsolescence. Management of the Company has recorded an allowance for potential inventory obsolescence. The provision for potential inventory obsolescence was $144,000 and zero for the six-month periods ended November 30, 2023 and 2022.

Current wording

Maintenance and other inventory represent stock that is estimated to have a product life cycle in excess of twelve months. This stock represents certain items the Company is required to maintain for service of products sold and items that are generally subject to spontaneous ordering. This inventory is particularly sensitive to technological obsolescence in the near term due to its use in industries characterized by the continuous introduction of new product lines, rapid technological advances and product obsolescence. Management of the Company has recorded an allowance for potential inventory obsolescence. The provision for potential inventory obsolescence was $369,000 and $68,000 for the nine-month periods ended February 29, 2024 and February 28, 2023.

Previous wording

Accounts receivable of $4,072,000 as of November 30, 2023 includes $29,000 of an allowance for doubtful accounts (“Allowance”). The accounts receivable balance as of May 31, 2023 of $5,554,000 included an Allowance of $29,000. The number of an average day's sales outstanding in accounts receivable (“DSO”) decreased from 47 days at May 31, 2023 to 35 at November 30, 2023. The DSO is a function of 1.) the level of sales for an average day (for example, total sales for the past three months divided by 90 days) and 2.) the level of accounts receivable at the balance sheet date. The Company expects to collect the net accounts receivable balance during the next twelve months.

Current wording

Accounts receivable of $4,887,000 as of February 29, 2024 includes $29,000 of an allowance for doubtful accounts (“Allowance”). The accounts receivable balance as of May 31, 2023 of $5,554,000 included an Allowance of $29,000. The number of an average day's sales outstanding in accounts receivable (“DSO”) decreased from 47 days at May 31, 2023 to 36 at February 29, 2024. The DSO is a function of 1.) the level of sales for an average day (for example, total sales for the past three months divided by 90 days) and 2.) the level of accounts receivable at the balance sheet date. The Company expects to collect the net accounts receivable balance during the next twelve months.

Previous wording

As noted above, CIEB represents revenues recognized in excess of amounts billed. Whenever possible, the Company negotiates a provision in sales contracts to allow the Company to bill, and collect from the customer, payments in advance of shipments. Unfortunately, such provisions are often not possible. The $1,723,000 balance in this account at November 30, 2023 is 58% less than the prior year-end balance. This decrease is the result of normal flow of the Projects through production with billings to the customers as permitted in the related contracts. The Company expects to bill the entire amount during the next twelve months. 61% of the CIEB balance as of the end of the last fiscal quarter, August 31, 2023, was billed to those customers in the current fiscal quarter ended November 30, 2023. The remainder will be billed as the Projects progress, in accordance with the terms specified in the various contracts.

Current wording

As noted above, CIEB represents revenues recognized in excess of amounts billed. Whenever possible, the Company negotiates a provision in sales contracts to allow the Company to bill, and collect from the customer, payments in advance of shipments. Unfortunately, such provisions are often not possible. The $4,534,000 balance in this account at February 29, 2024 is 10% more than the prior year-end balance. This increase is the result of normal flow of the Projects through production with billings to the customers as permitted in the related contracts. The Company expects to bill the entire amount during the next twelve months. 13% of the CIEB balance as of the end of the last fiscal quarter, November 30, 2023, was billed to those customers in the current fiscal quarter ended February 29, 2024. The remainder will be billed as the Projects progress, in accordance with the terms specified in the various contracts.

Previous wording

As noted above, BIEC represents billings to customers in excess of revenues recognized. The $3,006,000 balance in this account at November 30, 2023 is up 51% from the $1,992,000 balance at the end of the prior year. The balance in this account fluctuates in the same manner and for the same reasons as the CIEB, discussed above. Final delivery of product under these contracts is expected to occur during the next twelve months.

Current wording

As noted above, BIEC represents billings to customers in excess of revenues recognized. The $1,960,000 balance in this account at February 29, 2024 is down 2% from the $1,992,000 balance at the end of the prior year. The balance in this account fluctuates in the same manner and for the same reasons as the CIEB, discussed above. Final delivery of product under these contracts is expected to occur during the next twelve months.

Previous wording

The Company's backlog of sales orders at November 30, 2023 is $35.5 million, up from $32.5 million at the end of the prior year. $21.2 million of the current backlog is on Projects already in progress.

Current wording

The Company's backlog of sales orders at February 29, 2024 is $30.2 million, down from $32.5 million at the end of the prior year. $16.1 million of the current backlog is on Projects already in progress.

Previous wording

Accounts payable, at $1,168,000 as of November 30, 2023, is 32% less than the prior year-end. Accrued expenses decreased 26% from the prior year-end, to $3,033,000. The Company expects the current accrued amounts to be paid or applied during the next twelve months.

Current wording

Accounts payable, at $956,000 as of February 29, 2024, is 44% less than the prior year-end. Accrued expenses decreased 1% from the prior year-end, to $4,040,000. The Company expects the current accrued amounts to be paid or applied during the next twelve months.