TAYLOR DEVICES INC

Previous wording

Sales under certain fixed-price contracts, in which the product has no alternative use to the Company and the Company has enforceable rights to payment for progress completed to date, inclusive of profit, are accounted for under the percentage-of-completion method of accounting whereby revenues are recognized based on estimates of completion prepared on a ratio of cost to total estimated cost basis. Costs include all material and direct and indirect charges related to specific contracts.

Current wording

Sales under certain fixed-price contracts, in which the product has no alternative use to the Company and the Company has enforceable rights to payment for progress completed to date, inclusive of profit, are recognized over time whereby revenues are based on estimates of completion prepared on a ratio of cost to total estimated cost basis. Costs include all material and direct and indirect charges related to specific contracts.

Previous wording

The gross profit as a percentage of net revenue of 47% in the quarter ended August 31, 2024 is three percentage points higher than the same period of the prior year (44%). 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 six-month period ended November 30, 2024 is two percentage points higher than the same period of the prior year (45%).

Previous wording

At August 31, 2023, the Company had 131 open sales orders in our backlog with a total sales value of $28.3 million. At August 31, 2024, the Company has 118 open sales orders in our backlog, and the total sales value is $28.4 million. The Company expects to recognize revenue for the majority of the backlog during the current fiscal year.

Current wording

At November 30, 2023, the Company had 141 open sales orders in our backlog with a total sales value of $35.5 million. At November 30, 2024, the Company had 156 open sales orders in our backlog with a total sales value of $34.5 million. The Company expects to recognize revenue for the majority of the backlog during fiscal years 2025 and 2026.

Previous wording

The Company's backlog, revenues, gross profits, and net income fluctuate from period to period. The changes in the quarter ended August 31, 2024 compared to the same period in the prior year are not necessarily representative of future results.

Current wording

The Company's backlog, revenues, gross profits, and net income fluctuate from period to period. The changes in the six-month period ended November 30, 2024, compared to the same period in the prior year, are not necessarily representative of future results.

Previous wording

Research and development costs declined $60,000 during the quarter ended August 31, 2024, from the same period in the prior year, due to a change in the mix of engineering resource driven projects, inclusive of customer funded development.

Current wording

Research and development costs declined $41,000 from the same period in the prior year due to a change in the mix of engineering resource driven projects, inclusive of customer funded development.

Previous wording

Selling, general and administrative expenses during the quarter ended August 31, 2024 increased 8% from the same period in the prior year. This change is primarily due to increased employee compensation costs including incentive compensation.

Current wording

Selling, general and administrative expenses during the six-month period ended November 30, 2024 increased by 7% from the same period in the prior year. This change is primarily due to increased stock option expense. The Company expenses stock options using the fair value recognition provisions of the Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”). The Company recognized $731,000 and $301,000 of compensation cost for the six-month periods ended November 30, 2024 and 2023, respectively.

Previous wording

The Company's consolidated results of operations showed a 17% increase in net revenues and $0.8 million increase in net income. Revenues recorded in the quarter ended August 31, 2024 for Projects were 30% higher than the level recorded in the prior year. The Company had 23 Projects in process during the quarter ended August 31, 2024 as compared to 22 during the same period last year. Revenues recorded in the quarter ended August 31, 2024 for other-than long-term projects (non-projects) were 2% higher than the level recorded in the prior year. Total sales within the U.S. during the quarter ended August 31, 2024 increased 10% from the same period last year. Total sales to Asia during the quarter ended August 31, 2024 increased 38% from the same period of the prior year. Sales increases were recorded over the same period last year to customers in aerospace / defense (20%) and industrial customers (111%) with a decrease to customers involved in construction of buildings and bridges (-5%). 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 17% decrease in net revenues and 47% decrease in net income. Revenues recorded in the quarter ended November 30, 2024 for Projects were 8% lower than the level recorded in the prior year. The Company had 22 Projects in process during the quarter ended November 30, 2024 as compared to 16 during the same period last year. Revenues recorded in the quarter ended November 30, 2024 for other-than long-term projects (non-projects) were 31% lower than the level recorded in the prior year. Total sales within the U.S. during the quarter ended November 30, 2024 decreased 21% from the same period last year. Total sales to Asia during the quarter ended November 30, 2024 increased 34% from the same period of the prior year. Sales decreases were recorded over the same period last year to customers in aerospace / defense (-19%), customers involved in construction of buildings and bridges (-19%) and industrial customers (-2%). The decrease in sales from the prior year was attributed to differences in the timing of backlog conversion to revenue.

Previous wording

Operating income was $2,905,000 for the three months ended August 31, 2024, better than the $1,920,000 in the same period of the prior year. The increase in Operating income was attributed to increased gross margin from higher levels of sales.

Current wording

Operating income was $944,000 for the three months ended November 30, 2024, lower than the $2,054,000 in the same period of the prior year. The decrease in Operating income was attributed to lower revenue and increased stock option expense.

Previous wording

Other income was $377,000 for the three months ended August 31, 2024, a 4% increase from the same period of the prior year. This increase was driven by short-term investment interest income.

Current wording

Other income was $308,000 for the three months ended November 30, 2024, a 23% decrease from the same period of the prior year. This decrease was driven by short-term investment interest income.

Previous wording

Capital expenditures for the three months ended August 31, 2024 were $247,000 compared to $428,000 in the same period of the prior year. As of August 31, 2024, the Company has commitments for capital expenditures totaling $1,264,000 during the next twelve months. The Board of Directors is evaluating additional capital expenditures to expand capacity.

Current wording

Capital expenditures for the six-month period ended November 30, 2024 were $971,000 compared to $545,000 in the same period of the prior year. As of November 30, 2024, the Company has commitments for capital expenditures totaling $881,000 during the next twelve months.

Previous wording

NOTE: Inventory turnover is annualized for the three-month period ended August 31, 2024.

Current wording

NOTE: Inventory turnover is annualized for the six-month period ended November 30, 2024.

Previous wording

Inventory, at $8,154,000 as of August 31, 2024, is $642,000 more than the prior year-end level of $7,512,000. Approximately 86% of the inventory as of August 31, 2024 was work in process, 3% was finished goods, and 11% was raw materials.

Current wording

Inventory, at $8,611,000 as of November 30, 2024, is $1,099,000 more than the prior year-end level of $7,512,000. As of November 30, 2024, approximately 88% of the inventory was work in process, 2% was finished goods, and 10% was 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 $0 and $144,000 for the three-month periods ended August 31, 2024 and 2023, respectively.

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 zero and $144,000 for the six-month periods ended November 30, 2024 and 2023, respectively.

Previous wording

Accounts receivable of $6,780,000 as of August 31, 2024 includes $29,000 of an allowance for doubtful accounts (“Allowance”). The accounts receivable balance as of May 31, 2024 of $5,212,000 included an Allowance of $29,000. The number of an average day's sales outstanding in accounts receivable (“DSO”) increased from 39 days at May 31, 2024 to 53 days at August 31, 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.

Current wording

Accounts receivable of $8,248,000 as of November 30, 2024 includes $49,000 of an allowance for doubtful accounts (“Allowance”). The accounts receivable balance as of May 31, 2024 of $5,212,000 included an Allowance of $29,000. The number of an average day's sales outstanding in accounts receivable (“DSO”) increased from 39 days at May 31, 2024 to 87 days at November 30, 2024. The Accounts Receivable and DSO increase were the result of delayed collections for structural project invoices. 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 $4,333,000 balance in this account at August 31, 2024 is 1% lower 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. 34% of the CIEB balance as of the end of the last fiscal quarter, May 31, 2024, was billed to those customers in the quarter ended August 31, 2024. 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 $3,018,000 balance in this account at November 30, 2024 is 31% lower 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. 82% of the CIEB balance as of the end of the last fiscal quarter, August 31, 2024, was billed to those customers in the fiscal quarter ended November 30, 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 $2,984,000 balance in this account at August 31, 2024 is down 47% from the $5,601,000 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 $3,708,000 balance in this account at November 30, 2024 is down 34% from the $5,601,000 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 August 31, 2024 is $28.4 million, down from $33.1 million at the end of the prior year. $17.6 million of the Company’s backlog as of August 31, 2024 was on Projects already in progress.

Current wording

The Company's backlog of sales orders at November 30, 2024 is $34.5 million, up from $33.1 million at the end of the prior year. $13.1 million of the Company’s backlog as of November 30, 2024 was for Projects already in progress.

Previous wording

Accounts payable, at $1,848,000 as of August 31, 2024, is 28% higher than the prior year-end. Accrued expenses decreased 49% from the prior year-end, to $2,396,000, due to the payout of fiscal year 2024 incentive compensation. The Company expects the accrued amounts to be paid or applied during the next twelve months.

Current wording

Accounts payable, at $857,000 as of November 30, 2024, is 40% lower than the prior year-end. Accrued expenses decreased 48% from the prior year-end, to $2,497,000 due to the payout of fiscal year 2024 incentive compensation. The Company expects the accrued amounts to be paid or applied during the next twelve months.