TAYLOR DEVICES, INC.

Previous wording

A summary of the period-to-period changes in the principal items included in the condensed consolidated statements of income is shown below:

Current wording

A summary of the period-to-period changes in the principal items included in the unaudited condensed consolidated statements of income is shown below:

Previous wording

The Company's consolidated results of operations showed a 6% increase in net revenue and 25% increase in net income. Revenue recorded in the quarter ended February 28, 2026 for long-term projects was 13% lower than the level recorded in the prior year. The Company had 23 long-term projects in process during the quarter ended February 28, 2026 as compared to 21 during the same period last year. Revenue recorded in the quarter ended February 28, 2026 for other-than long-term projects was 37% higher than the level recorded in the prior year. Total sales within the U.S. during the quarter ended February 28, 2026 increased 6% from the same period last year. Total sales outside the U.S. during the quarter ended February 28, 2026 increased 4% from the same period of the prior year. The shift in domestic and international sales concentration from the prior year is attributable to normal changes in structural project activity. Sales increases were recorded over the same period last year to aerospace / defense customers (47%) with decreases to customers involved in construction of buildings and bridges (-49%) and industrial customers (-35%). The increases in total sales from the prior year is attributable to differences in the timing of backlog conversion to revenue.

Current wording

The Company's consolidated results of operations showed a 26% decrease in net sales and a 79% decrease in net income. Revenue recorded in the quarter ended August 31, 2026 for long-term projects was 33% lower than the level recorded in the prior year. The Company had 24 long-term projects in process during the quarter ended August 31, 2026 as compared to 25 during the same period last year. Revenue recorded in the quarter ended August 31, 2026 for other-than long-term projects was 18% lower than the level recorded in the prior year. Total sales within the U.S. during the quarter ended August 31, 2026 decreased 20% from the same period last year. Total sales to Asia during the quarter ended August 31, 2026 decreased 31% from the same period of the prior year. The change in domestic and international sales concentration from the prior year is attributed to normal fluctuations in structural project activity. Sales decreases were recorded over the same period last year to customers in aerospace / defense (-17%) and customers involved in construction of buildings and bridges (-49%) with an increase to industrial customers (8%). The decrease in sales from the prior year is attributable to differences in the timing of bookings and backlog conversion to revenue.

Previous wording

The gross profit as a percentage of net revenue of 40% in the quarter ended February 28, 2026 is three percentage points lower than the same period of the prior year (43%).

Current wording

The gross profit as a percentage of net sales of 30% in the quarter ended August 31, 2026 is 15 percentage points lower than the same period of the prior year (45%). The decrease in gross profit percentage is attributed to lower revenue and shift in sales mix.

Previous wording

At February 28, 2025, the Company had 146 open sales orders in its backlog with a total sales value of $33.3 million. At February 28, 2026, the Company had 116 open sales orders in its backlog with a total sales value of $20.8 million. The Company expects to recognize revenue for the majority of the backlog during fiscal years 2026 and 2027.

Current wording

At August 31, 2025, the Company had 127 open sales orders in its backlog with a total sales value of $27.9 million. At August 31, 2026, the Company had 151 open sales orders in its backlog, with a total sales value of $55.2 million. The backlog at August 31, 2026 includes a $19.0 million non-project order with $1.7 million scheduled to be delivered in the fiscal year ending May 31, 2027, $5.0 million scheduled to be delivered in the fiscal year ending May 31, 2028, $10.0 million scheduled to be delivered in the fiscal year ending May 31, 2029 and $2.3 million scheduled to be delivered in the fiscal year ending May 31, 2030. The Company expects to recognize revenue for the majority of the remaining backlog during the current fiscal year, with the balance expected to be recognized during the fiscal year ending May 31, 2028.

Previous wording

The Company's backlog, revenues, gross profits, and net income fluctuate from period to period. The changes in the nine-month period ended February 28, 2026, compared to the same period in the prior year, are not necessarily representative of future results.

Current wording

The Company's backlog, revenues, gross profit, and net income fluctuate from period to period. The changes in the quarter ended August 31, 2026 compared to the same period in the prior year are not necessarily representative of future results.

Previous wording

Net revenue by geographic region, as a percentage of total net revenue for the three-month periods ended February 28, 2026 and February 28, 2025, is as follows:

Current wording

Net sales by geographic region, as a percentage of total net sales for the three-month periods ended August 31, 2026 and 2025, is as follows:

Previous wording

Selling, general and administrative expenses during the quarter ended February 28, 2026 decreased 11% from the same period in the prior year. This change is primarily due to lower incentive compensation accruals.

Current wording

Selling, general and administrative expenses during the quarter ended August 31, 2026 decreased 7% from the same period in the prior year. This change is primarily due to lower employee incentive compensation accruals.

Previous wording

Operating income was $6,790,000 for the nine-month period ended February 28, 2026, higher than $5,869,000 in the same period of the prior year. The increase in operating income is attributable to increased revenue and lower selling, general and administrative expenses.

Current wording

Operating income was $38,000 for the three-month period ended August 31, 2026, 98.3% lower than $2,245,000 in the same period of the prior year. The decrease in operating income is attributable to lower gross margin associated with reduced revenue and shift in sales mix.

Previous wording

Other income was $1,231,000 for the nine-month period ended February 28, 2026, a 22% increase from the same period of the prior year. This increase was driven by short-term investment interest income.

Current wording

Other income was $418,000 for the three-month period ended August 31, 2026, a 9% increase from the same period of the prior year. This increase was driven by short-term investment interest income.

Previous wording

Capital expenditures for the nine-month period ended February 28, 2026 were $2,006,000 compared to $1,158,000 in the same period of the prior year. As of February 28, 2026, the Company has commitments for capital expenditures totaling $1,610,000 during the next twelve months. The Company is evaluating additional capital expenditures to expand capacity.

Current wording

Capital expenditures for the three months ended August 31, 2026 were $242,000 compared to $185,000 in the same period of the prior year. As of August 31, 2026, the Company has commitments for capital expenditures totaling $1,928,000 during the next twelve months. The Company is evaluating additional capital expenditures to expand capacity.

Previous wording

NOTE: Inventory turnover is annualized for the nine-month period ended February 28, 2026.

Current wording

NOTE: Inventory turnover is annualized for the three-month period ended August 31, 2026.

Previous wording

Inventory, at $7,481,000 as of February 28, 2026, is $632,000 lower than the prior year-end level of $8,113,000. As of February 28, 2026, approximately 90% of the inventory was work-in-process, 2% was finished goods, and 8% was raw materials.

Current wording

Inventory, at $9,356,000 as of August 31, 2026, is $1,827,000 higher than the prior year-end level of $7,529,000. Approximately 88% of the inventory as of August 31, 2026 was work-in-process, 3% was finished goods, and 9% 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, from time to time, recorded an allowance for potential inventory obsolescence. The provision for potential inventory obsolescence was $195,000 and zero for the nine-month periods ended February 28, 2026 and February 28, 2025, 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. Company management has, from time to time, recorded an allowance for potential inventory obsolescence. The provision for potential inventory obsolescence was zero for both the three-month periods ended August 31, 2026 and 2025.

Previous wording

Accounts receivable of $4,863,000 as of February 28, 2026 is net of $319,000 of an allowance for estimated credit losses (“Allowance”). The accounts receivable balance as of May 31, 2025 of $5,600,000 is net of an Allowance of $564,000. The decrease to the Allowance was due to collections against an overdue structural project balance. After discussions with the customer regarding payment of this balance, the overdue balance has been reduced from $751,000 at prior year end to $111,000 at February 28, 2026. The number of an average day's sales outstanding in accounts receivable (“DSO”) increased from 32 days at May 31, 2025 to 39 days at February 28, 2026. 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 $3,371,000 as of August 31, 2026 is net of $195,000 of an allowance for estimated credit losses (“Allowance”). The accounts receivable balance as of May 31, 2026 of $3,932,000 is net of an Allowance of $195,000. The number of an average day's sales outstanding in accounts receivable (“DSO”) increased from 40 days at May 31, 2026 to 42 days at August 31, 2026. 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, these contract provisions are often not possible to obtain. The $5,681,000 balance in CIEB at February 28, 2026 is 6% higher than the prior year-end balance. This increase is the result of normal flow of long-term projects through production with billings to the customers as permitted in the related contracts. 33% of the CIEB balance as of the end of the last fiscal quarter, November 30, 2025, was billed to those customers in the fiscal quarter ended February 28, 2026. 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, these contract provisions are often not possible to obtain. The $2,332,000 balance in CIEB at August 31, 2026 is 71% lower than the prior year-end balance. This decrease is the result of normal flow of the long-term projects through production with billings to the customers as permitted in the related contracts. 83% of the CIEB balance as of the end of the last fiscal quarter, May 31, 2026, was billed to those customers in the quarter ended August 31, 2026. 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 $1,404,000 balance in BIEC at February 28, 2026 is down 68% from the $4,382,000 balance at the end of the prior year. The balance in BIEC 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 $4,539,000 balance in BIEC at August 31, 2026 is up 232% from the $1,367,000 balance at the end of the prior year. The balance in BIEC 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 February 28, 2026 is $20.8 million, down from $27.1 million at the end of the prior year. Of the Company’s backlog as of February 28, 2026, $8.2 million was on projects already in progress.

Current wording

The Company's backlog of sales orders at August 31, 2026 is $55.2 million, up from $52.8 million at the end of the prior year. Of the Company’s backlog as of August 31, 2026, $9.5 million was on projects already in progress.

Previous wording

Accounts payable, at $1,129,000 as of February 28, 2026, is 1% higher than the prior year-end. Accrued expenses decreased 32% from the prior year-end to $2,773,000 due to a reduction of accrued incentive compensation. The Company expects the accrued amounts to be paid or applied during the next twelve months.

Current wording

Accounts payable, at $1,043,000 as of August 31, 2026, is 82% higher than the prior year-end. Accrued expenses decreased 31% from the prior year-end, to $2,042,000, due to the payout of fiscal year 2026 incentive compensation. The Company expects the accrued amounts to be paid or applied during the next twelve months.