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Taylor Devices Inc. Reports Operating Results (10-K)
Posted by: gurufocus (IP Logged)
Date: August 29, 2012 10:00AM
Taylor Devices Inc. (TAYD) filed Annual Report for the period ended 2012-05-31. Taylor Devices, Inc. has a market cap of $28.13 million; its shares were traded at around $8.55 with a P/E ratio of 13.17 and P/S ratio of 1.35. Taylor Devices, Inc. had an annual average earning growth of 8.3% over the past 10 years.
Highlight of Business Operations:The Company's consolidated results of operations showed a 38% increase in net revenues and an increase in net income of 55%. Gross profit increased by 45%. Revenue and income were bolstered by record shipments of Taylor Devices’ Seismic Dampers, largely to Asia. The increase in demand for these products has been influenced by major earthquakes in Asia over the past several years. It is too soon to determine how long the demand for these products will remain at this level. Revenues recorded in the current period for long-term construction projects increased by 77% from the level recorded in the prior year. This increase is primarily due to more projects in process in the current year (75 in fiscal 2012; 46 in fiscal 2011). Of the 75 projects in process during this year, 28 were still in process at 5/31/12 compared with the prior year when 28 of the 46 projects worked on were still in process at 5/31/11. The average value of these projects in-process at the end of the current fiscal year ($715,000) increased by 40% over the projects in-process at the end of the prior fiscal year ($510,000). The projects in the current year are 61% complete in the aggregate as compared with 67% for those in process at 5/31/11. Revenues recorded for all other product sales decreased by 20% from last year. This fluctuation is attributable primarily to a decrease in sales to customers in aerospace and defense from the prior year. The gross profit as a percentage of net revenues for the current and prior year periods was 28% and 27%, respectively.
At May 31, 2011, we had 117 open sales orders in our backlog with a total sales value of $15.0 million. At May 31, 2012, we had slightly more open sales orders in our backlog (151 orders) and the total sales value is $17.5 million. $8.0 million of the current backlog is on projects already in progress. $4.6 million of the $15.0 million sales order backlog at May 31, 2011 was in progress at that date. 38% of the sales value in the backlog is for aerospace / defense customers compared to 42% at the end of fiscal 2011. As a percentage of the total sales order backlog, orders from customers in construction accounted for 67% at May 31, 2012 and 60% at May 31, 2011.
Inventory, at $8,372,000 as of May 31, 2012, is 56% higher than the prior year-end. Of this, approximately 85% is work in process, 8% is finished goods, and 7% is raw materials. The significant increase in inventory was necessary to complete the manufacture of products currently on order from customers and to reduce the lead time required to secure new sales orders anticipated for quoted projects in the fiscal year ending May 31, 2013. While there is more inventory, it is turning over more frequently than in prior years. All of the current inventory is expected to be consumed or sold within twelve months. The level of inventory will fluctuate from time to time due to the stage of completion of the non-project sales orders in progress at the time. The inventory level is expected to decrease 10% to 20% from current levels during the next twelve months.
Accounts receivable of $5,610,000 as of May 31, 2012 includes approximately $1,430,000 of amounts retained by customers on long-term construction projects. This retained amount is almost four times the amount retained as May 31, 2011. The increase is simply due to contractual requirements of certain open projects at the year ends. The Company expects to collect all of these amounts, including the retained amounts, during the next twelve months. The number of an average day's sales outstanding in accounts receivable (DSO) increased from 27 days at May 31, 2011 to 52 days at May 31, 2012. 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 level of sales for an average day in the fourth quarter of the current year is 35% higher than in the fourth quarter of the prior year. This is consistent with the overall increase in revenue for the quarter from $7,125,000 last year to $9,643,000 this year. The level of accounts receivable at the end of the current year is 163% higher than at the end of the prior year. The combination of these two factors caused the DSO to increase from last year end to this. The increase in the level of accounts receivable was due to: a.) the increase in retained amounts on projects, as discussed above and b.) a significant increase (185%) in the amount of billings to customers on projects in May 2012 over May 2011.
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, provisions such as this are often not possible. The $5,492,000 balance in this account at May 31, 2012 is a 31% increase from the prior year-end. Generally, if progress billings are permitted under the terms of a project sales agreement, then the more complete the project is, the more progress billings will be permitted. The Company expects to bill the entire amount during the next twelve months. 58% of the CIEB balance as of the end of the last fiscal quarter, February 28, 2012, was billed to those customers in the current fiscal quarter ended May 31, 2012. The remainder will be billed as the projects progress, in accordance with the terms specified in the various contracts.
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