Taylor Devices Inc. Reports Operating Results (10-Q)
Taylor Devices has a market cap of $29 million; its shares were traded at around $8.75 with a P/E ratio of 11.3 and P/S ratio of 0.9. Taylor Devices had an annual average earning growth of 9.9% over the past 10 years.
Highlight of Business Operations:The Company's backlog, revenues, commission expense, gross margins, gross profits, and net income fluctuate from period to period. The changes in the current period, compared to the prior period, are not necessarily representative of future results.
Accounts receivable of $6,667,000 as of November 30, 2012 includes approximately $2,402,000 of amounts retained by customers on Projects. It also includes $42,000 of an allowance for doubtful accounts (“Allowance”). The accounts receivable balance as of May 31, 2012 of $5,610,000 included an Allowance of $42,000. The number of an average day's sales outstanding in accounts receivable (“DSO”) increased from 52 days at May 31, 2012 to 92 at November 30, 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 second quarter of the current fiscal year is approximately 33% less than in the fourth quarter of the prior year when the Company recorded record high level of sales. The level of accounts receivable at the end of the current fiscal quarter is 19% more 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 quarter-end. The $1,057,000 increase in accounts receivable is primarily due to a 68% increase in the retained amounts by customers on construction Projects. The retained amounts are high at this time due to the recent completion or near completion of several Projects. It is expected that the retained amounts will be released in the normal course of the business in accordance with the related contracts. The Company expects to collect the net accounts receivable balance, including the retainage, during the next twelve months.
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 $2,279,000 balance in this account at November 30, 2012 is 59% less than the prior year-end. The Company expects to bill the entire amount during the next twelve months. 68% of the CIEB balance as of the end of the last fiscal quarter, August 31, 2012, was billed to those customers in the current fiscal quarter ended November 30, 2012. The remainder will be billed as the Projects progress, in accordance with the terms specified in the various contracts.
Accounts payable, at $1,510,000 as of November 30, 2012, is 55% less than the prior year-end. The volume of purchases is lower to because sales volume decreased from the final quarter of fiscal 2012. Commission expense on applicable sales orders is recognized at the time revenue is recognized. The commission is paid following receipt of payment from the customers. Accrued commissions as of November 30, 2012 are $748,000, up 19% from the $631,000 accrued at the prior year-end. The Company expects the current accrued amount to be paid during the next twelve months. Other current liabilities decreased 21% from the prior year-end, to $1,774,000. This is primarily due to a lower level of customer advance payments and lower level of accrued incentive compensation expense. Payments on these liabilities will take place as scheduled within the next twelve months.
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