Business Context and Reporting Period
Company: Taylor Devices, Inc. (TAYD)
Filing Type: Form 10-K (Annual Report)
Period Ended: May 31, 2026
Business Overview: The Company designs, develops, manufactures, and markets shock absorption, rate control, and energy storage devices. Products include Seismic Dampers, Fluidicshoks, Crane Buffers, and custom actuators for aerospace, defense, structural, and industrial applications. The Company operates as a single segment with facilities in North Tonawanda, New York.
Key Financial Metrics
| Metric | Fiscal 2026 | Fiscal 2025 |
|---|---|---|
| Net Revenue | $41,650,000 | $46,293,000 |
| Gross Profit | $18,347,000 | $21,478,000 |
| Gross Margin | 44% | 46% |
| Operating Income | $7,343,000 | $9,627,000 |
| Net Income | $8,564,000 | $9,413,000 |
| Diluted EPS | $2.62 | $2.87 |
| Cash & Short-Term Investments | $41,479,000 | $35,990,000 |
| Working Capital | $57,530,000 | $46,709,000 |
| Long-Term Debt | $0 | $0 |
| Backlog (Sales Orders) | $52,800,000 | $27,100,000 |
Material Changes vs. Prior Period
- Revenue Decline: Net revenue decreased 10% ($4.6M) primarily due to a 31% drop in sales to structural customers (seismic/wind protection) and an 11% decrease in industrial sales. This was partially offset by a 1% increase in aerospace/defense sales.
- Backlog Surge: The sales order backlog nearly doubled to $52.8 million from $27.1 million. 92% of the current backlog is attributed to aerospace/defense customers, compared to 75% in the prior year.
- Profitability: Net income decreased 9% ($849,000). Gross margin compressed by 2 percentage points to 44%.
- Expense Management: Selling, General, and Administrative (SG&A) expenses decreased 10% due to lower employee incentive compensation accruals. Research and Development (R&D) costs increased 75% to $776,000 driven by aerospace/defense activity.
- Balance Sheet Strength: Accounts receivable decreased 30% to $3.9 million, while "Costs and estimated earnings in excess of billings" (CIEB) increased 50% to $8.0 million, reflecting higher progress on long-term projects.
Guidance, Outlook, and Risks
- Outlook: Management expects to recognize the majority of the remaining $52.8 million backlog during the fiscal year ending May 31, 2027. The Company anticipates sufficient liquidity from cash on hand, operating cash flows, and a $10 million line of credit (currently unused) to fund operations for the next 12 months.
- Capital Expenditures: Capital expenditures were $2.1 million in 2026. The Company has committed to approximately $1.8 million in future capital expenditures for new manufacturing and testing equipment.
- Risks & Contingencies:
- Customer Concentration: Five customers accounted for 45% of net sales in 2026. Loss of these customers could have a material adverse effect.
- Government Contracts: A significant portion of revenue is derived from federal government contracts which are subject to termination at the government's election and dependent on defense spending levels.
- Legal Proceedings: The Company is a third-party defendant in litigation regarding the 432 Park Avenue building in New York. While the Company denies allegations, it cannot currently quantify potential losses. Discovery is ongoing.
- Cybersecurity: The Company maintains NIST-aligned security controls but notes that preventative actions may not successfully protect against future threats.
Investor Verification Checklist
- Backlog Realization: Verify the timing of revenue recognition for the $52.8 million backlog, specifically the $19.0 million non-project order scheduled for delivery between 2027 and 2030.
- Customer Concentration: Monitor the stability of the top five customers who represent 45% of revenue.
- Legal Exposure: Track the status of the 432 Park Avenue litigation and any potential indemnification claims from LendLease.
- Deferred Tax Assets: Assess the Company's ability to generate the approximately $12.1 million in future taxable income required to realize its $2.5 million deferred tax asset.
- Inventory Obsolescence: Review the $225,000 provision for inventory obsolescence and the $318,000 in disposed inventory, given the Company's exposure to rapid technological changes in aerospace and defense.