Taylor Devices, Inc. reports financial results for the quarter ended November 29, 2017.
- Summary numbers: Revenues of USD 4.81 million, Net Earnings of USD 0.05 million.
- Gross margins narrowed from 35.17% to 26.22% compared to the same period last year, operating (EBITDA) margins now 0.73% from 17.58%.
- Change in operating cash flow of 98.59% compared to same period last year is about the same as change in earnings, likely no significant movement in accruals or reserves.
- Narrowing of operating margins contributed to decline in earnings.
The table below shows the preliminary results and recent trends for key metrics such as revenues and net income growth:
|Relevant Numbers (Quarterly)|
|Revenue Growth (%YOY)||-38.37||14.11||-30.46||-31.87||-11.48|
|Earnings Growth (%YOY)||-94.44||43.81||-22.71||-71.38||1.47|
|Net Margin (%)||1.08||4.59||13.4||5.96||12.02|
|Return on Equity (%)||0.16||0.91||2.61||1.07||3.02|
|Return on Assets (%)||0.55||3.22||9.07||3.61||10.14|
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Market Share Versus Profits
Compared to the same period last year, TAYD-US’s change in revenue was close to the amount of its change in earnings. It remains to be seen how the rest of its peer group’s results will turn out and if TAYD-US’s performance is a sign of any major shift in the composition of market share in this sector. Also, for comparison purposes, revenues changed by -26.74% and earnings by -82.72% compared to the previous period.
Earnings Growth Analysis
The company’s year-on-year decline in earnings was influenced by a weakening in gross margins from 35.17% to 26.22%, as well as issues with cost controls. As a result, operating margins (EBITDA margins) went from 17.58% to 0.73% in this time frame. For comparison, gross margins were 24.63% and EBITDA margins were 6.24% in the previous period.
Gross Margin Trend
Companies sometimes sacrifice improvements in revenues and margins in order to extend friendlier terms to customers and vendors. Capital Cube probes for such activity by comparing the changes in gross margins with any changes in working capital. If the gross margins improved without a worsening of working capital, it is possible that the company’s performance is a result of truly delivering in the marketplace and not simply an accounting prop-up using the balance sheet.
TAYD-US’s decline in gross margins has not produced any significant offsetting improvement in its working capital . This leads Capital Cube to conclude that the decline in gross margins are likely from operating issues and not trade-offs with the balance sheet. Working capital days are currently 409.10 days, compared to last year’s level of 248.29 days.
Cash Versus Earnings – Sustainable Performance?
It is important to examine a companyï¿½s cash versus earnings numbers to gauge whether its performance is sustainable.
TAYD-US’s year-on-year change in operating cash flow of 98.59% is around its change in earnings. This suggests that there are likely no significant movement in accruals or reserves for managing earnings this period.
The company’s decline in earnings has been influenced by the following factors: (1) Decline in operating margins (EBIT margins) from 17.58% to 0.73% and (2) one-time items that contributed to a decrease in pretax margins from 17.91% to 0.88%
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Taylor Devices, Inc. is engaged in the design, development, manufacture and marketing of shock absorption, rate control and energy storage devices for use in various types of machinery, equipment and structures. The Company’s Seismic Dampers are designed to ameliorate the effects of earthquake tremors on structures. As of May 31, 2016, Fluidicshoks were small, extremely compact shock absorbers with up to 19,200 inch-pound capacities, produced in 15 standard sizes. As of May 31, 2016, crane and industrial buffers were larger versions of the Fluidicshoks with up to 60,000,000 inch-pound capacities, produced in over 60 standard sizes. Its Self-adjusting shock absorbers are designed for high cycle application in heavy industry. Its Liquid die springs are used as component parts of machinery and equipment. Its Vibration dampers are used by the aerospace and defense industries to control the response of electronics and optical systems subjected to air, ship, or spacecraft vibration.
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