Taylor sees recovery under way
Douglas P. Taylor doesn’t see much to smile about in the U. S. economy, but he still thinks the recovery is under way at Taylor Devices, the North Tonawanda maker of giant shock absorbers.
“I think we’re going to be up for this year,” said Taylor, the company’s president and chief executive officer following its annual shareholders meeting on Friday. “Compared with last year, I’m more upbeat.”
Behind Taylor’s optimism is the company’s growing aerospace and military business, which is benefiting from increased defense spending at a time when its construction products business is struggling with a big drop in the number of building projects being launched amid a weak economy that is further constrained by tight credit.
The company’s performance during June, July and August adds credence to Taylor’s optimistic outlook, coming off a year when profits tumbled by almost two-thirds and sales slid by 10 percent. In contrast, Taylor Devices’ profits for June, July and August more than doubled, bolstered by improved sales in its more lucrative aerospace and defense markets. Earnings for the North Tonawanda shock absorber manufacturer jumped to $320,797, or 10 cents per share, from $148,652, or 5 cents per share, a year earlier, as the profitability of its product mix improved during the summer quarter.
And while sales grew by only 4 percent to $5 million during the quarter that ended in August, more of those revenues came from Taylor’s defense and aerospace customers, offsetting continued weakness in its construction markets.
“The commercial stuff is still shaky, but I think it’s bottomed,” Taylor said, who noted that the trend continued into the current quarter, which ends at the end of November.
The company’s roughly $6 million in aerospace sales accounts for about 40 percent of Taylor Devices’ annual revenues in the year that ended in May, and that percentage swelled to more than half in the June-July-August quarter.
At the same time, the company’s construction products business, which makes equipment that helps prevent buildings and bridges from being damaged by earthquakes and high winds, has struggled with the severe slump in commercial building projects, especially in the United States.
Of the 11 new seismic projects that Taylor has won since June, just two are in the United States, with the rest in China and Taiwan. “It’s very difficult to find new construction projects in the United States, because none are starting,” Taylor said.
“The Asian markets are pretty flat, but most of our recent projects are coming from there,” said Robert Schneider, who shares marketing responsibilities for the building products business.
Still, Taylor Devices has been able to avoid layoffs at its North Tonawanda factory, which employs 102 workers, because it has been willing to accept less profitable work. While that has trimmed profit margins to their lowest levels in at least six years, it also has kept production up.
“We did what we had to do to get the jobs, while remaining profitable,” said Mark McDonough, the company’s chief financial officer.
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