Twin Disc, Inc. Announces Fiscal 2014 First Quarter Financial Results *First Quarter Sales Declined Slightly Compared to 2013 First Quarter *Sales to Asia Continued at Record Levels *Six-Month Backlog at September 27, 2013 was $58,053,000 Business Wire RACINE, Wis. -- October 22, 2013 Twin Disc, Inc. (NASDAQ: TWIN), today reported financial results for the fiscal 2014 first quarter ended September 27, 2013. Sales for the first three months of fiscal 2014, declined to $66,426,000, from $68,793,000 for the same period last year. The decrease in sales resulted from a lower level of business in both North America and Europe. Offsetting this were higher shipments to customers in our Asian markets. Sales to customers serving the global mega yacht market remained at historical lows in the quarter, while demand remained steady for equipment used in the industrial, and airport rescue and fire fighting (ARFF) markets. Gross margin for the fiscal 2014 first quarter was 31.1 percent, compared to 28.2 percent in the fiscal 2013 first quarter. The increase in fiscal 2014 first quarter gross margin was the result of a more profitable mix of business, primarily driven by increased shipments of pressure-pumping transmissions to China. For the fiscal 2014 first quarter, marketing, engineering and administrative (ME&A) expenses, as a percentage of sales, were 23.4 percent, compared to 24.2 percent for the fiscal 2013 first quarter. ME&A expenses decreased $1,103,000 versus the same period last fiscal year. The decrease in ME&A expenses for the quarter relates to lower stock based and incentive compensation expenses, and controlled spending in the Company's global operations. The Company recorded a restructuring charge of $1,094,000, or $0.10 per diluted share, in the fiscal 2014 first quarter representing the incremental cost above the minimum legal indemnity for a targeted workforce reduction at the Company's Belgian operation, following finalization of negotiations with the local labor union. The minimum legal indemnity of $708,000 was recorded in the fourth quarter of fiscal 2013, upon announcement of the intended restructuring action. The effective tax rate for the first quarter of fiscal 2014 was 64.4 percent, which is significantly higher than the prior year rate of 46.4 percent. Both years were significantly impacted by non-deductible losses in certain foreign jurisdictions that are subject to a full valuation allowance. Adjusting for these non-deductible losses, the fiscal 2014 rate would have been 39.7 percent compared to 36.9 percent for the fiscal 2013 first quarter. The increase in the fiscal 2014 rate was primarily driven by adjustments to tax on foreign earnings (Canada and Italy) recorded in the quarter. Net earnings attributable to Twin Disc for the fiscal 2014 first quarter were $1,277,000, or $0.11 per diluted share, compared to earnings of $1,231,000, or $0.11 per diluted share, for the fiscal 2013 first quarter. Net earnings for the first quarter of fiscal 2014 includes out-of-period adjustments related to the correction of errors deemed immaterial to all periods impacted, which have the effect of increasing net earnings $69,000 ($437,000 pre-tax). Earnings before interest, taxes, depreciation and amortization (EBITDA)* was $6,606,000 for the fiscal 2014 first quarter, compared to $5,266,000 for the fiscal 2013 first quarter. Commenting on the results, Michael E. Batten, Chairman and Chief Executive Officer, said: “Our financial results remain under pressure due to a challenging North American pressure-pumping market. Demand in this market remains weak, however we are optimistic about this market’s medium- and long-term growth prospects as well as significant pressure-pumping opportunities in Asia and potential in Latin America. Our growing international footprint plays an important role in diversifying sales and allows us to respond more quickly to faster growing markets. While sales were down in North America and Europe, we experienced double digit increases in shipments to customers in the Asia-Pacific region. As we have previously communicated, we are improving the cost structure of our European operations and during the fiscal 2014 first quarter we recorded an additional restructuring charge as a result of actions announced in the fiscal 2013 fourth quarter to increase profitability at our Belgian facility.” Christopher J. Eperjesy, Vice President - Finance, Chief Financial Officer and Treasurer, stated: “Our balance sheet continues to be an asset and provides us with the financial flexibility to withstand near-term volatility in our financial results, while allowing us to invest in our business and take advantage of long-term opportunities. During the quarter we generated free cash flow of $8,856,000 and ended the quarter with total debt, net of cash, of $773,000, compared to $6,429,000 at June 30, 2013. Capital expenditures during the fiscal 2014 first quarter were $866,000 and we anticipate investing $10,000,000 to $15,000,000 in capital expenditures for fiscal 2014 as we continue to upgrade our facilities.” Mr. Batten continued: “Our six-month backlog at September 27, 2013 was $58,053,000 compared to $66,765,000 at June 30, 2013 and $82,434,000 at September 28, 2012. The six-month backlog reflects continued weakness in demand from the North American oil and gas market, which we anticipate will continue for the balance of fiscal 2014. We are obviously disappointed in the time it has taken the North American pressure-pumping market to rebound and the impact this is having on our near-term financial results. However, lead times for all of our forward production marine and industrial transmission units are now within a six-month window, so that we are able to react to any increase in demand and still have a positive impact on our second half of the year. Globally the commercial marine market remains robust and we expect another strong year from customers in this market. Other markets, including ARFF and North American industrial markets are expected to remain stable, while European and mega-yacht markets will remain depressed. The Company continues to be well-positioned to grow as key end markets recover. We remain focused on providing innovative and differentiating product and market development projects that will enhance our revenue and earnings prospects in the future.” Twin Disc will be hosting a conference call to discuss these results and to answer questions at 11:00 a.m. Eastern Time on Tuesday, October 22, 2013. To participate in the conference call, please dial 877-941-1427 five to ten minutes before the call is scheduled to begin. A replay will be available from 2:00 p.m. October 22, 2013 until midnight October 29, 2013. The number to hear the teleconference replay is 877-870-5176. The access code for the replay is 4644540. The conference call will also be broadcast live over the Internet. To listen to the call via the Internet, access Twin Disc's website at http://ir.twindisc.com/index.cfm and follow the instructions at the web cast link. The archived web cast will be available shortly after the call on the Company's website. About Twin Disc, Inc. Twin Disc, Inc. designs, manufactures and sells marine and heavy-duty off-highway power transmission equipment. Products offered include: marine transmissions, surface drives, propellers and boat management systems, as well as power-shift transmissions, hydraulic torque converters, power take-offs, industrial clutches and control systems. The Company sells its products to customers primarily in the pleasure craft, commercial and military marine markets, as well as in the energy and natural resources, government and industrial markets. The Company’s worldwide sales to both domestic and foreign customers are transacted through a direct sales force and a distributor network. Forward-Looking Statements This press release may contain statements that are forward looking as defined by the Securities and Exchange Commission in its rules, regulations and releases. The Company intends that such forward-looking statements be subject to the safe harbors created thereby. All forward-looking statements are based on current expectations regarding important risk factors including those identified in the Company’s most recent periodic report and other filings with the Securities and Exchange Commission. Accordingly, actual results may differ materially from those expressed in the forward-looking statements, and the making of such statements should not be regarded as a representation by the Company or any other person that the results expressed therein will be achieved. *Non-GAAP Financial Disclosures Financial information excluding the impact of foreign currency exchange rate changes and the impact of acquisitions, if any, in this press release are not measures that are defined in U.S. Generally Accepted Accounting Principles (“GAAP”). These items are measures that management believes are important to adjust for in order to have a meaningful comparison to prior and future periods and to provide a basis for future projections and for estimating our earnings growth prospects. Non-GAAP measures are used by management as a performance measure to judge profitability of our business absent the impact of foreign currency exchange rate changes and acquisitions. Management analyzes the company’s business performance and trends excluding these amounts. These measures, as well as EBITDA, provide a more consistent view of performance than the closest GAAP equivalent for management and investors. Management compensates for this by using these measures in combination with the GAAP measures. The presentation of the non-GAAP measures in this press release are made alongside the most directly comparable GAAP measures. Definition – Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) The sum of, net earnings and adding back provision for income taxes, interest expense, depreciation and amortization expenses: this is a financial measure of the profit generated excluding the above mentioned items. --Financial Results Follow-- CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands, except per-share data; unaudited) Three Months Ended September 27, September 28, 2013 2012 Net sales $ 66,426 $ 68,793 Cost of goods sold 45,759 49,377 Gross profit 20,667 19,416 Marketing, engineering and 15,517 16,620 administrative expenses Restructuring of operations 1,094 - Earnings from operations 4,056 2,796 Interest expense 254 306 Other (income) expense, net (34 ) 127 Earnings before income taxes and 3,836 2,363 noncontrolling interest Income taxes 2,472 1,097 Net earnings 1,364 1,266 Less: Net earnings attributable to (87 ) (35 ) noncontrolling interest, net of tax Net earnings attributable to Twin Disc $ 1,277 $ 1,231 Earnings per share: Basic earnings per share attributable $ 0.11 $ 0.11 to Twin Disc common shareholders Diluted earnings per share attributable to Twin Disc common $ 0.11 $ 0.11 shareholders Weighted average shares outstanding: Basic 11,234 11,368 Diluted 11,240 11,446 Dividends per share $ 0.09 $ 0.09 Net earnings $ 1,364 $ 1,266 Other comprehensive income: Foreign currency translation 1,880 1,264 adjustment Benefit plan adjustments, net 450 668 Comprehensive income 3,694 3,198 Comprehensive income attributable to (87 ) (35 ) noncontrolling interest Comprehensive income attributable to $ 3,607 $ 3,163 Twin Disc RECONCILIATION OF CONSOLIDATED NET EARNINGS TO EBITDA (In thousands; unaudited) Three Months Ended September 27, September 28, 2013 2012 Net earnings attributable to Twin Disc $ 1,277 $ 1,231 Interest expense 254 306 Income taxes 2,472 1,097 Depreciation and amortization 2,603 2,632 Earnings before interest, taxes, $ 6,606 $ 5,266 depreciation and amortization CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands; unaudited) September 27, June 30, 2013 2013 ASSETS Current assets: Cash $ 24,062 $ 20,724 Trade accounts receivable, net 37,471 46,331 Inventories, net 103,106 102,774 Deferred income taxes 5,366 5,280 Other 11,807 13,363 Total current assets 181,812 188,472 Property, plant and equipment, net 61,106 62,315 Goodwill 13,319 13,232 Deferred income taxes 5,111 7,614 Intangible assets, net 3,079 3,149 Other assets 8,729 10,676 TOTAL ASSETS $ 273,156 $ 285,458 LIABILITIES AND EQUITY Current liabilities: Short-term borrowings and current $ 3,664 $ 3,681 maturities of long-term debt Accounts payable 17,344 20,651 Accrued liabilities 33,342 39,171 Total current liabilities 54,350 63,503 Long-term debt 21,171 23,472 Accrued retirement benefits 46,987 48,290 Deferred income taxes 2,723 2,925 Other long-term liabilities 3,542 3,706 Total liabilities 128,773 141,896 Twin Disc shareholders’ equity: Common shares authorized: 30,000,000; 11,159 13,183 Issued: 13,099,468; no par value Retained earnings 184,372 184,110 Accumulated other comprehensive loss (23,523 ) (25,899 ) 172,008 171,394 Less treasury stock, at cost (1,843,949 and 1,886,516 shares, 28,238 28,890 respectively) Total Twin Disc shareholders' equity 143,770 142,504 Noncontrolling interest 613 1,058 Total equity 144,383 143,562 TOTAL LIABILITIES AND EQUITY $ 273,156 $ 285,458 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands; unaudited) Three Months Ended September 27, September 28, 2013 2012 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 1,364 $ 1,266 Adjustments to reconcile net earnings to net cash provided by operating activities: Depreciation and amortization 2,603 2,632 Restructuring of operations 1,094 - Other non-cash changes, net 2,323 2,223 Net change in working capital, 2,338 (4,039 ) excluding cash and debt, and other Net cash provided by operating 9,722 2,082 activities CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions of fixed assets (866 ) (1,337 ) Proceeds from sale of fixed assets - 31 Other, net - (293 ) Net cash used by investing activities (866 ) (1,599 ) CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments of notes payable (14 ) (88 ) (Payments of) proceeds from long-term (2,305 ) 6,935 debt Proceeds from exercise of stock - 129 options Dividends paid to shareholders (1,015 ) (1,026 ) Dividends paid to noncontrolling (486 ) (204 ) interest Excess tax benefits from stock 435 1,316 compensation Payments of withholding taxes on stock (2,126 ) (1,700 ) compensation Net cash (used) provided by financing (5,511 ) 5,362 activities Effect of exchange rate changes on (7 ) (53 ) cash Net change in cash and cash 3,338 5,792 equivalents Cash and cash equivalents: Beginning of period 20,724 15,701 End of period $ 24,062 $ 21,493 Contact: Twin Disc, Inc. Christopher J. Eperjesy, 262-638-4343
Twin Disc, Inc. Announces Fiscal 2014 First Quarter Financial Results
Press spacebar to pause and continue. Press esc to stop.