Twin Disc, Inc. Announces Fiscal 2014 Third Quarter Financial Results *Demand from Customers in Asia Continues at Record Levels *Challenges in some North American and most European Markets Persist *Improving Outlook for North American Oil and Gas *Net Cash at March 28, 2014 was $1,313,000 *Six-Month Backlog at March 28, 2014 up slightly to $57,599,000 Business Wire RACINE, Wis. -- April 29, 2014 Twin Disc, Inc. (NASDAQ: TWIN), today reported financial results for the fiscal 2014 third quarter ended March 28, 2014. Sales for the fiscal 2014 third quarter declined to $60,705,000, from $68,232,000 for the same period last year. Year-to-date, sales were $190,343,000, compared to $209,351,000 for the fiscal 2013 nine months. The decrease in sales resulted from lower levels of business in both North American and European markets and continued weakness in the global mega yacht market. Offsetting this were higher shipments to customers in Asian markets. In addition, global demand for commercial marine transmission systems remains strong but less than the record levels experienced in fiscal 2013. Commenting on the results, John H. Batten, President and Chief Executive Officer, said: “The challenges we have experienced throughout fiscal 2014 persisted during the third quarter. Specifically, lower levels of activity from North American and European customers continued to influence our results. Additionally, the severe winter weather throughout most of the U.S. and Canada, while difficult to quantify, impacted the performance of our supply chain causing some shipments to be delayed, and there was a general low level of order activity for both new units and spares during the quarter. However, we continued to experience favorable demand trends from customers in Asia for both pressure pumping and commercial marine products as a result of overall economic growth in the region and market share gains. Towards the end of the quarter, demand for our pressure pumping transmission systems began increasing in North America, and we are hopeful that these recent trends will continue as the excess field inventory situation continues to improve.” Gross margin for the fiscal 2014 third quarter was 27.4 percent, compared to 25.9 percent in the fiscal 2013 third quarter. The increase in fiscal 2014 third quarter gross margin was the result of a more profitable mix of business. Year-to-date, gross margin was 29.3 percent, compared to 28.4 percent for the fiscal 2013 nine months. For the fiscal 2014 third quarter, marketing, engineering and administrative (ME&A) expenses, as a percentage of sales, were 27.8 percent, compared to 25.5 percent for the fiscal 2013 third quarter. ME&A expenses decreased $535,000 versus the same period last fiscal year. Year-to-date, ME&A expenses, as a percentage of sales, were 26.0 percent, compared to 24.3 percent for the fiscal 2013 nine months. For the fiscal 2014 nine month period, ME&A expenses decreased $1,223,000 versus the same period last fiscal year. Stock based compensation expense decreased $1,181,000 and $1,478,000 for the third fiscal quarter and year-to-date, respectively, compared to the prior fiscal year. The net decrease in ME&A expenses relates to a continued focus on controlled spending at the Company’s European and North American operations and the noted decrease in stock based compensation expense this fiscal year compared to fiscal 2013 partially offset by increased spending in the Company’s growing Asian operations and increased spending on corporate projects. The fiscal 2014 third quarter tax benefit on near break-even, pre-tax results was impacted by a reduced effective rate driven by a change in the jurisdictional mix of earnings along with provision to return adjustments for the federal and various state tax returns filed in the quarter. The fiscal 2013 third quarter tax expense was primarily impacted by foreign tax credits following final settlement of an IRS audit and the completion of the fiscal 2012 federal tax return. The year-to-date effective tax rate for fiscal 2014 is 65.4 percent, which is significantly higher than the prior year rate of 46.6 percent. However, the effective rates in both years are impacted by the non-deductibility of operating losses in a certain foreign jurisdiction that is subject to a full valuation allowance. Adjusting both fiscal years for the non-deductible losses, the fiscal 2014 year-to-date rate would have been 33.3 percent compared to 37.6 percent for the same period in fiscal 2013. The fiscal 2014 rate was favorably impacted by a change in the jurisdictional mix of earnings, along with favorable provision to return adjustments recorded in the fiscal 2014 third quarter. The net loss attributable to Twin Disc for the fiscal 2014 third quarter was $393,000, or $0.03 per share, compared to a net loss of $757,000, or $0.07 per share, for the fiscal 2013 third quarter. Year-to-date, net earnings attributable to Twin Disc were $1,402,000, or $0.12 per diluted share, compared to $3,835,000, or $0.34 per diluted share for the fiscal 2013 nine months. Earnings before interest, taxes, depreciation and amortization (EBITDA)* were $2,381,000 for the fiscal 2014 third quarter, compared to $2,929,000 for the fiscal 2013 third quarter. For the fiscal 2014 nine months, EBITDA was $13,012,000, compared to $16,413,000 for the fiscal 2013 comparable period. Christopher J. Eperjesy, Vice President — Finance, Chief Financial Officer and Treasurer, stated: “Our balance sheet remains strong as we continue to focus our capital allocation on growth producing initiatives. At March 28, 2014 we had total debt of $25,047,000 and cash of $26,360,000. Working capital at March 28, 2014 was $127,470,000 compared to $124,969,000 at June 30, 2013. Working capital should improve during the fiscal 2014 fourth quarter as we anticipate inventory levels to decline from the third quarter level. Year-to-date, we have invested $5,183,000 in capital expenditures as we focus on modernizing core manufacturing, assembly and testing processes, and investing in machinery and equipment that improves productivity and the cost competitiveness of the Company.” Mr. Batten concluded: “Our six-month backlog at March 28, 2014 was $57,599,000, compared to $56,161,000 at December 27, 2013 and $64,879,000 at March 29, 2013. The six-month backlog reflects an improvement in demand from the North American oil and gas market. We are cautiously optimistic current demand trends and order inquiries from North American pressure pumping customers may reflect the beginning of a recovery in this market and we anticipate the fourth quarter will show sequential improvements in sales and profitability. With transmission systems dedicated to mid to high horsepower pressure pumping applications and extremely competitive lead times, we are positioned for growth as this market recovers. In addition, our global market share within our other major categories continues to increase as we invest in new product development, customer service capabilities, and our international operations. We are capitalizing on the long-term trends of our markets and committed to creating value for our customers, employees and shareholders.” 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, April 29, 2014. To participate in the conference call, please dial 877-941-2068 five to ten minutes before the call is scheduled to begin. A replay will be available from 2:00 p.m. April 29, 2014 until midnight May 6, 2014. The number to hear the teleconference replay is 877-870-5176. The access code for the replay is 4678880. 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 OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (In thousands, except per-share data; unaudited) Three Months Ended Nine Months Ended March 28, March 29, March 28, March 29, 2014 2013 2014 2013 Net sales $ 60,705 $ 68,232 $ 190,343 $ 209,351 Cost of goods sold 44,095 50,558 134,522 149,949 Gross profit 16,610 17,674 55,821 59,402 Marketing, engineering and administrative expenses 16,870 17,405 49,572 50,795 Restructuring of - - 1,094 - operations (Loss) earnings from (260 ) 269 5,155 8,607 operations Interest expense 220 366 697 1,001 Other expense (income), 68 (129 ) (85 ) (24 ) net (Loss) earnings before income taxes and (548 ) 32 4,543 7,630 noncontrolling interest Income taxes (188 ) 640 2,973 3,552 Net (loss) earnings (360 ) (608 ) 1,570 4,078 Less: Net earnings attributable to noncontrolling interest, (33 ) (149 ) (168 ) (243 ) net of tax Net (loss) earnings attributable to Twin $ (393 ) $ (757 ) $ 1,402 $ 3,835 Disc (Loss) earnings per share data: Basic (loss) earnings per share attributable $ (0.03 ) $ (0.07 ) $ 0.12 $ 0.34 to Twin Disc common shareholders Diluted (loss) earnings per share attributable $ (0.03 ) $ (0.07 ) $ 0.12 $ 0.34 to Twin Disc common shareholders Weighted average shares outstanding data: Basic shares outstanding 11,265 11,243 11,256 11,327 Diluted shares 11,265 11,243 11,262 11,400 outstanding Dividends per share $ 0.09 $ 0.09 $ 0.27 $ 0.27 Comprehensive income (loss): Net (loss) earnings $ (360 ) $ (608 ) $ 1,570 $ 4,078 Other comprehensive income (loss): Foreign currency 1,054 (874 ) 4,053 2,520 translation adjustment Benefit plan 528 676 1,506 1,996 adjustments, net Comprehensive income 1,222 (806 ) 7,129 8,594 (loss) Comprehensive income attributable to (33 ) (149 ) (168 ) (243 ) noncontrolling interest Comprehensive income (loss) attributable to Twin Disc $ 1,189 $ (955 ) $ 6,961 $ 8,351 RECONCILIATION OF CONSOLIDATED NET (LOSS) EARNINGS TO EBITDA (In thousands; unaudited) Three Months Ended Nine Months Ended March 28, March 29, March 28, March 29, 2014 2013 2014 2013 Net (loss) earnings $ (393 ) $ (757 ) $ 1,402 $ 3,835 attributable to Twin Disc Interest expense 220 366 697 1,001 Income taxes (188 ) 640 2,973 3,552 Depreciation and amortization 2,742 2,680 7,940 8,025 Earnings before interest, taxes, $ 2,381 $ 2,929 $ 13,012 $ 16,413 depreciation and amortization CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share amounts; unaudited) March 28, June 30, 2014 2013 ASSETS Current assets: Cash $ 26,360 $ 20,724 Trade accounts receivable, net 33,489 46,331 Inventories, net 105,131 102,774 Deferred income taxes 5,221 5,280 Other 13,055 13,363 Total current assets 183,256 188,472 Property, plant and equipment, net 60,986 62,315 Goodwill, net 13,526 13,232 Deferred income taxes 6,322 7,614 Intangible assets, net 2,947 3,149 Other assets 8,891 10,676 TOTAL ASSETS $ 275,928 $ 285,458 LIABILITIES AND EQUITY Current liabilities: Short-term borrowings and current maturities of $ 3,625 $ 3,681 long-term debt Accounts payable 19,665 20,651 Accrued liabilities 32,496 39,171 Total current liabilities 55,786 63,503 Long-term debt 21,422 23,472 Accrued retirement benefits 45,803 48,290 Deferred income taxes 2,589 2,925 Other long-term liabilities 3,881 3,706 Total liabilities 129,481 141,896 Twin Disc shareholders’ equity: Common shares authorized: 30,000,000; Issued: 13,099,468; no par value 11,676 13,183 Retained earnings 182,467 184,110 Accumulated other comprehensive loss (20,256 ) (25,899 ) 173,887 171,394 Less treasury stock, at cost 28,095 28,890 (1,834,595 and 1,886,516 shares, respectively) Total Twin Disc shareholders' equity 145,792 142,504 Noncontrolling interest 655 1,058 Total equity 146,447 143,562 TOTAL LIABILITIES AND EQUITY $ 275,928 $ 285,458 CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands, unaudited) Nine Months Ended March 28, March 29, 2014 2013 CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 1,570 $ 4,078 Adjustments to reconcile to net earnings to cash provided by operating activities: Depreciation and amortization 7,940 8,025 Restructuring of operations 1,094 - Other non-cash changes, net 441 1,679 Net change in working capital, excluding cash 6,742 (2,980 ) Net cash provided by operating activities 17,787 10,802 CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions of fixed assets (5,183 ) (5,118 ) Proceeds from sale of fixed assets 121 181 Other, net (244 ) (232 ) Net cash used by investing activities (5,306 ) (5,169 ) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable - 38 Payments of notes payable (59 ) (96 ) Payments of long-term debt - (95 ) Borrowings under revolving loan agreement 48,550 65,200 Repayments under revolving loan agreement (50,600 ) (62,500 ) Proceeds from exercise of stock options - 189 Dividends paid to shareholders (3,045 ) (3,066 ) Acquisition of Treasury stock - (3,069 ) Dividends paid to noncontrolling interest (487 ) (204 ) Excess tax benefits from stock compensation 524 1,276 Payments of withholding taxes on stock (2,170 ) (1,700 ) compensation Net cash used by financing activities (7,287 ) (4,027 ) Effect of exchange rate changes on cash 442 (146 ) Net change in cash 5,636 1,460 Cash: Beginning of period 20,724 15,701 End of period $ 26,360 $ 17,161 Contact: Twin Disc, Inc. Christopher J. Eperjesy, 262-638-4343
Twin Disc, Inc. Announces Fiscal 2014 Third Quarter Financial Results
Press spacebar to pause and continue. Press esc to stop.