Twin Disc, Inc. (NASDAQ: TWIN), today reported
financial results for the fiscal 2022 first quarter ended September
24, 2021.
Sales for the fiscal 2022 first quarter were
$47.8 million, compared to $46.2 million for the same period last
year. The 3.4% increase in 2022 first quarter sales was primarily
due to improving demand within the Company’s global oil and gas,
industrial and marine markets compared to the same period last
fiscal year. The impact of improving markets has been partially
offset by significant global supply chain challenges, limiting
sales revenue in the quarter. Foreign currency exchange had a $0.5
million positive impact on fiscal 2022 first quarter
sales.
John H. Batten, Chief Executive Officer,
commented: “Demand across many of our global markets is improving,
and I am encouraged by our strong first quarter performance as we
worked tirelessly to navigate unprecedented global supply chain
issues. We anticipate the supply chain challenges will
persist through our second fiscal quarter before easing through the
second half of the fiscal year. We continue to focus on
strategies that modernize our global facilities and realign our
cost structure. During the first quarter, we completed a sale
leaseback of our Rolla production facility for net proceeds of $9.1
million (resulting in a gain of $2.9 million recorded in Other
Operating Income). The restructuring action at our Belgium
operation announced in the fourth quarter of fiscal 2021 is
expected to be completed this fiscal year and we anticipate
incurring approximately $1.0 million of restructuring expenses in
the second quarter. These actions as well as future actions
are expected to generate annualized pre-tax savings of
approximately $1.6 million, while reducing the capital requirements
necessary to operate our business.”
“Our six-month backlog at September 24, 2021,
was $86.1 million, compared to $69.4 million at September 25, 2020,
and $70.3 million at June 30, 2021. The 22.5% increase in our
six-month backlog over the past three months is encouraging and is
supported by improving demand trends across many of our global
markets. The investment cycle in the North America pressure
pumping industry has yet to materialize. However, we are
optimistic an oil and gas investment cycle will begin in the coming
quarters supported by an aging fleet of equipment and higher oil
and gas prices. Overall, I am pleased with the progress we
are making to transform our business. We ended the quarter
with strong order rates across many areas of our business and we
believe fiscal 2022 will be a good year of profitable growth for
Twin Disc.”
Gross profit percent for the fiscal 2022 first
quarter was 28.2%, compared to 21.0% in the fiscal 2021 first
quarter. The 720-basis point increase in gross profit margin
percentage for the fiscal 2022 first quarter compared to the fiscal
2021 first quarter, was primarily due to higher, more profitable
sales, the positive outcomes of targeted cost reduction initiatives
and the favorable impact of the Employee Retention Credit (“ERC”),
a COVID-19 relief program of the U.S. government, recorded in the
quarter ($1.3 million). The quarter also benefited from the
incremental impact of the NOW subsidy ($0.3 million), a COVID-19
relief program of the Netherlands government.
For the fiscal 2022 first quarter, marketing,
engineering and administrative (ME&A) expenses increased $0.7
million to $13.1 million, compared to $12.4 million for the fiscal
2021 first quarter. The slight increase in ME&A expenses in the
quarter was primarily due to a current year global bonus accrual
and higher salary and benefit costs, partially offset by the
favorable impact of the ERC. As a percent of revenues, ME&A
expenses increased to 27.4% for the fiscal 2022 first quarter,
compared to 26.9% for the same period last year.
Twin Disc recorded restructuring charges of
$48,000 in the fiscal 2022 first quarter, compared to restructuring
charges of $0.4 million in the same period last fiscal year.
Restructuring activities during the fiscal 2022 first quarter
related primarily to ongoing cost reduction and productivity
actions at the Company’s European operations and actions to adjust
the cost structure at our domestic operation.
The fiscal 2022 first quarter effective tax rate
was 16.2% compared to 19.1% in the prior fiscal year first quarter.
The current year rate was impacted by the fact that the domestic
entity recognized a full valuation allowance in the fourth quarter
of fiscal 2021, resulting in limited recognition of tax
expense.
Net income attributable to Twin Disc for the
fiscal 2022 first quarter was $1.9 million or $0.14 per share,
compared to a net loss attributable to Twin Disc of $(4.0) million
or $(0.30) per share for the prior fiscal year first
quarter.
Earnings before interest, taxes, depreciation,
and amortization (EBITDA)* was $5.4 million for the fiscal 2022
first quarter, compared to a loss of $(1.6 million) for the fiscal
2021 first quarter.
Jeffrey S. Knutson, Vice President – Finance,
Chief Financial Officer, Treasurer and Secretary stated, “We
generated $2.4 million of cash provided by operating activities and
benefitted from the sale leaseback of our Rolla facility. As a
result, we ended the fiscal 2022 first quarter with net debt of
$9.8 million, compared to $19.7 million at June 30, 2021 which
represents the lowest net debt level (Total debt less cash) in over
three years. While inventories increased over the last three
months, we continue to believe we will reduce inventories as fiscal
2022 progresses and many of our global markets recover. I am
pleased with the progress we are making improving our balance sheet
and liquidity position. As a result, we are planning to increase
capital expenditures during fiscal 2022 after controlling
investments throughout the COVID-19 crisis. We expect to invest $9
million to $11 million in capital expenditures during fiscal
2022.”
Twin Disc will be hosting a conference call to
discuss these results and to answer questions at 11:00 a.m. Eastern
Time on October 29, 2021. To participate in the conference call,
please dial 1-877-407-9039 five to ten minutes before the call
is scheduled to begin. A replay will be available from 2:00 p.m.
October 29, 2021 until midnight November 5, 2021. The number to
hear the teleconference replay is 1-844-512-2921. The access code
for the replay is 13723996.
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/ and follow the
instructions at the web cast link. The archived webcast 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, azimuth drives, 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. For more information, please visit
www.twindisc.com.
Forward-Looking StatementsThis 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. Risk factors also include the
effects of the COVID-19 pandemic, and any impact the COVID-19
pandemic may have on the Company’s business operations, as well as
its impact on general economic and financial market conditions.
*Non-GAAP Financial Disclosures Financial
information excluding the impact of asset impairments,
restructuring charges, foreign currency exchange rate changes and
the impact of acquisitions, if any, as well as the measure of net
debt 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)
Net earnings or loss excluding interest expense,
the provision or benefit for income taxes, 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 (In thousands,
except per-share data; unaudited) |
|
For the Quarter Ended |
|
September 24,2021 |
September 25,2020 |
Net sales |
$ |
47,761 |
|
$ |
46,179 |
|
Cost of goods sold |
|
34,314 |
|
|
36,476 |
|
Gross profit |
|
13,447 |
|
|
9,703 |
|
Marketing, engineering
and administrative expenses |
|
13,091 |
|
|
12,445 |
|
Restructuring expenses |
|
48 |
|
|
405 |
|
Other operating income |
|
(2,939 |
) |
|
- |
|
Income (loss) from
operations |
|
3,247 |
|
|
(3,147 |
) |
|
|
|
Interest expense |
|
530 |
|
|
573 |
|
Other expense (income), net |
|
355 |
|
|
1,148 |
|
Income (loss) before income taxes
and noncontrolling interest |
|
2,362 |
|
|
(4,868 |
) |
Income tax expense (benefit) |
|
382 |
|
|
(931 |
) |
|
|
|
Net income (loss) |
|
1,980 |
|
|
(3,937 |
) |
Less: Net earnings attributable
to noncontrolling interest, net of tax/ |
|
(60 |
) |
|
(42 |
) |
Net income (loss) attributable
to Twin Disc |
$ |
1,920 |
|
$ |
(3,979 |
) |
Income (loss) per share data: |
|
|
Basic income (loss) per share |
$ |
0.14 |
|
$ |
(0.30 |
) |
Diluted income (loss) per share |
$ |
0.14 |
|
$ |
(0.30 |
) |
Weighted average shares outstanding data: |
|
|
Basic shares outstanding |
|
13,283 |
|
|
13,197 |
|
Diluted shares outstanding |
|
13,350 |
|
|
13,197 |
|
|
|
|
Comprehensive income: |
|
|
Net income (loss) |
$ |
1,980 |
|
$ |
(3,937 |
) |
Benefit plan adjustments, net of income taxes of $117 and
$177, respectively |
|
384 |
|
|
553 |
|
Foreign currency translation adjustment |
|
(1,938 |
) |
|
3,612 |
|
Unrealized gain on hedges, net of income taxes of $63 and $22,
respectively |
|
204 |
|
|
75 |
|
Comprehensive income |
|
630 |
|
|
303 |
|
Less: Comprehensive income attributable to noncontrolling
interest |
|
(136 |
) |
|
(55 |
) |
|
|
|
|
|
|
|
Comprehensive income attributable
to Twin Disc |
$ |
494 |
|
$ |
248 |
|
|
|
|
|
|
|
|
RECONCILIATION OF CONSOLIDATED NET INCOME
(LOSS) TO EBITDA(In thousands; unaudited)
|
|
|
For the Quarter Ended |
|
September 24,2021 |
September 25,2020 |
Net income (loss) attributable to Twin Disc |
$ |
1,920 |
$ |
(3,979 |
) |
Interest expense |
|
530 |
|
573 |
|
Income taxes |
|
382 |
|
(931 |
) |
Depreciation and
amortization |
|
2,550 |
|
2,758 |
|
Earnings (loss) before interest,
taxes, depreciation and amortization |
$ |
5,382 |
$ |
(1,579 |
) |
|
|
|
|
|
|
RECONCILIATION OF TOTAL DEBT TO NET
DEBT(In thousands; unaudited)
|
|
|
For the Quarter Ended |
|
September 24,2021 |
June 30,2021 |
Current maturities of long-term debt |
$ |
2,000 |
$ |
2,000 |
Long-term debt |
|
29,883 |
|
30,085 |
Total debt |
|
31,883 |
|
32,085 |
Less cash |
|
22,092 |
|
12,340 |
Net debt |
$ |
9,791 |
$ |
19,745 |
|
|
|
|
|
CONDENSED CONSOLIDATED BALANCE
SHEETS(In thousands; unaudited)
|
|
|
|
September 24,2021 |
June 30,2021 |
|
ASSETS |
|
|
Current assets: |
|
|
Cash |
$ |
22,092 |
|
$ |
12,340 |
|
Trade accounts receivable, net |
|
34,837 |
|
|
39,491 |
|
Inventories |
|
121,092 |
|
|
114,967 |
|
Assets held for sale |
|
3,321 |
|
|
9,539 |
|
Prepaid expenses |
|
6,165 |
|
|
5,704 |
|
Other |
|
7,334 |
|
|
9,926 |
|
Total current assets |
|
194,841 |
|
|
191,967 |
|
|
|
|
Property, plant and equipment,
net |
|
44,339 |
|
|
45,463 |
|
Right-of-use assets operating
leases |
|
14,216 |
|
|
14,736 |
|
Intangible assets, net |
|
16,468 |
|
|
17,480 |
|
Deferred income taxes |
|
2,615 |
|
|
2,511 |
|
Other assets |
|
3,768 |
|
|
3,256 |
|
|
|
|
TOTAL ASSETS |
$ |
276,247 |
|
$ |
275,413 |
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
Current liabilities: |
|
|
Current maturities of long-term debt |
$ |
2,000 |
|
$ |
2,000 |
|
Accounts payable |
|
29,363 |
|
|
31,011 |
|
Accrued liabilities |
|
49,138 |
|
|
45,549 |
|
|
|
|
Total current liabilities |
|
80,501 |
|
|
78,560 |
|
|
|
|
Long-term debt |
|
29,883 |
|
|
30,085 |
|
Lease obligations |
|
12,373 |
|
|
12,887 |
|
Accrued retirement benefits |
|
10,853 |
|
|
11,176 |
|
Deferred income taxes |
|
4,543 |
|
|
5,045 |
|
Other long-term liabilities |
|
6,470 |
|
|
7,000 |
|
|
|
|
Total liabilities |
|
144,623 |
|
|
144,753 |
|
|
|
|
Twin Disc shareholders’
equity: |
|
|
Preferred shares authorized:
200,000; issued: none; no par value |
|
- |
|
|
- |
|
Common shares authorized:
30,000,000; Issued: 14,632,802; no par value |
|
41,165 |
|
|
40,972 |
|
Retained earnings |
|
128,856 |
|
|
126,936 |
|
Accumulated other comprehensive
loss |
|
(24,041 |
) |
|
(22,615 |
) |
|
|
145,980 |
|
|
145,293 |
|
Less treasury stock, at cost (974,978 and 985,686 shares,
respectively) |
|
14,942 |
|
|
15,083 |
|
|
|
|
Total Twin Disc shareholders' equity |
|
131,038 |
|
|
130,210 |
|
|
|
|
Noncontrolling interest |
|
586 |
|
|
450 |
|
Total equity |
|
131,624 |
|
|
130,660 |
|
TOTAL LIABILITIES AND EQUITY |
$ |
276,247 |
|
$ |
275,413 |
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS(In thousands; unaudited)
|
|
|
|
For the Quarter Ended |
|
September 24,2021 |
September 25,2020 |
|
|
|
CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
Net income (loss) |
$ |
1,980 |
|
$ |
(3,937 |
) |
Adjustments to reconcile net income (loss) to net cash provided
(used) by operating activities, net of acquired assets: |
|
|
Depreciation and amortization |
|
2,550 |
|
|
2,758 |
|
Gain on sale of assets |
|
(2,939 |
) |
|
- |
|
Restructuring expenses |
|
(125 |
) |
|
- |
|
Provision for deferred income taxes |
|
(814 |
) |
|
(4,908 |
) |
Stock compensation expense and other non-cash changes, net |
|
937 |
|
|
709 |
|
Net change in operating assets and liabilities |
|
785 |
|
|
4,662 |
|
Net cash provided (used) by
operating activities |
|
2,374 |
|
|
(716 |
) |
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES: |
|
|
Acquisitions of fixed assets |
|
(846 |
) |
|
(1,419 |
) |
Proceeds from sale of fixed assets |
|
9,139 |
|
|
19 |
|
Proceed on note receivable |
|
500 |
|
|
300 |
|
Other, net |
|
(81 |
) |
|
(129 |
) |
Net cash used by investing
activities |
|
8,712 |
|
|
(1,229 |
) |
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES: |
|
|
Borrowings under revolving loan arrangement |
|
20,591 |
|
|
18,301 |
|
Repayments under revolver loans |
|
(20,591 |
) |
|
(18,674 |
) |
Repayments of other long-term debt |
|
(278 |
) |
|
(155 |
) |
Payments of withholding taxes on stock compensation |
|
(292 |
) |
|
(224 |
) |
Net used by financing
activities |
|
(570 |
) |
|
(752 |
) |
|
|
|
Effect of exchange rate changes
on cash |
|
(764 |
) |
|
1,322 |
|
|
|
|
Net change in cash |
|
9,752 |
|
|
(1,375 |
) |
|
|
|
Cash: |
|
|
Beginning of period |
|
12,340 |
|
|
10,688 |
|
|
|
|
End of period |
$ |
22,092 |
|
$ |
9,313 |
|
Contact: Jeffrey S. Knutson(262) 638-4242
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