Twin Disc, Inc. (NASDAQ: TWIN), today reported financial results
for the fiscal 2022 fourth quarter ended June 30, 2022.
Sales for the fiscal 2022 fourth quarter were
$76.0 million, compared to $66.2 million for the same period last
year. The 14.8% year-over-year increase in 2022 fourth 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 positive impact of improving
market conditions was partially offset by global supply chain
challenges, which continued to limit sales growth during both the
fiscal 2022 fourth quarter and full year. Proactive pricing actions
that started in the fiscal 2022 third quarter continued to help
offset inflationary cost increases in previous quarters and
contributed to incremental sales as well as a strong recovery in
gross margin performance. Foreign currency exchange had a $5.1
million unfavorable impact on fiscal 2022 fourth quarter sales and
a $8.5 million unfavorable impact on fiscal 2022 full year sales.
For the fiscal 2022 full year, sales increased 11.1% to $242.9
million from $218.6 million for fiscal 2021.
John H. Batten, President and Chief Executive
Officer, commented: “Our strong fourth quarter financial results
and operating performance are encouraging and reflect improving
market conditions across our global end markets, as well as the
success of growth strategies and the initiatives underway to
improve profitability. The positive momentum during the fourth
quarter was especially strong, as we continued to successfully
navigate challenging raw material, component, and supply chain
conditions. I am also pleased with the significant improvement we
experienced in profitability as a result of the successful pricing
initiatives we put in place last quarter, the benefits of our
strategies to improve manufacturing efficiencies, including our
recently opened Lufkin, Texas production facility, along with an
increase in aftermarket components and oil and gas transmission
systems. As a result, fourth quarter net income was at the highest
quarterly net income since the third quarter of fiscal 2012.”
“Our six-month backlog at June 30, 2022, was
$101.2 million, compared to $70.3 million at June 30, 2021, and
$108.9 million at March 25, 2022. We believe the 44.0% increase in
our six-month backlog over the past 12 months indicates a
significant improvement in underlying trends across our global
markets. Improving oil and gas market conditions are supporting
strong aftermarket component sales, as well as growing demand for
new oil and gas transmission systems from pressure pumping
customers in North America. As a result, we expect to benefit
throughout fiscal 2023 from renewed investments from North American
pressure pumping operators.”
Mr. Batten concluded: “An important component of
our long-term growth strategy is to become a leading supplier of
hybrid power control systems for industrial and marine
applications. We recently reached an important milestone with the
launch and commercialization of Twin Disc’s first marine based
hybrid power control system through a collaboration with Hinckley
Yachts. Through our partnership, we helped develop Hinckley Yachts’
SilentJet™ hybrid technology, and we are excited to be part of
Hinckley Yachts’ cutting-edge naval architecture. Overall, our
strong fourth-quarter results and favorable outlook demonstrate our
continued focus on supporting our customers, modernizing our
operations, diversifying our end markets and geographies, and
investing in new products. I am encouraged by the direction we are
headed and believe fiscal 2023 will be a strong year of sales
growth and profitability.”
Gross profit percent for the fiscal 2022 fourth
quarter was 31.8%, compared to 27.7% in the fiscal 2021 fourth
quarter, while gross profit dollars increased 32.1%. The 410-basis
point increase in gross profit percentage for the fiscal 2022
fourth quarter compared to the fiscal 2021 fourth quarter, was
primarily due to improved efficiencies, prudent selling price
adjustments to offset higher raw material prices, and a more
profitable mix of sales. For the fiscal 2022 full year, gross
profit percent was 28.3%, compared to 23.3% for the fiscal 2021
full year.
For the fiscal 2022 fourth quarter, marketing,
engineering and administrative (ME&A) expenses increased $0.6
million to $17.3 million, compared to $16.7 million for the fiscal
2021 fourth quarter. As a percent of net sales, for the fiscal 2022
fourth quarter, ME&A expenses improved 250 basis points to
22.8%, compared to 25.3% for the fiscal 2021 fourth quarter. The
3.5% dollar increase in ME&A expenses in the quarter was
primarily due to the absence of a prior year Employee Retention
Credit and a broad-based inflationary impact, partially offset by
an exchange driven decrease. For the fiscal 2022 full
year, ME&A expenses increased $4.3 million, or by 7.8%, to
$60.1 million, compared to $55.7 million for the fiscal 2021 full
year. As a percent of net sales, for the fiscal 2022 full year,
ME&A expenses improved 80 basis points to 24.7%, compared to
25.5% for the fiscal 2021 full year.
Twin Disc recorded a restructuring benefit of
$0.6 million in the fiscal 2022 fourth quarter, compared to
restructuring charges of $6.6 million in the same period last
fiscal year. The reversal of restructuring expenses for the fiscal
2022 fourth quarter was due to an adjustment to previous
restructuring efforts at the Company’s Belgium manufacturing
facility. For the fiscal 2022 full year, the Company recorded
restructuring charges of $1.0 million, compared to $7.4 million for
the fiscal 2021 full year.
During the fiscal 2021 fourth quarter, Twin Disc
received full forgiveness of the Company’s Small Business
Administration Paycheck Protection Program (“PPP”) loan in the
amount of approximately $8.2 million, which was received pursuant
to the Coronavirus Aid, Relief and Economic Security Act. This
amount is reflected as income from extinguishment of loan in the
consolidated statement of operations.
During the fiscal 2022 first quarter, Twin Disc
completed a sale leaseback of its Rolla production facility in
Switzerland for net proceeds of $9.1 million, which resulted in a
gain of $2.9 million and was recorded in other operating income for
the full year period.
For the fiscal 2022 fourth quarter and full
year, Twin Disc recorded other income of $0.7 million and $1.3
million, respectively, primarily attributable to translation gains
related to Euro denominated liabilities. For the fiscal 2021 fourth
quarter and full year, Twin Disc recorded other expenses of $1.1
million and $3.4 million, respectively, also attributable to
exchange rate movements related to Euro denominated
liabilities.
The effective tax rate for fiscal 2022 was 17.8%
compared to -200.0% for fiscal 2021. During the prior fiscal year,
the Company recorded a full domestic valuation allowance due to
continued historical domestic losses and uncertain future domestic
earnings, reducing the effective tax rate by 248.2%.
Net income attributable to Twin Disc for the
fiscal 2022 fourth quarter was $7.8 million, or $0.58 per diluted
share, compared to a net loss of $(21.5 million), or $(1.62) per
diluted share, for the fiscal 2021 fourth quarter. For the fiscal
2022 full year, net income attributable to Twin Disc was $8.1
million, or $0.60 per diluted share, compared to net loss of $(29.7
million), or $(2.24) per diluted share for the fiscal 2021 full
year.
Earnings before interest, taxes, depreciation
and amortization (EBITDA)* was $10.6 million for the fiscal 2022
fourth quarter, compared to $4.9 million for the fiscal 2021 fourth
quarter. For the fiscal 2022 full year, EBITDA was $21.6 million
compared to EBITDA of $3.6 million for the fiscal 2021 full
year.
Jeffrey S. Knutson, Vice President – Finance,
Chief Financial Officer, Treasurer and Secretary stated, “We expect
to generate higher levels of positive operating cash flow during
fiscal 2023, which over the near term we will allocate to pay down
debt, strengthen our balance sheet, and invest in our operations
and growth initiatives. In addition, we believe current working
capital levels will support near-term sales growth, and we are
focused on reducing inventory levels throughout fiscal 2023. We
anticipate the sale of our corporate headquarters during fiscal
2023, which is expected to save $0.7 million in annual operating
expenses. We also continue to pursue strategies that modernize our
global facilities, and we are planning to invest approximately $12
million - $15 million in capital expenditures during fiscal
2023.”
Twin Disc will be hosting a conference call to
discuss these results and to answer questions at 11:00 a.m. Eastern
Time on, September 1, 2022. To participate in the conference call,
please dial 877-407-9039 five to ten minutes before the call is
scheduled to begin. A replay will be available from 2:00 p.m.
September 1, 2022, until midnight September 8, 2022. The number to
hear the teleconference replay is 844-512-2921. The access code for
the replay is 13731795.
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 webcast 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, 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) |
|
|
|
|
|
Quarter Ended |
|
Year Ended |
|
June 30,2022 |
June 30,2021 |
|
June 30,2022 |
|
|
|
June 30,2021 |
Net sales |
$ |
75,974 |
|
|
$ |
66,204 |
|
|
$ |
242,913 |
|
|
$ |
218,581 |
|
Cost of goods sold |
|
51,782 |
|
|
|
47,889 |
|
|
|
174,101 |
|
|
|
167,724 |
|
Gross profit |
|
24,192 |
|
|
|
18,315 |
|
|
|
68,812 |
|
|
|
50,857 |
|
|
|
|
|
|
|
Marketing, engineering, and
administrative expenses |
|
17,332 |
|
|
|
16,750 |
|
|
|
60,085 |
|
|
|
55,750 |
|
Restructuring (income)
expenses |
|
(569 |
) |
|
|
6,600 |
|
|
|
973 |
|
|
|
7,377 |
|
Other operating income |
|
(325 |
) |
|
|
- |
|
|
|
(3,282 |
) |
|
|
- |
|
|
|
|
|
|
|
Income (loss) from
operations |
|
7,754 |
|
|
|
(5,035 |
) |
|
|
11,036 |
|
|
|
(12,270 |
) |
Interest expense |
|
534 |
|
|
|
588 |
|
|
|
2,128 |
|
|
|
2,358 |
|
Income from extinguishment of
loan |
|
- |
|
|
|
(8,200 |
) |
|
|
- |
|
|
|
(8,200 |
) |
Other (income) expense, net |
|
(713 |
) |
|
|
1,097 |
|
|
|
(1,321 |
) |
|
|
3,411 |
|
|
|
(179 |
) |
|
|
(6,515 |
) |
|
|
807 |
|
|
|
(2,431 |
) |
Income (loss) before income taxes
and noncontrolling interest |
|
7,933 |
|
|
|
1,480 |
|
|
|
10,229 |
|
|
|
(9,839 |
) |
Income tax expense |
|
66 |
|
|
|
22,948 |
|
|
|
1,823 |
|
|
|
19,681 |
|
|
|
|
|
|
|
Net income (loss) |
|
7,867 |
|
|
|
(21,468 |
) |
|
|
8,406 |
|
|
|
(29,519 |
) |
Less: Net earnings attributable
to |
|
|
|
|
|
noncontrolling interest, net of tax |
|
(88 |
) |
|
|
(53 |
) |
|
|
(311 |
) |
|
|
(200 |
) |
Net income (loss) attributable to
Twin Disc |
$ |
7,779 |
|
|
$ |
(21,521 |
) |
|
$ |
8,095 |
|
|
$ |
(29,719 |
) |
|
|
|
|
|
|
Income (loss) per share
data: |
|
|
|
|
|
Basic income (loss) per share attributable to Twin Disc common
shareholders |
$ |
0.58 |
|
|
$ |
(1.62 |
) |
|
$ |
0.61 |
|
|
$ |
(2.24 |
) |
Diluted income (loss) per share attributable to Twin Disc
common shareholders |
$ |
0.58 |
|
|
$ |
(1.62 |
) |
|
$ |
0.60 |
|
|
$ |
(2.24 |
) |
|
|
|
|
|
|
Weighted average shares
outstanding data: |
|
|
|
|
|
Basic shares outstanding |
|
13,399 |
|
|
|
13,270 |
|
|
|
13,353 |
|
|
|
13,247 |
|
Diluted shares outstanding |
|
13,456 |
|
|
|
13,270 |
|
|
|
13,382 |
|
|
|
13,247 |
|
|
|
|
|
|
|
Comprehensive income (loss): |
|
|
|
|
|
Net income (loss) |
$ |
7,867 |
|
|
$ |
(21,468 |
) |
|
$ |
8,406 |
|
|
$ |
(29,519 |
) |
Benefit plan adjustments, net of income taxes of $3, $3,086, $7 and
$3,791, respectively |
|
(1,775 |
) |
|
|
583 |
|
|
|
(263 |
) |
|
|
12,113 |
|
Foreign currency translation adjustment |
|
(5,234 |
) |
|
|
(3,008 |
) |
|
|
(11,593 |
) |
|
|
5,639 |
|
Unrealized gain on hedges, net of income taxes of $0, ($12), $0 and
$235, respectively |
|
502 |
|
|
|
193 |
|
|
|
2,250 |
|
|
|
760 |
|
Comprehensive income (loss) |
$ |
1,360 |
|
|
|
(23,700 |
) |
|
|
(1,200 |
) |
|
|
(11,007 |
) |
Less: Comprehensive income (loss) attributable to
noncontrolling interest |
|
60 |
|
|
|
(34 |
) |
|
|
176 |
|
|
|
(101 |
) |
Comprehensive income (loss)
attributable to Twin Disc |
$ |
1,300 |
|
|
$ |
(23,734 |
) |
|
$ |
(1,024 |
) |
|
$ |
(11,108 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF CONSOLIDATED NET INCOME (LOSS) TO
EBITDA(In thousands; unaudited) |
|
|
|
|
Quarter Ended |
Year Ended |
|
June 30,2022 |
|
June 30,2021 |
|
June 30,2022 |
|
June 30,2021 |
Net income (loss) attributable to Twin Disc |
$ |
7,779 |
|
$ |
(21,521 |
) |
|
$ |
8,095 |
|
$ |
(29,719 |
) |
Interest expense |
|
534 |
|
|
588 |
|
|
|
2,128 |
|
|
2,358 |
|
Income taxes |
|
66 |
|
|
22,948 |
|
|
|
1,823 |
|
|
19,681 |
|
Depreciation and amortization |
|
2,230 |
|
|
2,877 |
|
|
|
9,547 |
|
|
11,243 |
|
Earnings before interest, taxes,
depreciation and amortization |
$ |
10,609 |
|
$ |
4,892 |
|
|
$ |
21,593 |
|
$ |
3,563 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS |
(In thousands; except per share amounts, unaudited) |
|
|
|
|
June 30, |
June 30, |
|
|
2022 |
|
|
|
2021 |
|
ASSETS |
|
|
Current assets: |
|
|
Cash |
$ |
12,521 |
|
|
$ |
12,340 |
|
Trade accounts receivable, net |
|
45,452 |
|
|
|
39.491 |
|
Inventories |
|
127,109 |
|
|
|
114,967 |
|
Assets held for sale |
|
2,968 |
|
|
|
9,539 |
|
Prepaid expenses |
|
7,756 |
|
|
|
5,704 |
|
Other |
|
8,646 |
|
|
|
9,926 |
|
Total current assets |
|
204,452 |
|
|
|
191,967 |
|
|
|
|
Property, plant and equipment,
net |
|
41,615 |
|
|
|
45,463 |
|
Right-of-use assets operating
leases |
|
12,685 |
|
|
|
14,736 |
|
Intangible assets, net |
|
13,010 |
|
|
|
17,480 |
|
Deferred income taxes |
|
2,178 |
|
|
|
2,511 |
|
Other assets |
|
2,583 |
|
|
|
3,256 |
|
|
|
|
TOTAL ASSETS |
$ |
276,523 |
|
|
$ |
275,413 |
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
Current liabilities: |
|
|
Current maturities of long-term debt |
$ |
2,000 |
|
|
$ |
2,000 |
|
Accounts payable |
|
28,536 |
|
|
|
31,011 |
|
Accrued liabilities |
|
50,542 |
|
|
|
45,549 |
|
|
|
|
Total current liabilities |
|
81,078 |
|
|
|
78,560 |
|
|
|
|
Long-term debt |
|
34,543 |
|
|
|
30,085 |
|
Lease obligations |
|
10,575 |
|
|
|
12,887 |
|
Accrued retirement benefits |
|
9,974 |
|
|
|
11,176 |
|
Deferred income taxes |
|
3,802 |
|
|
|
5,045 |
|
Other long-term liabilities |
|
5,363 |
|
|
|
7,000 |
|
|
|
|
Total liabilities |
|
145,335 |
|
|
|
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 |
|
42,551 |
|
|
|
40,972 |
|
Retained earnings |
|
135,031 |
|
|
|
126,936 |
|
Accumulated other comprehensive
loss |
|
(32,086 |
) |
|
|
(22,615 |
) |
|
|
145,496 |
|
|
|
145,293 |
|
Less treasury stock, at cost (965,987and 984,139 shares,
respectively) |
|
14,720 |
|
|
|
15,083 |
|
|
|
|
Total Twin Disc shareholders' equity |
|
130,776 |
|
|
|
130,210 |
|
|
|
|
Noncontrolling interest |
|
412 |
|
|
|
450 |
|
Total equity |
|
131,188 |
|
|
|
130,660 |
|
TOTAL LIABILITIES AND EQUITY |
$ |
276,523 |
|
|
$ |
275,413 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In
thousands, unaudited) |
|
|
|
For the Year Ended |
|
June 30,2022 |
June 30,2021 |
|
|
|
CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
Net income (loss) |
$ |
8,406 |
|
|
$ |
(29,519 |
) |
Adjustments to reconcile net income (loss) to net cash (used) |
|
|
provided by operating activities: |
|
|
Depreciation and amortization |
|
9,547 |
|
|
|
11,243 |
|
Gain on extinguishment of loan |
|
- |
|
|
|
(8,200 |
) |
Gain on sale of assets |
|
(3,126 |
) |
|
|
- |
|
Restructuring of operations |
|
(1,328 |
) |
|
|
6,619 |
|
Provision for deferred income taxes |
|
(674 |
) |
|
|
17,655 |
|
Stock compensation expense and other non-cash changes, net |
|
2,248 |
|
|
|
2,154 |
|
Net change in operating assets and liabilities |
|
(23,564 |
) |
|
|
6,576 |
|
Net cash (used) provided by
operating activities |
|
(8,312 |
) |
|
|
6,528 |
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES: |
|
|
Acquisitions of property, plant and equipment |
|
(4,729 |
) |
|
|
(4,464 |
) |
Proceeds from sale of fixed assets |
|
9,455 |
|
|
|
102 |
|
Proceeds on note receivable |
|
500 |
|
|
|
1,500 |
|
Other, net |
|
675 |
|
|
|
120 |
|
Net cash provided (used) by
investing activities |
|
5,901 |
|
|
|
(2,742 |
) |
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES: |
|
|
Borrowings under revolving loan arrangement |
|
104,473 |
|
|
|
76,335 |
|
Repayments of revolver loans |
|
(95,704 |
) |
|
|
(78,370 |
) |
Repayments of other long-term debt Payments of finance lease
obligations |
(3,081)(933) |
(1,838)- |
Payments of withholding taxes on stock compensation |
|
(487 |
) |
|
|
(224 |
) |
Dividends paid to noncontrolling interest |
|
(214 |
) |
|
|
(220 |
) |
Net cash provided (used) by
financing activities |
|
4,054 |
|
|
|
(4,317 |
) |
|
|
|
Effect of exchange rate changes
on cash |
|
(1,462 |
) |
|
|
2,183 |
|
|
|
|
Net change in cash |
|
181 |
|
|
|
1,652 |
|
|
|
|
Cash: |
|
|
Beginning of year |
|
12,340 |
|
|
|
10,688 |
|
|
|
|
End of year |
$ |
12,521 |
|
|
$ |
12,340 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contact: Jeffrey S. Knutson(262) 638-4242
Twin Disc (NASDAQ:TWIN)
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From Jun 2024 to Jul 2024
Twin Disc (NASDAQ:TWIN)
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From Jul 2023 to Jul 2024