Twin Disc, Inc. (NASDAQ: TWIN), today reported
financial results for the fiscal 2022 third quarter and nine months
ended March 25, 2022.
Sales for the fiscal 2022 third quarter were
$59.3 million, compared to $57.6 million for the same period last
year. The 2.9% increase in fiscal 2022 third quarter net 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
third quarter and nine-months. Proactive pricing actions taken
at the beginning of the quarter to offset inflationary cost
increases in previous quarters contributed to the incremental
revenue and a strong recovery in gross margin performance. Foreign
currency exchange had a $3.0 million negative impact on fiscal 2022
third quarter sales and a $3.5 million negative impact on fiscal
2022 year-to-date sales. Year-to-date sales increased 9.6% to
$166.9 million, compared to $152.4 million for the fiscal 2021
nine-months.
John H. Batten, President and Chief Executive
Officer, commented: “I am pleased with the progress we made during
the third quarter and the positive momentum underway across many
aspects of our business and global markets. Throughout the quarter,
our teams worked with our suppliers and customers to navigate tight
raw material supply conditions. As expected, our third quarter
financial results also reflect the benefits of our recent pricing
initiatives and multi-year strategies focused on improving our
global cost structure, which combined with a more profitable mix of
sales, drove third quarter gross margin to the highest level in
three fiscal years. We remain focused on pursuing initiatives that
further diversify our geographic and end markets, while maintaining
compelling levels of profitability through an efficient and
asset-light operating model, and investing in R&D programs that
drive long-term growth and innovation.”
“Our six-month backlog at March 25, 2022, was
$108.9 million, compared to $70.3 million at June 30, 2021, and
$98.9 million at December 31, 2021. The 10.1% sequential increase
was due to strong orders and demand trends across many of our
global markets. Growth in our backlog also reflects shipping,
logistics, and production delays, which impacted the timing of
shipments during the third quarter. Aftermarket sales to North
American pressure pumping customers remains strong, which we
believe indicates a growing investment cycle over the coming
quarters within the North American pressure pumping market. In
addition, we are experiencing higher global demand for our pressure
pumping transmission systems, most notably our 7600 series
transmission systems for use in the Chinese oil and gas market. We
expect fiscal 2022 to be a strong year of sales growth and
profitability as we benefit from the strategies we are pursuing to
create long-term and sustainable value for our customers, team
members, and shareholders.”
Gross profit percent for the fiscal 2022 third
quarter was 29.8%, compared to 24.2% for the same period last year.
The 560-basis point year-over-year increase in gross profit margin
percentage was primarily due to improved efficiencies, prudent
selling price adjustments to offset higher raw material prices, and
a more profitable mix of sales. Year-to-date, gross margin was
26.7% compared to 21.4% for the fiscal 2021 nine months.
For the fiscal 2022 third quarter, marketing,
engineering and administrative (ME&A) expenses increased by
$1.2 million to $14.4 million, compared to $13.2 million for the
fiscal 2021 third quarter. The 9.1% increase in ME&A expenses
in the quarter was primarily due to the accrual for the global
bonus program ($0.8 million), professional fees ($0.3 million),
increased travel ($0.2 million) and other net spending increases of
$1.0 million. These increases were partially offset by a Dutch
COVID relief subsidy recorded in the quarter, which reduced
ME&A expense by $0.7 million and a currency impact of $0.4
million. As a percent of revenues, ME&A expenses were 24.3% for
the fiscal 2022 third quarter, compared to 22.9% for the same
period last fiscal year. Year-to-date, ME&A expenses were $42.8
million, compared to $39.0 million for the fiscal 2021 nine-month
period. As a percent of revenues, ME&A expenses were 25.6% for
both the fiscal 2022 and 2021 nine-month periods.
The Company incurred restructuring charges of
approximately $1.5 million during the fiscal 2022 nine-month
period, which includes $0.3 million during the fiscal 2022 third
quarter. Year-to-date restructuring expenses have been primarily
associated with the final negotiated settlement related to the
Belgian restructuring program announced in June 2021. The total
cost of this program is now estimated at $3.3 million, and the
Company anticipates annual pre-tax savings of approximately $1.6
million upon completion of this program.
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 fiscal 2022 third quarter and nine-month
period, Twin Disc recorded other income of $0.5 million and $0.6
million, respectively, primarily attributable to translation gains
related to Euro denominated liabilities. For the fiscal 2021 third
quarter and nine-month period, Twin Disc recorded other income of
$0.6 million and other expenses of $2.3 million, respectively, also
attributable to exchange rate movements related to Euro denominated
liabilities.
For the nine months ended March 25, 2022, and
March 26, 2021, the Company’s effective income tax rate was 76.5%
and 28.9%, respectively. 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 no tax benefits
being recognized for current domestic losses.
Net income attributable to Twin Disc for the
fiscal 2022 third quarter was $2.2 million, or $0.17 per diluted
share, compared to net income attributable to Twin Disc of $94,000,
or $0.01 per diluted share, for the fiscal 2021 third quarter.
Year-to-date, net income attributable to Twin Disc was $0.3
million, or $0.02 per diluted share, compared to a net loss
attributable to Twin Disc of $(8.2 million), or $(0.62) per diluted
share for the fiscal 2021 nine-month period.
Earnings before interest, taxes, depreciation
and amortization (EBITDA)* were $5.8 million for the fiscal 2022
third quarter, compared to $3.8 million for the fiscal 2021 third
quarter. For the fiscal 2022 nine-month period, EBITDA was $11.0
million, compared to a loss of $(1.3 million) for the fiscal 2021
comparable period.
Jeffrey S. Knutson, Vice President – Finance,
Chief Financial Officer, Treasurer and Secretary stated, “While we
remain focused on controlling inventory and working capital levels,
inventories increased 5.8% over the past three months as we support
recent order growth and navigate global supply chain and logistic
challenges. With total debt, net of cash, of $21.2 million and a
$12.3 million year-over-year improvement in year-to-date EBITDA
results, we believe we have the financial flexibility to support
our long-term growth initiatives. We also continue to make progress
creating a more asset-light business model and, during the third
quarter signed an agreement to sell our corporate headquarters for
approximately $3.3 million. We believe this transaction will close
during our fiscal 2023 first quarter, and we expect to save $0.7
million in annual expenses. We also continue to invest in
modernizing our global facilities, which includes adding resources
and capabilities to our Lufkin manufacturing facility. We plan to
invest approximately $5 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 April 29, 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.
Eastern Time April 29, 2022, until midnight May 6, 2022. The number
to hear the teleconference replay is 844-512-2921. The access code
for the replay is 13727780.
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, 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
ANDCOMPREHENSIVE INCOME (LOSS)(In
thousands, except per-share data; unaudited) |
|
|
For the Quarter Ended |
|
For the Three Quarters Ended |
|
March 25, 2022 |
|
|
March 26, 2021 |
|
|
March 25, 2022 |
|
|
March 26, 2021 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
$ |
59,289 |
|
|
$ |
57,640 |
|
|
$ |
166,939 |
|
|
$ |
152,377 |
|
Cost of goods sold |
|
41,598 |
|
|
|
43,678 |
|
|
|
122,319 |
|
|
|
119,835 |
|
Gross profit |
|
17,691 |
|
|
|
13,962 |
|
|
|
44,620 |
|
|
|
32,542 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing, engineering and
administrative expenses |
|
14,396 |
|
|
|
13,196 |
|
|
|
42,753 |
|
|
|
39,000 |
|
Restructuring expenses |
|
303 |
|
|
|
251 |
|
|
|
1,542 |
|
|
|
777 |
|
Other operating income |
|
(63 |
) |
|
|
- |
|
|
|
(2,957 |
) |
|
|
- |
|
Income (loss) from
operations |
|
3,055 |
|
|
|
515 |
|
|
|
3,282 |
|
|
|
(7,235 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
490 |
|
|
|
606 |
|
|
|
1,594 |
|
|
|
1,769 |
|
Other (income) expense,
net |
|
(498 |
) |
|
|
(557 |
) |
|
|
(608 |
) |
|
|
2,314 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income
taxes and noncontrolling interest |
|
3,063 |
|
|
|
466 |
|
|
|
2,296 |
|
|
|
(11,318 |
) |
Income tax expense
(benefit) |
|
753 |
|
|
|
300 |
|
|
|
1,757 |
|
|
|
(3,267 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
2,310 |
|
|
|
166 |
|
|
|
539 |
|
|
|
(8,051 |
) |
Less: Net earnings
attributable to |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
noncontrolling interest, net of tax |
|
(80 |
) |
|
|
(72 |
) |
|
|
(223 |
) |
|
|
(147 |
) |
Net income (loss) attributable
to Twin Disc |
$ |
2,231 |
|
|
$ |
94 |
|
|
$ |
316 |
|
|
$ |
(8,198 |
) |
|
|
|
|
|
|
Earnings (loss) per share
data: |
|
|
|
|
|
Basic income (loss) per share attributable to Twin Disc common
shareholders |
$ |
0.17 |
|
|
$ |
0.01 |
|
|
$ |
0.02 |
|
|
$ |
(0.62 |
) |
Diluted income (loss) per share attributable to Twin Disc common
shareholders |
$ |
0.17 |
|
|
$ |
0.01 |
|
|
$ |
0.02 |
|
|
$ |
(0.62 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
13,397 |
|
|
|
13,269 |
|
|
|
13,339 |
|
|
|
13,240 |
|
Diluted |
|
13,457 |
|
|
|
13,295 |
|
|
|
13,373 |
|
|
|
13,240 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income
(loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
2,310 |
|
|
$ |
166 |
|
|
$ |
539 |
|
|
$ |
(8,051 |
) |
Benefit plan adjustments, net of taxes of $4, $177, $4, and $529,
respectively |
|
505 |
|
|
|
583 |
|
|
|
1,512 |
|
|
|
1,691 |
|
Foreign currency translation adjustment |
|
(2,680 |
) |
|
|
(3,008 |
) |
|
|
(6,359 |
) |
|
|
5,503 |
|
Unrealized gain on cash flow hedge, net of income taxes of $0,$60,
$0, and $115, respectively |
|
810 |
|
|
|
193 |
|
|
|
1,748 |
|
|
|
372 |
|
Comprehensive income (loss) |
|
945 |
|
|
|
(2,066 |
) |
|
|
(2,560 |
) |
|
|
(485 |
) |
Less: Comprehensive income (loss) attributable to noncontrolling
interest |
|
38 |
|
|
|
(34 |
) |
|
|
235 |
|
|
|
(133 |
) |
Comprehensive income (loss) attributable to Twin Disc |
$ |
983 |
|
|
$ |
(2,100 |
) |
|
$ |
(2,325 |
) |
|
$ |
(618 |
) |
RECONCILIATION OF CONSOLIDATED NET INCOME
(LOSS) TO EBITDA(In thousands; unaudited)
|
For the Quarter Ended |
|
For the Three Quarters Ended |
|
|
March 25,2022 |
|
March 26,2021 |
|
March 25,2022 |
|
March 26,2021 |
|
Net income (loss) attributable to Twin Disc |
$ |
2,231 |
|
$ |
94 |
|
$ |
316 |
|
$ |
(8,198 |
) |
Interest expense |
|
490 |
|
|
606 |
|
|
1,594 |
|
|
1,769 |
|
Income taxes |
|
753 |
|
|
300 |
|
|
1,757 |
|
|
(3,267 |
) |
Depreciation and amortization |
|
2,306 |
|
|
2,843 |
|
|
7,317 |
|
|
8,366 |
|
Earnings (loss) before
interest, taxes, depreciation and amortization |
$ |
5,780 |
|
$ |
3,843 |
|
$ |
10,984 |
|
$ |
(1,330 |
) |
CONDENSED CONSOLIDATED BALANCE SHEETS |
(In thousands; except share amounts, unaudited) |
|
|
|
|
March 25, |
|
|
June 30, |
|
|
2022 |
|
|
2021 |
|
ASSETS |
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
Cash |
|
12,825 |
|
|
$ |
12,340 |
|
Trade accounts receivable, net |
|
38,977 |
|
|
|
39,491 |
|
Inventories |
|
131,080 |
|
|
|
114,967 |
|
Assets held for sale |
|
3,082 |
|
|
|
9,539 |
|
Prepaid expenses |
|
6,984 |
|
|
|
5,704 |
|
Other |
|
8,447 |
|
|
|
9,926 |
|
|
|
|
Total current assets |
|
201,395 |
|
|
|
191,967 |
|
|
|
|
Property, plant and equipment,
net |
|
42,753 |
|
|
|
45,463 |
|
Right-of-use assets operating
leases |
|
13,692 |
|
|
|
14,736 |
|
Intangible assets, net |
|
13,944 |
|
|
|
17,480 |
|
Deferred income taxes |
|
2,258 |
|
|
|
2,511 |
|
Other assets |
|
3,682 |
|
|
|
3,256 |
|
|
|
|
TOTAL ASSETS |
$ |
277,724 |
|
|
$ |
275,413 |
|
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
|
Current maturities of long-term debt |
$ |
2,000 |
|
|
$ |
2,000 |
|
Accounts payable |
|
34,195 |
|
|
|
31,011 |
|
Accrued liabilities |
|
48,779 |
|
|
|
45,549 |
|
|
|
|
Total current liabilities |
|
84,974 |
|
|
|
78,560 |
|
|
|
|
Long-term debt |
|
32,069 |
|
|
|
30,085 |
|
Lease obligations |
|
11,543 |
|
|
|
12,887 |
|
Accrued retirement
benefits |
|
10,065 |
|
|
|
11,176 |
|
Deferred income taxes |
|
3,959 |
|
|
|
5,045 |
|
Other long-term
liabilities |
|
5,659 |
|
|
|
7,000 |
|
|
|
|
Total liabilities |
|
148,269 |
|
|
|
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 |
|
42,048 |
|
|
|
40,972 |
|
Retained earnings |
|
127,251 |
|
|
|
126,936 |
|
Accumulated other
comprehensive loss |
|
(25,724 |
) |
|
|
(22,615 |
) |
|
|
143,575 |
|
|
|
145,293 |
|
Less treasury stock, at cost (965,987 and 984,139 shares,
respectively) |
|
14,805 |
|
|
|
15,083 |
|
|
|
|
Total Twin Disc shareholders' equity |
|
128,770 |
|
|
|
130,210 |
|
|
|
|
Noncontrolling interest |
|
685 |
|
|
|
450 |
|
Total equity |
|
129,455 |
|
|
|
130,660 |
|
|
|
|
TOTAL LIABILITIES AND
EQUITY |
$ |
277,724 |
|
|
$ |
275,413 |
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In
thousands; unaudited) |
|
|
|
|
|
|
|
For the Three Quarters Ended |
|
March 25, 2022 |
|
|
March 26, 2021 |
|
|
|
|
|
|
|
CASH FLOWS FROM
OPERATING ACTIVITIES: |
|
|
|
|
|
Net income (loss) |
$ |
539 |
|
|
$ |
(8,051 |
) |
Adjustments to reconcile net income (loss) to net cash (used)
provided by operating activities, net of acquired assets: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
7,317 |
|
|
|
8,366 |
|
Gain on sale of assets |
|
(2,939 |
) |
|
|
- |
|
Restructuring expenses |
|
(487 |
) |
|
|
215 |
|
Provision for deferred income taxes |
|
(1,383 |
) |
|
|
(6,052 |
) |
Stock compensation expense and other non-cash charges, net |
|
2,642 |
|
|
|
1,934 |
|
Net change in operating assets and liabilities |
|
(12,912 |
) |
|
|
8,603 |
|
|
|
|
|
|
|
|
|
Net cash (used) provided by
operating activities |
|
(7,223 |
) |
|
|
5,015 |
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM
INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
Acquisition of fixed assets |
|
(2,371 |
) |
|
|
(3,851 |
) |
Proceeds from sale of fixed assets |
|
9,152 |
|
|
|
76 |
|
Proceeds on note receivable |
|
500 |
|
|
|
700 |
|
Other, net |
|
465 |
|
|
|
(18 |
) |
|
|
|
|
|
|
|
|
Net cash provided (used) by
investing activities |
|
7,746 |
|
|
|
(3,093 |
) |
|
|
|
|
|
|
|
|
CASH FLOWS FROM
FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
Borrowings under revolving loan agreement |
|
78,142 |
|
|
|
56,463 |
|
Repayments of revolver loans |
|
(73,192 |
) |
|
|
(58,497 |
) |
Repayments of other long-term debt |
|
(2,789 |
) |
|
|
(411 |
) |
Payments of withholding taxes on stock compensation |
|
(487 |
) |
|
|
(224 |
) |
|
|
|
|
|
|
|
|
Net cash provided (used) by
financing activities |
|
1,674 |
|
|
|
(2,669 |
) |
|
|
|
|
|
|
|
|
Effect of exchange rate
changes on cash |
|
(1,712 |
) |
|
|
1,653 |
|
|
|
|
|
|
|
|
|
Net change in cash |
|
485 |
|
|
|
906 |
|
|
|
|
|
|
|
|
|
Cash: |
|
|
|
|
|
|
|
Beginning of period |
|
12,340 |
|
|
|
10,688 |
|
|
|
|
|
|
|
|
|
End of period |
$ |
12,825 |
|
|
$ |
11,594 |
|
Contact: Jeffrey S. Knutson(262) 638-4242
Twin Disc (NASDAQ:TWIN)
Historical Stock Chart
From Jun 2024 to Jul 2024
Twin Disc (NASDAQ:TWIN)
Historical Stock Chart
From Jul 2023 to Jul 2024