Twin Disc, Inc. (NASDAQ: TWIN), today reported
financial results for the fiscal 2021 third quarter ended March 26,
2021.
Sales for the fiscal 2021 third quarter
decreased to $57.6 million, from $68.6 million for the same period
last year. The 16.0% decrease in 2021 third quarter sales was
primarily due to continued softness in the Company’s oil and gas
markets along with weaker demand for industrial products compared
to the same period the prior fiscal year. Year-to-date, sales were
$152.4 million, compared to $187.5 million for the fiscal 2020 nine
months. Foreign currency exchange had a $3.9 million favorable
impact on fiscal 2021 third quarter sales and a $7.5 million
favorable impact on fiscal 2021 year-to-date sales.
John H. Batten, Chief Executive Officer,
commented: “I am encouraged by the progress we are making
navigating one of the most challenging cycles in Twin Disc’s
103-year history, and we experienced a strong improvement in
profitability during the quarter. Throughout the COVID-19 pandemic
we have focused on realigning our cost structure, improving our
balance sheet, investing in new products and technologies, and
opening our Lufkin, TX facility, while supporting our customers and
associates. As trends within our markets improve, we are well
positioned to significantly increase sales and profitability, and I
am excited by the long-term opportunities we have across our
business.”
“Our six-month backlog at March 26, 2021 was
$71.4 million, compared to $66.6 million at June 30, 2020, and
$74.9 million at December 25, 2020. The sequential decline is
partially due to the seasonal nature of our six-month backlog,
along with the impacts of foreign currency exchange rates. We have
seen a recent uptick in aftermarket orders across many of our
global markets, which has historically been a positive leading
indicator for future capital spending by our customers. In
addition, we believe we are well positioned to capitalize on
improving demand trends driven primarily by re-opening efforts from
the pandemic, the benefits of government stimulus programs, and an
improving repair and replacement cycle, including in the North
American fracking industry,” concluded Mr. Batten.
Gross profit percent for the fiscal 2021 third
quarter was 24.2%, compared to 24.1% in the fiscal 2020 third
quarter. The Company received a $1.2 million benefit to gross
profit, as a result of the employee retention credit made available
under the American Rescue Plan Act. Gross profit percent, adjusted
for this benefit was 22.1%. While a sequential improvement, this
reflects the continuation of a less profitable mix of revenues
associated with reduced new rig construction and aftermarket demand
in the North American fracking market and lower overall sales
resulting from the economic uncertainty brought on by the COVID-19
pandemic. Year-to-date, gross profit percent was 21.4% compared to
22.3% for the fiscal 2020 nine-month period.
For the fiscal 2021 third quarter, marketing,
engineering and administrative (ME&A) expenses decreased $2.2
million to $13.2 million. The 14.0% decrease in ME&A expenses
in the quarter was primarily due to reduced domestic wages and
benefits ($0.6 million), lower marketing expenses ($0.4 million),
the impact of the employee retention credit ($0.6 million), reduced
amortization expense ($0.3 million) and general cost containment
actions. As a percent of revenues, ME&A expenses were 22.9% for
the fiscal 2021 third quarter, compared to 22.4% for the same
period last fiscal year. Year-to-date, ME&A expenses were $39.0
million, compared to $48.1 million for the fiscal 2020 nine-month
period. As a percent of revenues, year-to-date ME&A expenses
were 25.6%, compared to 25.7% for the same period last fiscal
year.
Twin Disc recorded restructuring charges of $0.3
million in the fiscal 2021 third quarter, compared to restructuring
charges of $0.5 million in the same period last fiscal year.
Restructuring activities during the fiscal 2021 third quarter
related primarily to ongoing cost reduction and productivity
actions at the Company’s European operations. Year-to-date, the
Company recorded restructuring charges of $0.8 million, compared to
$4.9 million for the same period last fiscal year.
The Company recorded a $27.6 million non-cash
goodwill and long-lived asset impairment charge in the fiscal 2020
third quarter related to the unprecedented uncertainty in the
Company’s markets due to the global COVID-19 pandemic, along with
an historic decline in oil prices impacting the global energy
market.
Other income of $0.6 million in the quarter, and
other expenses of $2.3 million for the nine months of fiscal 2021
were primarily attributable to changes related to Euro denominated
liabilities.
The effective tax rate for the first three
quarters of fiscal 2021 was 28.9% compared to just 8.9% in the
comparable period of the prior fiscal year. In the prior year the
Company’s management determined that the carrying value of certain
goodwill and intangibles exceeded the fair value and a $27.6
million impairment loss was calculated which resulted in a decrease
to the prior year effective tax rate of 13.8%. During the current
fiscal year, the Company was able to take advantage of the newly
enacted high tax exception regulations. The Company filed its
federal tax return utilizing this exception and had no GILTI
inclusion, thus increasing the current rate.
Net income attributable to Twin Disc for the
fiscal 2021 third quarter was $0.1 million, or $0.01 per diluted
share, compared to net loss attributable to Twin Disc of $(25.2
million), or ($1.92) per diluted share, for the fiscal 2020 third
quarter. Year-to-date, net loss attributable to Twin Disc was $(8.2
million), or $(0.62) per diluted share, compared to net loss
attributable to Twin Disc of $(38.1 million), or ($2.89) per
diluted share, for the fiscal 2020 nine months.
Earnings before interest, taxes, depreciation
and amortization (EBITDA)* were $3.8 million for the fiscal 2021
third quarter, compared to a loss of $(24.9 million) for the fiscal
2020 third quarter. For the fiscal 2021 nine months, EBITDA was a
loss of $(1.3 million), compared to a loss of $(31.5 million) for
the fiscal 2020 comparable period.
Jeffrey S. Knutson, Vice President – Finance,
Chief Financial Officer, Treasurer and Secretary stated, “We
continue to focus on controlling expenses and generating positive
operating cash flow, which have significantly strengthened our
balance sheet. In fact, including the $8.2 million for our PPP
loan, which we expect to be fully forgiven in the coming quarters,
our net debt balance was $29.6 million, the lowest level since the
quarter following our acquisition of Veth Propulsion in 2018. We
continue to manage spending, strengthen our balance sheet, and
invest in our business. We currently expect to invest $5 million to
$7 million in capital expenditures during fiscal 2021.”
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 30, 2021. To participate in the conference call,
please dial 800-263-0877 five to ten minutes before the call is
scheduled to begin. A replay will be available from 2:00 p.m. April
30, 2021 until midnight May 7, 2021. The number to hear the
teleconference replay is 844-512-2921. The access code for the
replay is 9985307.
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 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 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 (LOSS) INCOME(In
thousands, except per-share data; unaudited) |
|
|
For the Quarter Ended |
|
For the Three QuartersEnded |
|
March 26,2021 |
March 27,2020 |
|
March 26,2021 |
March 27,2020 |
Net sales |
$ |
57,640 |
|
|
$ |
68,636 |
|
|
$ |
152,377 |
|
|
$ |
187,462 |
|
Cost of goods sold |
|
43,678 |
|
|
|
52,087 |
|
|
|
119,835 |
|
|
|
145,566 |
|
Gross profit |
|
13,962 |
|
|
|
16,549 |
|
|
|
32,542 |
|
|
|
41,896 |
|
|
|
|
|
|
|
Marketing, engineering and
administrative expenses |
|
13,196 |
|
|
|
15,349 |
|
|
|
39,000 |
|
|
|
48,106 |
|
Restructuring expenses |
|
251 |
|
|
|
532 |
|
|
|
777 |
|
|
|
4,902 |
|
Goodwill and other impairment
charge |
|
- |
|
|
|
27,603 |
|
|
|
- |
|
|
|
27,603 |
|
Income (loss) from
operations |
|
515 |
|
|
|
(26,935 |
) |
|
|
(7,235 |
) |
|
|
(38,715 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
606 |
|
|
|
488 |
|
|
|
1,769 |
|
|
|
1,324 |
|
Other expense (income), net |
|
(557 |
) |
|
|
898 |
|
|
|
2,314 |
|
|
|
1,618 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes
and noncontrolling interest |
|
466 |
|
|
|
(28,321 |
) |
|
|
(11,318 |
) |
|
|
(41,657 |
) |
Income tax expense (benefit) |
|
300 |
|
|
|
(3,145 |
) |
|
|
(3,267 |
) |
|
|
(3,722 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
166 |
|
|
|
(25,176 |
) |
|
|
(8,051 |
) |
|
|
(37,935 |
) |
Less: Net earnings attributable
to noncontrolling interest, net of tax |
|
(72 |
) |
|
|
(54 |
) |
|
|
(147 |
) |
|
|
(122 |
) |
Net income (loss) attributable to
Twin Disc |
$ |
94 |
|
|
$ |
(25,230 |
) |
|
$ |
(8,198 |
) |
|
$ |
(38,057 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per share
data: |
|
|
|
|
|
Basic income (loss)
per share attributable to Twin Disc common shareholders |
$ |
0.01 |
|
|
$ |
(1.92 |
) |
|
$ |
(0.62 |
) |
|
$ |
(2.89 |
) |
Diluted income
(loss) per share attributable to Twin Disc common
shareholders |
$ |
0.01 |
|
|
$ |
(1.92 |
) |
|
$ |
(0.62 |
) |
|
$ |
(2.89 |
) |
|
|
|
|
|
|
Weighted average shares
outstanding data: |
|
|
|
|
|
Basic shares
outstanding |
|
13,269 |
|
|
|
13,175 |
|
|
|
13,240 |
|
|
|
13,147 |
|
Diluted shares
outstanding |
|
13,295 |
|
|
|
13,175 |
|
|
|
13,240 |
|
|
|
13,147 |
|
|
|
|
|
|
|
Comprehensive loss |
|
|
|
|
|
Net income
(loss) |
$ |
166 |
|
|
$ |
(25,176 |
) |
|
$ |
(8,051 |
) |
|
$ |
(37,935 |
) |
Benefit plan adjustments, net of income taxes of $177, $490, $529,
and $828, respectively |
|
583 |
|
|
|
1,593 |
|
|
|
1,691 |
|
|
|
2,698 |
|
Foreign currency
translation adjustment |
|
(3,008 |
) |
|
|
(1,266 |
) |
|
|
5,503 |
|
|
|
(2,615 |
) |
Unrealized gain (loss) on cash
flow hedge, net of income taxes of $60, $178, $115, and $177,
respectively |
|
193 |
|
|
|
(582 |
) |
|
|
372 |
|
|
|
(579 |
) |
Comprehensive
loss |
|
(2,066 |
) |
|
|
(25,431 |
) |
|
|
(485 |
) |
|
|
(38,431 |
) |
Less: Comprehensive
income attributable to noncontrolling interest |
|
(34 |
) |
|
|
(46 |
) |
|
|
(133 |
) |
|
|
(132 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss attributable to Twin Disc |
$ |
(2,100 |
) |
|
$ |
(25,477 |
) |
|
$ |
(618 |
) |
|
$ |
(38,563 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF CONSOLIDATED NET INCOME (LOSS) TO
EBITDA(In thousands; unaudited) |
|
For the Quarter Ended |
For the Three Quarters Ended |
|
March 26,2021 |
March 27,2020 |
March 26,2021 |
March 27,2020 |
Net income (loss) attributable to Twin Disc |
$ |
94 |
|
$ |
(25,230 |
) |
|
$ |
(8,198 |
) |
|
$ |
(38,057 |
) |
Interest
expense |
|
606 |
|
|
488 |
|
|
|
1,769 |
|
|
|
1,324 |
|
Income taxes |
|
300 |
|
|
(3,145 |
) |
|
|
(3,267 |
) |
|
|
(3,722 |
) |
Depreciation and
amortization |
|
2,843 |
|
|
2,991 |
|
|
|
8,366 |
|
|
|
8,917 |
|
Earnings before interest,
taxes, depreciation and amortization |
$ |
3,843 |
|
$ |
(24,896 |
) |
|
$ |
(1,330 |
) |
|
$ |
(31,538 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS |
(In thousands; except share amounts, unaudited) |
|
|
|
|
March 26, |
June 30, |
|
|
2021 |
|
|
|
2020 |
|
ASSETS |
|
|
Current assets: |
|
|
Cash |
$ |
11,594 |
|
|
$ |
10,688 |
|
Trade accounts
receivable, net |
|
31,309 |
|
|
|
30,682 |
|
Inventories |
|
116,693 |
|
|
|
120,607 |
|
Prepaid
expenses |
|
5,478 |
|
|
|
5,269 |
|
Other |
|
7,781 |
|
|
|
6,739 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
current assets |
|
172,855 |
|
|
|
173,985 |
|
|
|
|
Property, plant and equipment,
net |
|
75,607 |
|
|
|
72,732 |
|
Intangible assets, net |
|
17,420 |
|
|
|
18,973 |
|
Deferred income taxes |
|
29,261 |
|
|
|
24,445 |
|
Other assets |
|
3,340 |
|
|
|
3,992 |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL ASSETS |
$ |
298,483 |
|
|
$ |
294,127 |
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
Current liabilities: |
|
|
Current maturities
of long-term debt |
$ |
2,000 |
|
|
$ |
4,691 |
|
Accounts
payable |
|
25,756 |
|
|
|
25,663 |
|
Accrued
liabilities |
|
41,123 |
|
|
|
36,380 |
|
|
|
|
|
|
|
Total
current liabilities |
|
68,879 |
|
|
|
66,734 |
|
|
|
|
Long-term debt |
|
39,226 |
|
|
|
37,896 |
|
Lease obligations |
|
17,352 |
|
|
|
13,495 |
|
Accrued retirement benefits |
|
24,977 |
|
|
|
27,938 |
|
Deferred income taxes |
|
5,217 |
|
|
|
5,501 |
|
Other long-term liabilities |
|
1,979 |
|
|
|
2,605 |
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities |
|
157,630 |
|
|
|
154,169 |
|
|
|
|
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 |
|
40,446 |
|
|
|
42,756 |
|
Retained earnings |
|
148,457 |
|
|
|
156,655 |
|
Accumulated other comprehensive
loss |
|
(33,646 |
) |
|
|
(41,226 |
) |
|
|
155,257 |
|
|
|
158,185 |
|
Less treasury stock, at
cost (985,686 and
1,226,809 and shares, respectively) |
|
15,106 |
|
|
|
8,796 |
|
|
|
|
|
|
|
|
|
|
|
|
Total Twin Disc shareholders'
equity |
|
140,151 |
|
|
|
139,389 |
|
|
|
|
|
|
|
Noncontrolling interest |
|
702 |
|
|
|
569 |
|
Total equity |
|
140,853 |
|
|
|
139,958 |
|
|
|
|
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND EQUITY |
$ |
298,483 |
|
|
$ |
294,127 |
|
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In
thousands, unaudited) |
|
For the Three Quarters Ended |
|
March 26,2021 |
March 27,2020 |
|
|
|
CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
Net loss |
$ |
(8,051 |
) |
|
$ |
(37,935 |
) |
Adjustments to reconcile net loss to net cash provided
by operating activities, net of acquired assets: |
|
|
Depreciation and amortization |
|
8,366 |
|
|
|
8,917 |
|
Restructuring expenses |
|
215 |
|
|
|
2,556 |
|
Goodwill and other impairment charge |
|
- |
|
|
|
27,603 |
|
Provision for deferred income taxes |
|
(6,052 |
) |
|
|
(6,225 |
) |
Stock compensation expense and other non-cash changes, net |
|
1,934 |
|
|
|
859 |
|
Net change in operating assets and liabilities |
|
8,603 |
|
|
|
9,556 |
|
Net cash provided by operating
activities |
|
5,015 |
|
|
|
5,331 |
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES: |
|
|
Acquisitions of fixed assets |
|
(3,851 |
) |
|
|
(9,155 |
) |
Proceeds from sale of fixed assets |
|
76 |
|
|
|
109 |
|
Proceeds from sale on note receivable |
|
700 |
|
|
|
- |
|
Other, net |
|
(18 |
) |
|
|
(27 |
) |
Net cash used by investing
activities |
|
(3,093 |
) |
|
|
(9,073 |
) |
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES: |
|
|
Borrowings under revolving loan arrangement |
|
56,463 |
|
|
|
78,597 |
|
Repayments of revolver loans |
|
(58,497 |
) |
|
|
(76,805 |
) |
Repayments of long-term debt |
|
(411 |
) |
|
|
(1,164 |
) |
Payments of withholding taxes on stock compensation |
|
(224 |
) |
|
|
(913 |
) |
Dividends paid to noncontrolling interest |
|
- |
|
|
|
(127 |
) |
Net cash used by financing
activities |
|
(2,669 |
) |
|
|
(412 |
) |
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes
on cash |
|
1,653 |
|
|
|
226 |
|
|
|
|
|
|
|
Net change in cash |
|
906 |
|
|
|
(3,928 |
) |
|
|
|
Cash: |
|
|
|
|
|
Beginning of period |
|
10,688 |
|
|
|
12,362 |
|
|
|
|
|
|
|
End of period |
$ |
11,594 |
|
|
$ |
8,434 |
|
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