Twin Disc, Inc. (NASDAQ: TWIN), today reported financial
results for the fiscal 2021 fourth quarter ended June 30, 2021.
Sales for the fiscal 2021 fourth quarter were
$66.2 million, compared to $59.4 million for the same period last
year, and $57.6 million for the fiscal 2021 third quarter. The
11.5% year-over-year increase in 2021 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. For the fiscal 2021 full year, sales were $218.6
million, compared to $246.8 million for fiscal 2020. The
year-over-year decline was primarily driven by the global economic
impact of the COVID-19 pandemic. Foreign currency exchange had a
$4.1 million favorable impact on fiscal 2021 fourth quarter sales
and an $11.6 million favorable impact on fiscal 2021 year-to-date
sales.
John H. Batten, Chief Executive Officer,
commented: “Solid fourth quarter sales growth and improving gross
profit is encouraging and reflects the significant actions we have
undertaken to expand our financial and operating performance.
Throughout the year, we focused on investing in our operations,
supporting new product development, modernizing our business, and
realigning our cost structure. Our Lufkin, Texas operation opened
during the year, which improved manufacturing efficiencies and
enhanced our position with new and existing industrial customers,
as we focus on growing this important segment of our business. We
leveraged our leading control systems and mechanical expertise to
develop new hybrid and electric products for marine and industrial
applications. During the fourth quarter, initial orders were
received from a marine customer and an industrial customer, and we
are excited by the long-term potential within these developing
markets. Finally, we continued to focus on strategies that
modernize our global facilities and realign our cost structure.
During the fourth quarter, we announced a restructuring action at
our Belgium operation, which combined with other restructuring
actions, will produce estimated annual savings of approximately
$2.0 million once completed in fiscal 2022.”
“Our six-month backlog at June 30, 2021, was
$70.3 million, compared to $71.4 million at March 26, 2021, and
$66.6 million at June 30, 2020. While our six-month backlog is down
slightly over the past three months, our total backlog during this
period is up 11% which we believe indicates strengthening
underlying trends across our global markets. We ended the year with
a strong backlog at our Veth Propulsion subsidiary, driven by
robust power control and thruster orders from North American and
European marine customers. In addition, we continue experiencing
improving global demand for our oil and gas transmission systems
and after-market components.”
“We believe Twin Disc is emerging from the
COVID-19 crisis better positioned to drive profitable growth and
increase market share, and we are optimistic a recovery is underway
across many of our global markets despite industry-wide supply
chain and labor constraints. On behalf of everyone at the Company,
I appreciate the support of our customers, employees, and
shareholders throughout the COVID-19 crisis,” concluded Mr.
Batten.
Gross profit percent for the fiscal 2021 fourth
quarter was 27.7%, compared to 23.3% in the fiscal 2020 fourth
quarter. The 440-basis point increase in gross profit margin
percentage for the fiscal 2021 fourth quarter compared to the
fiscal 2020 fourth 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 ($1.2 million). For the fiscal 2021 full
year, gross profit was 23.3%, compared to 22.6% for the fiscal 2020
full year.
For the fiscal 2021 fourth quarter, marketing,
engineering and administrative (ME&A) expenses increased $1.6
million to $16.7 million, compared to $15.1 million for the fiscal
2020 fourth quarter. The 10.8% increase in ME&A expenses in the
quarter was primarily due to the partial achievement of global
incentive metrics resulting in bonus expense ($2.6 million) and a
positive currency translation impact ($0.7 million). These
increases were partially offset by the impact of the ERC ($0.6
million) and ongoing focus on cost containment. For the fiscal 2021
full year, ME&A expenses decreased $7.5 million, or 11.8%, to
$55.7 million, compared to $63.2 million for the fiscal 2020 full
year. As a percent of revenues, for the fiscal 2021 full year,
ME&A expenses improved 10 basis points to 25.5%, compared to
25.6% for the fiscal 2020 full year.
Twin Disc recorded restructuring charges of $6.6
million in the fiscal 2021 fourth quarter, compared to
restructuring charges of $0.2 million in the same period last
fiscal year. Restructuring activities during the fiscal 2021 fourth
quarter included a $2.3 million provision for a previously
announced restructuring program at the Company’s Belgian operation,
as well as a $4.3 million impairment to write down the value of the
Company’s Racine, Wisconsin corporate office, which is currently
held for sale. For the fiscal 2021 full year, the Company recorded
restructuring charges of $7.4 million, compared to $5.1 million for
the fiscal 2020 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.
The effective tax rate for fiscal year 2021 was
-110.4% compared to 9.5% for fiscal year 2020. During the current
fiscal year, the Company received full forgiveness of its PPP loan
which resulted in an increase to the effective tax rate of 17.5%.
In the prior year the Company 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 fiscal 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 increasing the current rate by 12%. Due to
continued historical domestic losses and uncertain future domestic
earnings, the Company recognized a full domestic valuation
allowance reducing the effective tax rate by 158.6%.
Net loss attributable to Twin Disc for the
fiscal 2021 fourth quarter was $(12.7 million), or $(0.96) per
diluted share, compared to a net loss of $(1.8 million), or $(0.13)
per diluted share, for the fiscal 2020 fourth quarter. For the
fiscal 2021 full year, net loss attributable to Twin Disc was
$(20.9 million), or $(1.58) per diluted share, compared to net loss
of $(39.8 million), or $(3.03) per diluted share for the fiscal
2020 full year.
Earnings before interest, taxes, depreciation
and amortization (EBITDA)* was $4.9 million for the fiscal 2021
fourth quarter, compared to $1.3 million for the fiscal 2020 fourth
quarter. For the fiscal 2021 full year, EBITDA was $3.6 million
compared to EBITDA of $(30.2 million) for the fiscal 2020 full
year.
Jeffrey S. Knutson, Vice President – Finance,
Chief Financial Officer, Treasurer and Secretary stated, “We ended
fiscal 2021 with net debt of $19.7 million, representing the lowest
net debt level in three years, as a result of the successful
forgiveness of our PPP loan, strong operating cash flow, and our
strategic focus on strengthening our balance sheet. In addition, I
am pleased with the continued improvement in inventory levels, and
we believe we are well positioned to further reduce inventories as
fiscal 2022 progresses and many of our global markets recover.
After controlling investments throughout the COVID-19 crisis, we
are planning to increase capital expenditures during fiscal 2022
and expect to invest $10 million to $12 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 Friday, August 13, 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.
August 13, 2021, until midnight August 20, 2021. The number to hear
the teleconference replay is 844-512-2921. The access code for the
replay is 7124600.
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 LOSS(In thousands,
except per-share data; unaudited) |
|
Quarter Ended |
|
|
Year Ended |
|
|
June 30,2021 |
|
June 30,2020 |
|
|
June 30,2021 |
|
June 30,2020 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales |
$ |
66,204 |
|
$ |
59,376 |
|
|
$ |
218,581 |
|
$ |
246,838 |
|
Cost of goods sold |
|
47,889 |
|
|
45,564 |
|
|
|
167,724 |
|
|
191,130 |
|
Gross profit |
|
18,315 |
|
|
13,812 |
|
|
|
50,857 |
|
|
55,708 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing, engineering, and
administrative expenses |
|
16,750 |
|
|
15,111 |
|
|
|
55,750 |
|
|
63,218 |
|
Restructuring expenses |
|
6,600 |
|
|
237 |
|
|
|
7,377 |
|
|
5,138 |
|
Goodwill and other asset
impairment charge |
|
- |
|
|
- |
|
|
|
- |
|
|
27,603 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss from operations |
|
(5,035 |
) |
|
(1,536 |
) |
|
|
(12,270 |
) |
|
(40,251 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
(588 |
) |
|
(536 |
) |
|
|
(2,358 |
) |
|
(1,860 |
) |
Income from extinguishment of
loan |
|
8,200 |
|
|
- |
|
|
|
8,200 |
|
|
- |
|
Other (expense), net |
|
(1,097 |
) |
|
(11 |
) |
|
|
(3,411 |
) |
|
(1,629 |
) |
|
|
6,515 |
|
|
(547 |
) |
|
|
2,431 |
|
|
(3,489 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before
income taxes and noncontrolling interest |
|
1,480 |
|
|
(2,083 |
) |
|
|
(9,839 |
) |
|
(43,740 |
) |
Income tax expense
(benefit) |
|
14,127 |
|
|
(447 |
) |
|
|
10,859 |
|
|
(4,169 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
(12,647 |
) |
|
(1,636 |
) |
|
|
(20,698 |
) |
|
(39,571 |
) |
Less: Net earnings
attributable to |
|
|
|
|
|
|
|
|
|
|
|
|
|
noncontrolling interest, net
of tax |
|
(53 |
) |
|
(124 |
) |
|
|
(200 |
) |
|
(246 |
) |
Net loss attributable to Twin
Disc |
$ |
(12,700 |
) |
$ |
(1,760 |
) |
|
$ |
(20,898 |
) |
$ |
(39,817 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss per share data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic loss per share attributable to Twin Disc common
shareholders |
$ |
(0.96 |
) |
$ |
(0.13 |
) |
|
$ |
(1.58 |
) |
$ |
(3.03 |
) |
Diluted loss per share attributable to Twin Disc common
shareholders |
$ |
(0.96 |
) |
$ |
(0.13 |
) |
|
$ |
(1.58 |
) |
$ |
(3.03 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic shares outstanding |
|
13,270 |
|
|
13,175 |
|
|
|
13,247 |
|
|
13,153 |
|
Diluted shares
outstanding |
|
13,270 |
|
|
13,175 |
|
|
|
13,247 |
|
|
13,153 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss: |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
$ |
(12,647 |
) |
$ |
(1,636 |
) |
|
$ |
(20,698 |
) |
$ |
(39,571 |
) |
Foreign currency translation adjustment |
|
137 |
|
|
1,649 |
|
|
|
5,639 |
|
|
(966 |
) |
Benefit plan adjustments, net of income taxes of $108, ($1,358),
$112 and ($530), respectively |
|
1,600 |
|
|
(4,373 |
) |
|
|
3,292 |
|
|
(1,675 |
) |
Unrealized gain (loss) on hedges, net of income taxes of $0, ($7),
$0 and ($185), respectively |
|
388 |
|
|
(16 |
) |
|
|
760 |
|
|
(595 |
) |
Comprehensive loss |
|
(10,522 |
) |
|
(4,376 |
) |
|
|
(11,007 |
) |
|
(42,807 |
) |
Less: Comprehensive (loss) income attributable to
noncontrolling interest |
|
32 |
|
|
(134 |
) |
|
|
(101 |
) |
|
(266 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
attributable to Twin Disc |
$ |
(10,490 |
) |
|
(4,510 |
) |
|
$ |
(11,108 |
) |
$ |
(43,073 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
RECONCILIATION OF CONSOLIDATED NET LOSS TO
EBITDA(In thousands; unaudited) |
|
Quarter Ended |
Year Ended |
|
June 30,2021(1) |
June 30,2020 |
June 30,2021(2) |
June 30,2020(3) |
Net loss attributable to Twin Disc |
$ |
(12,700 |
) |
$ |
(1,760 |
) |
$ |
(20,898 |
) |
$ |
(39,817 |
) |
Interest expense |
|
588 |
|
|
536 |
|
|
2,358 |
|
|
1,860 |
|
Income taxes |
|
14,127 |
|
|
(447 |
) |
|
10,859 |
|
|
(4,169 |
) |
Depreciation and amortization |
|
2,877 |
|
|
3,008 |
|
|
11,243 |
|
|
11,925 |
|
Earnings (loss) before
interest, taxes, depreciation and amortization |
$ |
4,892 |
|
$ |
1,337 |
|
$ |
3,562 |
|
$ |
(30,201 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes restructuring charges of $6.6 million, and an $8.2
million benefit from the PPP forgiveness (2) Includes restructuring
charges of $7.4 million, and an $8.2 million benefit from the PPP
forgiveness (3) Includes restructuring charges of $5.1 million, and
a $27.6 million impairment charge recorded in the third quarter of
fiscal 2020.
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS |
(In thousands; unaudited) |
|
|
|
|
June 30, |
June 30, |
|
|
2021 |
|
|
2020 |
|
ASSETS |
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
Cash |
$ |
12,340 |
|
$ |
10,688 |
|
Trade accounts receivable, net |
|
39.491 |
|
|
30,682 |
|
Inventories |
|
114,967 |
|
|
120,607 |
|
Prepaid expenses |
|
5,704 |
|
|
5,269 |
|
Assets held for sale |
|
9,539 |
|
|
- |
|
Other |
|
9,926 |
|
|
6,739 |
|
Total current assets |
|
191,967 |
|
|
173,985 |
|
|
|
|
|
|
|
|
Property, plant and equipment,
net |
|
45,463 |
|
|
58,284 |
|
Right-of-use assets operating
leases |
|
14,736 |
|
|
14,448 |
|
Intangible assets, net |
|
17,480 |
|
|
18,973 |
|
Deferred income taxes |
|
2,511 |
|
|
24,445 |
|
Other assets |
|
3,256 |
|
|
3,992 |
|
|
|
|
|
|
|
|
TOTAL ASSETS |
$ |
275,413 |
|
$ |
294,127 |
|
|
|
|
|
|
|
|
LIABILITIES AND
EQUITY |
|
|
|
|
|
|
Current liabilities: |
|
|
|
|
|
|
Current maturities of long-term debt |
$ |
2,000 |
|
$ |
4,691 |
|
Accounts payable |
|
31,011 |
|
|
25,663 |
|
Accrued liabilities |
|
45,549 |
|
|
36,380 |
|
|
|
|
|
|
|
|
Total current liabilities |
|
78,560 |
|
|
66,734 |
|
|
|
|
|
|
|
|
Long-term debt |
|
30,085 |
|
|
37,896 |
|
Lease obligations |
|
12,887 |
|
|
12,738 |
|
Accrued retirement
benefits |
|
11,176 |
|
|
27,938 |
|
Deferred income taxes |
|
5,045 |
|
|
5,501 |
|
Other long-term
liabilities |
|
7,000 |
|
|
3,362 |
|
|
|
|
|
|
|
|
Total liabilities |
|
144,753 |
|
|
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 |
|
40,972 |
|
|
42,756 |
|
Retained earnings |
|
135,757 |
|
|
156,655 |
|
Accumulated other
comprehensive loss |
|
(31,436 |
) |
|
(41,226 |
) |
|
|
145,293 |
|
|
158,185 |
|
|
|
|
|
|
|
|
Less treasury stock, at cost (984,139 and 1,226,809 shares,
respectively) |
|
15,083 |
|
|
18,796 |
|
|
|
|
|
|
|
|
Total Twin Disc shareholders' equity |
|
130,210 |
|
|
139,389 |
|
|
|
|
|
|
|
|
Noncontrolling interest |
|
450 |
|
|
569 |
|
Total equity |
|
130,660 |
|
|
139,958 |
|
|
|
|
|
|
|
|
TOTAL LIABILITIES AND
EQUITY |
$ |
275,413 |
|
$ |
294,127 |
|
|
|
|
|
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In
thousands, unaudited) |
|
For the Year Ended |
|
June 30,2021 |
June 30,2020 |
|
|
|
CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
Net loss |
$ |
(20,698 |
) |
$ |
(39,571 |
) |
Adjustments to reconcile net loss to net cash |
|
|
|
|
|
|
provided by operating activities: |
|
|
|
|
|
|
Depreciation and amortization |
|
11,243 |
|
|
11,925 |
|
Gain on extinguishment of loan |
|
(8,200 |
) |
|
- |
|
Restructuring of operations |
|
6,619 |
|
|
2,269 |
|
Stock compensation expense |
|
2,154 |
|
|
1,158 |
|
Provision for deferred income taxes |
|
8,834 |
|
|
(8,072 |
) |
Goodwill and other impairment charge |
|
- |
|
|
27,603 |
|
Other, net |
|
798 |
|
|
258 |
|
Net change in operating assets and liabilities |
|
5,778 |
|
|
13,548 |
|
Net cash provided by operating
activities |
|
6,528 |
|
|
9,118 |
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES, NET OF ACQUIRED BUSINESS: |
|
|
|
|
|
|
Capital expenditures |
|
(4,464 |
) |
|
(10,699 |
) |
Proceeds on note receivable |
|
1,500 |
|
|
500 |
|
Proceeds from sale of plant assets |
|
102 |
|
|
137 |
|
Proceeds from life insurance policy |
|
253 |
|
|
102 |
|
Other, net |
|
(133 |
) |
|
(159 |
) |
Net cash used by investing
activities |
|
(2,742 |
) |
|
(10,119 |
) |
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES: |
|
|
|
|
|
|
Borrowings under long-term debt agreement |
|
- |
|
|
8,200 |
|
Borrowings under revolving loan agreement |
|
76,335 |
|
|
99,262 |
|
Repayments under revolving loan agreement |
|
(78,370 |
) |
|
(105,065 |
) |
Repayments of long-term borrowings |
|
(1,838 |
) |
|
(2,241 |
) |
Payments of withholding taxes on stock compensation |
|
(224 |
) |
|
(913 |
) |
Dividends paid to noncontrolling interest |
|
(220 |
) |
|
(298 |
) |
Net cash used provided by
financing activities |
|
(4,317 |
) |
|
(1,055 |
) |
|
|
|
|
|
|
|
Effect of exchange rate changes
on cash |
|
2,183 |
|
|
382 |
|
|
|
|
|
|
|
|
Net change in cash |
|
1,652 |
|
|
(1,674 |
) |
|
|
|
|
|
|
|
Cash: |
|
|
|
|
|
|
Beginning of year |
|
10,688 |
|
|
12,362 |
|
|
|
|
|
|
|
|
End of year |
$ |
12,340 |
|
$ |
10,688 |
|
|
|
|
|
|
|
|
Contact: Jeffrey S. Knutson (262) 638-4242
Twin Disc (NASDAQ:TWIN)
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From Jun 2024 to Jul 2024
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From Jul 2023 to Jul 2024