Twin Disc, Inc. (NASDAQ: TWIN), today reported
results for the fiscal 2024 third quarter ended March 29, 2024.
Fiscal Third Quarter 2024 Highlights
- Sales increased 50 basis points year-over-year to $74.2
million
- Gross margin of 28.2%, expanded 210 basis points on a
year-over-year basis
- Net income attributable to Twin Disc was $3.8 million and
EBITDA* of $7.0 million
- Robust operating cash flow year to date of $22.3 million
compared to $6.9 million in the year-ago period
- Free cash flow* year to date of $14.7 million compared to
breakeven in the year-ago period
- Solid six-month backlog of $130.5 million bolstered by healthy
ongoing demand
CEO Perspective
“We continued our trend of solid performance in the third
quarter as we captured healthy end market demand in an evolving
environment. Through our focus on operational discipline and
working capital management, we delivered margin expansion, strong
EBITDA generation, and impressive free cash generation despite
lingering macroeconomic headwinds. Critically, these results
highlight the impact of improvements we have made throughout our
business in recent years, which we expect to serve as a tailwind
well into the future,” commented John H. Batten, President and
Chief Executive Officer of Twin Disc. “We are also pleased to have
announced an agreement to acquire Katsa Oy earlier in the quarter,
which will expand our global footprint and broaden our offerings
within the industrial, marine and hybrid/electrification space.
With our strong balance sheet and flexible financial profile, we
will continue to explore similar opportunities to drive sustainable
growth for Twin Disc while enabling long-term value creation for
our stakeholders.”
Third Quarter Results
Sales for the fiscal 2024 third quarter increased 50 basis
points year-over-year to $74.2 million, driven by continued demand
for the Company’s Marine and Propulsion Systems market and
favorable product mix. The Company saw total sales increase in
Europe, decrease in North America, and remain flat in
Asia-Pacific.
Sales by product group:
Product Group(Thousands of $): |
|
Q3 FY24 Sales |
|
|
Q3 FY23 Sales |
|
|
Change (%) |
|
Marine and Propulsion Systems |
$ |
45,244 |
|
|
$ |
43,854 |
|
|
|
3.20 |
% |
|
Land-Based Transmissions |
|
19,089 |
|
|
|
19,574 |
|
|
|
-2.50 |
% |
|
Industrial |
|
6,232 |
|
|
|
7,303 |
|
|
|
-14.70 |
% |
|
Other |
|
3,596 |
|
|
|
3,041 |
|
|
|
18.30 |
% |
|
Total |
$ |
74,161 |
|
|
$ |
73,772 |
|
|
|
0.50 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit increased 8.7% to $20.9 million compared to $19.3
million for the third fiscal quarter of 2023. Third quarter gross
margin increased approximately 210 basis points sequentially to
28.2%. This improvement reflects the benefit of prior pricing
actions, continued easing of supply chain headwinds, a favorable
product mix and successfully executing our operational
playbook.
Marketing, engineering and administrative (ME&A) expense
increased by $2.6 million, or 17.6%, to $17.2 million, compared to
$14.6 million in the prior year quarter. The increased ME&A
expense was primarily driven by the investment in resources to
drive our hybrid electric strategy, the impact of inflation and
currency translation.
Net income attributable to Twin Disc for the quarter was $3.8
million, or $0.27 per diluted share, compared to net income
attributable to Twin Disc of $3.3 million, or $0.24 per share, for
the third fiscal quarter of 2023. The year-over-year increase was
driven by favorable operating results.
Earnings before interest, taxes, depreciation, and amortization
(EBITDA) remained strong at $7.0 million in the third quarter,
compared to $7.0 million in the third fiscal quarter of 2023.
On a consolidated basis, the backlog of orders to be shipped
over the next six months is approximately $130.5 million, compared
to $125.2 million at the end of the second fiscal quarter of 2024.
As a percentage of six-month backlog, inventory decreased from
105.3% at the end of the second quarter to 99.5% at the end of the
third fiscal quarter of 2024. Compared to the third fiscal quarter
of 2023, cash increased 70.0% to $23.8 million, total debt
decreased 45.5% to $17.0 million and net debt* decreased $24.1
million to $(6.8) million. The improvement was primarily
attributable to net payoff of long-term debt as a result of our
strong cash from operations.
CFO PerspectiveJeffrey S. Knutson, Vice
President of Finance, Chief Financial Officer, Treasurer, and
Secretary stated, “Our solid results, underscored by profitable
growth and healthy free cash flow, have continued to strengthen our
balance sheet. We are seeing ongoing improvements in backlog, and
believe there is even more runway for enhanced cash generation as
we target additional inventory reductions in the fourth quarter. As
we near the end of the fiscal year, we remain well-positioned to
keep advancing our capital allocation priorities while making
progress towards our strategic and financial goals.”
Discussion of ResultsTwin Disc will host a
conference call to discuss these results and to answer questions at
11:00 a.m. Eastern time on April 30, 2024. The live audio webcast
will be available on Twin Disc’s website at
https://ir.twindisc.com. To participate in the conference call,
please dial (800) 715-9871 approximately ten minutes before the
call is scheduled to begin. A replay of the webcast will be
available at https://ir.twindisc.com shortly after the call until
April 29, 2025.
About Twin DiscTwin 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 words “anticipates,” “believes,”
“intends,” “estimates,” and “expects,” or similar anticipatory
expressions, usually identify forward-looking statements. The
Company intends that such forward-looking statements qualify for
the safe harbors from liability established by the Private
Securities Litigation Reform Act of 1995. All forward-looking
statements are based on current expectations, and are subject to
certain risks and uncertainties that could cause actual results or
outcomes to differ materially from current expectations. Such risks
and uncertainties include the impact of general economic conditions
and the cyclical nature of many of the Company’s product markets;
foreign currency risks and other risks associated with the
Company’s international sales and operations; the ability of the
Company to successfully implement price increases to offset
increasing commodity costs; the ability of the Company to generate
sufficient cash to pay its indebtedness as it becomes due; and the
possibility of unforeseen tax consequences and the impact of tax
reform in the U.S. or other jurisdictions. These and other risks
are described under the caption “Risk Factors” in Item 1A of the
Company’s most recent Form 10-K filed with the Securities and
Exchange Commission, as supplemented in subsequent periodic reports
filed with the Securities and Exchange Commission. Accordingly, 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. The Company assumes no
obligation, and disclaims any obligation, to publicly update or
revise any forward-looking statements to reflect subsequent events,
new information, or otherwise.
*Non-GAAP Financial InformationFinancial
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.
DefinitionsEarnings before interest, taxes,
depreciation and amortization (EBITDA) is calculated as net
earnings or loss excluding interest expense, the provision or
benefit for income taxes, depreciation and amortization
expenses.
Net debt is calculated as total debt less cash.
Free cash flow is calculated as net cash provided (used) by
operating activities less acquisition of fixed assets.
Investors: RiveronTwinDiscIR@riveron.com
Source: Twin Disc, Incorporated
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
AND COMPREHENSIVE (In thousands, except
per-share data; unaudited) |
|
|
|
|
|
For the Quarter Ended |
|
|
|
For the Three Quarters Ended |
|
|
|
|
|
|
|
|
As Adjusted |
|
|
|
|
|
|
|
As Adjusted |
|
|
|
|
March 29, 2024 |
|
|
|
March 31, 2023 |
|
|
|
March 29, 2024 |
|
|
|
March 31, 2023 |
|
|
Net sales |
$ |
74,161 |
|
|
$ |
73,772 |
|
|
$ |
210,709 |
|
|
$ |
193,036 |
|
|
Cost of goods sold |
|
53,221 |
|
|
|
54,507 |
|
|
|
149,377 |
|
|
|
143,451 |
|
|
Cost of goods sold - Sale of boat management system product line
and related inventory |
|
- |
|
|
|
- |
|
|
|
3,099 |
|
|
|
- |
|
|
Gross profit |
|
20,940 |
|
|
|
19,265 |
|
|
|
58,233 |
|
|
|
49,585 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing, engineering, and administrative expenses |
|
17,199 |
|
|
|
14,626 |
|
|
|
51,268 |
|
|
|
45,688 |
|
|
Restructuring expenses |
|
139 |
|
|
|
33 |
|
|
|
207 |
|
|
|
208 |
|
|
Other operating income |
|
- |
|
|
|
1 |
|
|
|
- |
|
|
|
(4,149 |
) |
|
Income from operations |
|
3,602 |
|
|
|
4,605 |
|
|
|
6,758 |
|
|
|
7,838 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense (income): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
263 |
|
|
|
522 |
|
|
|
1,049 |
|
|
|
1,682 |
|
|
Other expense (income), net |
|
(959 |
) |
|
|
178 |
|
|
|
(649 |
) |
|
|
13 |
|
|
|
|
(696 |
) |
|
|
700 |
|
|
|
400 |
|
|
|
1,695 |
|
|
Income before income taxes and noncontrolling interest |
|
4,298 |
|
|
|
3,905 |
|
|
|
6,358 |
|
|
|
6,143 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
398 |
|
|
|
548 |
|
|
|
2,606 |
|
|
|
2,350 |
|
|
Net income |
|
3,900 |
|
|
|
3,357 |
|
|
|
3,752 |
|
|
|
3,793 |
|
|
Less: Net earnings attributable to noncontrolling interest, net of
tax |
|
(78 |
) |
|
|
(76 |
) |
|
|
(173 |
) |
|
|
(188 |
) |
|
Net income attributable to Twin Disc |
$ |
3,822 |
|
|
$ |
3,281 |
|
|
$ |
3,579 |
|
|
$ |
3,605 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends per share |
$ |
0.04 |
|
|
$ |
- |
|
|
$ |
0.08 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income per share data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic income per share attributable to Twin Disc common
shareholders |
$ |
0.28 |
|
|
$ |
0.24 |
|
|
$ |
0.26 |
|
|
$ |
0.27 |
|
|
Diluted income per share attributable to Twin Disc common
shareholders |
$ |
0.27 |
|
|
$ |
0.24 |
|
|
$ |
0.26 |
|
|
$ |
0.26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares outstanding data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic shares outstanding |
|
13,742 |
|
|
|
13,504 |
|
|
|
13,663 |
|
|
|
13,455 |
|
|
Diluted shares outstanding |
|
13,904 |
|
|
|
13,662 |
|
|
|
13,852 |
|
|
|
13,608 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Comprehensive income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
$ |
3,900 |
|
|
$ |
3,357 |
|
|
$ |
3,752 |
|
|
$ |
3,793 |
|
|
Benefit plan adjustments, net of income taxes of $10, $(1), $2 and
$(5), respectively |
|
(191 |
) |
|
|
(29 |
) |
|
|
(470 |
) |
|
|
(1,240 |
) |
|
Foreign currency translation adjustment |
|
(3,084 |
) |
|
|
1,014 |
|
|
|
(930 |
) |
|
|
3,116 |
|
|
Unrealized gain (loss) on cash flow hedge, net of income taxes of
$0, $0, $0 and $0, respectively |
|
196 |
|
|
|
(224 |
) |
|
|
(74 |
) |
|
|
(26 |
) |
|
Comprehensive income |
|
821 |
|
|
|
4,118 |
|
|
|
2,278 |
|
|
|
5,643 |
|
|
Less: Comprehensive income attributable to noncontrolling
interest |
|
34 |
|
|
|
67 |
|
|
|
224 |
|
|
|
277 |
|
|
Comprehensive income attributable to Twin Disc |
$ |
787 |
|
|
$ |
4,051 |
|
|
$ |
2,054 |
|
|
$ |
5,366 |
|
|
|
|
RECONCILIATION OF CONSOLIDATED NET INCOME TO
EBITDA(In thousands; unaudited) |
|
|
|
|
For the Quarter Ended |
|
For the Three Quarters Ended |
|
|
March 29, 2024 |
|
March 31, 2023 |
|
March 29, 2024 |
|
March 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income attributable to Twin Disc |
$ |
3,822 |
|
$ |
3,281 |
|
$ |
3,579 |
|
$ |
3,605 |
|
Interest expense |
|
263 |
|
|
522 |
|
|
1,049 |
|
|
1,682 |
|
Income tax expense |
|
398 |
|
|
548 |
|
|
2,606 |
|
|
2,350 |
|
Depreciation and amortization |
|
2,474 |
|
|
2,670 |
|
|
7,497 |
|
|
6,936 |
|
Earnings before interest, taxes, depreciation, and amortization
(EBITDA) |
$ |
6,957 |
|
$ |
7,021 |
|
$ |
14,731 |
|
$ |
14,573 |
|
|
|
RECONCILIATION OF TOTAL DEBT TO NET DEBT(In
thousands; unaudited) |
|
|
|
|
|
|
|
March 29, 2024 |
|
|
|
March 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
Current maturities of long-term debt |
$ |
2,000 |
|
|
$ |
2,000 |
|
|
Long-term debt |
|
15,042 |
|
|
|
29,276 |
|
|
Total debt |
|
17,042 |
|
|
|
31,276 |
|
|
Less cash |
|
23,843 |
|
|
|
14,024 |
|
|
Net debt |
$ |
(6,801 |
) |
|
$ |
17,252 |
|
|
|
|
|
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES
TO FREE CASH FLOW(In thousands; unaudited) |
|
|
|
|
|
For the Quarter Ended |
|
|
|
|
March 29, 2024 |
|
|
|
March 31, 2023 |
|
|
Net cash provided by operating activities |
$ |
22,273 |
|
|
$ |
6,859 |
|
|
Acquisition of fixed assets |
|
(7,598 |
) |
|
|
(6,783 |
) |
|
Free cash flow |
$ |
14,675 |
|
|
$ |
(76 |
) |
|
|
|
CONDENSED CONSOLIDATED BALANCE SHEETS(In
thousands; except share amounts, unaudited) |
|
|
|
|
|
March 29, 2024 |
|
|
|
June 30, 2023 |
|
|
ASSETS |
|
|
|
|
|
|
|
|
Current assets: |
|
|
|
|
|
|
|
|
Cash |
$ |
23,843 |
|
|
$ |
13,263 |
|
|
Trade accounts receivable, net |
|
40,950 |
|
|
|
54,760 |
|
|
Inventories |
|
129,845 |
|
|
|
131,930 |
|
|
Assets held for sale |
|
2,968 |
|
|
|
2,968 |
|
|
Prepaid expenses |
|
10,471 |
|
|
|
8,459 |
|
|
Other |
|
10,451 |
|
|
|
8,326 |
|
|
Total current assets |
|
218,528 |
|
|
|
219,706 |
|
|
|
|
|
|
|
|
|
|
|
Property, plant and equipment, net |
|
40,606 |
|
|
|
38,650 |
|
|
Right-of-use assets operating leases |
|
14,498 |
|
|
|
13,133 |
|
|
Intangible assets, net |
|
10,157 |
|
|
|
12,637 |
|
|
Deferred income taxes |
|
2,210 |
|
|
|
2,244 |
|
|
Other assets |
|
2,755 |
|
|
|
2,811 |
|
|
|
|
|
|
|
|
|
|
|
Total assets |
$ |
288,754 |
|
|
$ |
289,181 |
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES AND EQUITY |
|
|
|
|
|
|
|
|
Current
liabilities: |
|
|
|
|
|
|
|
|
Current maturities of long-term debt |
$ |
2,000 |
|
|
$ |
2,010 |
|
|
Accounts payable |
|
33,230 |
|
|
|
36,499 |
|
|
Accrued liabilities |
|
63,406 |
|
|
|
61,586 |
|
|
Total current liabilities |
|
98,636 |
|
|
|
100,095 |
|
|
. |
|
|
|
|
|
|
|
|
Long-term debt |
|
15,042 |
|
|
|
16,617 |
|
|
Lease
obligations |
|
12,638 |
|
|
|
10,811 |
|
|
Accrued
retirement benefits |
|
6,707 |
|
|
|
7,608 |
|
|
Deferred
income taxes |
|
2,965 |
|
|
|
3,280 |
|
|
Other
long-term liabilities |
|
5,822 |
|
|
|
5,253 |
|
|
Total
liabilities |
|
141,810 |
|
|
|
143,664 |
|
|
|
|
|
|
|
|
|
|
|
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 |
|
40,428 |
|
|
|
42,855 |
|
|
Retained
earnings |
|
122,759 |
|
|
|
120,299 |
|
|
Accumulated other comprehensive loss |
|
(7,094 |
) |
|
|
(5,570 |
) |
|
|
|
156,093 |
|
|
|
157,584 |
|
|
Less
treasury stock, at cost (638,712 and 814,734 shares,
respectively) |
|
9,797 |
|
|
|
12,491 |
|
|
|
|
|
|
|
|
|
|
|
Total
Twin Disc shareholders' equity |
|
146,296 |
|
|
|
145,093 |
|
|
|
|
|
|
|
|
|
|
|
Noncontrolling interest |
|
648 |
|
|
|
424 |
|
|
Total
equity |
|
146,944 |
|
|
|
145,517 |
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and
equity |
$ |
288,754 |
|
|
$ |
289,181 |
|
|
|
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In
thousands; unaudited) |
|
|
|
|
|
For the Quarters Ended |
|
|
|
|
|
|
|
|
As Adjusted |
|
|
|
|
March 29, 2024 |
|
|
|
March 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES: |
|
|
|
|
|
|
|
|
Net income |
$ |
3,752 |
|
|
$ |
3,793 |
|
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
|
|
|
Depreciation and amortization |
|
7,497 |
|
|
|
6,936 |
|
|
Gain on sale of assets |
|
(87 |
) |
|
|
(4,237 |
) |
|
Loss on sale of boat management product line and related
inventory |
|
3,099 |
|
|
|
- |
|
|
Provision for deferred income taxes |
|
239 |
|
|
|
(1,462 |
) |
|
Stock compensation expense and other non-cash changes, net |
|
2,242 |
|
|
|
2,355 |
|
|
Net change in operating assets and liabilities |
|
5,531 |
|
|
|
(526 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash provided by operating activities |
|
22,273 |
|
|
|
6,859 |
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES: |
|
|
|
|
|
|
|
|
Acquisition of property, plant, and equipment |
|
(7,598 |
) |
|
|
(6,783 |
) |
|
Proceeds from sale of fixed assets |
|
- |
|
|
|
7,177 |
|
|
Other, net |
|
(167 |
) |
|
|
199 |
|
|
|
|
|
|
|
|
|
|
|
Net cash (used) provided by investing activities |
|
(7,765 |
) |
|
|
593 |
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES: |
|
|
|
|
|
|
|
|
Borrowings under revolving loan arrangements |
|
66,661 |
|
|
|
65,862 |
|
|
Repayments of revolving loan arrangements |
|
(66,661 |
) |
|
|
(69,823 |
) |
|
Repayments of other long-term debt |
|
(1,510 |
) |
|
|
(1,534 |
) |
|
Dividends paid to shareholders |
|
(1,119 |
) |
|
|
- |
|
|
Payments of finance lease obligations |
|
(663 |
) |
|
|
(231 |
) |
|
Payments of withholding taxes on stock compensation |
|
(1,791 |
) |
|
|
(463 |
) |
|
|
|
|
|
|
|
|
|
|
Net cash used by financing activities |
|
(5,083 |
) |
|
|
(6,189 |
) |
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate changes on cash |
|
1,155 |
|
|
|
240 |
|
|
|
|
|
|
|
|
|
|
|
Net change in cash |
|
10,580 |
|
|
|
1,503 |
|
|
|
|
|
|
|
|
|
|
|
Cash: |
|
|
|
|
|
|
|
|
Beginning of period |
|
13,263 |
|
|
|
12,521 |
|
|
|
|
|
|
|
|
|
|
|
End of period |
$ |
23,843 |
|
|
$ |
14,024 |
|
|
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