Twin Disc, Inc. (NASDAQ: TWIN), today reported
results for the fiscal 2024 second quarter ended December 29, 2023.
Fiscal Second Quarter 2024 Highlights
- Sales increased 15.2% year-over-year to $73.0 million
- Gross margin of 28.3%, expanded 140 basis points on a
year-over-year basis
- Net income attributable to Twin Disc was $0.9 million and
EBITDA* of $5.5 million
- Significantly improved operating cash flow of $16.0
million
- Free cash flow* of $10.6 million compared to ($4.7) million in
the year-ago period
- Robust six-month backlog of $125.2 million supported by healthy
ongoing demand
CEO Perspective“We delivered another excellent
quarter, continuing our momentum of double-digit revenue growth and
expanded margins while generating historically high cash from
operations. Similar to the prior quarter, strength in Marine and
Propulsion and Land-Based Transmissions drove our outperformance,
more than offsetting near-term softness in Industrial. Our agile
teams are working to capture solid end market demand, underscored
by continued backlog growth, demonstrating the ongoing resilience
of our business as we navigate a volatile macroeconomic landscape,”
commented John H. Batten, President and Chief Executive Officer of
Twin Disc. “Despite lingering challenges in our broader operating
environment, we are cautiously optimistic moving into the second
half of the fiscal year and look forward to maintaining this trend
of sustained value creation well into the future.”
Second Quarter ResultsSales for the fiscal 2024
second quarter increased 15.2% year-over-year to $73.0 million,
driven by demand for the Company’s Marine and Propulsion Systems
and Land-Based Transmissions markets, and favorable product
mix.
Sales by product group:
Product Group |
Q2 FY24 Sales |
Q2 FY23 Sales |
Change (%) |
(Thousands of $): |
Marine and Propulsion Systems |
$ |
46,945 |
$ |
36,466 |
28.7 |
% |
Land-Based Transmissions |
|
15,863 |
|
14,672 |
8.1 |
% |
Industrial |
|
6,532 |
|
7,513 |
-13.1 |
% |
Other |
|
3,654 |
|
4,700 |
-22.3 |
% |
Total |
$ |
72,994 |
$ |
63,351 |
15.2 |
% |
The Company delivered 12.5% sales growth year-over-year in the
Europe, North America, and Asia-Pacific regions. The proportion of
total sales increased in the Europe and Asia-Pacific regions, with
a decrease in North America.
Gross profit increased 21.8% to $20.7 million compared to $17.0
million for the second fiscal quarter of 2023. Second quarter gross
margin increased approximately 140 basis points sequentially to
28.3%. 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 $1.1 million, or 6.9%, to $17.1 million, compared to
$16.0 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 $0.9
million, or $0.07 per diluted share, compared to net income
attributable to Twin Disc of $1.8 million, or $0.13 per share, for
the second fiscal quarter of 2023. The year-over-year decline was
driven by the prior year gain on the sale of our Belgian
facility.
Earnings before interest, taxes, depreciation, and amortization
(EBITDA) decreased by $1.4 million to $5.5 million in the second
quarter, compared to $7.0 million in the second fiscal quarter of
2023.
On a consolidated basis, the backlog of orders to be shipped
over the next six months is approximately $125.2 million, compared
to $122.5 million at the end of the first fiscal quarter of 2024.
As a percentage of six-month backlog, inventory increased from
103.1% at the end of the first quarter to 105.3% at the end of the
second fiscal quarter of 2024. Compared to the second fiscal
quarter of 2023, cash increased 55.4% to $21.0 million, total debt
decreased 44.6% to $17.7 million and net debt* decreased $21.7
million to $(3.3) million. The improvement was primarily
attributable to net payoff of long-term debt as a result of our
strong cash operations.
CFO PerspectiveJeffrey S. Knutson, Vice
President of Finance, Chief Financial Officer, Treasurer, and
Secretary stated, “We are very pleased with our results in the
second quarter, supported by solid operational execution and a
focus on working capital improvement. Our robust cash generation
has further strengthened our balance sheet, giving us the
flexibility to drive continued investment in both organic and
inorganic growth opportunities while we keep debt at appropriate
levels and return capital to shareholders. Through this consistent
performance, we are making great strides towards achieving our
revenue, gross margin, and free cash flow conversion targets,
further positioning Twin Disc for long-term success.”
Discussion of ResultsTwin Disc will host a
conference call to discuss these results and to answer questions at
9:00 a.m. Eastern time on February 7, 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
February 6, 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
ANDCOMPREHENSIVE INCOME (LOSS)(In
thousands, except per-share data; unaudited) |
|
|
|
For the Quarter Ended |
|
|
For the Two Quarters Ended |
|
|
|
As Adjusted |
|
|
|
|
|
As Adjusted |
|
|
December 29, 2023 |
|
December 30, 2022 |
|
December 29, 2023 |
|
December 30, 2022 |
Net sales |
$ |
72,994 |
|
|
$ |
63,351 |
|
|
$ |
136,547 |
|
|
$ |
119,264 |
|
Cost of goods sold |
|
52,338 |
|
|
|
46,328 |
|
|
|
96,156 |
|
|
|
88,944 |
|
Cost of goods sold - Sale of
boat management system product line and related inventory |
|
- |
|
|
|
- |
|
|
|
3,099 |
|
|
|
- |
|
Gross profit |
|
20,656 |
|
|
|
17,023 |
|
|
|
37,292 |
|
|
|
30,320 |
|
|
|
|
|
|
|
|
|
|
Marketing, engineering, and
administrative expenses |
|
17,149 |
|
|
|
15,983 |
|
|
|
34,068 |
|
|
|
31,063 |
|
Restructuring expenses |
|
69 |
|
|
|
164 |
|
|
|
68 |
|
|
|
174 |
|
Other operating income |
|
- |
|
|
|
(4,150 |
) |
|
|
- |
|
|
|
(4,150 |
) |
Income from operations |
|
3,438 |
|
|
|
5,026 |
|
|
|
3,156 |
|
|
|
3,233 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other expense (income): |
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
392 |
|
|
|
594 |
|
|
|
786 |
|
|
|
1,160 |
|
Other expense (income),
net |
|
449 |
|
|
|
182 |
|
|
|
310 |
|
|
|
(164 |
) |
|
|
841 |
|
|
|
776 |
|
|
|
1,096 |
|
|
|
996 |
|
Income before income taxes and
noncontrolling interest |
|
2,597 |
|
|
|
4,250 |
|
|
|
2,060 |
|
|
|
2,237 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
1,662 |
|
|
|
2,489 |
|
|
|
2,208 |
|
|
|
1,801 |
|
Net income (loss) |
|
935 |
|
|
|
1,761 |
|
|
|
(148 |
) |
|
|
436 |
|
Less: Net earnings
attributable to noncontrolling interest, net of tax |
|
(5 |
) |
|
|
(15 |
) |
|
|
(95 |
) |
|
|
(112 |
) |
Net income (loss) attributable
to Twin Disc |
$ |
930 |
|
|
$ |
1,746 |
|
|
$ |
(243 |
) |
|
$ |
324 |
|
|
|
|
|
|
|
|
|
|
Dividends per share |
$ |
0.04 |
|
|
$ |
- |
|
|
$ |
0.04 |
|
|
$ |
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) per share
data: |
|
|
|
|
|
|
|
|
Basic income (loss) per share attributable to Twin Disc common
shareholders |
$ |
0.07 |
|
|
$ |
0.13 |
|
|
$ |
(0.02 |
) |
|
$ |
0.02 |
|
Diluted income (loss) per share attributable to Twin Disc common
shareholders |
$ |
0.07 |
|
|
$ |
0.13 |
|
|
$ |
(0.02 |
) |
|
$ |
0.02 |
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding data: |
|
|
|
|
|
|
|
|
Basic shares outstanding |
|
13,718 |
|
|
|
13,460 |
|
|
|
13,629 |
|
|
|
13,434 |
|
Diluted shares outstanding |
|
13,923 |
|
|
|
13,699 |
|
|
|
13,629 |
|
|
|
13,649 |
|
|
|
|
|
|
|
|
|
|
Comprehensive income
(loss) |
|
|
|
|
|
|
|
|
Net income (loss) |
$ |
935 |
|
|
$ |
1,761 |
|
|
$ |
(148 |
) |
|
$ |
436 |
|
Benefit plan adjustments, net
of income taxes of $13, $13, $8 and $4, respectively |
|
(108 |
) |
|
|
(1,122 |
) |
|
|
(279 |
) |
|
|
(1,211 |
) |
Foreign currency translation
adjustment |
|
5,190 |
|
|
|
8,392 |
|
|
|
2,154 |
|
|
|
2,102 |
|
Unrealized (loss) gain on
hedges, net of income taxes of $0, $0, $0 and $0, respectively |
|
(485 |
) |
|
|
(595 |
) |
|
|
(269 |
) |
|
|
198 |
|
Comprehensive income |
|
5,532 |
|
|
|
8,436 |
|
|
|
1,458 |
|
|
|
1,525 |
|
Less: Comprehensive income
attributable to noncontrolling interest |
|
40 |
|
|
|
74 |
|
|
|
190 |
|
|
|
210 |
|
Comprehensive income attributable to Twin Disc |
$ |
5,492 |
|
|
$ |
8,362 |
|
|
$ |
1,268 |
|
|
$ |
1,315 |
|
RECONCILIATION OF CONSOLIDATED NET INCOME TO
EBITDA(In thousands; unaudited) |
|
|
For the Quarter Ended |
|
For the Two Quarters Ended |
|
December 29, 2023 |
|
December 30, 2022 |
|
December 29, 2023 |
|
December 30, 2022 |
|
|
|
|
|
|
|
|
Net income (loss) attributable to Twin Disc |
$ |
930 |
|
|
$ |
1,746 |
|
|
$ |
(243 |
) |
|
$ |
324 |
|
Interest expense |
|
392 |
|
|
|
594 |
|
|
|
786 |
|
|
|
1,160 |
|
Income tax expense |
|
1,662 |
|
|
|
2,489 |
|
|
|
2,208 |
|
|
|
1,801 |
|
Depreciation and
amortization |
|
2,531 |
|
|
|
2,126 |
|
|
|
5,023 |
|
|
|
4,266 |
|
Earnings before interest,
taxes, depreciation, and amortization (EBITDA) |
$ |
5,515 |
|
|
$ |
6,955 |
|
|
$ |
7,774 |
|
|
$ |
7,551 |
|
RECONCILIATION OF TOTAL DEBT TO NET DEBT(In
thousands; unaudited) |
|
|
December 29, 2023 |
|
December 30, 2022 |
|
|
|
|
Current maturities of long-term debt |
$ |
2,000 |
|
|
$ |
2,000 |
|
Long-term debt |
|
15,698 |
|
|
|
29,927 |
|
Total debt |
|
17,698 |
|
|
|
31,927 |
|
Less cash |
|
21,021 |
|
|
|
13,528 |
|
Net debt |
$ |
(3,323 |
) |
|
$ |
18,399 |
|
RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES
TO FREE CASH FLOW(In thousands; unaudited) |
|
|
For the Quarter Ended |
|
December 29, 2023 |
|
December 30, 2022 |
Net cash provided by operating activities |
$ |
16,047 |
|
|
$ |
32 |
|
Acquisition of fixed
assets |
|
(5,419 |
) |
|
|
(4,734 |
) |
Free cash flow |
$ |
10,628 |
|
|
$ |
(4,702 |
) |
CONDENSED CONSOLIDATED BALANCE SHEETS(In
thousands; except share amounts, unaudited) |
|
|
|
December 29, 2023 |
|
|
June 30, 2023 |
ASSETS |
|
|
|
|
|
Current assets: |
|
|
|
|
|
Cash |
$ |
21,021 |
|
|
$ |
13,263 |
|
Trade accounts receivable, net |
|
41,428 |
|
|
|
54,760 |
|
Inventories |
|
131,768 |
|
|
|
131,930 |
|
Assets held for sale |
|
2,968 |
|
|
|
2,968 |
|
Prepaid expenses |
|
10,157 |
|
|
|
8,459 |
|
Other |
|
9,235 |
|
|
|
8,326 |
|
Total current assets |
|
216,577 |
|
|
|
219,706 |
|
|
|
|
Property, plant and equipment,
net |
|
40,334 |
|
|
|
38,650 |
|
Right-of-use assets operating
leases |
|
12,017 |
|
|
|
13,133 |
|
Intangible assets, net |
|
11,146 |
|
|
|
12,637 |
|
Deferred income taxes |
|
2,371 |
|
|
|
2,244 |
|
Other assets |
|
2,745 |
|
|
|
2,811 |
|
Total assets |
$ |
285,190 |
|
|
$ |
289,181 |
|
|
|
|
LIABILITIES AND EQUITY |
|
|
Current liabilities: |
|
|
Current maturities of long-term debt |
$ |
2,000 |
|
|
$ |
2,010 |
|
Accounts payable |
|
32,611 |
|
|
|
36,499 |
|
Accrued liabilities |
|
62,929 |
|
|
|
61,586 |
|
Total current liabilities |
|
97,540 |
|
|
|
100,095 |
|
. |
|
|
Long-term debt |
|
15,698 |
|
|
|
16,617 |
|
Lease obligations |
|
9,988 |
|
|
|
10,811 |
|
Accrued retirement benefits |
|
6,975 |
|
|
|
7,608 |
|
Deferred income taxes |
|
3,162 |
|
|
|
3,280 |
|
Other long-term liabilities |
|
5,917 |
|
|
|
5,253 |
|
Total liabilities |
|
139,280 |
|
|
|
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 |
|
39,661 |
|
|
|
42,855 |
|
Retained earnings |
|
119,496 |
|
|
|
120,299 |
|
Accumulated other comprehensive
loss |
|
(4,059 |
) |
|
|
(5,570 |
) |
|
|
155,098 |
|
|
|
157,584 |
|
Less treasury stock, at cost
(639,006 and 814,734 shares, respectively) |
|
9,802 |
|
|
|
12,491 |
|
|
|
|
Total Twin Disc shareholders'
equity |
|
145,296 |
|
|
|
145,093 |
|
|
|
|
Noncontrolling interest |
|
614 |
|
|
|
424 |
|
Total equity |
|
145,911 |
|
|
|
145,517 |
|
|
|
|
Total liabilities and
equity |
$ |
285,190 |
|
|
$ |
289,181 |
|
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(In
thousands; unaudited) |
|
|
For the Two Quarters Ended |
|
|
|
|
|
As Adjusted |
|
|
December 29, 2023 |
|
|
December 30, 2022 |
|
|
|
|
|
|
CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
|
|
|
Net (loss) income |
$ |
(148 |
) |
|
$ |
436 |
|
Adjustments to reconcile net
(loss) income to net cash provided by operating activities: |
|
|
|
|
|
Depreciation and amortization |
|
5,023 |
|
|
|
4,266 |
|
Gain on sale of assets |
|
(42 |
) |
|
|
(4,203 |
) |
Loss on sale of boat management product line and related
inventory |
|
3,099 |
|
|
|
- |
|
Provision for deferred income taxes |
|
280 |
|
|
|
(1,105 |
) |
Stock compensation expense and other non-cash changes, net |
|
1,413 |
|
|
|
1,565 |
|
Net change in operating assets and liabilities |
|
6,422 |
|
|
|
(927 |
) |
|
|
|
|
|
|
Net cash provided by operating activities |
|
16,047 |
|
|
|
32 |
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES: |
|
|
|
|
|
Acquisition of property,
plant, and equipment |
|
(5,419 |
) |
|
|
(4,734 |
) |
Proceeds from sale of fixed
assets |
|
- |
|
|
|
7,152 |
|
Other, net |
|
(252 |
) |
|
|
385 |
|
|
|
|
|
|
|
Net cash (used) provided by
investing activities |
|
(5,671 |
) |
|
|
2,803 |
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES: |
|
|
|
|
|
Borrowings under revolving
loan arrangements |
|
50,632 |
|
|
|
42,898 |
|
Repayments of revolving loan
arrangements |
|
(50,632 |
) |
|
|
(46,628 |
) |
Repayments of other long-term
debt |
|
(1,010 |
) |
|
|
(707 |
) |
Dividends paid to
shareholders |
|
(560 |
) |
|
|
- |
|
Payments of finance lease
obligations |
|
(471 |
) |
|
|
(132 |
) |
Payments of withholding taxes
on stock compensation |
|
(1,772 |
) |
|
|
(463 |
) |
|
|
|
|
|
|
Net cash used by financing
activities |
|
(3,813 |
) |
|
|
(5,032 |
) |
|
|
|
|
|
|
Effect of exchange rate
changes on cash |
|
1,195 |
|
|
|
3,204 |
|
|
|
|
|
|
|
Net change in cash |
|
7,758 |
|
|
|
1,007 |
|
|
|
|
|
|
|
Cash: |
|
|
|
|
|
Beginning of period |
|
13,263 |
|
|
|
12,521 |
|
|
|
|
|
|
|
End of period |
$ |
21,021 |
|
|
$ |
13,528 |
|
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