• Twin Disc Reports Strong Fourth Quarter & Full Year Results

    ソース: Nasdaq GlobeNewswire / 16 8 2023 07:00:01   America/Chicago

    MILWAUKEE, Aug. 16, 2023 (GLOBE NEWSWIRE) -- Twin Disc, Inc. (NASDAQ: TWIN) today reported results for the fourth quarter and full fiscal year 2023, which ended on June 30, 2023.

    Fiscal Fourth Quarter 2023 Highlights

    • Sales increased 10.5% year-over-year to $83.9 million
    • Net income attributable to Twin Disc was $8.6 million and EBITDA* of $13.0 million
    • Significantly improved operating cash flow of $16.0 million
    • Free cash flow* of $14.9 million compared to $(3.4) million in the year-ago period
    • Strong six-month backlog of $119.2 million supported by healthy ongoing demand

    CEO Perspective
    “Fiscal 2023 was a tale of two halves. After facing significant supply chain headwinds and cost increases in the first half of the year, our team maintained focus and executed exceptionally. Since the start of the year, we further streamlined shipments and caught up on past-due orders. The cumulative benefit of our pricing actions from earlier in the year and easing supply chain conditions, combined with operational excellence, contributed to sales growth, sequential gross margin expansion, and significant improvements to operating and free cash flow,” commented John H. Batten, President and Chief Executive Officer of Twin Disc.

    “Global demand across product groups drove solid year-over-year sales growth for the quarter and full year. We also had several projects reactivated after being canceled during COVID. The macroeconomic and geopolitical environment remains uncertain though project visibility, customer inquiries, and after-market demand continue to fuel our cautiously optimistic outlook. As we look to fiscal 2024, we remain committed to maintaining our momentum, driving further growth, and delivering value to our stakeholders,” concluded Mr. Batten.

    Fourth Quarter & Full-Year Results
    Sales for the fiscal 2023 fourth quarter increased 10.5% year-over-year to $83.9 million and fiscal 2023 sales increased 14.0% to $277.0 million. Fourth quarter and full year sales growth were similarly 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
    Q4 FY23 Sales 

    Q4 FY22 Sales 
    Change (%) 
    (Thousands of $):
    Marine and Propulsion Systems 48,634  39,693 22.4% 
    Land-Based Transmissions 22,864  23,259 (1.7)% 
    Industrial 7,928  9,800 (19.1)% 
    Other 4,497  3,222 39.6% 
    Total $83,923  $75,974 10.5% 


    Product GroupFY23 Sales 
    FY22 Sales 
    Change (%) 
    (Thousands of $):
    Marine and Propulsion Systems 158,291  135,008 17.2% 
    Land-Based Transmissions 73,048  64,904 12.5% 
    Industrial 29,775  32,100 (7.2)% 
    Other 15,846  10,901 45.4% 
    Total $276,960  $242,913 14.0% 


    For fiscal 2023, Twin Disc delivered double-digit growth year-over-year in the North America and the Asia-Pacific regions. The distribution of sales across geographical regions was consistent, with a slight increase in the proportion of total sales coming from North America versus Europe.

    Gross profit increased 2.3% to $24.7 million compared to $24.2 million for the fourth quarter of fiscal 2022. Fourth quarter gross margin increased approximately 340 basis points sequentially to 29.5%, reflecting the benefit of prior pricing actions, continued easing of supply chain headwinds, and successfully executing our operational playbook. For fiscal 2023, gross profit increased 8.0% to $74.3 million. For the fiscal 2023 full year, gross margin decreased approximately 150 basis points to 26.8%.

    Marketing, engineering and administrative (ME&A) expense decreased by $0.8 million, or 4.5%, to $16.6 million, compared to $17.3 million in the prior year quarter. The decreased ME&A expense was primarily driven by lower bonus expense. For the fiscal 2023 full year, ME&A expense increased 3.6% to $62.2 million, primarily driven by subsidies that did not recur in fiscal 2023, wage inflation, and increased marketing activities. These were partially offset by the impact of foreign exchange and reduced bonus expense.

    Net income attributable to Twin Disc for the quarter was $8.6 million, or $0.62 per diluted share, compared to net income attributable to Twin Disc of $10.2 million, or $0.75 per share, for the fourth fiscal quarter of 2022. The year-over-year decrease was driven by higher income tax and interest expenses. For fiscal 2023, the Company generated net income attributable to Twin Disc of $10.4 million, or $0.75 per diluted share, a decrease of 0.8% and 3.8%, respectively, from fiscal 2022.

    Earnings before interest, taxes, depreciation and amortization (EBITDA) of $13.0 million in the fourth quarter were flat compared to the fourth quarter of fiscal 2022. Full year fiscal 2023 EBITDA increased 7.6% to $25.8 million from $24.0 million in fiscal 2022. The year-over-year increase was primarily driven by higher income tax expense.

    On a consolidated basis, the backlog of orders to be shipped over the next six months is approximately $119.2 million, compared to $127.7 million at the end of the third quarter. As a percentage of six-month backlog, inventory increased slightly from 107% at the end of the third quarter to 111% at the end of the fourth quarter. Compared to the end of fiscal 2022, cash increased 5.9% to $13.3 million and net debt* decreased $18.7 million to $5.4 million. The decrease was primarily attributable to net payoff of long-term debt.

    CFO Perspective
    Jeffrey S. Knutson, Vice President of Finance, Chief Financial Officer, Treasurer and Secretary stated, “Consistent and strong global demand across our product groups and end markets drove sales growth through the year as price, mix, and volume all contributed to our fiscal 2023 performance. Disciplined execution allowed our team to improve past-due orders and strategically manage our inventory and backlog levels, a fiscal 2023 priority and key milestone to achieve our medium-term targets. We also made progress on our free cash flow conversion target, generating $14.9 million of free cash flow, and expect this momentum to continue in 2024.”

    Other Updates
    Twin Disc’s pension accounting method changed to modified mark-to-market during the fourth quarter of fiscal year 2023. The change in accounting method has been applied retroactively for the fourth quarter and full fiscal year results presented in this earnings release. The modified mark-to-market adjustment for fiscal year 2022 resulted in a $2.4 million increase in net income compared with what was originally reported.

    Discussion of Results
    Twin Disc will host a conference call to discuss these results and to answer questions at 9:00 a.m. Eastern time on August 16, 2023. 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 866-652-5200 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 August 15, 2024.

    About Twin Disc
    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 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 Information
    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.

    Definitions
    Earnings 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.

     
    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
    COMPREHENSIVE INCOME (LOSS)
    (In thousands, except per-share data; unaudited)
     
      For the Quarter Ended For the Year Ended
      June 30,
    2023
    June 30,
    2022
    (As Adjusted)
     June 30,
    2023

    June 30,
    2022
    (As Adjusted)
       
    Net sales $83,923 $75,974  $276,960 $242,913 
    Cost of goods sold  59,177  51,782   202,628  174,101 
    Gross profit  24,747  24,192   74,332  68,812 
           
    Marketing, engineering and administrative expenses  16,556  17,331   62,243  60,085 
    Restructuring expenses  (31) (569)  177  973 
    Other operating income  (1) (325)  (4,148) (3,282)
    Income from operations

      8,222  7,754   16,060  11,036 
                   
    Interest expense  (571) (534)  (2,253) (2,128)
    Other income (expense), net  2,492
      3,083
       658  3,693
     
       1,921  2,549   (1,595) 1,565 
    Income before income taxes and noncontrolling interest  10,144  10,304   14,465  12,601 
    Income tax expense  1,439  66   3,788  1,823 
           
    Net income  8,705  10,238   10,677  10,778 
    Less: Net earnings attributable to noncontrolling interest, net of tax  (110) (88)  (297) (311)
    Net income attributable to Twin Disc $8,596 $10,150  $10,380 $10,467 
           
    Income per share data:      
    Basic income per share attributable to Twin Disc common shareholders $0.64 $0.76  $0.77 $0.78 
    Diluted income per share attributable to Twin Disc common shareholders $0.62 $0.75  $0.75 $0.78 
           
    Weighted average shares outstanding data:      
    Basic shares outstanding  13,508  13,399   13,468  13,353 
    Diluted shares outstanding  13,844  13,456   13,811  13,382 
           
    Comprehensive income      
    Net income $8,704 $10,238  $10,677 $10,778 
    Benefit plan adjustments, net of income taxes of $25, $(619), $21 and $(598), respectively  85  (4,147)  667  (2,635)
    Foreign currency translation adjustment  (2,483) (5,222)  634  (11,593)
    Unrealized gain on cash flow hedge, net of income taxes of $0, $0, $0, and $0, respectively  81  501   54  2,250 
    Comprehensive income (loss)  6,387  1,370   12,032  (1,200)
    Less: Comprehensive income (loss) attributable to noncontrolling interest  (30) (59)  248  176 
                   
    Comprehensive income (loss) attributable to Twin Disc $6,417 $1,429  $11,783 $(1,376)

    Note: Amounts may not foot due to rounding

     
     
    RECONCILIATION OF CONSOLIDATED NET INCOME TO EBITDA
    (In thousands; unaudited)
     
      For the Quarter EndedFor the Year Ended
      June 30,
    2023
    June 30,
    2022
    (As Adjusted)
    June 30,
    2023
    June 30,
    2022
    (As Adjusted)
    Net income attributable to Twin Disc $8,596$10,150$10,380$10,467
    Interest expense  571 534 2,253 2,128
    Income tax expense  1,439 66 3,788 1,823
    Depreciation and amortization  2,423 2,230 9,359 9,547
    Earnings before interest, taxes depreciation and amortization $13,029$12,980$25,781$23,965
          


    RECONCILIATION OF TOTAL DEBT TO NET DEBT
    (In thousands; unaudited)
       
      June 30,
    2023
    June 30,
    2022
    Current maturities of long-term debt $2,010$2,000
    Long-term debt  16,617 34,543
    Total debt  18,627 36,543
    Less cash  13,263 12,521
          
    Net debt $5,364$24,022


     
     
    RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW
    (In thousands; unaudited)
        
      For the Quarter EndedFor the Year Ended
      June 30,
    2023
    June 30,
    2022
    June 30,
    2023
    June 30,
    2022
                
    Net cash provided by operating activities $16,037$(1,090)$22,898$(8,313)
    Acquisition of fixed assets  1,108 2,358  7,918 4,729 
          
    Free cash flow $14,929$(3,448)$14,980$(13,042)
          

    Note: Amounts may not foot due to rounding

     
     
    CONDENSED CONSOLIDATED BALANCE SHEETS  
    (In thousands; except share amounts, unaudited)
        
      June 30,June 30,
       2023 2022
    (As Adjusted)
    ASSETS   
    Current assets:   
    Cash $13,263 $12,521 
    Trade accounts receivable, net  54,760  45,452 
    Inventories  131,930  127,109 
    Assets held for sale  2,968  2,968 
    Prepaid expenses  8,459  7,756 
    Other  8,326  8,646 
        
    Total current assets  219,706  204,452 
        
    Property, plant and equipment, net  38,650  41,615 
    Right-of-use assets operating leases  13,133  12,685 
    Intangible assets, net  12,637  13,010 
    Deferred income taxes  2,244  2,178 
    Other assets  2,811  2,583 
        
    TOTAL ASSETS $289,181 $276,523 
        
    LIABILITIES AND EQUITY   
    Current liabilities:   
    Current maturities of long-term debt $2,010 $2,000 
    Accounts payable  36,499  28,536 
    Accrued liabilities  61,586  50,542 
        
    Total current liabilities  100,095  81,078 
        
    Long-term debt, less current maturities  16,617  34,543 
    Lease obligations  10,811  10,575 
    Accrued retirement benefits  7,608  9,974 
    Deferred income taxes  3,280  3,802 
    Other long-term liabilities  5,253  5,363 
        
    Total liabilities  143,664  145,335 
        
    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  42,855  42,551 
    Retained earnings  120,299  109,919 
    Accumulated other comprehensive loss  (5,570) (6,974)
       157,584  145,496 
    Less treasury stock, at cost (960,459 and 984,139 shares, respectively)  12,491  14,720 
        
    Total Twin Disc shareholders' equity  145,093  130,776 
        
    Noncontrolling interest  424  412 
    Total equity  145,517  131,188 
        
    TOTAL LIABILITIES AND EQUITY $289,181 $276,523 
     

    Note: Amounts may not foot due to rounding

     
     
    CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
    (In thousands; unaudited)
        
        
      For the Year Ended
      June 30,
    2023
    June 30,
    2022
    (As Adjusted)
        
    CASH FLOWS FROM OPERATING ACTIVITIES:   
    Net income $        10,677 $         10,778 
    Adjustments to reconcile net income to net cash provided (used) by operating activities:   
    Depreciation and amortization  9,359  9,547 
    Gain on sale of assets  (4,264) (3,126)
    Restructuring expenses  137  (1,328)
    Provision for deferred income taxes  (634) (849)
    Stock compensation expense and other non-cash charges, net  2,996  2,428 
    Other  201  201 
    Net change in operating assets and liabilities                4,426  (25,964)
        
    Net cash provided by operating activities              22,898           (8,313)
        
    CASH FLOWS FROM INVESTING ACTIVITIES:   
    Acquisition of property, plant, and equipment  (7,918) (4,729)
    Proceeds from sale of fixed assets  7,177  9,455 
    Proceeds on note receivable  -  500 
    Other, net                    333                  675 
        
    Net cash (used) provided by investing activities                  (408)              5,901 
        
    CASH FLOWS FROM FINANCING ACTIVITIES:   
    Borrowings under revolving loan arrangements  81,620  104,473 
    Repayments of revolving loan arrangements  (97,774) (95,704)
    Repayments of other long-term debt  (2,037) (3,081)
    Payments of finance lease obligations  (621) (933)
    Payments of withholding taxes on stock compensation         (463) (486)
    Dividends paid to noncontrolling interest                  (236) (214)
        
    Net cash (used) provided by financing activities             (19,511)              4,055 
        
    Effect of exchange rate changes on cash               (2,237)           (1,462)
        
    Net change in cash  742  181 
        
    Cash:   
    Beginning of period  12,521  12,340 
        
    End of period $13,263 $12,521 
     

    Note: Amounts may not foot due to rounding

    Investors:
    Riveron
    TwinDiscIR@Riveron.com

    Source: Twin Disc, Incorporated


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