Twin Disc, Inc. Announces Fiscal 2011 Fourth-Quarter and Full-Year Financial Results
- Fiscal 2011 Net Earnings Up Significantly Year-Over-Year
- Fiscal 2011 Sales Up 36% Year-Over-Year
- Six-Month Backlog at All-Time Record
- Management Optimistic For Fiscal 2012
Sales for the fiscal 2011 fourth quarter were
Gross margin for the fiscal 2011 fourth quarter was 37.1 percent, compared to 30.2 percent in last year's comparable period and 36.3 percent in the fiscal 2011 third quarter. The significant improvement in the fiscal 2011 fourth quarter gross margin compared to the same period last fiscal year was the result of increased sales volumes, improved manufacturing efficiency and absorption, and a more profitable mix of business. For fiscal 2011, gross margin was 34.7 percent, compared to 26.6 percent for fiscal 2010.
For the fiscal 2011 and fiscal 2010 fourth quarters, marketing,
engineering and administrative (ME&A) expenses, as a percentage of
sales, were 22.8 percent. In dollars, ME&A expenses increased
Three Months Ended | |||||||||
(In thousands) | June 30, 2011 | June 30, 2010 | Increase | ||||||
Stock-Based Compensation |
$ | 2,860 | $ | 122 | $ | 2,738 | |||
Incentive/Bonus Expense |
1,717 |
- |
1,717 |
||||||
$ |
4,455 |
||||||||
Foreign Exchange Translation, net | 1,150 | ||||||||
$ |
5,605 |
||||||||
All other, net |
1,980 |
||||||||
$ | 7,585 | ||||||||
Despite a significant increase in sales, and an increase in compensation
related costs, ME&A expenses as a percentage of sales declined from 25.0
percent for fiscal 2010 to 23.4 percent in fiscal 2011. ME&A expenses
increased
Year Ended | |||||||||
(In thousands) | June 30, 2011 | June 30, 2010 | Increase | ||||||
Stock-Based Compensation | $ | 6,148 | $ | 507 | $ | 5,641 | |||
Incentive/Bonus Expense |
4,964 |
- |
4,964 |
||||||
$ |
10,605 |
||||||||
Foreign Exchange Translation, net | 1,015 | ||||||||
$ |
11,620 |
||||||||
All other, net |
4,207 |
||||||||
$ | 15,827 | ||||||||
The net remaining increase in ME&A, both for the quarter and on a year-to-date basis, was primarily driven by the restoration of salary and wage reductions, higher benefit costs, increased travel, higher project related expenses and a continued emphasis on the Company's product development program.
The effective tax rate for fiscal 2011 of 40.8 percent (41.4 percent for
the fiscal 2011 fourth quarter) is significantly lower than the prior
year rate of 57.6 percent (54.4 percent for the fiscal 2010 fourth
quarter). As announced in the third fiscal quarter, the current year
rate was unfavorably impacted by the recording of a valuation allowance
against the net deferred tax asset at one of the Company's foreign
jurisdictions, resulting in additional tax expense of approximately
Net earnings attributable to
Earnings before interest, taxes, depreciation and amortization (EBITDA)*
was
Commenting on the results,
"Investments in inventory made throughout the year in anticipation of
strong demand for our oil and gas transmission systems, plus the roll
out of our 7500 series transmission, increased inventory 36.2 percent to
The conference call will also be broadcast live over the Internet. To
listen to the call via the Internet, access
About
Forward-Looking Statements
This press release may contain statements that are forward looking as
defined by the
*Non-GAAP Financial Disclosures
Financial information excluding the impact of 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 INCOME (LOSS) (In thousands, except per-share data, unaudited) |
||||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||||
June 30, 2011 |
June 30, 2010 |
June 30, 2011 |
June 30, 2010 |
|||||||||||||
Net sales | $ | 97,367 | $ | 64,314 | $ | 310,393 | $ | 227,534 | ||||||||
Cost of goods sold | 61,246 | 44,887 | 202,710 | 167,069 | ||||||||||||
Gross profit | 36,121 | 19,427 | 107,683 | 60,465 | ||||||||||||
Marketing, engineering and administrative expenses |
22,243 | 14,658 | 72,713 | 56,886 | ||||||||||||
Restructuring of operations | 254 | 494 | 254 | 494 | ||||||||||||
Earnings from operations | 13,624 | 4,275 | 34,716 | 3,085 | ||||||||||||
Interest expense | 410 | 461 | 1,719 | 2,282 | ||||||||||||
Other expense (income), net | 132 | (683 | ) | 968 | (919 | ) | ||||||||||
Earnings before income taxes and noncontrolling interest |
13,082 |
4,497 |
32,029 |
1,722 |
||||||||||||
Income taxes | 5,416 | 2,446 | 13,064 | 992 | ||||||||||||
Net earnings | 7,666 | 2,051 | 18,965 | 730 | ||||||||||||
Less: Net earnings attributable to noncontrolling interest, net of tax |
(74 | ) | (11 | ) | (135 | ) | (133 | ) | ||||||||
Net earnings attributable to Twin Disc | $ | 7,592 | $ | 2,040 | $ | 18,830 | $ | 597 | ||||||||
Earnings per share data: | ||||||||||||||||
Basic earnings per share attributable to Twin Disc common shareholders |
$ |
0.67 |
$ |
0.18 |
$ |
1.66 |
$ |
0.05 |
||||||||
Diluted earnings per share attributable to Twin Disc common shareholders |
$ |
0.66 |
$ |
0.18 |
$ |
1.64 |
$ |
0.05 |
||||||||
Weighted average shares outstanding data: | ||||||||||||||||
Basic shares outstanding | 11,355 | 11,066 | 11,319 | 11,063 | ||||||||||||
Diluted shares outstanding | 11,510 | 11,173 | 11,463 | 11,159 | ||||||||||||
Dividends per share | $ | 0.08 | $ | 0.07 | $ | 0.30 | $ | 0.28 | ||||||||
Comprehensive income (loss): | ||||||||||||||||
Net earnings | $ | 7,666 | $ | 2,051 | $ | 18,965 | $ | 730 | ||||||||
Foreign currency translation adjustment | 4,495 | (8,158 | ) | 19,271 | (9,650 | ) | ||||||||||
Benefit plan adjustments, net | 9,841 | (7,819 | ) | 11,506 | (6,414 | ) | ||||||||||
Comprehensive income (loss) | 22,002 | (13,926 | ) | 49,742 | (15,334 | ) | ||||||||||
Comprehensive earnings attributable to noncontrolling interest |
(74 |
) |
(11 |
) |
|
(135 |
) |
(133 |
) |
|||||||
Comprehensive income (loss) attributable to Twin Disc |
$ |
21,928 |
$ |
(13,937 |
) |
$ |
49,607 |
$ |
(15,467 |
) |
||||||
RECONCILIATION OF CONSOLIDATED NET EARNINGS TO EBITDA
(In thousands, unaudited) |
||||||||||||
Three Months Ended |
Twelve Months Ended |
|||||||||||
June 30, 2011 |
June 30, 2010 |
June 30, 2011 |
June 30, 2010 |
|||||||||
Net earnings attributable to Twin Disc | $ | 7,592 | $ | 2,040 | $ | 18,830 | $ | 597 | ||||
Interest expense | 410 | 461 | 1,719 | 2,282 | ||||||||
Income taxes | 5,416 | 2,446 | 13,064 | 992 | ||||||||
Depreciation and amortization | 2,921 | 2,479 | 9,904 | 9,817 | ||||||||
Earnings before interest, taxes, depreciation and amortization |
$ | 16,339 | $ | 7,426 | $ | 43,517 | $ | 13,688 | ||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(In thousands, unaudited) | ||||||||
June 30, | June 30, | |||||||
2011 |
2010 |
|||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash | $ | 20,167 | $ | 19,022 | ||||
Trade accounts receivable, net | 61,007 | 43,014 | ||||||
Inventories, net | 99,139 | 72,799 | ||||||
Deferred income taxes | 5,765 | 5,224 | ||||||
Other | 9,090 | 7,391 | ||||||
Total current assets | 195,168 | 147,450 | ||||||
Property, plant and equipment, net | 65,791 | 58,243 | ||||||
Goodwill, net | 17,871 | 16,440 | ||||||
Deferred income taxes | 16,480 | 24,029 | ||||||
Intangible assets, net | 6,439 | 6,268 | ||||||
Other assets | 7,371 | 6,626 | ||||||
TOTAL ASSETS | $ | 309,120 | $ | 259,056 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Short-term borrowings and current maturities of long-term debt |
$ |
3,915 |
$ | 3,920 | ||||
Accounts payable | 38,372 | 23,842 | ||||||
Accrued liabilities | 41,673 | 35,545 | ||||||
Total current liabilities | 83,960 | 63,307 | ||||||
Long-term debt | 25,784 | 27,211 | ||||||
Accrued retirement benefits | 50,063 | 72,833 | ||||||
Deferred income taxes | 4,170 | 3,914 | ||||||
Other long-term liabilities | 7,089 | 2,472 | ||||||
Total liabilities | 171,066 | 169,737 | ||||||
Twin Disc shareholders' equity: | ||||||||
Common stock authorized: 30,000,000; Issued: 13,099,468; no par value |
10,863 | 10,667 | ||||||
Retained earnings | 162,857 | 147,438 | ||||||
Accumulated other comprehensive loss | (11,383 | ) | (42,048 | ) | ||||
162,337 | 116,057 | |||||||
Less treasury stock, at cost (1,739,574 and 1,901,242 shares, respectively) |
25,252 |
27,597 |
||||||
Total Twin Disc shareholders' equity |
137,085 | 88,460 | ||||||
Noncontrolling interest | 969 | 859 | ||||||
Total equity | 138,054 | 89,319 | ||||||
TOTAL LIABILITIES AND EQUITY | $ | 309,120 | $ | 259,056 | ||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited) |
||||||||
Twelve Months Ended | ||||||||
June 30, 2011 |
June 30, 2010 |
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net earnings | $ | 18,965 | $ | 730 | ||||
Adjustments to reconcile to net earnings to net cash provided by operating activities: |
||||||||
Depreciation and amortization | 9,904 | 9,817 | ||||||
Loss on sale of plant assets | 120 | 261 | ||||||
Restructuring of operations | 254 | 494 | ||||||
Stock compensation expense | 6,148 | 507 | ||||||
Provision (benefit) for deferred income taxes | 1,716 | (1,474 | ) | |||||
Changes in operating assets and liabilities: | ||||||||
Trade accounts receivable, net | (13,605 | ) | 8,181 | |||||
Inventories, net | (17,258 | ) | 16,338 | |||||
Other assets | (1,736 | ) | 1,177 | |||||
Accounts payable | 11,839 | (191 | ) | |||||
Accrued liabilities | 6,097 | (3,779 | ) | |||||
Accrued/prepaid retirement benefits | (8,584 | ) | 3,055 | |||||
Net cash provided by operating activities | 13,860 | 35,116 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Proceeds from sale of plant assets | 296 | 148 | ||||||
Acquisitions of plant assets | (12,028 | ) | (4,456 | ) | ||||
Other, net | (293 | ) | (293 | ) | ||||
Net cash used by investing activities | (12,025 | ) | (4,601 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from notes payable | 84 | 86 | ||||||
Payments of notes payable | (83 | ) | (690 | ) | ||||
Payments of long-term debt | (1,405 | ) | (18,950 | ) | ||||
Proceeds from exercise of stock options | 322 | 108 | ||||||
Dividends paid to shareholders | (3,411 | ) | (3,133 | ) | ||||
Dividends paid to noncontrolling interest | (138 | ) | (160 | ) | ||||
Other | 453 | (449 | ) | |||||
Net cash used by financing activities | (4,178 | ) | (23,188 | ) | ||||
Effect of exchange rate changes on cash | 3,488 | (1,571 | ) | |||||
Net change in cash | 1,145 | 5,756 | ||||||
Cash: | ||||||||
Beginning of year | 19,022 | 13,266 | ||||||
End of year | $ | 20,167 | $ | 19,022 | ||||
Source:
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