Twin Disc, Inc. Announces Fiscal 2013 Fourth Quarter Financial Results
- Sales and Earnings Decline due to Continued Weakness in North American Pressure Pumping Sector
- China Expands to 10% of Sales
- Company Opens India Manufacturing Facility
- Balance Sheet Remains Strong
- Backlog Shows First Improvement in Seven Quarters
Sales for the fiscal 2013 fourth quarter were
Gross margin for the fiscal 2013 fourth quarter was 27.2 percent, compared to 29.4 percent in the fiscal 2012 fourth quarter and 25.9 percent in the fiscal 2013 third quarter. The anticipated year-over-year decline in the fiscal 2013 fourth quarter gross margin was the result of lower sales volumes and a less profitable mix of business. For fiscal 2013, gross margin was 28.1 percent, compared to 34.2 percent for fiscal 2012.
For the fiscal 2013 fourth quarter, marketing, engineering and
administrative (ME&A) expenses, as a percentage of sales, were 22.5
percent, compared to 20.1 percent for the fiscal 2012 fourth quarter.
ME&A expenses decreased
Three Months Ended | |||||||||||
(In thousands) |
|
|
Increase/ |
||||||||
Stock-Based Compensation | $ | 270 | $ | (380 | ) | $ | 650 | ||||
Incentive/Bonus Expense | 290 | 1,885 | (1,595 | ) | |||||||
$ | (945 | ) | |||||||||
Foreign Exchange Translation, Net | (107 | ) | |||||||||
$ | (1,052 | ) | |||||||||
All Other, Net | (1,183 | ) | |||||||||
$ | (2,235 | ) | |||||||||
The year-over-year net remaining decrease in ME&A expenses of
For fiscal 2013, ME&A expenses, as a percentage of sales, were 23.8
percent, compared to 20.5 percent for fiscal 2012. For fiscal 2013, ME&A
expenses decreased
Year Ended | ||||||||||
(In thousands) |
June 30,
2013 |
June 30,
2012 |
Increase/
(Decrease) |
|||||||
Stock-Based Compensation | $ | 2,681 | $ | 1,642 | $ | 1,039 | ||||
Incentive/Bonus Expense | 493 | 5,013 | (4,520 | ) | ||||||
$ | (3,481 | ) | ||||||||
Foreign Exchange Translation, Net | (913 | ) | ||||||||
$ | (4,394 | ) | ||||||||
All Other, Net | (798 | ) | ||||||||
$ | (5,192 | ) | ||||||||
The year-over-year net remaining decrease in ME&A expenses of
In connection with preparing its financial statements for fiscal 2013,
the Company recorded an impairment of
The Company also recorded a
The effective tax rate for the twelve months of fiscal 2013 was 54.0
percent, which is significantly higher than the prior year rate of 39.8
percent. Both years were impacted by non-deductible losses in certain
foreign jurisdictions that are subject to a valuation allowance, as well
as non-deductible impairment charges. Adjusting for these non-deductible
losses, the fiscal 2013 rate would have been 35.0 percent compared to
33.3 percent for fiscal 2012. The effective rate for the fiscal 2013
fourth quarter was 89.2 percent compared to 76.6 percent for the same
period last fiscal year. Adjusting both for non-deductible losses
results in rates of 30.0 percent for the fiscal 2013 fourth quarter and
37.8 percent for the fiscal 2012 fourth quarter. The fiscal 2013 fourth
quarter rate was favorably impacted by a favorable change in Italian tax
law of
The Company reported net income attributable to
Earnings before interest, taxes, depreciation and amortization (EBITDA)*
was
Commenting on the results,
"In addition to diversifying our sales geographically, during fiscal
2013 we expanded our manufacturing footprint with the commissioning of a
facility near
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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,
2013 |
June 30,
2012(*) |
June 30,
2013 |
June 30,
2012(*) |
||||||||||||||
Net sales | $ | 75,931 | $ | 96,109 | $ | 285,282 | $ | 355,870 | |||||||||
Cost of goods sold | 55,308 | 67,863 | 205,257 | 234,238 | |||||||||||||
Gross profit | 20,623 | 28,246 | 80,025 | 121,632 | |||||||||||||
Marketing, engineering and administrative expenses |
17,104 |
19,339 |
67,899 |
73,091 |
|||||||||||||
Impairment charge | 1,405 | 3,670 | 1,405 | 3,670 | |||||||||||||
Restructuring of operations | 708 | - | 708 | - | |||||||||||||
Earnings from operations | 1,406 | 5,237 | 10,013 | 44,871 | |||||||||||||
Interest expense | 434 | 346 | 1,435 | 1,475 | |||||||||||||
Other income, net | (636 | ) | (887 | ) | (659 | ) | (1,360 | ) | |||||||||
Earnings before income taxes and noncontrolling interest |
1,608 |
5,778 |
9,237 |
44,756 |
|||||||||||||
Income taxes | 1,435 | 4,425 | 4,986 | 17,815 | |||||||||||||
Net earnings | 173 | 1,353 | 4,251 | 26,941 | |||||||||||||
Less: Net earnings attributable to | |||||||||||||||||
noncontrolling interest, net of tax | (126 | ) | (90 | ) | (369 | ) | (198 | ) | |||||||||
Net earnings attributable to |
$ | 47 | $ | 1,263 | $ | 3,882 | $ | 26,743 | |||||||||
Earnings per share data: | |||||||||||||||||
Basic earnings per share attributable
to |
$ |
0.00 |
$ |
0.11 |
$ |
0.34 |
$ |
2.34 |
|||||||||
Diluted earnings per share attributable
to |
$ |
0.00 |
$ |
0.11 |
$ |
0.34 |
$ |
2.31 |
|||||||||
Weighted average shares outstanding data: | |||||||||||||||||
Basic shares outstanding | 11,236 | 11,384 | 11,304 | 11,410 | |||||||||||||
Diluted shares outstanding | 11,311 | 11,534 | 11,377 | 11,556 | |||||||||||||
Dividends per share | $ | 0.09 | $ | 0.09 | $ | 0.36 | $ | 0.34 | |||||||||
Comprehensive income (loss): | |||||||||||||||||
Net earnings | $ | 173 | $ | 1,353 | $ | 4,251 | $ | 26,941 | |||||||||
Other comprehensive (loss) income: | |||||||||||||||||
Foreign currency translation adjustment |
(2,073 | ) | (5,446 | ) | 447 | (11,738 | ) | ||||||||||
Benefit plan adjustments, net | 6,326 | (12,993 | ) | 8,322 | (11,690 | ) | |||||||||||
Comprehensive income (loss) | 4,426 | (17,086 | ) | 13,020 | 3,513 | ||||||||||||
Comprehensive income attributable to noncontrolling interest |
(126 |
) |
(90 |
) |
|
(369 |
) |
(198 |
) |
||||||||
Comprehensive income (loss) attributable to |
$ |
4,300 |
$ |
(17,176 |
) |
$ |
12,651 |
$ |
3,315 |
||||||||
(*) Includes revisions to correct previously reported amounts. As
previously reported, the Company's review of its reserve for uncertain
tax positions identified errors that affected prior periods. The effect
of the errors was not material to any previously issued financial
statements, however, the cumulative effect of correcting the errors in
the current year would have been material to fiscal year 2013.
Therefore, the Company revised its prior period financial statements. As
part of this revision, the Company recorded other previously disclosed
out-of-period adjustments, which were immaterial, in the periods in
which the errors originated. The aggregate impact was to decrease net
earnings for the three months ended
RECONCILIATION OF CONSOLIDATED NET EARNINGS TO EBITDA
(In thousands; unaudited) |
||||||||||||
Three Months Ended |
Twelve Months Ended |
|||||||||||
June 30,
2013 |
June 30,
2012(*) |
June 30,
2013 |
June 30,
2012(*) |
|||||||||
Net earnings attributable to |
$ | 47 | $ | 1,263 | $ | 3,882 | $ | 26,743 | ||||
Interest expense | 434 | 346 | 1,435 | 1,475 | ||||||||
Income taxes | 1,435 | 4,425 | 4,986 | 17,815 | ||||||||
Depreciation and amortization | 2,813 | 2,746 | 10,838 | 10,756 | ||||||||
Earnings before interest, taxes,
depreciation and amortization |
$ | 4,729 | $ | 8,780 | $ | 21,141 | $ | 56,789 | ||||
(*) Includes revisions to previously reported amounts.
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(In thousands; unaudited) | ||||||||
|
|
|||||||
2013 | 2012(*) | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash | $ | 20,724 | $ | 15,701 | ||||
Trade accounts receivable, net | 46,331 | 63,438 | ||||||
Inventories, net | 102,774 | 103,178 | ||||||
Deferred income taxes | 4,176 | 3,745 | ||||||
Other | 10,472 | 11,099 | ||||||
Total current assets | 184,477 | 197,161 | ||||||
Property, plant and equipment, net | 62,315 | 66,356 | ||||||
Goodwill, net | 13,232 | 13,116 | ||||||
Deferred income taxes | 7,975 | 14,335 | ||||||
Intangible assets, net | 3,149 | 4,996 | ||||||
Other assets | 10,676 | 7,868 | ||||||
TOTAL ASSETS | $ | 281,824 | $ | 303,832 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Short-term borrowings and current maturities of long-term debt | $ | 3,681 | $ | 3,744 | ||||
Accounts payable | 20,651 | 23,550 | ||||||
Accrued liabilities | 36,064 | 39,331 | ||||||
Total current liabilities | 60,396 | 66,625 | ||||||
Long-term debt | 23,472 | 28,401 | ||||||
Accrued retirement benefits | 48,290 | 64,009 | ||||||
Deferred income taxes | 2,398 | 3,340 | ||||||
Other long-term liabilities | 3,706 | 4,948 | ||||||
Total liabilities | 138,262 | 167,323 | ||||||
|
||||||||
Common shares authorized: 30,000,000; | ||||||||
Issued: 13,099,468; no par value | 13,183 | 12,759 | ||||||
Retained earnings | 184,110 | 184,306 | ||||||
Accumulated other comprehensive loss | (25,899 | ) | (34,797 | ) | ||||
171,394 | 162,268 | |||||||
Less treasury stock, at cost
(1,886,516 and 1,794,981 shares, respectively) |
28,890 |
26,781 |
||||||
Total |
142,504 | 135,487 | ||||||
Noncontrolling interest | 1,058 | 1,022 | ||||||
Total equity | 143,562 | 136,509 | ||||||
TOTAL LIABILITIES AND EQUITY | $ | 281,824 | $ | 303,832 | ||||
(*) Includes revisions to correct previously reported amounts resulting
in an increase of
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||
(In thousands; unaudited) |
||||
Twelve Months Ended | ||||
June 30,
2013 |
June 30,
2012(*) |
|||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||
Net earnings |
|
|
||
Adjustments to reconcile net earnings to net cash provided by operating activities: |
||||
Depreciation and amortization | 10,838 | 10,756 | ||
Loss on sale of plant assets | 287 | 315 | ||
Impairment charge | 1,405 | 3,670 | ||
Stock compensation expense | 615 | 1,642 | ||
Restructuring of operations | 708 | 295 | ||
Provision for deferred income taxes | (38) | 7,486 | ||
Net change in working capital, excluding cash and debt, and other | 6,410 | (36,661) | ||
Net cash provided by operating activities | 24,476 | 14,444 | ||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||
Proceeds from sale of plant assets | 315 | 116 | ||
Acquisitions of plant assets | (6,582) | (13,733) | ||
Other, net | (231) | (293) | ||
Net cash used by investing activities | (6,498) | (13,910) | ||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||
Proceeds from notes payable | 32 | 3 | ||
Payments of notes payable | (96) | (145) | ||
(Payments of) proceeds from long-term debt | (4,932) | 2,590 | ||
Proceeds from exercise of stock options | 189 | 169 | ||
Acquisition of treasury stock | (3,069) | (2,425) | ||
Dividends paid to shareholders | (4,079) | (3,886) | ||
Dividends paid to noncontrolling interest | (204) | (131) | ||
Excess tax benefits from stock compensation | 1,451 | 535 | ||
Other | (1,699) | (184) | ||
Net cash used by financing activities | (12,407) | (3,474) | ||
Effect of exchange rate changes on cash | (548) | (1,526) | ||
Net change in cash | 5,023 | (4,466) | ||
Cash: | ||||
Beginning of period | 15,701 | 20,167 | ||
End of period |
|
|
||
(*) Includes corrections to previously reported amounts, resulting in a reclassification within Net cash used by operating activities.
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