1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K Current Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of Earliest Event Reported) January 24, 2006 ------------------ Twin Disc, Incorporated -------------------------------------- (exact name of registrant as specified in its charter) WISCONSIN 39-0667110 ------------- --------------- (State or other jurisdiction of (IRS Employer Identification No.) incorporation or organization) 1328 Racine Street Racine, Wisconsin 53403 - -------------------------------------------------------- (Address of principal executive offices) Registrant's telephone number, including area code: (262)638-4000 ------------- - ----------------------------------------------------------------------- Item 2.02. Results of Operation and Financial Condition Twin Disc, Inc. has reported its 2nd quarter 2006 financial results. The Company's press release dated January 24, 2006 announcing the results is attached hereto as Exhibit 99.1 and is incorporated herein in its entirety by reference. The information in this Current Report is being furnished pursuant to Items 9 and 12 of Form 8-K and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and Section 11 of the Securities Act of 1933, as amended, or otherwise subject to the liabilities of those sections. The Current Report will not be deemed an admission by the Company as to the materiality of any information in this report that is required to be disclosed solely by Items 9 or 12. The Company does not undertake a duty to update the information in this Current Report and cautions that the information included in this Current Report is current only as of January 24, 2005, and may change thereafter. Item 9.01 Financial Statements and Exhibits. (c) Exhibits. Exhibit 99 Twin Disc, Incorporated's 2nd quarter 2006 financial results. - ------------------------------------------------------------------------------ SIGNATURE Pursuant to the requirements of section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. January 24, 2006 Twin Disc, Inc. /s/ Christopher J. Eperjesy ----------------------------- Christopher J. Eperjesy VP - Finance, CFO and Secretary
1 FOR IMMEDIATE RELEASE Contact: Christopher J. Eperjesy (262) 638-4343 TWIN DISC, INC., ANNOUNCES HIGHER FISCAL 2006 SECOND-QUARTER FINANCIAL RESULTS Second-Quarter Diluted EPS Up 121.1% First-Half Diluted EPS Up 123.7% Backlog Up Significantly Management Confident About 2006 RACINE, WISCONSIN-January 24, 2006-Twin Disc, Inc. (NASDAQ: TWIN), today reported financial results for the fiscal 2006 second quarter and first half ended December 31, 2005. Sales for the quarter ended December 31, 2005, improved 4.2 percent to $57,051,000 from $54,731,000 in the same period a year ago. Year to date, sales increased 6.5 percent to $106,628,000 from $100,113,000 in the fiscal 2005 first half. Sales continue to benefit from strong demand across all the markets the Company serves, especially from its oilfield, military, and commercial marine customers. Gross margin as a percentage of sales increased 2.6 percentage points to 28.1 percent from 25.5 percent in last year's comparable period. For the fiscal 2006 first half, gross margin as a percentage of sales increased 2.9 percentage points to 28.5 percent from 25.6 percent in the same period last year. The increase in gross margins is a result of a shift in product mix to higher margin items, selective price increases, improved absorption due to higher volume at the Company's domestic manufacturing operation, and previously announced cost reduction programs. Net earnings for the second quarter increased 123.6 percent, or $1,376,000, to $2,489,000, or $0.84 per diluted share, compared with $1,113,000, or $0.38 per diluted share, for the fiscal 2005 second quarter. For the fiscal 2006 first half, net earnings increased 127.1 percent to $4,974,000, or $1.70 per diluted share, compared with $2,190,000, or $0.76 per diluted share, in the fiscal 2005 first half. Commenting on the results, Michael E. Batten, Chairman and Chief Executive Officer, said, "Fiscal 2006 is turning out to be one of the best years in the Company's 87 year history. We are extremely pleased with the positive momentum as this was the best second quarter of sales since 1982, and the best second quarter for net earnings since 1989. With our trailing twelve-month sales and earnings now at $224,987,000 and $3.31 per diluted share, respectively, we are confident about the financial outlook for fiscal 2006. We are encouraged with our financial growth and are seeking acquisitions to further expand our internal businesses." Christopher J. Eperjesy, Vice President, Chief Financial Officer and Secretary, stated, "The Company's balance sheet remains firm. At the end of the second quarter, working capital increased 27.5 percent to $55,608,000. Our accounts receivable and accounts payable decreased 10.9 percent and 17.7 percent, respectively. With our six-month backlog up 40.0 percent since June 30, 2005, our inventories were up only 13.0. Further, over the past five years, over half of our sales and significantly more than half of our income came in the second half of the year. Shareholders' equity now stands at $69,879,000, an increase of 4.5 percent from $66,899,000 at June 30, 2005." Mr. Batten concluded, "Our backlog of orders to be shipped over the next six months is approximately $87,000,000, up over 60.0 percent compared with the same period a year ago. Based on our expanding backlog, strong margins, business mix and favorable industry dynamics, Twin Disc is well positioned to continue to expand sales and earnings throughout the year." Twin Disc designs, manufactures and sells heavy-duty off-highway power transmission equipment. Products offered include: marine transmissions, surface drives and propellers; power-shift transmissions; power take-offs and reduction gears; industrial clutches; and control systems. The Company sells its products to customers primarily in the marine, industrial equipment, government, energy and natural resources, and agricultural markets.
2 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 Company intends that such forward-looking statements be subject to the safe harbors created thereby. All forward-looking statements are based on current expectations regarding important risk factors including those identified in the Company's most recent periodic report and other filings with the Securities and Exchange Commission. Accordingly, actual results may differ materially from those expressed in the forward-looking statements, and 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. --Financial Results Follow-- CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per-share data; unaudited) Three Months Ended Six Months Ended December 31, December 31, 2005 2004 2005 2004 ---- ---- ---- ---- Net sales $57,051 $54,731 $106,628 $100,113 Cost of goods sold 41,028 40,793 76,201 74,523 ------ ------ ------ ------ Gross profit 16,023 13,938 30,427 25,590 Marketing, engineering and administrative expenses 11,489 11,261 21,637 20,770 Interest expense 399 291 715 510 Other expense (Income), net (47) 185 (101) 141 ------- ------ ------- ------ Earnings before income taxes and minority interest 4,182 2,201 8,176 4,169 Income taxes 1,671 1,045 3,137 1,911 Minority interest 22 43 65 68 ----- ----- ----- ----- Net earnings $2,489 $1,113 $4,974 $2,190 ------ ------ ------ ------ ------ ------ ------ ------ Earnings per share: Basic $ 0.86 $ 0.39 $ 1.73 $ 0.77 Diluted $ 0.84 $ 0.38 $ 1.70 $ 0.76 Average shares outstanding: Basic 2,888 2,859 2,877 2,848 Diluted 2,950 2,907 2,934 2,895 Dividends per share $0.175 $0.175 $ 0.35 $ 0.35 CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except per-share data; unaudited) December 31, June 30, 2005 2005 ---- ----- ASSETS Current assets: Cash and cash equivalents $11,493 $11,614 Trade accounts receivable, net 33,623 37,751 Inventories, net 54,778 48,481 Deferred income taxes 6,944 5,514 Other 2,437 3,423 ------- ------- Total current assets 109,275 106,783 Property, plant and equipment, net 38,771 40,331 Goodwill 12,591 12,854 Deferred income taxes 14,680 16,230 Other assets 9,026 9,097 ------ ------ $184,343 $185,295 -------- -------- -------- -------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Notes payable $831 $3,522 Current maturities on long-term debt 2,854 2,849 Accounts payable 17,897 21,746 Accrued liabilities 32,085 35,050
3 ------ ------ Total current liabilities 53,667 63,167 Long-term debt 21,631 14,958 Accrued retirement benefits 38,639 39,680 ------ ------ 113,937 117,805 Minority interest 527 591 Shareholders' equity: Common stock 11,653 11,653 Retained earnings 93,277 89,316 Unearned Compensation (135) (203) Accumulated other comprehensive loss (19,478) (17,567) -------- -------- 85,317 83,199 Less treasury stock, at cost 15,438 16,300 ------ ------ Total shareholders' equity 69,879 66,899 ------ ------ $184,343 $185,295 -------- -------- -------- --------