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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) July 31, 2007
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Twin Disc,
Incorporated
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(exact name of registrant as specified in its charter)
| WISCONSIN | 001-7635 | 39-0667110 | ||
| --------- | -------- | ----------- | ||
| (State or other jurisdiction | (Commission | (IRS Employer | ||
| of incorporation) | File Number) | Identification No.) |
1328 Racine Street Racine, Wisconsin 53403
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(Address of
principal executive offices)
| Registrant's telephone number, including area code: | (262)638-4000 | |
| ------------- |
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Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| [ ] | Written communications pursuant to Rule 425 under the Securities Act (17CFR 230.425) | |
| [ ] | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
| [ ] | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 24014d-2(b)) | |
| [ ] | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |
Item 2.02 Results of Operations and Financial Condition
The Company has reported its 4th quarter 2007 financial results. The Company's press release dated July 31, 2007 announcing the results is attached hereto as Exhibit 99.1 and is incorporated herein in its entirety by reference.
The information set forth in this Item 2.02 of Form 8-K, including Exhibit 99.1, is furnished pursuant to Item 2.02 and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
Item 7.01
Regulation FD Disclosure
The information set forth under Item 2.02 of this report is incorporated herein by reference solely for the purposes of this Item 7.01.
The information set forth in this Item 7.01 of Form 8-K is furnished pursuant to Item 7.01 and shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.
FORWARD LOOKING STATEMENTS
The disclosures in this report on Form 8-K and in the documents incorporated herein by reference contain or may contain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. The words “believes,” “expects,” “intends,” “plans,”
“anticipates,” “hopes,” “likely,” “will,” and similar expressions identify such forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause the actual results, performance or achievements of the Company (or entities in which the Company has interests), or industry results, to differ materially from future results, performance or achievements expressed or implied by such forward-looking statements. Certain factors that could cause the Company’s actual future results to differ materially from those discussed are noted in connection with such statements, but other unanticipated factors could arise. Readers are cautioned not to place undue reliance on these forward-looking statements which reflect management’s view only as of the date of this Form 8-K. The Company undertakes no obligation to publicly release any revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, conditions or circumstances.
| Item | 9.01 | Financial Statements and Exhibits | ||
| (c) | Exhibits. | |||
EXHIBIT NUMBER DESCRIPTION
99.1 Press Release announcing 4th quarter 2007 financial results.
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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.
Date: July 31, 2007 Twin Disc, Inc.
/s/ CHRISTOPHER J. EPERJESY
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Vice Present – Finance, Chief Financial Officer and Secretary
FOR
IMMEDIATE RELEASE
Contact: Christopher J.
Eperjesy
(262)
638-4343
TWIN DISC, INC., ANNOUNCES RECORD FINANCIAL RESULTS
Fiscal 2007 Net Earnings up 51.2% to $21,852,000
Fiscal 2007 Sales up 30.4% to $317,200,000
Management is Optimistic for Fiscal 2008
RACINE, WISCONSIN—July 31, 2007—Twin Disc, Inc. (NASDAQ: TWIN), today reported financial results for the fiscal 2007 fourth quarter and fiscal year ended June 30, 2007. The Company reported record sales and net earnings for fiscal 2007.
Sales for the quarter ended June 30, 2007 improved 25.2 percent to $90,782,000 from $72,534,000 in the same period a year ago. Sales for fiscal 2007 increased 30.4 percent to $317,200,000 from $243,287,000 for fiscal 2006. The BCS Group acquisition contributed $11,116,000 to net sales in the fiscal 2007 fourth quarter and $33,118,000 to full-year sales. The net year-over-year translation effect of the change in foreign currency exchange rates was to increase sales by $1,986,000 in the fiscal 2007 fourth quarter and $7,515,000 for the full year when compared to the same periods in fiscal 2006. Sales continued to benefit from strong demand across all the markets the Company serves, especially from its oil, commercial marine, propulsion systems and military customers.
Gross profit, as a percentage of 2007 fourth-quarter sales, remained flat at 33.1 percent. The net impact of the change in foreign currency exchange rates was to increase gross profit by $337,000 in the fiscal 2007 fourth quarter. This represents the net impact of favorable foreign currency translation of $636,000 and the unfavorable margin impact of a strengthening Euro on the US dollar sales of our Belgian manufacturing operation of $299,000.
Gross profit, as a percentage of fiscal 2007 sales, increased 1.8 percentage points to 32.4 percent from 30.6 percent last fiscal year. The net impact of the change in foreign currency exchange rates was to increase gross profit by $952,000 in fiscal 2007 compared to fiscal 2006. This represents the net impact of favorable foreign currency translation of $2,325,000 and the unfavorable margin impact of a strengthening Euro on the US dollar sales of our Belgian manufacturing operation of $1,373,000. For the year, profitability continued to improve from higher sales volumes, the implementation of cost reduction and outsourcing programs, manufacturing efficiencies, a better product mix, and selective price increases.
more…
Page 2, Twin
Disc, Inc.
Net earnings for the fiscal 2007 fourth quarter decreased 11.6 percent to $5,001,000, or $0.83 per diluted share, compared with $5,660,000, or $0.95 per diluted share, for the fiscal 2006 fourth quarter. Net earnings for the quarter were unfavorably impacted by the following items: (1) an after-tax restructuring charge at the Company’s Belgian operation of $1,751,000, or $0.29 per diluted share, (2) an after-tax write-off of an impaired intangible asset of $366,000, or $0.06 per diluted share, and (3) an after-tax increase in the Company’s accrual for executive stock-based compensation versus the fourth quarter of fiscal 2006 of $740,000, or $0.12 per diluted share, primarily due to an increase in the Company’s stock price in the fiscal fourth quarter of 2007. These items were somewhat offset by a favorable tax benefit booked in the quarter of $877,000, or $0.15 per diluted share, as a result of a research and development tax credit project completed by the Company in fiscal 2007.
Year-to-date, earnings increased 51.2 percent to $21,852,000, or $3.68 per diluted share, from last year’s $14,453,000, or $2.43 per diluted share. Net earnings for the full fiscal year were unfavorably impacted by the following items: (1) an after-tax restructuring charge at the Company’s Belgian operation of $1,751,000, or $0.29 per diluted share, (2) an after-tax write-off of an impaired intangible asset of $366,000, or $0.06 per diluted share, and (3) an after-tax increase in the Company’s accrual for executive stock-based compensation versus fiscal year 2006 of $1,347,000, or $0.23 per diluted share, primarily due to an increase in the Company’s stock price in fiscal 2007. These items were somewhat offset by a favorable tax benefit booked in the third and fourth quarters of $1,077,000, or $0.18 per diluted share, as a result of a research and development tax credit project completed by the Company in fiscal 2007.
For the fiscal 2007 fourth quarter and full year, the recently acquired BCS Group companies added $0.16 and $0.32, respectively, to diluted earnings per share. As previously announced, the Company had unfavorable non-cash, non-recurring purchase accounting adjustments to inventory in the first six months of fiscal 2007 that reduced after-tax earnings by $733,000, or $0.12 per diluted share. The effect of these adjustments was to reduce gross margin as a percentage of sales by 0.4 percentage points for the fiscal year.
Earnings before interest, taxes, depreciation and amortization (EBITDA)* grew from $30,507,000, or 12.5 percent of sales, for fiscal year 2006, to $44,531,000, or 14.0 percent of sales for fiscal 2007. The year-over-year growth can be attributed to the significant increase in operating profitability in fiscal 2007, including the effect of the recently acquired BCS Group. This was somewhat offset by the unfavorable items noted above that were booked in fiscal 2007.
Commenting on the results, Michael E. Batten, Chairman, President and Chief Executive Officer, said, “Fiscal 2007 represented the best operating year in the Company’s 88 year history. We are proud of this achievement and of the hard work all of our associates have accomplished over the past year. The fiscal 2007 fourth quarter represents the 14th consecutive quarter of year-over-year quarterly increases in sales. Although there were a number of unfavorable items that impacted our net earnings for fiscal 2007, we are pleased with the Company’s ability to drive profitable growth. The positive contribution of the BCS Group companies exceeded our expectations and we are working hard to strengthen our Belgian manufacturing operation. We are optimistic the Belgian operation can achieve annual pre-tax savings between $1,000,000 - $1,200,000 within the next three years, as a result of the previously announced fourth quarter restructuring.”
Page 3, Twin Disc, Inc.
Christopher J. Eperjesy, Vice President - Finance, Chief Financial Officer and Secretary, stated, “Our balance sheet remains strong, as a result of our positive financial results and financial management. Our cash and cash equivalents increased 18.8 percent to $19,508,000, at June 30, 2007. Total debt at June 30, 2007 increased $1,708,000, or 4.0 percent to $43,920,000 from $42,212,000 at June 30, 2006. We are pleased that compared to the period ended March 30, 2007, total debt decreased $11,258,000, as a result of strong operating cash flows. We spent $15,681,000 in capital expenditures for the year, compared to $8,385,000 for fiscal 2006. We expect to spend a similar amount in fiscal 2008 as the Company continues to invest in modernizing its equipment and facilities. Working capital for the year ended June 30, 2007 increased 32.1 percent to $94,475,000, primarily driven by increases in inventories and accounts receivables, as a result of the significant increase in sales and order activities.”
Mr. Batten concluded, “With our six-month backlog at $110,357,000 (which includes backlog of $10,898,000 from BCS), the preliminary outlook for fiscal 2008 is encouraging. While this number is down from the record six-month backlog at March 30, 2007 of $118,397,000, our backlog is up significantly from $91,598,000 at June 30, 2006. The reduction in the six-month backlog versus the end of the third fiscal quarter can partially be attributed to the reduction we were able to achieve in our past due backlog at our domestic manufacturing operation. Historically, a seasonal decrease in the last quarter of the fiscal year is not unusual. While we expect our growth rates to moderate somewhat for fiscal 2008, we remain optimistic that we will continue to see positive trends in the marine- and land-based oil and gas, defense, and mega-yacht markets.”
Twin Disc will be hosting a conference call today (July 31, 2007) to discuss these results and to answer questions at 2:00 p.m. EDT. To participate in the conference call, please dial 888-339-9446 five to 10 minutes before the call is scheduled to begin. A replay will be available from 5:00 p.m. July 31, 2007 until midnight on August 7, 2007. The number to hear the teleconference replay is 800-406-7325. The access code for the replay is 3758696.
The conference call will also be broadcast live over the Internet. To listen to the call via the Internet, access Twin Disc's website at http://www.twindisc.com/companyinvestor.aspx and follow the instructions at the web cast link. The archived web cast will be available shortly after the call on the Company's website.
About Twin Disc, Inc.
Twin Disc, Inc. designs, manufactures and sells marine and heavy-duty off-highway power transmission equipment. Products offered include: marine transmissions, 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.
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 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
Page 4, Twin
Disc, Inc.
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.
*Non-GAAP
Financial Disclosures
Financial information excluding the impact of foreign currency exchange rate changes and the impact of acquisitions 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--
Page 5, Twin Disc, Inc.
| CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
| (In thousands, except per-share data; unaudited) | ||||
| Three Months Ended | Fiscal Year Ended | |||
| June 30, | June 30, | June 30, | June 30, | |
| 2007 | 2006 | 2007 | 2006 | |
| Net sales | $90,782 | $72,534 | $317,200 | $243,287 |
| Cost of goods sold | 60,760 | 48,477 | 214,291 | 168,897 |
| Gross profit | 30,022 | 24,057 | 102,909 | 74,390 |
| Marketing, engineering and | ||||
| administrative expenses | 19,174 | 14,816 | 63,267 | 49,606 |
| Restructuring of operations | 2,652 | 0 | 2,652 | 0 |
| Interest expense | 801 | 582 | 3,154 | 1,718 |
| Interest income | (160) | (146) | (443) | (302) |
| Other expense (income), net | 195 | 227 | (50) | 316 |
| Earnings before income | ||||
| taxes and minority interest | 7,360 | 8,578 | 34,329 | 23,052 |
| Income taxes | 2,300 | 2,888 | 12,273 | 8,470 |
| Minority interest | (59) | (30) | (204) | (129) |
| Net earnings | $5,001 | $5,660 | $ 21,852 | $ 14,453 |
| Earnings per share: | ||||
| Basic | $0.86 | $0.98 | $ 3.76 | $ 2.51 |
| Diluted | $0.83 | $0.95 | $ 3.68 | $ 2.43 |
| Average shares outstanding: | ||||
| Basic | 5,817 | 5,785 | 5,810 | 5,767 |
| Diluted | 6,035 | 5,979 | 5,939 | 5,941 |
| Dividends per share | $0.110 | $0.095 | $ 0.410 | $ 0.365 |
| #### | ||||
| Page 6, Twin Disc, Inc. | ||||
| CONDENSED CONSOLIDATED BALANCE SHEETS | ||||
| (In thousands; unaudited) | ||||
| June 30, | June 30, | |||
| 2007 | 2006 | |||
| ASSETS | ||||
| Current assets: | ||||
| Cash and cash equivalents | $19,508 | $16,427 | ||
| Trade accounts receivable, net | 63,277 | 55,963 | ||
| Inventories, net | 76,253 | 65,081 | ||
| Deferred income taxes | 6,046 | 5,780 | ||
| Other | 8,156 | 7,880 | ||
| Total current assets | 173,240 | 151,131 | ||
| Property, plant and equipment, net | 56,810 | 46,958 | ||
| Goodwill | 17,171 | 15,304 | ||
| Deferred income taxes | 3,771 | 4,152 | ||
| Intangible assets, net | 9,352 | 12,211 | ||
| Other assets | 6,840 | 6,416 | ||
| $267,184 | $236,172 | |||
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||||
| Current liabilities: | ||||
| Bank overdraft | $ - | $3,194 | ||
| Notes payable | - | 16 | ||
| Current maturities on long-term debt | 615 | 633 | ||
| Accounts payable | 28,896 | 27,866 | ||
| Accrued liabilities | 49,254 | 47,912 | ||
| Total current liabilities | 78,765 | 79,621 | ||
| Long-term debt | 43,305 | 38,369 | ||
| Accrued retirement benefits | 26,392 | 28,065 | ||
| Other long-term liabilities | 2,640 | 312 | ||
| 151,102 | 146,367 | |||
| Minority interest | 645 | 572 | ||
| Shareholders' equity: | ||||
| Common stock | 13,304 | 11,777 | ||
| Retained earnings | 121,109 | 101,652 | ||
| Accumulated other comprehensive loss | ( 4,493) | ( 9,166) | ||
| 129,920 | 104,263 | |||
| Less treasury stock, at cost | 14,483 | 15,030 | ||
| Total shareholders' equity | 115,437 | 89,233 | ||
| $267,184 | $236,172 | |||
| #### | ||||
Page 7, Twin Disc, Inc
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||
| (In thousands; unaudited) | ||
| June 30, | June 30, | |
| 2007 | 2006 | |
| CASH FLOWS FROM OPERATING ACTIVITIES: | ||
| Net earnings | $21,852 | $14,453 |
| Adjustments to reconcile net earnings | ||
| to net cash provided by operating activities | ||
| Depreciation and amortization | 7,252 | 5,866 |
| Write-off of impaired asset | 600 | - |
| Gain on sale of plant assets | 71 | 456 |
| Minority interest | 73 | 129 |
| Loss on restructuring of operations | 2,652 | - |
| Stock-based compensation | 1,075 | 784 |
| Provision for deferred income taxes | 466 | 2,758 |
| Changes in operating assets and liabilities: | ||
| Trade accounts receivable, net | (6,087) | (4,151) |
| Inventories, net | (8,988) | (6,933) |
| Other assets | (21) | (1,883) |
| Accounts payable | 642 | 2,209 |
| Accrued liabilities | 7,440 | 7,318 |
| Accrued/prepaid retirement benefits | (10,283) | (2,729) |
| Net cash provided by operating activities | 16,744 | 18,277 |
| Cash flows from investing activities: | ||
| Proceeds from sale of plant assets | 114 | 240 |
| Acquisition of plant assets | (15,681) | (8,385) |
| Acquisition of affiliate, net of cash acquired | - | (20,330) |
| Net cash used by investing activities | (15,567) | (28,475) |
| Cash flows from financing activities: | ||
| Bank overdraft | (3,194) | (562) |
| (Decrease) increase in notes payable, net | (669) | 21,518 |
| Proceeds from (payments of) long-term debt | 5,525 | (4,500) |
| Proceeds from exercise of stock options | 273 | 1,027 |
| Acquisition of treasury stock | (51) | (214) |
| Dividends paid | (2,395) | (2,117) |
| Other | 777 | (92) |
| Net cash provided by financing activities | 266 | 15,060 |
| Effect of exchange rate changes on cash | 1,638 | (49) |
| Net change in cash and cash equivalents | 3,081 | 4,813 |
| Cash and cash equivalents: | ||
| Beginning of year | 16,427 | 11,614 |
| End of year | 19,508 | 16,427 |
| Supplemental cash flow information: | ||
| Cash paid during the year for: | ||
| Interest | 3,048 | 1,391 |
| Income taxes | 8,030 | 7,565 |
| #### | ||
Page 8, Twin
Disc, Inc
RECONCILIATION OF CONSOLIDATED NET EARNINGS TO EBITDA
(In thousands; unaudited)
| Three Months Ended | Fiscal Year Ended | |||
| June 30, | June 30, | June 30, | June 30, | |
| 2007 | 2006 | 2007 | 2006 | |
| Net earnings | $ 5,001 | $ 5,660 | $21,852 | $ 14,453 |
| Income taxes | 2,300 | 2,888 | 12,273 | 8,470 |
| Interest expense | 801 | 582 | 3,154 | 1,718 |
| Depreciation and amortization | 2,048 | 1,757 | 7,252 | 5,866 |
| Earnings before interest, taxes, | ||||
| depreciation and amortization | $10,150 | $10,887 | $44,531 | $30,507 |
| #### | ||||