Press Release

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Nov 04, 2022
Twin Disc, Inc. Announces Fiscal 2023 First Quarter Financial Results
  • First quarter sales up 17.1% year-over-year and are up 27.2% on a constant currency1 basis
  • Six-month backlog of $108.9 million at September 30, 2022, up 7.6% from June 30, 2022 and up 26.5% from September 24, 2021
  • Management optimistic financial and operating results will accelerate throughout fiscal year 2023

RACINE, Wis., Nov. 04, 2022 (GLOBE NEWSWIRE) --  Twin Disc, Inc. (NASDAQ: TWIN), today reported financial results for the fiscal 2023 first quarter ended September 30, 2022.

Sales for the fiscal 2023 first quarter were $55.9 million, compared to $47.8 million for the same period last year. The 17.1% increase in 2023 first quarter sales was primarily due to improving demand within the Company’s global oil and gas, industrial and marine markets compared to the same period last fiscal year. The positive impact of improving market conditions was partially offset by global supply chain challenges, which continued to limit sales growth during the fiscal 2023 first quarter. Foreign currency exchange had a $4.8 million negative impact on fiscal 2023 first quarter sales. On a constant currency1 basis first quarter sales increased 27.2%.   The strengthening of the U.S. dollar has also negatively impacted the Company’s competitiveness on U.S. produced goods sold into Europe.

John H. Batten, President and Chief Executive Officer, commented: “Trends across our global markets are recovering, and helped drive solid year-over-year sales growth during the first quarter, despite continued supply chain issues and the impact of foreign currency exchange rates. Continued supply chain challenges and higher component costs had a material impact on our European operations’ profitability during the first quarter. We are taking quick and decisive actions to improve performance, focusing resources on supply chain issues and reducing our European cost structure. We expect these actions will improve our gross profit margin throughout the remainder of fiscal year 2023.”

“Our six-month backlog at September 30, 2022, was $108.9 million, compared to $86.1 million at September 24, 2021, and $101.2 million at June 30, 2022. Our growing backlog is supported by strengthening demand across many of our global markets as well as new, market-leading transmission and power control systems for hybrid, hydrogen, and electric vehicle applications. In addition, we continue to anticipate renewed investments from North American pressure pumping operators will benefit our financial results during fiscal year 2023. While we are disappointed by first quarter profitability, we expect sales and profitability to improve throughout the remainder of the year and we believe fiscal 2023 will be a year of robust sales growth and higher profitability,” concluded Mr. Batten.

Gross profit percent for the fiscal 2023 first quarter was 23.8%, compared to 28.2% in the fiscal 2022 first quarter. However, fiscal 2022 first quarter gross profit margin included the favorable impact of the Employee Retention Credit (“ERC”), a COVID-19 relief program of the U.S. government, recorded in the fiscal 2022 first quarter of $1.3 million, the impact of the NOW subsidy of $0.7 million, a COVID-19 relief program of the Netherlands government and a favorable adjustment to the Company’s warranty reserve ($0.5 million). Adjusting for these items, the prior year gross profit percent would have been 22.9%. The slight improvement in the current year first quarter reflects the impact of additional volume and strong North American demand for oil and gas related products, partially offset by the negative impact of inflation, primarily at our European operations.

For the fiscal 2023 first quarter, marketing, engineering and administrative (ME&A) expenses increased $2.0 million to $15.1 million, compared to $13.1 million for the fiscal 2022 first quarter. The increase in ME&A expenses in the quarter was primarily due to the incremental impact of prior year COVID subsidies in the U.S. and the Netherlands ($0.8 million), increased marketing activities ($0.4 million), higher salary expense ($0.5 million), the accrual for the global bonus program ($0.3 million), travel costs ($0.2 million), professional fees ($0.3 million) and other inflationary impacts ($0.4 million). These increases were partially offset by a foreign currency translation impact of $0.9 million.   As a percent of revenues, ME&A expenses decreased to 27.0% for the fiscal 2023 first quarter, compared to 27.4% for the same period last year.

During the fiscal 2022 first quarter, Twin Disc completed a sale leaseback of its Rolla production facility in Switzerland for net proceeds of $9.1 million, which resulted in a gain of $2.9 million and was recorded in other operating income for the full year period.

The fiscal 2023 first quarter effective tax rate was 26.3% compared to 16.2% in the prior fiscal year first quarter. The mix of foreign earnings by jurisdiction resulted in the increase to the effective tax rate.

Net loss attributable to Twin Disc for the fiscal 2023 first quarter was ($2.0) million or ($0.15) per share, compared to net income attributable to Twin Disc of $1.9 million or $0.14 per diluted share for the prior fiscal year first quarter.  

Earnings before interest, taxes, depreciation, and amortization (EBITDA)* was essentially break even for the fiscal 2023 first quarter, compared to $5.4 million for the fiscal 2022 first quarter.  

Jeffrey S. Knutson, Vice President – Finance, Chief Financial Officer, Treasurer and Secretary stated, “Challenging supply chain and shipping conditions continued to impact inventory levels during the first quarter, and reducing inventory is a key priority during fiscal 2023. We continue to believe we will generate higher levels of positive operating cash flow during fiscal 2023 as our growing backlog converts to sales, we pursue actions that improve profitability and ease supply chain challenges. As free cash flow is expected to improve during the remainder of fiscal 2023, we will allocate capital to pay down debt, strengthen our balance sheet, and invest in our operations and growth initiatives.”

Twin Disc will be hosting a conference call to discuss these results and to answer questions at 11:00 a.m. Eastern Time on November 4, 2022. To participate in the conference call, please dial 1-877-407-9039 five to ten minutes before the call is scheduled to begin. A replay will be available from 2:00 p.m. November 4, 2022, until midnight November 11, 2022. The number to hear the teleconference replay is 1-844-512-2921. The access code for the replay is 13734019.

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 and follow the instructions at the webcast link. The archived webcast 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, 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

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 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. Risk factors also include the effects of the COVID-19 pandemic, and any impact the COVID-19 pandemic may have on the Company’s business operations, as well as its impact on general economic and financial market conditions.

*Non-GAAP Financial Disclosures
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.

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.

Definition – Constant Currency
The current quarter revenue in local currency translated into U.S. dollars using the same translation rate as the prior year comparable period.

1 Constant currency is a non-GAAP financial measure described more fully later in this release.

--Financial Results Follow--

(In thousands, except per-share data; unaudited)
  For the Quarter Ended
  September 30,
September 24,
Net sales $ 55,913   $ 47,761  
Cost of goods sold   42,616     34,314  
Gross profit   13,297     13,447  
Marketing, engineering and administrative expenses   15,079     13,091  
Restructuring expenses   11     48  
Other operating income   -     (2,939)  
(Loss) income from operations   (1,793)     3,247  
Interest expense   566     530  
Other (income) expense, net   260     355  
(Loss) income before income taxes   and noncontrolling interest   (2,619)     2,362  
Income tax (benefit) expense   (688)     382  
Net (loss) income   (1,931)     1,980  
Less: Net earnings attributable to noncontrolling interest, net of tax   (98)     (60)  
Net (loss) income attributable to Twin Disc $ (2,029)   $ 1,920  
(Loss) income per share data:            
Basic (loss) income per share $ (0.15)   $ 0.14  
Diluted (loss) income per share $ (0.15)   $ 0.14  
Weighted average shares outstanding data:            
Basic shares outstanding   13,407     13,283  
Diluted shares outstanding   13,407     13,350  
Comprehensive income (loss):            
Net (loss) income $ (1,931)   $ 1,980  
Benefit plan adjustments, net of income taxes of $1 and $117, respectively   518     384  
Foreign currency translation adjustment   (6,290)     (1,938)  
Unrealized gain on cash flow hedges, net of income taxes of $0 and $63, respectively   793     204  
Comprehensive (loss) income   (6,910)     630  
Less: Comprehensive income (loss) attributable to noncontrolling interest   136     (136)  
Comprehensive (loss) income attributable to Twin Disc $ (6,774)   $ 494  

(In thousands; unaudited)

  For the Quarter Ended
  September 30,
September 24,
Net (loss) income attributable to Twin Disc $ (2,029)   $ 1,920
Interest expense   566     530
Income taxes (benefit)   (688)     382
Depreciation and amortization   2,140     2,550
Earnings (loss) before interest, taxes, depreciation and amortization $ (11)   $ 5,382

(In thousands; unaudited)
  September 30, June 30,
    2022     2022  
Current assets:    
Cash $ 13,214   $ 12,521  
Trade accounts receivable, net   40,007     45,452  
Inventories   128,100     127,109  
Assets held for sale   5,769     2,968  
Prepaid expenses   8,207     7,756  
Other   6,521     8,646  
Total current assets   201,818     204,452  
Property, plant and equipment, net   38,989     41,615  
Right-of-use assets operating leases   11,492     12,685  
Intangible assets, net   11,560     13,010  
Deferred income taxes   2,846     2,178  
Other assets   2,846     2,583  
TOTAL ASSETS $ 269,551   $ 276,523  
Current liabilities:            
Current maturities of long-term debt $ 2,000   $ 2,000  
Accounts payable   30,706     28,536  
Accrued liabilities   49,158     50,542  
Total current liabilities   81,864     81,078  
Long-term debt   35,112     34,543  
Lease obligations   9,483     10,575  
Accrued retirement benefits   9,860     9,974  
Deferred income taxes   3,422     3,802  
Other long-term liabilities   5,042     5,363  
Total liabilities   144,783     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   41,285     42,551  
Retained earnings   133,002     135,031  
Accumulated other comprehensive loss   (37,103)     (32,086)  
    137,184     145,496  
Less treasury stock, at cost (845,670 and 974,978 shares, respectively)   12,964     14,720  
Total Twin Disc shareholders' equity   124,220     130,776  
Noncontrolling interest   548     412  
Total equity   124,768     131,188  
TOTAL LIABILITIES AND EQUITY $ 269,551   $ 276,523  

(In thousands; unaudited)
  For the Quarter Ended
  September 30,
September 24,
Net (loss) income $ (1,931)   $ 1,980  
Adjustments to reconcile net (loss) income to net cash (used) provided by operating activities, net of acquired assets:            
Depreciation and amortization   2,140     2,550  
Gain on sale of assets   (42)     (2,939)  
Restructuring expenses   (68)     (125)  
Provision for deferred income taxes   (1,623)     (814)  
Stock compensation expense and other non-cash changes, net   864     937  
Net change in operating assets and liabilities   (36)     785  
Net cash (used) provided by operating activities   (696)     2,374  
Acquisitions of property, plant and equipment   (2,237)     (846)  
Proceeds from sale of fixed assets   2     9,139  
Proceed on note receivable   -     500  
Other, net   534     (81)  
Net cash (used) provided by investing activities   (1,701)     8,712  
Borrowings under revolving loan arrangement   20,221     20,591  
Repayments under revolver loans   (18,685)     (20,591)  
Repayments of other long-term debt   (651)     (278)  
Payments of withholding taxes on stock compensation   (168)     (292)  
Net cash provided (used) by financing activities   717     (570)  
Effect of exchange rate changes on cash   2,373     (764)  
Net change in cash   693     9,752  
Beginning of period   12,521     12,340  
End of period $ 13,214   $ 22,092  

Contact: Jeffrey S. Knutson
(262) 638-4242

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Source: Twin Disc, Incorporated