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) October 17, 2008
Twin
Disc, Incorporated
(exact
name of registrant as specified in its charter)
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WISCONSIN
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001-7635
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39-0667110
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(State
or other jurisdiction
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(Commission
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(IRS
Employer
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of
incorporation)
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File
Number)
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Identification
No.)
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1328
Racine
Street Racine,
Wisconsin 53403
Registrant's
telephone number, including area
code: (262) 638-4000
==========================================================================================================================================================
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:
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[
]
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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[
]
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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[
]
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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[
]
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Pre-commencement
communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR
240.13e-4(c))
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1
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Item
2.02
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Results
of Operations and Financial
Condition
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The
Company has reported its 1st quarter
2009 financial results. The Company's press release dated October 21, 2008
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.
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Item
7.01
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Regulation
FD Disclosure
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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.
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Item
9.01
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Financial
Statements and Exhibits
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(c) Exhibits.
EXHIBIT
NUMBER DESCRIPTION
99.1 Press
Release announcing 1st quarter
2009 financial results.
==========================================================================================================================================================
2
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.
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Date:
October 21, 2008
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Twin
Disc, Inc.
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/s/THOMAS E.
VALENTYN
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|
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Thomas
E. Valentyn
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General
Counsel & Secretary
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21092029-1
3
FOR
IMMEDIATE RELEASE
60; Contact: Christopher J.
Eperjesy
&
#160; (262)
638-4343
TWIN
DISC, INC., ANNOUNCES FISCAL 2009
FIRST-QUARTER
FINANCIAL RESULTS
•
Sales were second highest first quarter in the Company’s history
•
Results unfavorably impacted by ERP implementation in the quarter
•
Management remains cautiously optimistic for Fiscal 2009
RACINE,
WISCONSIN—October 21, 2008—Twin
Disc, Inc. (NASDAQ: TWIN), today reported financial results for the
fiscal 2009 first quarter ended September 26, 2008.
Sales for
the fiscal 2009 first quarter were $72,671,000, compared to $73,613,000 for the
fiscal 2008 first quarter. For the fiscal 2009 first quarter, foreign
currency translation favorably impacted sales by $3,961,000. Demand
from customers in the commercial marine and mega yacht markets remained high
during the quarter, especially from customers in the Asian commercial marine
market. The 1.3 percent decrease in first-quarter sales was the
result of lower oil and gas transmission sales in the fiscal 2009 first quarter,
compared to very robust oil and gas transmission sales in the fiscal 2008 first
quarter. However, the Company has seen a recent increase in order
activity from this market compared to the same period last year. In
addition, during the 2009 first quarter, the Company implemented its new ERP
system at its domestic manufacturing operations, which caused delays in the
Company’s shipments during July and August. The Company began
shipping at normal rates in September.
Gross
margin, as a percentage of fiscal 2009 first-quarter sales, was 27.6 percent,
compared to 32.4 percent in last year’s comparable
period. Profitability for fiscal 2009 first quarter was impacted by
lower volumes, unfavorable product mix, higher material costs, and higher
pension expense, partially offset by higher pricing and expanded
outsourcing. Specifically, the fiscal 2009 first quarter experienced
a decrease in sales of oil and gas transmission sales, compared to fiscal 2008’s
first quarter. In addition, one-time shipping delays related to the
implementation of the ERP system also negatively impacted gross margins during
the fiscal 2009 first quarter, primarily due to the impact of lower volumes on
absorption and manufacturing productivity.
For the
2009 first quarter, marketing, engineering and administrative (ME&A)
expenses, as a percentage of sales, were 22.5 percent, compared to nearly 20.0
percent in the fiscal 2008 first quarter. ME&A expenses were
unfavorably impacted by higher corporate IT expenses, primarily depreciation
expense related to the new ERP system, higher pension expense and an overall
increase in salaries and benefit costs. Foreign exchange currency
translation increased ME&A expenses by $621,000 versus the first fiscal
quarter of 2008.
Net
earnings for the fiscal 2009 first quarter were $2,465,000, or $0.22 per diluted
share, compared with $5,106,000, or $0.44 per diluted share, for the fiscal 2008
first quarter. Earnings before interest, taxes, depreciation and
amortization (EBITDA)* was $6,814,000 for the fiscal 2009 first quarter,
compared to $10,842,000 for the fiscal 2008 first quarter.
Commenting
on the results, Michael E. Batten, Chairman and Chief Executive Officer, said,
“Our business remains strong, in spite of the recent turmoil in the financial
markets. Sales for the fiscal 2009 first quarter were the second
highest first quarter in the Company’s history despite an adverse comparison in
oil field transmission sales and the delayed shipments experienced due to issues
encountered with our domestic ERP implementation. While I am
disappointed with the difficulties we experienced with the implementation of the
new ERP system and its impact on the first quarter’s financial results, I am
confident that the issues relating to the ERP implementation are behind us and
the system is beginning to help improve our marketing support, shipping,
purchasing, inventory and accounting procedures and controls.
“Our
international operations performed very well and partially offset the results we
experienced at our domestic operation. Our Asian and European
operations had strong quarters due to continued strength in the commercial
marine transmission and mega yacht markets. While some of these
increases were partially due to foreign currency exchange, the vast majority
were real volume increases.”
Christopher
J. Eperjesy, Vice President - Finance, Chief Financial Officer and Treasurer,
stated, “In spite of the recent global financial crisis, our balance sheet
remains strong with excellent liquidity and we are very comfortable with our
current capital structure. At September 26, 2008, the Company had
cash and cash equivalents of $14,888,000, compared to $14,447,000 at fiscal year
end. Working capital at September 26, 2008 was $109,843,000, compared
to $106,107,000 at September 28, 2007. We are focused on improving
our working capital efficiency throughout the year, including improved
management of inventory levels on a global basis.
“Total
debt, at September 26, 2008, was $55,147,000, compared to $49,957,000 at June
30, 2008 and $55,156,000 at September 28, 2007. The increase from
June 30, 2008 can be primarily attributed to an increase in working capital
requirements in the quarter. We currently have approximately
$10,000,000 available under our existing revolver, which has two years remaining
before it needs to be extended. As of September 26, 2008, the
interest rate on the Company’s revolver was 3.74 percent. Our total
debt to total capitalization now stands at 30.7 percent compared to 27.8 percent
at June 30, 2008.”
Mr.
Batten concluded, “Despite the current worldwide economic and market conditions,
we are cautiously optimistic that fiscal 2009 will be another good
year. We continue to have strong orders in most of our marine markets
and industrial orders continue to show improvement over year ago
levels. The backlog and order flow for our land-based transmission
products grew in the quarter, although delivery of some of these units may
extend into fiscal 2010. Our six-month backlog at September 26, 2008
was $118,639,000, compared to $120,774,000 at June 30, 2008 and $112,293,000 at
September 28, 2007. The decrease in backlog from fiscal year end
resulting from foreign exchange rate movements was
$2,765,000. Adjusted for this impact, the backlog would have
increased slightly. The recent global economic crisis has not yet had
an impact on our business, as our order flows continue to be
strong. We are actively monitoring the situation, talking to our
customers and focusing on delivering great products with outstanding customer
service.
“Finally,
I would like to use this opportunity to thank David Swift for his service,
stewardship and counsel, since joining Twin Disc’s Board of Directors in
1995. We will miss him and wish him well in retirement. As
a result of David’s retirement, Michael Doar, Chairman and Chief Executive
Officer of Hurco Companies, Inc. (NASDAQ: HURC), has been elected to our Board
of Directors. We are excited to have Michael join our Board, as he
brings a wealth of business experience and expertise to us.”
Twin Disc
will be hosting a conference call today (October 21, 2008) to discuss these
results and to answer questions at 2:00 p.m. ET. To participate in the
conference call, please dial 800-762-8795 five to 10 minutes before the call is
scheduled to begin. A replay will be available from 5:00 p.m. October
21, 2008 until midnight on October 28, 2008. The number to hear the
teleconference replay is 800-406-7325. The access code for the replay is
3930325.
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 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--
Twin Disc, Inc.,
Page 2
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CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
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||||||||
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(In
thousands, except per-share data; unaudited)
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||||||||
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Three
Months Ended
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||||||||
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September
26, 2008
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September
28, 2007
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|||||||
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Net
sales
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$ | 72,671 | $ | 73,613 | ||||
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Cost
of goods sold
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52,599 | 49,762 | ||||||
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Gross
profit
|
20,072 | 23,851 | ||||||
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Marketing,
engineering and administrative expenses
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16,318 | 14,694 | ||||||
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Interest
expense
|
597 | 744 | ||||||
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Other
income, net
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(820 | ) | (5 | ) | ||||
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Earnings
before income taxes and minority interest
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3,977 | 8,418 | ||||||
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Income
taxes
|
1,353 | 3,237 | ||||||
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Minority
interest
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(159 | ) | (75 | ) | ||||
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Net
earnings
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$ | 2,465 | $ | 5,106 | ||||
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Earnings
per share:
|
||||||||
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Basic
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$ | 0.22 | $ | 0.44 | ||||
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Diluted
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$ | 0.22 | $ | 0.44 | ||||
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Average
shares outstanding:
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||||||||
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Basic
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11,250 | 11,496 | ||||||
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Diluted
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11,378 | 11,632 | ||||||
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Dividends
per share
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$ | 0.070 | $ | 0.055 | ||||
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RECONCILIATION
OF CONSOLIDATED NET EARNINGS TO EBITDA
|
||||||||
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(In
thousands; unaudited)
|
||||||||
|
Three
Months Ended
|
||||||||
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September
26, 2008
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September
28, 2007
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|||||||
|
Net
earnings
|
$ | 2,465 | $ | 5,106 | ||||
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Interest
expense
|
597 | 744 | ||||||
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Income
taxes
|
1,353 | 3,237 | ||||||
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Depreciation
and amortization
|
2,399 | 1,755 | ||||||
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Earnings
before interest, taxes, depreciation and amortization
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$ | 6,814 | $ | 10,842 | ||||
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CONDENSED
CONSOLIDATED BALANCE SHEETS
|
||||||||
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(In
thousands, unaudited)
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||||||||
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September
26,
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June
30,
|
|||||||
|
2008
|
2008
|
|||||||
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ASSETS
|
||||||||
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Current
assets:
|
||||||||
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Cash
and cash equivalents
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$ | 14,888 | $ | 14,447 | ||||
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Trade
accounts receivable, net
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60,381 | 67,611 | ||||||
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Inventories,
net
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99,024 | 97,691 | ||||||
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Deferred
income taxes
|
6,235 | 6,297 | ||||||
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Other
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9,537 | 9,649 | ||||||
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Total
current assets
|
190,065 | 195,695 | ||||||
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Property,
plant and equipment, net
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65,698 | 67,855 | ||||||
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Goodwill
|
17,754 | 18,479 | ||||||
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Deferred
income taxes
|
4,626 | 5,733 | ||||||
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Intangible
assets, net
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8,842 | 9,589 | ||||||
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Other
assets
|
7,510 | 7,277 | ||||||
| $ | 294,495 | $ | 304,628 | |||||
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LIABILITIES
AND SHAREHOLDERS' EQUITY
|
||||||||
|
Current
liabilities:
|
||||||||
|
Current
maturities of long-term debt
|
$ | 796 | $ | 1,730 | ||||
|
Accounts
payable
|
33,451 | 37,919 | ||||||
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Accrued
liabilities
|
45,975 | 49,939 | ||||||
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Total
current liabilities
|
80,222 | 89,588 | ||||||
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Long-term
debt
|
54,351 | 48,227 | ||||||
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Accrued
retirement benefits
|
33,735 | 34,325 | ||||||
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Other
long-term liabilities
|
1,188 | 2,163 | ||||||
| 169,496 | 174,303 | |||||||
|
Minority
interest
|
486 | 679 | ||||||
|
Shareholders'
equity:
|
||||||||
|
Common
stock
|
13,655 | 14,693 | ||||||
|
Retained
earnings
|
144,037 | 142,361 | ||||||
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Accumulated
other comprehensive (loss) income
|
(4,532 | ) | 2,446 | |||||
| 153,160 | 159,500 | |||||||
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Less
treasury stock, at cost
|
28,647 | 29,854 | ||||||
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Total
shareholders' equity
|
124,513 | 129,646 | ||||||
| $ | 294,495 | $ | 304,628 | |||||
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CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
||||||||
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(In
thousands, unaudited)
|
||||||||
|
Three
Months Ended
|
||||||||
|
September
26, 2008
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September
28, 2007
|
|||||||
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CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
|
Net
earnings
|
$ | 2,465 | $ | 5,106 | ||||
|
Adjustments
to reconcile net earnings to cash (used)
|
||||||||
|
provided
by operating activities:
|
||||||||
|
Depreciation
and amortization
|
2,399 | 1,755 | ||||||
|
Other
non-cash changes, net
|
447 | 594 | ||||||
|
Net
change in working capital, excluding cash and debt, and
other
|
(6,603 | ) | (2,313 | ) | ||||
| (1,292 | ) | 5,142 | ||||||
|
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
|
Acquisitions
of fixed assets
|
(1,679 | ) | (2,502 | ) | ||||
| (1,679 | ) | (2,502 | ) | |||||
|
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
|
Decrease
in notes payable, net
|
(1,403 | ) | (395 | ) | ||||
|
Proceeds
from long-term debt
|
6,306 | 11,251 | ||||||
|
Proceeds
from exercise of stock options
|
72 | 100 | ||||||
|
Purchase
of treasury stock
|
- | (13,367 | ) | |||||
|
Dividends
paid
|
(789 | ) | (653 | ) | ||||
|
Other
|
- | 18 | ||||||
| 4,186 | (3,046 | ) | ||||||
|
Effect
of exchange rate changes on cash
|
(774 | ) | 575 | |||||
|
Net
change in cash and cash equivalents
|
441 | 169 | ||||||
|
Cash
and cash equivalents:
|
||||||||
|
Beginning
of period
|
14,447 | 19,508 | ||||||
|
End
of period
|
$ | 14,888 | $ | 19,677 | ||||
####