twin20240205_8k.htm
false 0000100378 0000100378 2024-02-07 2024-02-07
 
UNITED STATES
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) February 7, 2024
 
 
TWIN DISC, INCORPORATED
 
(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.)
 
 
222 East Erie Street, Suite 400         Milwaukee, Wisconsin 53202
 
(Address of principal executive offices)
 
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:
 
         Written communications pursuant to Rule 425 under the Securities Act (17 CFR 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 240.14d-2(b))
 
         Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
Securities registered pursuant to Section 12(b) of the Exchange Act:
 
Title of each class
Trading Symbol(s)
Name of each exchange on
which registered
Common Stock (No Par Value)
TWIN
The NASDAQ Stock Market LLC
 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
 
  Emerging growth company   
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.                                             
 
 
 
 

 
Item 2.02
Results of Operations and Financial Condition
 
Twin Disc, Incorporated (the “Company”) has reported its second quarter 2024 financial results. The Company's press release dated February 7, 2024 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. Certain risks regarding the Company’s forward-looking statement are discussed in the Company’s filings with the Securities and Exchange Commission, including an extensive discussion of these risks in the Company’s Annual Report on Form 10-K for the year ended June 30, 2023. 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
 
(d)
Exhibits

 
EXHIBIT NUMBER
DESCRIPTION
   
99.1
 
 
104
Cover Page Interactive Data File (embedded within the Inline XBRL document)
 

 
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: February 7, 2024
Twin Disc, Inc.
   
 
/s/ JEFFREY S. KNUTSON
 
Jeffrey S. Knutson
 
Vice President-Finance, Chief Financial
Officer, Treasurer & Secretary
 
 
ex_622949.htm

 

Exhibit 99.1

 

https://cdn.kscope.io/0939f1d2cfeaf751a379d6297a4f9a23-ex_622949img001.jpg

 

 

Twin Disc Announces Second Quarter Results

 

 

MILWAUKEE, Wis., February 7, 2024 (GLOBE NEWSWIRE) -- Twin Disc, Inc. (NASDAQ: TWIN), today reported results for the fiscal 2024 second quarter ended December 29, 2023.

 

Fiscal Second Quarter 2024 Highlights

 

 

Sales increased 15.2% year-over-year to $73.0 million

 

Gross margin of 28.3%, expanded 140 basis points on a year-over-year basis

 

Net income attributable to Twin Disc was $0.9 million and EBITDA* of $5.5 million

 

Significantly improved operating cash flow of $16.0 million

 

Free cash flow* of $10.6 million compared to ($4.7) million in the year-ago period

 

Robust six-month backlog of $125.2 million supported by healthy ongoing demand

 

 

CEO Perspective

“We delivered another excellent quarter, continuing our momentum of double-digit revenue growth and expanded margins while generating historically high cash from operations. Similar to the prior quarter, strength in Marine and Propulsion and Land-Based Transmissions drove our outperformance, more than offsetting near-term softness in Industrial. Our agile teams are working to capture solid end market demand, underscored by continued backlog growth, demonstrating the ongoing resilience of our business as we navigate a volatile macroeconomic landscape,” commented John H. Batten, President and Chief Executive Officer of Twin Disc. “Despite lingering challenges in our broader operating environment, we are cautiously optimistic moving into the second half of the fiscal year and look forward to maintaining this trend of sustained value creation well into the future.”

 

Second Quarter Results

Sales for the fiscal 2024 second quarter increased 15.2% year-over-year to $73.0 million, driven by demand for the Company’s Marine and Propulsion Systems and Land-Based Transmissions markets, and favorable product mix.

 

Sales by product group:

 

  Product Group

 

 

 

 

   

 

 

  (Thousands of $):

  Q2 FY24 Sales   Q2 FY23 Sales     Change (%)  

  Marine and Propulsion Systems

  $ 46,945     $ 36,466       28.7 %

  Land-Based Transmissions

    15,863       14,672       8.1 %

  Industrial

    6,532       7,513       -13.1 %

  Other

    3,654       4,700       -22.3 %

  Total

  $ 72,994     $ 63,351       15.2 %

 

The Company delivered 12.5% sales growth year-over-year in the Europe, North America, and Asia-Pacific regions. The proportion of total sales increased in the Europe and Asia-Pacific regions, with a decrease in North America.

 

Gross profit increased 21.8% to $20.7 million compared to $17.0 million for the second fiscal quarter of 2023. Second quarter gross margin increased approximately 140 basis points sequentially to 28.3%. This improvement reflects the benefit of prior pricing actions, continued easing of supply chain headwinds, a favorable product mix and successfully executing our operational playbook.

 

Marketing, engineering and administrative (ME&A) expense increased by $1.1 million, or 6.9%, to $17.1 million, compared to $16.0 million in the prior year quarter. The increased ME&A expense was primarily driven by the investment in resources to drive our hybrid electric strategy, the impact of inflation and currency translation.

 

Net income attributable to Twin Disc for the quarter was $0.9 million, or $0.07 per diluted share, compared to net income attributable to Twin Disc of $1.8 million, or $0.13 per share, for the second fiscal quarter of 2023. The year-over-year decline was driven by the prior year gain on the sale of our Belgian facility.

 

 

 

Earnings before interest, taxes, depreciation, and amortization (EBITDA) decreased by $1.4 million to $5.5 million in the second quarter, compared to $7.0 million in the second fiscal quarter of 2023.

 

On a consolidated basis, the backlog of orders to be shipped over the next six months is approximately $125.2 million, compared to $122.5 million at the end of the first fiscal quarter of 2024. As a percentage of six-month backlog, inventory increased from 103.1% at the end of the first quarter to 105.3% at the end of the second fiscal quarter of 2024. Compared to the second fiscal quarter of 2023, cash increased 55.4% to $21.0 million, total debt decreased 44.6% to $17.7 million and net debt* decreased $21.7 million to $(3.3) million. The improvement was primarily attributable to net payoff of long-term debt as a result of our strong cash operations.

 

CFO Perspective

Jeffrey S. Knutson, Vice President of Finance, Chief Financial Officer, Treasurer, and Secretary stated, “We are very pleased with our results in the second quarter, supported by solid operational execution and a focus on working capital improvement. Our robust cash generation has further strengthened our balance sheet, giving us the flexibility to drive continued investment in both organic and inorganic growth opportunities while we keep debt at appropriate levels and return capital to shareholders. Through this consistent performance, we are making great strides towards achieving our revenue, gross margin, and free cash flow conversion targets, further positioning Twin Disc for long-term success.”

 

Discussion of Results

Twin Disc will host a conference call to discuss these results and to answer questions at 9:00 a.m. Eastern time on February 7, 2024. The live audio webcast will be available on Twin Disc’s website at https://ir.twindisc.com. To participate in the conference call, please dial (800) 715-9871 approximately ten minutes before the call is scheduled to begin. A replay of the webcast will be available at https://ir.twindisc.com shortly after the call until February 6, 2025.

 

About Twin Disc

 

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 www.twindisc.com.

 

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 words “anticipates,” “believes,” “intends,” “estimates,” and “expects,” or similar anticipatory expressions, usually identify forward-looking statements. The Company intends that such forward-looking statements qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. All forward-looking statements are based on current expectations, and are subject to certain risks and uncertainties that could cause actual results or outcomes to differ materially from current expectations. Such risks and uncertainties include the impact of general economic conditions and the cyclical nature of many of the Company’s product markets; foreign currency risks and other risks associated with the Company’s international sales and operations; the ability of the Company to successfully implement price increases to offset increasing commodity costs; the ability of the Company to generate sufficient cash to pay its indebtedness as it becomes due; and the possibility of unforeseen tax consequences and the impact of tax reform in the U.S. or other jurisdictions. These and other risks are described under the caption “Risk Factors” in Item 1A of the Company’s most recent Form 10-K filed with the Securities and Exchange Commission, as supplemented in subsequent periodic reports filed with the Securities and Exchange Commission. Accordingly, 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. The Company assumes no obligation, and disclaims any obligation, to publicly update or revise any forward-looking statements to reflect subsequent events, new information, or otherwise.

 

 

 

 

*Non-GAAP Financial Information

 

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.

 

Definitions
Earnings before interest, taxes, depreciation and amortization (EBITDA) is calculated as net earnings or loss excluding interest expense, the provision or benefit for income taxes, depreciation and amortization expenses.

 

Net debt is calculated as total debt less cash.

 

Free cash flow is calculated as net cash provided (used) by operating activities less acquisition of fixed assets.

 

 

 

 

Investors:

Riveron

TwinDiscIR@riveron.com

 

 

https://cdn.kscope.io/0939f1d2cfeaf751a379d6297a4f9a23-ex_622949img002.jpg

 

 

Source: Twin Disc, Incorporated

 

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME (LOSS)

(In thousands, except per-share data; unaudited)

 

   

For the Quarter Ended

   

For the Two Quarters Ended

 
           

As Adjusted

           

As Adjusted

 
   

December 29,

   

December 30,

   

December 29,

   

December 30,

 
    2023     2022     2023     2022  

Net sales

  $ 72,994     $ 63,351     $ 136,547     $ 119,264  

Cost of goods sold

    52,338       46,328       96,156       88,944  

Cost of goods sold - Sale of boat management system product line and related inventory

    -       -       3,099       -  

Gross profit

    20,656       17,023       37,292       30,320  
                                 

Marketing, engineering, and administrative expenses

    17,149       15,983       34,068       31,063  

Restructuring expenses

    69       164       68       174  

Other operating income

    -       (4,150 )     -       (4,150 )

Income from operations

    3,438       5,026       3,156       3,233  
                                 

Other expense (income):

                               

Interest expense

    392       594       786       1,160  

Other expense (income), net

    449       182       310       (164 )
      841       776       1,096       996  

Income before income taxes and noncontrolling interest

    2,597       4,250       2,060       2,237  
                                 

Income tax expense

    1,662       2,489       2,208       1,801  

Net income (loss)

    935       1,761       (148 )     436  

Less: Net earnings attributable to noncontrolling interest, net of tax

    (5 )     (15 )     (95 )     (112 )

Net income (loss) attributable to Twin Disc

  $ 930     $ 1,746     $ (243 )   $ 324  
                                 

Dividends per share

  $ 0.04     $ -     $ 0.04     $ -  
                                 

Income (loss) per share data:

                               

Basic income (loss) per share attributable to Twin Disc common shareholders

  $ 0.07     $ 0.13     $ (0.02 )   $ 0.02  

Diluted income (loss) per share attributable to Twin Disc common shareholders

  $ 0.07     $ 0.13     $ (0.02 )   $ 0.02  
                                 

Weighted average shares outstanding data:

                               

Basic shares outstanding

    13,718       13,460       13,629       13,434  

Diluted shares outstanding

    13,923       13,699       13,629       13,649  
                                 

Comprehensive income (loss)

                               

Net income (loss)

  $ 935     $ 1,761     $ (148 )   $ 436  

Benefit plan adjustments, net of income taxes of $13, $13, $8 and $4, respectively

    (108 )     (1,122 )     (279 )     (1,211 )

Foreign currency translation adjustment

    5,190       8,392       2,154       2,102  

Unrealized (loss) gain on hedges, net of income taxes of $0, $0, $0 and $0, respectively

    (485 )     (595 )     (269 )     198  

Comprehensive income

    5,532       8,436       1,458       1,525  

Less: Comprehensive income attributable to noncontrolling interest

    40       74       190       210  

Comprehensive income attributable to Twin Disc

  $ 5,492     $ 8,362     $ 1,268     $ 1,315  

 

 

 

 

RECONCILIATION OF CONSOLIDATED NET INCOME TO EBITDA

(In thousands; unaudited)

 

   

For the Quarter Ended

   

For the Two Quarters Ended

 
   

December 29,

2023

   

December 30,

2022

   

December 29,

2023

   

December 30,

2022

 
                                 

Net income (loss) attributable to Twin Disc

  $ 930     $ 1,746     $ (243 )   $ 324  

Interest expense

    392       594       786       1,160  

Income tax expense

    1,662       2,489       2,208       1,801  

Depreciation and amortization

    2,531       2,126       5,023       4,266  

Earnings before interest, taxes, depreciation, and amortization (EBITDA)

  $ 5,515     $ 6,955     $ 7,774     $ 7,551  

 

 

RECONCILIATION OF TOTAL DEBT TO NET DEBT

(In thousands; unaudited)

 

   

December 29, 2023

   

December 30, 2022

 
                 

Current maturities of long-term debt

  $ 2,000     $ 2,000  

Long-term debt

    15,698       29,927  

Total debt

    17,698       31,927  

Less cash

    21,021       13,528  

Net debt

  $ (3,323 )   $ 18,399  

 

 

RECONCILIATION OF NET CASH PROVIDED BY OPERATING ACTIVITIES TO FREE CASH FLOW

(In thousands; unaudited)

 

   

For the Quarter Ended

 
   

December 29, 2023

   

December 30, 2022

 

Net cash provided by operating activities

  $ 16,047     $ 32  

Acquisition of fixed assets

    (5,419 )     (4,734 )

Free cash flow

  $ 10,628     $ (4,702 )

 

 

 

 

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands; except share amounts, unaudited)

 

     

December 29, 2023

   

June 30, 2023

 

ASSETS

                 

Current assets:

                 

Cash

    $ 21,021     $ 13,263  

Trade accounts receivable, net

      41,428       54,760  

Inventories

      131,768       131,930  

Assets held for sale

      2,968       2,968  

Prepaid expenses

      10,157       8,459  

Other

      9,235       8,326  

Total current assets

      216,577       219,706  
                   

Property, plant and equipment, net

      40,334       38,650  

Right-of-use assets operating leases

      12,017       13,133  

Intangible assets, net

      11,146       12,637  

Deferred income taxes

      2,371       2,244  

Other assets

      2,745       2,811  

Total assets

    $ 285,190     $ 289,181  
                   

LIABILITIES AND EQUITY

                 

Current liabilities:

                 

Current maturities of long-term debt

    $ 2,000     $ 2,010  

Accounts payable

      32,611       36,499  

Accrued liabilities

      62,929       61,586  

Total current liabilities

      97,540       100,095  
                   

Long-term debt

      15,698       16,617  

Lease obligations

      9,988       10,811  

Accrued retirement benefits

      6,975       7,608  

Deferred income taxes

      3,162       3,280  

Other long-term liabilities

      5,917       5,253  

Total liabilities

      139,280       143,664  
                   

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

      39,661       42,855  

Retained earnings

      119,496       120,299  

Accumulated other comprehensive loss

      (4,059 )     (5,570 )
        155,098       157,584  

Less treasury stock, at cost (639,006 and 814,734 shares, respectively)

      9,802       12,491  
                   

Total Twin Disc shareholders' equity

      145,296       145,093  
                   

Noncontrolling interest

      614       424  

Total equity

      145,910       145,517  
                   

Total liabilities and equity

    $ 285,190     $ 289,181  

 

 

 

 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands; unaudited)

 

   

For the Two Quarters Ended

 
           

As Adjusted

 
   

December 29, 2023

   

December 30, 2022

 
                 

CASH FLOWS FROM OPERATING ACTIVITIES:

               

Net (loss) income

  $ (148 )   $ 436  

Adjustments to reconcile net (loss) income to net cash provided by operating activities:

               

Depreciation and amortization

    5,023       4,266  

Gain on sale of assets

    (42 )     (4,203 )

Loss on sale of boat management product line and related inventory

    3,099       -  

Provision for deferred income taxes

    280       (1,105 )

Stock compensation expense and other non-cash changes, net

    1,413       1,565  

Net change in operating assets and liabilities

    6,422       (927 )
                 

Net cash provided by operating activities

    16,047       32  
                 

CASH FLOWS FROM INVESTING ACTIVITIES:

               

Acquisition of property, plant, and equipment

    (5,419 )     (4,734 )

Proceeds from sale of fixed assets

    -       7,152  

Other, net

    (252 )     385  
                 

Net cash (used) provided by investing activities

    (5,671 )     2,803  
                 

CASH FLOWS FROM FINANCING ACTIVITIES:

               

Borrowings under revolving loan arrangements

    50,632       42,898  

Repayments of revolving loan arrangements

    (50,632 )     (46,628 )

Repayments of other long-term debt

    (1,010 )     (707 )

Dividends paid to shareholders

    (560 )     -  

Payments of finance lease obligations

    (471 )     (132 )

Payments of withholding taxes on stock compensation

    (1,772 )     (463 )
                 

Net cash used by financing activities

    (3,813 )     (5,032 )
                 

Effect of exchange rate changes on cash

    1,195       3,204  
                 

Net change in cash

    7,758       1,007  
                 

Cash:

               

Beginning of period

    13,263       12,521  
                 

End of period

  $ 21,021     $ 13,528