Twin Disc, Inc. Announces Fiscal 2015 Third Quarter Financial Results
- Third Quarter Sales Flat Compared to Prior Year
-
Third Quarter Earnings Improve Significantly to
$0.26 per Diluted Share -
Operating Cash Flow Generation of
$6,056,000 in Fiscal 2015 Third Quarter -
Net Cash at
March 27, 2015 was$11,207,000 -
Six-Month Backlog at
March 27, 2015 was$47,828,000 Down 18% Sequentially
Sales for the fiscal 2015 third quarter increased slightly to
Commenting on the results,
Gross margin for the fiscal 2015 third quarter was 31.2 percent, compared to 27.2 percent in the fiscal 2014 third quarter. Gross profit for fiscal 2015's third quarter was favorably impacted by increased shipments to the Company's North American manufacturing and distribution customers across most product markets, and increased service and parts sales, along with reduced pension expense, only partially offset by moderating demand in the Company's Asian markets for commercial marine and oil and gas products. Year-to-date, gross margin was 32.0 percent, compared to 29.3 percent for the fiscal 2014 nine months.
For the fiscal 2015 third quarter, marketing, engineering and
administrative (ME&A) expenses, as a percentage of sales, declined
significantly to 25.7 percent, compared to 27.8 percent for the fiscal
2014 third quarter. ME&A expenses decreased
The effective tax rate for the fiscal 2015 third quarter was 18.8 percent, significantly lower than the prior year third quarter rate of 29.8 percent. However, the effective rates are impacted by the operating results of a certain foreign jurisdiction that is subject to a full valuation allowance. Adjusting fiscal 2015 results for the results of this jurisdiction, the third quarter rate would have been 27.3 percent, which was positively impacted by favorable provision to return adjustments for the federal and various state tax returns filed in the quarter, along with an adjustment to the reserve for uncertain tax positions. The fiscal 2014 third quarter tax benefit on near break-even, pre-tax results was impacted by a reduced effective rate driven by a change in the jurisdictional mix of earnings along with provision to return adjustments for the federal and various state tax returns filed in the quarter. The effective rate for the fiscal 2015 nine month period was 31.8 percent, significantly lower than the prior year nine month rate of 66.6 percent. Adjusting both fiscal years for the results subject to a full valuation allowance, the fiscal 2015 year-to-date rate would have been 31.9 percent, compared to 33.3 percent for the fiscal 2014 comparable period. The fiscal 2014 rate is somewhat higher due to unfavorable discrete items recorded in the first quarter related to adjustment to tax.
Net earnings attributable to
Earnings before interest, taxes, depreciation and amortization (EBITDA)*
were
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About
Forward-Looking Statements
This press release may contain statements that are forward looking as
defined by the
*Non-GAAP Financial Disclosures
Financial information excluding the impact of 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.
--Financial Results Follow--
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
COMPREHENSIVE (LOSS) INCOME (In thousands, except per-share data; unaudited) |
||||||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||||||
2015 |
2014 |
2015 |
2014 |
|||||||||||||
Net sales | $ | 60,941 | $ | 60,705 | $ | 198,456 | $ | 190,343 | ||||||||
Cost of goods sold | 41,935 | 44,177 | 134,958 | 134,604 | ||||||||||||
Gross profit | 19,006 | 16,528 | 63,498 | 55,739 | ||||||||||||
Marketing, engineering and administrative expenses |
15,669 | 16,870 | 48,086 | 49,572 | ||||||||||||
Restructuring of operations | - | - | - | 1,094 | ||||||||||||
Earnings (loss) from operations | 3,337 | (342 | ) | 15,412 | 5,073 | |||||||||||
Interest expense | 122 | 220 | 436 | 697 | ||||||||||||
Other (income) expense, net | (539 | ) | 68 | (1,021 | ) | (85 | ) | |||||||||
Earnings (loss) before income taxes and noncontrolling interest |
|
3,754 |
(630 |
) |
15,997 |
4,461 |
||||||||||
Income taxes | 707 | (188 | ) | 5,088 | 2,973 | |||||||||||
Net earnings (loss) | 3,047 | (442 | ) | 10,909 | 1,488 | |||||||||||
Less: Net earnings attributable to noncontrolling interest, net of tax |
(101 | ) | (33 | ) | (173 | ) | (168 | ) | ||||||||
Net earnings (loss) attributable to |
$ | 2,946 | $ | (475 | ) | $ | 10,736 | $ | 1,320 | |||||||
Earnings (loss) per share data: | ||||||||||||||||
Basic earnings (loss) per share attributable to |
$ |
0.26 |
$ |
(0.04 |
) |
$ |
0.95 |
$ |
0.12 |
|||||||
Diluted earnings (loss) per share attributable to |
$ |
0.26 |
$ |
(0.04 |
) |
$ |
0.95 |
$ |
0.12 |
|||||||
Weighted average shares outstanding data: | ||||||||||||||||
Basic shares outstanding | 11,277 | 11,265 | 11,276 | 11,256 | ||||||||||||
Diluted shares outstanding | 11,279 | 11,265 | 11,280 | 11,262 | ||||||||||||
Dividends per share | $ | 0.09 | $ | 0.09 | $ | 0.27 | $ | 0.27 | ||||||||
Comprehensive (loss) income: | ||||||||||||||||
Net earnings (loss) | $ | 3,047 | $ | (442 | ) | $ | 10,909 | $ | 1,488 | |||||||
Other comprehensive (loss) income: Foreign currency translation adjustment |
(5,892 |
) |
1,054 |
|
(14,762 |
) |
4,053 |
|||||||||
Benefit plan adjustments, net | 542 | 528 | 1,545 | 1,506 | ||||||||||||
Comprehensive (loss) income | (2,303 | ) | 1,140 | (2,308 | ) | 7,047 | ||||||||||
Comprehensive income of noncontrolling interest |
(46 |
) |
(33 |
) |
|
(87 |
) |
(168 |
) |
|||||||
Comprehensive (loss) income attributable to |
|
$ |
(2,349 |
) |
$ |
1,107 |
|
|
$ |
(2,395 |
) |
$ |
6,879 |
|||
RECONCILIATION OF CONSOLIDATED NET EARNINGS (LOSS) TO EBITDA
(In thousands; unaudited) |
|||||||||||||
Three Months Ended |
Nine Months Ended |
||||||||||||
2015 |
2014 |
2015 |
2014 |
||||||||||
Net earnings (loss) attributable to |
$ | 2,946 | $ | (475 | ) | $ | 10,736 | $ | 1,320 | ||||
Interest expense | 122 | 220 | 436 | 697 | |||||||||
Income taxes | 707 | (188 | ) | 5,088 | 2,973 | ||||||||
Depreciation and amortization | 2,468 | 2,742 | 7,639 | 7,940 | |||||||||
Earnings before interest, taxes, depreciation and amortization |
$ | 6,243 | $ | 2,299 | $ | 23,899 | $ | 12,930 | |||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(In thousands; unaudited) | ||||||||
|
|
|||||||
2015 |
2014 |
|||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash | $ | 23,607 | $ | 24,757 | ||||
Trade accounts receivable, net | 35,729 | 40,219 | ||||||
Inventories, net | 90,039 | 97,579 | ||||||
Deferred income taxes | 4,713 | 4,779 | ||||||
Other | 13,926 | 12,763 | ||||||
Total current assets | 168,014 | 180,097 | ||||||
Property, plant and equipment, net | 55,791 | 60,267 | ||||||
Goodwill, net | 12,818 | 13,463 | ||||||
Deferred income taxes | 1,340 | 2,556 | ||||||
Intangible assets, net | 2,264 | 2,797 | ||||||
Other assets | 6,149 | 7,805 | ||||||
TOTAL ASSETS | $ | 246,376 | $ | 266,985 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Short-term borrowings and current maturities of long-term debt | $ | 3,571 | $ | 3,604 | ||||
Accounts payable | 24,859 | 22,111 | ||||||
Accrued liabilities | 29,152 | 31,265 | ||||||
Total current liabilities | 57,582 | 56,980 | ||||||
Long-term debt | 8,829 | 14,800 | ||||||
Accrued retirement benefits | 28,764 | 37,006 | ||||||
Deferred income taxes | 1,324 | 1,778 | ||||||
Other long-term liabilities | 3,050 | 4,110 | ||||||
Total liabilities | 99,549 | 114,674 | ||||||
|
|
11,969 |
11,973 |
|||||
Retained earnings | 191,384 | 183,695 | ||||||
Accumulated other comprehensive loss | (29,074 | ) | (15,943 | ) | ||||
174,279 | 179,725 | |||||||
Less treasury stock, at cost (1,831,457 and 1,837,595 shares, respectively) |
28,047 |
28,141 |
||||||
Total |
146,232 | 151,584 | ||||||
Noncontrolling interest | 595 | 727 | ||||||
Total equity | 146,827 | 152,311 | ||||||
TOTAL LIABILITIES AND EQUITY | $ | 246,376 | $ | 266,985 | ||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited) |
||||||||
Nine Months Ended | ||||||||
2015 |
2014 |
|||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net earnings | $ | 10,909 | $ | 1,488 | ||||
Adjustments to reconcile net earnings to cash provided by operating activities: |
||||||||
Depreciation and amortization | 7,639 | 7,940 | ||||||
Restructuring of operations | - | 1,094 | ||||||
Other non-cash changes, net | 295 | 441 | ||||||
Net change in operating assets and liabilities | (3,343 | ) | 6,824 | |||||
Net cash provided by operating activities | 15,500 | 17,787 | ||||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Acquisitions of fixed assets | (5,898 | ) | (5,183 | ) | ||||
Proceeds from sale of fixed assets | 210 | 121 | ||||||
Other, net | 1,553 | (244 | ) | |||||
Net cash used by investing activities | (4,135 | ) | (5,306 | ) | ||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Payments of notes payable | (30 | ) | (59 | ) | ||||
Borrowings under revolving loan agreement | 61,135 | 48,550 | ||||||
Repayments under revolving loan agreement | (67,100 | ) | (50,600 | ) | ||||
Proceeds from exercise of stock options | 15 | - | ||||||
Dividends paid to shareholders | (3,047 | ) | (3,045 | ) | ||||
Dividends paid to noncontrolling interest | (219 | ) | (487 | ) | ||||
Excess tax benefits from stock compensation | (36 | ) | 524 | |||||
Other | (313 | ) | (2,170 | ) | ||||
Net cash used by financing activities | (9,595 | ) | (7,287 | ) | ||||
Effect of exchange rate changes on cash | (2,920 | ) | 442 | |||||
Net change in cash | (1,150 | ) | 5,636 | |||||
Cash: | ||||||||
Beginning of period | 24,757 | 20,724 | ||||||
End of period | $ | 23,607 | $ | 26,360 |
Source:
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