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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON
Form 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 1995 Commission File Number 1-7635
TWIN DISC, INCORPORATED
(Exact name of registrant as specified in its charter)
Wisconsin 39-0667110
(State or other jurisdiction of (I.R.S Employer
Incorporation or organization) Identification No.)
1328 Racine Street, Racine, Wisconsin 53403
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (414) 638-4000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports ) and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
At March 31, 1995, the registrant had 2,774,374 shares of its common stock
outstanding.
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FINANCIAL STATEMENTS
TWIN DISC, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
March 31 June 30
(Thousands) 1995 1994
---- ----
(unaudited)
Assets
Cash and cash equivalents $ 3,626 $ 4,166
Accounts and notes receivable 28,374 25,682
Inventories 45,890 41,569
Deferred income taxes 4,510 4,511
Other current assets 3,380 4,482
-------- --------
Total current assets 85,780 80,410
Property, plant and equipment 109,556 103,776
Accumulated depreciation 72,240 67,100
-------- --------
Net property, plant and equipment 37,316 36,676
Deferred income taxes 4,511 4,584
Intangible pension asset 9,606 9,606
Other assets 16,279 12,640
-------- --------
$153,492 $143,916
-------- --------
-------- --------
Liabilities
Notes payable $ 2,500 $ 3,000
Accounts payable 11,197 7,890
Accrued liabilities 21,705 21,820
-------- --------
Total current liabilities 35,402 32,710
Long-term debt 14,020 11,500
Accrued postretirement benefits 34,638 34,309
-------- --------
Total liabilities 84,060 78,519
Shareholders' Equity
Common stock 11,653 11,653
Retained earnings 64,860 63,353
Translation component 10,830 7,778
-------- --------
87,343 82,784
Treasury stock 17,911 17,387
-------- --------
69,432 65,397
-------- --------
$153,492 $143,916
-------- --------
-------- --------
The notes to consolidated financial statements are an integral part of this
statement.
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TWIN DISC, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended Nine Months Ended
March 31 March 31
1995 1994 1995 1994
---- ---- ---- ----
Net sales $42,946 $34,147 $115,648 $100,169
Cost of goods sold 33,444 26,644 90,456 81,126
------- ------- -------- -------
9,502 7,503 25,192 19,043
Marketing, engineering and
administrative expenses 6,746 5,872 19,542 16,949
Interest expense 359 166 939 535
Other (income)and expense, net 76 (24) (236) (611)
------- -------- --------- --------
7,181 6,014 20,245 16,873
Earnings before income tax 2,321 1,489 4,947 2,170
Income taxes 916 547 1,975 688
------- ------- --------- --------
Net Earnings $ 1,405 $ 942 $ 2,972 $ 1,482
------- ------- --------- --------
------- ------- --------- --------
Earnings per share data:
Earnings per share $ 0.50 $ 0.34 $ 1.06 $ 0.53
------- ------- --------- --------
------- ------- --------- --------
Dividends per share $ .175 $ .175 $ .525 $ .525
Average shares outstanding
(thousands) 2,787 2,799 2,795 2,799
Translation component of equity
Balance - beginning of the
period $ 8,420 $ 5,855 $ 7,778 $ 6,219
Translation adjustment 2,410 875 3,052 511
------- ------- -------- -------
Balance - end of the period $10,830 $ 6,730 $10,830 $ 6,730
------- ------- -------- --------
------- ------- -------- --------
In thousands of dollars except per share statistics and average shares
outstanding. Per share figures are based on average shares outstanding.
The notes to consolidated financial statements are an integral part of this
statement.
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TWIN DISC, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
March 31
(Thousands) 1995 1994
---- ----
Cash flows from operating activities:
Net earnings $ 2,972 $ 1,482
Non-cash adjustments to net earnings:
Depreciation 3,133 3,500
Net change in working capital,
excluding cash and debt (838) 3,240
-------- --------
5,267 8,222
-------- --------
Cash flows from investing activities:
Acquisitions of fixed assets (2,748) (2,650)
Proceeds from sale of fixed assets 29 377
Investment in affiliates (3,168) -
-------- --------
(5,887) (2,273)
-------- --------
Cash flows from financing activities:
Decrease in notes payable,net (615) (2,122)
Proceeds from long-term debt 2,510 -
Principal payments on long-term debt - (1,000)
Dividend payments (1,465) (1,470)
Treasury stock activity (524) -
-------- --------
(94) (4,592)
-------- --------
Effect of exchange rate changes on cash 174 176
-------- --------
Net change in cash and cash equivalents (540) 1,533
Cash and cash equivalents:
Beginning of period 4,166 2,903
-------- --------
End of period $ 3,626 $ 4,436
-------- --------
-------- --------
The notes to consolidated financial statements are an integral part of this
statement.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
A. Basis of Presentation
The unaudited financial statements have been prepared by the Company
pursuant to the rules and regulations of the Securities and Exchange
Commission (SEC) and, in the opinion of the Company, include all adjustments,
consisting only of normal recurring items, necessary for a fair statement of
results for each period. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted account principles have been condensed or omitted pursuant
to such SEC rules and regulations. The Company believes that the disclosures
made are adequate to make the information presented not misleading. It is
suggested that these financial statements be read in conjunction with
financial statements and the notes thereto included in the Company's latest
Annual Report. The year end condensed balance sheet data was derived from
audited financial statements but does not include all disclosures required by
generally accepted accounting principles.
B. Inventory
The major classes of inventories were as follows (in thousands):
March 31 June 30
1995 1994
-------- --------
Inventories:
Finished parts $34,618 $30,315
Work in process 8,125 7,539
Raw materials 3,147 3,715
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$45,890 $41,569
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------- -------
C. Contingencies
The Company is involved in various stages of investigation relative to
hazardous waste sites, some of which are on the United States EPA National
Priorities List (Superfund). While it is impossible at this time to determine
with certainty the ultimate outcome of such environmental matters, they are
not expected to materially affect the Company's financial position or results
of operations.
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MANAGEMENT DISCUSSION AND ANALYSIS
The steady recovery in our markets continued in the third quarter and led to a
26 percent increase in sales when compared to those reported a year ago. Net
earnings also were up sharply from last year's third quarter as a result of
the higher sales and improved manufacturing productivity.
Quarterly net sales from domestic manufacturing operations were about 28
percent higher than a year ago. The increases were seen across most product
lines, but the most notable improvements were Arneson surface drives,
transmissions for large farm tractors, steering units for a military contract,
and marine transmissions for fish and work boats.
The increase in sales reported by our Belgian subsidiary was slightly less
than the domestic component, but a large part of that increase was due to the
weaker dollar exchange rate used in translation. About one-third of the
increase was attributable to the higher volume of shipments. Much of the
increased demand being served by that
operation relates to dollar denominated shipments into the United States, and
the weak dollar is causing margins to be squeezed. To date, budgeted earnings
are being realized through above budget sales volume and productivity. In
terms of products and markets, the higher sales level continues to reflect
demand for mobile torque converters and marine transmissions for pleasure
craft applications.
Domestic and overseas marketing subsidiaries continued to post volume gains
with sales of the overseas operations, as stated in dollar terms, generally
augmented by the effects of translating at the weaker dollar exchange rates.
While demand for marine transmissions continues, there is also solid demand
for Arneson surface drives and power take-offs.
Cost of goods sold as percent of net sales showed only a slight improvement
over the costs reported in the same quarter last year despite the volume
increase. The principal factors mitigating the favorable effect of volume and
productivity have been the narrowing of European margins caused by dollar's
decline and a change in mix of product sold domestically. As markets recover,
the higher unit volumes reduce the relative importance of our stable,
profitable renewal parts business.
Marketing, engineering, and administrative expenses continued to run about 15
percent higher than last year but declined as a percent of sales. As in the
prior quarter, most of the increase was caused by three items of similar
magnitude - computer leasing and training costs associated with this year's
phase-in of new business systems, weakness of dollar exchange rates, and costs
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associated with domestic operational changes. While the increase in interest
expense reflects the significant rise in borrowing rates in the U.S. during
the past year, most of the change in that item is due to a 30 percent increase
in average debt outstanding since last year.
Working capital increased by $3 million during the quarter, and the current
ratio declined slightly to 2.4. The current ratio is virtually unchanged from
the beginning of the fiscal year, but working capital has increased by $3
million since that time. While incremental sales volume normally would be
expected to require higher working capital, most of the increase can be
attributed to the effect of translating at the weak dollar rates. For the
quarter, net cash flow from operations exceeded spending for capital equipment
and payment of dividends and enabled repayment of debt. For the nine months,
operating cash flows have been sufficient for internal needs, but additional
borrowing was required in the first quarter for investment purposes. Despite
the increased borrowing during the period, our balance sheet remains strong,
and we continue to have liquidity sufficient for our near-term needs.
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OTHER INFORMATION
There were no reports on Form 8-K during the three months ended March 31,
1995. The financial statements included herein have been subjected to a
limited review by Coopers & Lybrand L.L.P., the registrant's independent
public auditors, in accordance with professional standards and procedures for
such review.
There were no securities of the Company sold by the Company during the three
months ended March 31, 1995, which were not registered under the Securities
Act of 1933, in reliance upon an exemption from registration provided by
Section 4 (2) of the Act.
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SIGNATURE
Pursuant to the requirements 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.
TWIN DISC, INCORPORATED
(Registrant)
/S/
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(Date) Fred H. Timm
Corporate Controller/Secretary
(Chief Accounting Officer)
5
1,000
9-MOS
JUN-30-1995
MAR-31-1995
3,626
0
28,532
158
45,890
85,780
109,556
72,240
153,492
35,402
14,020
11,653
0
0
57,779
153,492
115,648
115,648
90,456
90,456
0
24
939
4,947
1,975
2,972
0
0
0
2,972
1.06
1.06
