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TWIN DISC, INC., ANNOUNCES FIRST-QUARTER FINANCIAL RESULTS
Seventh Consecutive Quarter with Year-over-Year Improvement in Earnings
RACINE, WISCONSIN-October 15, 2004-Twin Disc, Inc. (NYSE: TDI), today reported
significantly improved financial results for the fiscal 2005 first quarter
ended September 30, 2004. The financial results for the first three months of
fiscal 2005 represents the best first quarter in the past seven fiscal years.
Net earnings for the first quarter increased $981,000 to $1,152,000, or $0.40
per diluted share, compared with $171,000, or $0.06 per diluted share, for the
fiscal 2004 first quarter. This represents the seventh consecutive fiscal
quarter with year-over-year improvement in net earnings.
Sales for the quarter ended September 30, 2004 improved 19.5% to $45,382,000
from $37,966,000 in the same period a year ago. This represents the third
consecutive fiscal quarter with year-over-year improvement in sales. The
results for the current fiscal quarter were favorably impacted by the Company's
recent acquisition of Rolla SP Propellers SA (Rolla) as well as a previously
announced military contract to supply transmission systems for vehicles to be
delivered to the Israeli Defense Forces. The latter contributed nearly $2.4
million in sales for the quarter.
Gross margin as a percentage of sales increased to 25.9% from 23.4%. Gross
margins improved primarily due to higher volume while maintaining fixed costs
at fiscal year 2004 levels. The benefits from cost reduction, prior
restructuring programs and lower pension expense helped to offset higher steel
and other costs.
Commenting on the results, Chairman and Chief Executive Officer Michael E.
Batten said, "The current fiscal year has started out very strong and continues
the positive momentum we established in the second half of fiscal year 2004.
Demand across most of our markets is up and our backlog of orders remains very
healthy. Our trailing 12-month earnings per diluted share now stand at $2.18
as we continue to focus on improving our worldwide operating results.
"The Company's balance sheet remains strong with excellent liquidity. Accounts
receivable were down nearly $4 million, or 10%, while inventory increased a
like amount. The latter is primarily a result of increased order activity as
we schedule production to meet demand for the balance of the fiscal year.
Long-term debt increased a little more than $3 million versus the end of fiscal
2004. This increase is primarily attributable to increased funding in the
quarter of the Company's pension plan as well as increased capital investment.
In the quarter, the Company invested $1,740,000 in capital expenditures. In
total, the Company expects to more than double its investments in capital
assets in fiscal 2005 compared to fiscal 2004. The ratio of total debt to
capital (total debt plus shareholders' equity) was 28.6%, compared with 26.1%
at the prior fiscal year-end. We continue our efforts to improve our overall
liquidity and strength our balance sheet.
"Our backlog of orders to be shipped over the next six months, excluding the
backlog from Rolla, was $52,200,000, an increase of 6% from fiscal year end,
and 27% higher than it was at September 30, 2003. We see our business
remaining firm entering the new quarter.
"Our marketing activities, as well as engineering services and manufacturing
are at high levels. We remain focused in producing quality products, providing
value-added services and using our global manufacturing presence to be able to
source and purchase components and raw materials that will allow us to contain
manufacturing costs. This is positioning the Company to expand sales, achieve
improving margins and manage higher returns on assets to earn our cost of
capital. We are pleased with our progress and believe we have more room for
improvement."
Twin Disc designs, manufactures and sells heavy-duty off-highway power
transmission equipment. Products offered include: marine transmissions,
surface drives and propellers; power-shift transmissions; power take-offs and
reduction gears; industrial clutches; and control systems. The Company sells
its products to customers primarily in the marine, industrial equipment,
government, energy and natural resources and agricultural markets.
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
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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.
- --Financial Results Follow--
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per-share data; unaudited)
Three Months Ended
September 30,
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2004 2003
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Net sales $45,382 $37,966
Cost of goods sold 33,607 29,070
Gross profit 11,775 8,896
Marketing, engineering and
administrative expenses 9,509 8,358
Interest expense 219 280
Other income, net (44) (205)
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Earnings before income taxes
and minority interest 2,091 463
Income taxes 914 281
Minority interest 25 11
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Net earnings $ 1,152 $ 171
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Earnings per share:
Basic $ 0.41 $ 0.06
Diluted $ 0.40 $ 0.06
Average shares outstanding:
Basic 2,836 2,803
Diluted 2,888 2,839
Dividends per share $ 0.175 $ 0.175
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per-share data; unaudited)
September 30, June 30,
2004 2004
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ASSETS
Current assets:
Cash and cash equivalents $ 8,008 $ 9,127
Trade accounts receivable, net 33,292 37,091
Inventories, net 55,840 52,079
Deferred income taxes 4,216 4,216
Other 3,432 3,111
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Total current assets 104,788 105,624
Property, plant and equipment, net 33,798 33,222
Goodwill 12,683 12,717
Deferred income taxes 15,673 15,668
Other assets 9,407 9,406
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$176,349 $176,637
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $ 1,865 $1,607
Current maturities on long-term debt 2,857 3,018
Accounts payable 15,525 17,241
Accrued liabilities 27,161 27,262
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Total current liabilities 47,408 49,128
Long-term debt 20,151 16,813
Accrued retirement benefits 46,210 49,456
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113,769 115,397
Minority interest 441 509
Shareholders' equity:
Common stock 11,653 11,653
Retained earnings 87,094 86,443
Unearned Compensation (262) (304)
Accumulated other comprehensive loss (20,072) (20,301)
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78,413 77,491
Less treasury stock, at cost 16,274 16,760
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Total shareholders' equity 62,139 60,731
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$176,349 $176,637
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