1
RACINE, WISCONSIN-April 19, 2005-Twin Disc, Inc. (NASDAQ: TWIN), today
announced financial results for the fiscal 2005 third quarter and the nine
months ended March 31, 2005. The third quarter of fiscal 2005 represents the
fifth consecutive quarter sales improved year-over-year; however, gross profit
margins were under pressure and restricted any earnings improvement primarily
because of higher raw material and energy costs and the effect of unfavorable
currency exchange rates.
For the three months ended March 31, 2005, sales increased $7,830,000, or
16.1 percent to $56,436,000 compared with $48,606,000 in the same period last
fiscal year. Year-to-date, sales have increased $27,606,000, or 21.4 percent
to $156,549,000 from $128,943,000 in the fiscal 2004 nine-month period.
Business has been solid across the board and this pattern is remaining firm
into the fourth quarter.
For the fiscal 2005 third quarter, gross margin as a percentage of sales,
decreased to 25.0 percent from 26.6 percent in the fiscal 2004 third quarter.
This decline results principally from the inability to offset higher prices for
steel, shipping and energy; as well as, the unfavorable impact of producing
pleasure craft marine transmissions in Euros at the Company's Belgium facility
and selling them in US dollars to the North American market. Management has
taken measures to offset the higher raw material costs through pricing actions
to be effective in the fourth quarter.
The year-to-date gross margin; however, improved to 25.5 percent from 25.2
percent in the same period a year ago, which is a result of the higher level of
profitability recorded during the first two quarters of the 2005 fiscal year.
The increases in marketing, engineering and administrative (ME&A) expenses
both in the quarter and year-to-date are primarily attributable to accruals
related to the reintroduction of the corporate incentive program after a two
year freeze, costs associated with the inclusions of Rolla's ME&A expenses
starting with this fiscal year, foreign currency translation effect on foreign
operations and the roll-out of a new corporate website (www.twindisc.com).
Net earnings for the fiscal 2005 third quarter declined to $1,218,000,
or $0.42 per diluted share from $1,776,000, or $0.62 per diluted share in the
fiscal 2004 third quarter. Year-to-date, net income has increased to
$3,544,000, or $1.22 per diluted share from $2,455,000, or $0.86 per diluted
share a year ago. The year-to-date results include the effect of the Company's
acquisition of Rolla SP Propellers SA (Rolla), which was acquired at the end of
the prior fiscal year.
Michael E. Batten, Chairman and Chief Executive Officer said, "We are very
impressed by the breadth and size of our incoming orders. Further, the backlog
of orders to be shipped over the next six months, which does not include any
business booked from Rolla, was $62,700,000 at March 31, 2005, up 27.0 percent
since the year began and up 20.0 percent compared with the same period a year
ago and is the highest six-month backlog since the third quarter of fiscal
1998. Thus, we see business expanding well into next year."
Mr. Batten further stated, "Our challenge is taking this growth and
bringing it to the bottom line. The benefits from a number of our programs
that were controlling production expenses and improving productivity have been
penalized due to the inflation from the costs for raw materials and the
deflation of the dollar. We are acting quickly to resolve these inflationary
pressures. Some of the improvement will be seen in the fourth quarter with
the full effect realized in the new fiscal year. We are also analyzing various
strategies that could reduce the impact of the weak dollar. And again, we are
optimistic that our actions will produce noticeable results."
Christopher J. Eperjesy, Vice President - Finance/Treasurer and Chief
Financial Officer, stated, "Our asset management and our cash flow continued
to strengthen our balance sheet. Inventories at March 31, 2005 were about even
over the same period last year compared with the 16.1 percent increase in
third-quarter sales. Our accounts receivable were up 3.5 percent since fiscal
year end and shareholders' equity rose to $68,268,000 from $60,731,000 at
June 30, 2004. The balance sheet remains strong with excellent liquidity and
we are poised to take advantage of an accretive acquisition when the
opportunity occurs, as well as, continuing to make investments that improve our
manufacturing productivity and quality."
Mr. Batten concluded, "For fiscal 2005, our net income will compare
favorably with the prior year, while we will be challenged during the fourth
quarter to beat last year's impressive fourth quarter earnings. Looking
forward to fiscal 2006, we are expecting another good year."
2
Twin Disc, Inc., designs, manufactures and internationally distributes
heavy-duty off-highway power transmission equipment for the construction,
industrial, government, marine, agricultural, and energy and natural resources
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 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 Nine Months Ended
March 31, March 31,
2005 2004 2005 2004
---- ---- ---- ----
Net sales $56,436 $48,606 $156,549 $128,943
Cost of goods sold 42,352 35,689 116,652 96,409
------ ------ ------- ------
Gross profit 14,084 12,917 39,897 32,534
Marketing, engineering and
administrative expenses 11,227 9,520 31,997 27,156
Interest expense 304 272 814 835
Other expense (Income), net 181 (42) 322 (227)
----- ----- ----- -----
Earnings before income
taxes and minority interest 2,372 3,167 6,764 4,770
Income taxes 1,158 1,393 3,156 2,298
Minority interest (4) (2) 64 17
----- ----- ----- -----
Net earnings $ 1,218 $ 1,776 $ 3,544 $ 2,455
------- ------- ------- -------
------- ------- ------- -------
Earnings per share:
Basic $ 0.42 $ 0.63 $ 1.24 $ 0.87
Diluted $ 0.42 $ 0.62 $ 1.22 $ 0.86
Average shares outstanding:
Basic 2,877 2,819 2,858 2,811
Diluted 2,928 2,848 2,906 2,832
Dividends per share $ 0.175 $ 0.175 $ 0.525 $ 0.525
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per-share data; unaudited)
March 31, June 30,
ASSETS 2005 2004
---- ----
Current assets:
Cash and cash equivalents $8,579 $9,127
Trade accounts receivable, net 38,383 37,091
Inventories, net 56,137 52,079
Deferred income taxes 4,557 4,216
Other 3,415 3,111
----- -----
Total current assets 111,071 105,624
3
Property, plant and equipment, net 36,616 33,222
Goodwill 13,065 12,717
Deferred income taxes 15,454 15,668
Other assets 8,973 9,406
------ ------
$185,179 $176,637
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $3,575 $1,607
Current maturities on long-term debt 2,857 3,018
Accounts payable 17,849 17,241
Accrued liabilities 28,283 27,262
------ ------
Total current liabilities 52,564 49,128
Long-term debt 17,618 16,813
Accrued retirement benefits 46,249 49,456
------ ------
116,431 115,397
Minority interest 480 509
Shareholders' equity:
Common stock 11,653 11,653
Retained earnings 88,472 86,443
Unearned Compensation (255) (304)
Accumulated other comprehensive loss (16,057) (20,301)
-------- --------
83,813 77,491
Less treasury stock, at cost 15,545 16,760
------ ------
Total shareholders' equity 68,268 60,731
------ ------
$185,179 $176,637
-------- --------
-------- --------