1
TWIN DISC, INC., ANNOUNCES HIGHER FISCAL 2006
FIRST-QUARTER FINANCIAL RESULTS
First-Quarter Diluted EPS up 129.7% to $0.85 versus $0.37
First-Quarter Sales up 9.2% to $49,577,000
Management Optimistic about the Fiscal 2006 Outlook
RACINE, WISCONSIN-October 21, 2005-Twin Disc, Inc. (NASDAQ: TWIN). today
reported significantly improved financial results for the fiscal 2006 first
quarter ended September 30, 2005. Sales and diluted earnings per share for the
first three months of fiscal 2006 represented the best first quarter in the
past 24 fiscal years.
Sales for the quarter ended September 30, 2005 improved 9.2 percent to
$49,577,000 from $45,382,000 in the same period a year ago. The results for
the current fiscal quarter were favorably impacted by continued strong demand
across all the markets the Company serves, especially from its oil and military
customers.
Gross margin as a percentage of sales increased 3.4 percent to 29.1
percent from 25.7 percent in last year's comparable period. This was the
fourth sequential quarterly increase in gross margins as a result of the
Company's previously announced cost reduction programs, shifting product mix
to higher margined items, and selective price increases. Net earnings for the
first quarter increased 130.8 percent, or $1,409,000 to $2,486,000, or $0.85
per diluted share, compared with $1,077,000, or $0.37 per diluted share, for
the fiscal 2005 first quarter.
Commenting on the results, Michael E. Batten, Chairman and Chief Executive
Officer, said, "We are extremely encouraged with how the 2006 fiscal year has
started out. The bottom-line growth experienced in the quarter exceeded our
expectations, as we were successful in increasing sales, managing costs, and
improving margins. Our trailing 12-month earnings per diluted share now stands
at $2.86, representing the positive sales and earnings momentum that started in
the second half of fiscal year 2004."
Christopher J. Eperjesy, Vice President - Finance, Chief Financial Officer
and Secretary, stated, "We remain focused on strengthening the Company's
balance sheet to support our future growth. At the end of the first quarter,
working capital was $52,298,000, an increase of $8,682,000 from the end of
fiscal 2005. In the quarter, we invested $1,300,000 in capital expenditures,
and, for the year, we expect to spend approximately $10,000,000 in investments
in capital assets, compared to almost $12,000,000 in fiscal 2005. While
inventories increased during the quarter as a result of our strong backlog and
improved order rate, accounts receivable declined $3,556,000, or 9.4 percent.
Shareholders' equity now stands at $69,438,000 an increase of 3.8 percent from
$66,899,000 at fiscal year end."
Mr. Batten concluded, "We received a number of new contracts during the
quarter, including one of the largest orders we have ever received for our 8500
Series Transmissions. More companies throughout the markets we serve are
recognizing Twin Disc as a leading provider of innovative and highly reliable
power transmission products. Our backlog of orders to be shipped over the next
six months, including the backlog from Rolla, was $74,700,000. Based on our
strong backlog, improving margins and favorable industry dynamics, Twin Disc is
well positioned to continue to expand sales and earnings throughout the year."
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
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--
2
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per-share data; unaudited)
Three Months Ended
September 30,
2005 2004
---- ----
Net sales $49,577 $45,382
Cost of goods sold 35,173 33,730
------ ------
Gross profit 14,404 11,652
Marketing, engineering and
administrative expenses 10,147 9,509
Interest expense 316 219
Other income, net (54) (44)
------ ------
Earnings before income taxes
and minority interest 3,995 1,968
Income taxes 1,466 866
Minority interest (43) (25)
Net earnings $ 2,486 $ 1,077
------ ------
------ ------
Earnings per share:
Basic $ 0.87 $ 0.38
Diluted $ 0.85 $ 0.37
Average shares outstanding:
Basic 2,866 2,836
Diluted 2,921 2,888
Dividends per share $ 0.175 $ 0.175
3
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per-share data; unaudited)
September 30, June 30,
2005 2005
---- ----
ASSETS
Current assets:
Cash and cash equivalents $9,502 $11,614
Trade accounts receivable, net 34,195 37,751
Inventories, net 53,345 48,481
Deferred income taxes 5,807 5,514
Other 4,015 3,423
------ ------
Total current assets 106,864 106,783
Property, plant and equipment, net 39,957 40,331
Goodwill 12,764 12,854
Deferred income taxes 14,627 16,230
Other assets 8,932 9,097
------ ------
$183,144 $185,295
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Notes payable $3,135 $3,522
Current maturities on long-term debt 2,849 2,849
Accounts payable 15,880 21,746
Accrued liabilities 32,702 35,050
------ ------
Total current liabilities 54,566 63,167
Long-term debt 20,277 14,958
Accrued retirement benefits 38,346 39,680
------ ------
113,189 117,805
Minority interest 517 591
Shareholders' equity:
Common stock 11,653 11,653
Retained earnings 91,297 89,316
Unearned Compensation (150) (203)
Accumulated other comprehensive loss (17,842) (17,567)
------ ------
84,958 83,199
Less treasury stock, at cost 15,520 16,300
------ ------
Total shareholders' equity 69,438 66,899
------ ------
$183,144 $185,295
-------- --------
-------- --------