TWIN - Earnings call transcript Q4 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, and welcome to the Twin Disc, Inc. Fiscal Fourth Quarter 2018 Investor Conference Call and Webcast. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Mr. Stan Berger of SM Berger. sir. ahead, go Please

Stan Berger

joining On results extremely the the pleased our and you participate James. fiscal the Disc, fourth business XXXX time of outlook. we in quarter for thank and are that year call, to behalf you, discuss management company’s financial of full Twin to us and Thank you’ve taken

hopes, this important Before materially beliefs, statements. states during the made in that certain I introduce statements for that such predictions management, or forward-looking It could projected that those I – expectations would company’s conference during the like management’s forward-looking differ especially actual results those intentions, to to remind everyone are the call, course statements. from future, remember is

differ in those are before release the SEC. of contacting Additional issued you forward-looking the statements company company’s the the which news materially by the was from copy of Form information that may results concerning factors XX-K, opened. morning contained in either this the or which report could should a annual on cause obtained copies market have received now be to By actual

time, Chief a you Officer, call to Executive If received John Batten. please send copy, Annette will you. Financial Secretary. at Jeff Knutson, the President I and this not John? Officer; turn President XXX-XXX-XXXX, Batten, will Finance, she Treasury Hosting Vice a Mianecki the Twin John of today and Chief call are call over Disc have copy and At company’s to the and

John Batten

good and fourth and Welcome XXXX quarter you, our conference morning, to everyone. Stan, call. fiscal year-end Thank

questions. Jeff and short a to with statement, I take begin then happy will and we usual, As will be your summary

vethpropulsion.com, operational signing We the some highlights take results, as touch family. call on but the Veth employees. results products website, the their the were and on in and have in Many both the Netherlands how to in how to the Jeff I new which fit been acquisition after the leaving announced products may us not to part Twin marine apologize closed of see with for and reiterate they both business. the their want I we in Before encourage quarter. to our technology Veth of range of the just were with conference Jeff we everyone without core people of to July. Disc and over Veth you takes excited meeting competencies. the are both I quarter our of levels, and June we goes and horsepower deal, in all I This have for this explore that from then opportunity to day, short will notice, the

Northern distribution With in global and their majority in Americas the we to have of currently the vast Europe, opportunity business real network. grow their very our through Asia the sales

You’ll also the we’ve in a U.S. relationship and that Asia. as two-year dealer of note had their with parts them

ago, for and year-over-year year our few up on best XX% fourth a our of demand in quarter. was most this was quarter quite Clearly, just So market. rose sales quarter to some Sales time. compared the comments the quarter in a

to oilfield addition In of our in grew segment. transmission, shipments most

improved and volume effect. than levels. the performance on demand control results ago The industrial through stronger efficiency, continues drop strong reflects year pose the Our the also marine margin and the to expense

through the just Our that increasing last was chain. quarter, space in need touched domestic external additional briefly so operations on for internal we able be supply to we $X million floor very to for the The throughout improvements is make delivered, $X the anticipate team a May during on call, being our incremental coming operation. In the our starting quarters. also quarters million capacity both did and CapEx order to good job

light and depot Over are actively to operations activity we in the past industrial, options back our in and comments over Houston Jeff to oil I’ll and pursuing assembly move some With of depot also gas on port, turn Racine. most back two at marine and area. some likely to years, we assembly but the that, the for functions closer an it had increased a financials. the With greater to consolidated

Jeff Knutson

sustained sixth Thanks, of John, prior the North $XX of gas fiscal growth, aftermarket improved everyone. and good and led by shipments the since demonstrating from growth along activity. year-over-year The has the demand, or represents the up units the has oilfield trend improved I’ll been middle million briefly American the numbers. of year over enjoyed with which through quarter. run also quarter consistently This $XX.X into million America, for transmission we’ve were oil of XXXX. XX% primary morning, North driver Sales consecutive the been quarter fourth fourth quarter

In of addition, all markets marine, nearly as we to positive continue markets. our industrial John patrol our global pointed see in trends craft and out, including commercial

$XX million to XX% nearly by higher $XXX.X finished sales year, or the For million.

reduction margin and and costs due compared to its This but quarter this $X.X second-highest was compared also in in of the increased transaction XX% the strong fixed is costs strong history and stock-based million million primarily a increase driven the finished of of reflects compensation percent very $X.X percent volume-driven, of basis for related Spending costs. by of for or margin acquisition, Veth increase million and gas XX.X% Twin and The a an improvement prior mix, Disc currency. Most fiscal at fourth XXXX. $XXX,XXX the efficiencies performance the to fourth the XXXX. margin the increase oil to $X.X a gross operating was incentive very a for full quarter quarterly in year to and fiscal improved global gross aftermarket and Our fiscal and quarter. roughly is XX.X%, year engineering from XXXX with XXX marketing, improvement XX.X% margin points administrative

full now invested related XXXX. to in the fiscal drive additional As a restructuring primarily to to for to year, cost reduction our fiscal actions at quarter XXXX the expenses We percent operations. European $XXX,XXX and declined of revenue XX.X% full for and efficiencies, million compared XX.X% year the in ME&A $X.X

million XXXX fourth improved over operating improvement reflects a a fourth now favorable $X.X XX% diluted $XX.X credit results and an $X profit the XX-month compared in a share of effective operating the quarter fiscal with reflecting which EBITDA, fiscal million million capital charges year smaller The profit availability tax to very at million. fourth net the year-to-date in legislation, prior and the new in are the fiscal The reflects have improved of XX.X%, $X.X along revolving $XX facility. of million. new EBITDA to results debt-to-total or $X.X of for operating the million on balance discrete the resulting a cash, million $X.X X.X% impact $XX.X in we loss operating million. for With quarter profit fiscal year prior a over compared $XX.X of of of items. remains by includes $X.X the Positive consistently per the to million of improvement performance, XXXX. quarter fiscal Net in $X.X year the some rate from fourth $X.X trailing million profit profit $XX and by XXXX, a million favorable quarter strong million quarter, improved of volume sheet year prior Full to an prior the of close was as – tax with million million $X.X restructuring of operating we our out our for million quarter, year margin the basis, $X.X position

of Veth of acquisition on closed in XXXX, we $XX roughly fiscal our of know, additional you borrowings first in Propulsion As week million. the resulting

Our level reflecting leaves fiscal of in $X.X new million. of this initial XXXX a forma covenant pro position review results comfortable us debt-to-EBITDA our to relation acquisition in

the increased increase since is the by remarkable supported prior capital, backlog, increase inventory actually the prior XXXX, in fiscal was six-month increased in $XX.X spending. have growing has Free XX% inventory an demand, fourth million increase year While reached This cash $X.X capital $XXX and results. year-end. our the of reduced working the turns end is with growth as XXX% strong positive consistent offsetting this quarter, which flow with the in in over quarter, million earnings over the million a

to million. support level. free increase which for fiscal increase volume-driven XXXX to XXXX, the was working it in in XX.X% required This line the comes in capital we of volume sales a the working our back cash reported reflecting $XXX,XXX, increase million above an with in of The capital John working of year, growing results. represents I’ll for slightly final For investment in of to $XX breakeven increase despite spending capital and some comments. control flow $X.X about turn have now capital And the fiscal of just efforts the

John Batten

Thanks, John thanks, Jeff. –

outlook. quick Just on spend the a moment

end to a this it with in down XXX%. window. heading non-oil quarter, the of was mentioned, but outside third of the versus rescheduling we’re slightly business as XXXX, fiscal mainly due up six-month For of gas the the and backlog, Note, Jeff was

oil marine and customers, strong customers. increase In from addition to industrial gas we’ve demand also our seen in and from orders an our

remarks, I year into questions. our year. and we and good the we Jeff James, heading will XXXX, fiscal about While XXXth prepared our your and for open line now celebrate anniversary concludes feel questions. happy take very That as to be strong another our begin please XXXst

Operator

Tim Batten. our we will Baird. from Mr. today Wojs you, Instructions] [Operator take Thank question And first with

Tim Wojs

Good guys. Hey, morning.

John Batten

Good morning, Tim.

Jeff Knutson

Tim. morning, Good

Tim Wojs

look a it normalized a kind there at few what of bit and But done performance questions. should compares gross lot modeling of like there. how had just look from I kind to would the things relative I the incremental thinking some here? hard kind of history? what to curious, job. maybe just think today a to know margin I margin and quarter, more business. of kind curious you cost maybe out in the of is strong you’re if that just I’m relative incrementals I makes fourth normalized guess, and – you’ve really Nice take

Jeff Knutson

that very this level we these we ask – Tim, because and Yes. I margin a strong a seen a seen never volume lot, Obviously, ourselves quarter. was we’ve levels. like at this have mean,

have from we’re right, strong you’re So also we very mix. out, taken benefiting but cost a

XX% incremental, we as saw something like far this an on incremental as quarter. I So volume think,

that was very strong. think I

levels. into think we and we head the as the the after volume challenging with is lower shutdown, I always shutdown the first quarter quarter, what is realized first factory restarting the

will stay that mid-XXs. we fourth as the answers So one few be expectation I is the into your as challenging I quarter think question. looking roll hope especially math, our quarters. the that But the we’re in first at to

Tim Wojs

And kind can is of of accurate? margins about But to make helpful. way margin look EBITDA think that’s I kind given a like, no, so we know what is modeling No, just the should there you’ve then for gross sure the that.

Jeff Knutson

cost between of be a honest, sold them the U.S. out I’ll need we’re breaking figuring and their Tim, ME&A Yes. goods in we still reported to. never level, cost way they’ve out because

So out think with, in but or XX% there. their what range margins through that it’ll XX% details working be in to, we we’re shake the still believe will line sort we of, is

Tim Wojs

And numbers. in your think about? Just, those for is just impact Okay. accounting for of could that sense then the what purchase sort figures you my there, that guess dollar we could include be? probably kind any reported Any of estimates

Jeff Knutson

it’s say early. I’ll pretty

we’ll But write-off going in some amortization think We’re I a one talk of through of about to significant the now. pretty particular, amortizations the valuation year work inventory. have

significant expect something at that’s think I we this be would would point.

Tim Wojs

Okay.

Jeff Knutson

the, to range is significant, what – say million estimating. year probably, when I we’re in $X significant $X million one So

Tim Wojs

Okay.

you’re considerable like year. then looks And pretty we this in about a for for great. – when Okay, planning it uptick think CapEx so

you XXXX? even of though to target? you’ve So or been I able at breakeven about be how in years. think is the think had the generate you that fiscal as positive cash look we higher you’ve couple Should flow free free flow cash last should should – CapEx, fiscal XXXX

Jeff Knutson

It yes. is,

– we on target I bit be timing, think to will it the I lumpy. spending cash depending on that the think, on a capital, little continue – that

think So I be flow. But and continue have free we’ll pluses some think to minuses. positive cash we’ll to I drive

Tim Wojs

Okay.

then wise, gaining position maybe last oil overall gas secondly, you’re Do market like the you or gas. situation? than one, you’re growing your you the oil would guys competitors? maybe then John, feel relative of in environment the kind line you maybe, how and on do today mean, you And just I you other within, share consider of with feel recovery market? And are and some do how pricing to like just feel Okay. the

John Batten

Certainly, question. that. All we’re good growing, questions believe is I wrapped one in so do up we’re the market gaining share. market enjoying

our customers. We’re to gaining going replace market and for other and refits share and existing units in units rebuilds

weren’t doubt no XXXX getting really that the lot the of growing. XXXX. that incremental really we’re there And between But looking think to share. at do I rebuilds So market some overall is back done market it’s a is

unit some market getting There’s and in But in one in to we the But some help expand up country, new speed. down really, also operation we’re addressing, there I some out our for in we’re general as brands, of in assembly the units of gaining that supply Racine. our going incremental what’s additional So and down in market chain in Racine, the to getting we’re think mentioned to share space refit think address whole in just here some up existing Texas, going footage for new internal there. I there. some even comments, further factors free is our share which square gas activity the construction, capacity we’re the market help beginning CapEx. so gaining need here limiting oil taking we And of capacity of is to other by and

think additional in So moves even market from some share see us further. the I chess our months capacity help our you’ll grow and to coming

Tim Wojs

then today to environment private? pricing relative And how good. pretty it just It should be you the like in sounds the Okay. characterize would other

John Batten

mean, is long It’s you think tariffs. keep everyone’s the you opportunity, Price – I in pricing, do inflation, certainly, be really pricing delivery – have what as of Shortage the I headlines. you’ll as better. up same is supply, match to okay. to your reading can

Tim Wojs

you good job Nice XXXX anniversary. the wish luck Great. XXXth and XXXX on and on

John Batten

much. very you thank right, All

Jeff Knutson

Tim. Thanks,

Operator

from Next hear with we Simon Instructions] will Gabelli Company. Wong & [Operator

Simon Wong

Hey, morning, John Jeff. and good

John Batten

Good morning, Simon.

Jeff Knutson

Good morning, Simon.

Simon Wong

Just of a questions. quick couple

– Veth completion of the percent With your acquisition, what the with business now is of Veth energy-related? your

Jeff Knutson

the depending that’s Veth, in. Obviously, good we’re on lowers drastically base that Simon, would a Yes. what with that question you… fluctuates because percentage – year it

John Batten

say I that Yes, would I probably by would XX%. lowers XX%. say, by

Simon Wong

So about XX%.

Jeff Knutson

XX% XXXX. we’re as one-third, into and roll at looking we Maybe it’s maybe between XX% fiscal

Simon Wong

your be of business So think you about XXX separating has is you a on further business its do business? Would the question, a strategic like stand energy it Or energy-related. – looks scale cyclicality you and million energy enough and would $XXX in interested the more to own? of be – by marine business reducing the

John Batten

own, I think to the relates energy it its business is hyper-cyclical. us on as as

have in but oil and marine, that would we the think is to its have transmission energy-related business, be military, we stand tough we have I and a nice our business also ARFF, In how, we on own. offshore, brown have have the we What’s and gas. water pushboat activity.

in you So energy as has a have – and industrial then base that and non-energy. oil some

the in I play a different technology same using lot the and transmission, are because assets think is, markets. of in to together, business marine best and left

Simon Wong

or that… seeing just your your or order are providers seeing then holding And white oversupplied. customers all the hearing you are to energy calendar. I’m describe the the of delaying this, space slightly the Can how light been on deliveries, pumping deferring in up rates mostly on some the have pressure given service hearing providers I’m Okay. side, be of or balanced, market

John Batten

lumpy, say, but for And would been Simon, equally we space delay strong. have general, or any been I have quarters not delivery. in have white in months request certainly, seen as

Simon Wong

good. that’s the this with extra Veth any incremental And then going on expenses Okay, back acquisition? associated acquisition, or integrating

Jeff Knutson

a the be There think in XXXX. it be be needle cash – will I don’t it of it expense, some. real will don’t think think fiscal don’t will I terms Sure. I will move – in

transaction I to great of recorded get in bulk the think deal done fiscal had we a the cost XXXX.

us. be should behind that So

cost see for we’ll some think incremental integration. I marginal

Simon Wong

that? than your reason And What’s higher tax expected. for for XX.X%, I the XXXX? a what’s And Okay. outlook the wondering rate just finally little

Jeff Knutson

Yes.

XX of tax year. our our blended June is this you fiscal year, remember if we’re rate because So –

part So the it’s of rate, the new tax part of old law.

down go will it roll U.S. So statutory as XXXX the in we into fiscal

XX%, expect we So place. depending that or XX.X% of would it range, the in are where to mix on kind the earnings be taking

Simon Wong

Got it. Thank so you much.

Operator

the turn or comments. session. question-and-answer for conclude Instructions] closing John that I’ll will Mr. additional to [Operator any today’s over And now Batten conference

John Batten

that the questions. join call many turn again be back at you anniversary all floor appreciate We that answered to our October, James, corporate at for our for our you forward gallery or hope conference we’ve our interest with you’ll please James, to joining in And to headquarters. Twin speaking you free quarter. Jeff call of chance your you. you, XXXX able our and us look thank will that, to a XXXth in Annual the first of of shareholders close October, yourselves following look of myself. Meeting anniversary, and XXXth today. feel I’ll we celebrate Disc, and your first hope with Thank call fiscal the in for not, when If continuing We to have

Operator

call. will you That today’s for you. conclude Thank your Thank conference participation.

You may disconnect. now

Twin Disc (TWIN) 6 Aug 182018 Q4 Earnings call transcript