TWIN - Earnings call transcript Q4 2021

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

Operator

Good day, and welcome to the Twin Disc's Fiscal 2021 Fourth Quarter Conference Call. Today's call is being recorded. At this time, I'd like to turn the call over to Stan Berger. Please go ahead.

Stanley Berger

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

beliefs, the for on introducing are Annual morning I By have by the in concerning factors cause would Information market that certain future the copy the during Company's made now, especially statements. management, XX-K, in important like Form those contacting that It this predictions results those statements. forward-looking Before or should the that statements to the which was may conference to actual management's differ states either those expectations could results are forward-looking be Report hopes, contained SEC. remember projected opened. issued you before of intentions, statements from forward-looking differ of release, materially copies the Company's which to materially remind Company or could call, obtained the news a the in is such everyone received from actual that

Disc's call please turn Executive If to will will Twin John. at send are Officer. you you. today I call the At to time, the Hosting a have Chief not XXX-XXX-XXXX John? received Batten, copy, John copy Mianecki this Annette and she over the call

John Batten

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

which the will Jeff in your a for require Jeff will are that good him few be now. Chief our with questions. are doing Feiertag, to weeks. me the expecting leave just The bad summary host our did President Sales. not as the listening Operating numbers. right week, next for be is He take mentioned Vice will well is recovery. to to earlier news call and a news an today then you notice today. we begin and But and Officer Stan and short I we'll The usual, Unfortunately, Batten, Tim this incident full me involved of joining a that As Most President on is unfortunate was likely most of Jim you Knutson happy statement have

just Before over some of I'll I the and operational results, the highlights touch go year-end quarter the quarter. from on

area. we of projects I've As as them number is hybrid in ready to our release their to Once products, electrification that are continues past, been mentioning and our with grow the the customers in you. development projects share product will

the clutches in full we a throughout coming facility supply been fourth but hitting demand, North gas being and oil are stride and driven and parts in of were Racine Lufkin. PTOs American issues full a all India, a quarter by mechanical strong by strong are were the they bit in production and rebuilds. for the aftermarket our in little hampered Orders in mentioned short from these that once India. chain the quarter, new produced from now we including continued I've COVID-related half hitting were Lufkin supply seeing of are for easement, issues from from first have the not development in Shipments is year As applications seen some chain cycles that the They've The one. our past, in but steam. particularly the fourth supply

supply those requirements chain backlog, is to the shift third versus backlog overall quarter combination of still realization The that days window issues. are the increased have customer our down for the nicely. our we also and as a six-month going six-month While out-passed backlog some

factory. global distribution are This new orders, improve get partners, being inventory will new through work confident that quarters. driving to with the our orders continue orders prove projects in this they the on our projects our continuing strong and coming new we are to markets as on remain in should marine we sold those and inventory We is off see and marine and

continues later shipments steady New in be and to year. oil should increase calendar to Asia this very and gas

Compared the full-year fiscal The XXXX a Looking or global North year ease. XX% into X%, industrial fourth improvement up were economy up transmission up numbers. ongoing into quarter, to were prior began were fourth By into up of sales fourth in pandemic numbers. at X%. the sales the and region, down year the XX.X% Europe million of X.X%. sales was sales quarter. $X.X up prior propulsion The Sales and America as marine strengthening quarter sales of to result were XX.X%, quarter up Asia COVID-XX from and million sales the from effects the and XX.X% the quarter prior fourth were $XX.X year Pacific

a $X.X fourth Foreign the sales in quarter. currency impact exchange to was net positive million

For the XX.X%. full-year, sales million down are $XX.X or

percent to mix margin the Foreign targeted discretionary quarter of XX.X% profit. of to of for offset a quarter. impact fiscal by and $X.X global in on impact. the million would in the benefit, partial The quarter oil quarter in Gross ongoing at year-over-year the driven achievement containment to currency fourth American quarter, fiscal to a primarily by prior expense translation global year and the with of a quarter XXXX year from favorable XXXX. the to activities. XX.X% cost year. increased the benefited the and the focus third this increase XX.X% is bonus quarter Retention Spending reduction gross gross sequential were Adjusting translation XX.X% the fiscal cost profit significant $X.X for compared Employee on incentive contributed for market a along have improvement, the Credit reflecting spending. prior The of more in compared administrative compared currency which fourth metrics profit impact ME&A a the and a still contributed million favorable $XX.X North aftermarket Employee in positive compared resulting $X.X These was XXXX. million finished marketing, to XX% engineering fourth positive Retention portion been fiscal Similar million to the XX.X%, having gas for sales Credit, the impact or fiscal fourth on increases the costs positive activity

As XX.X% of a expenses XX.X% the were quarter. compared percent to ME&A the prior quarter, fourth in for revenue year fourth

in For restructuring drive $X.X charge the This fiscal represents recorded down finishing the million or restructuring at fourth operation, year, XX.X% is totaling of to in program $X.X the at compared year. $X.X comprised of minimum approximately $X.X prior first This ME&A and annualized Negotiations our of in fiscal of will for spending will quarter. for cost a elimination recorded million the ongoing, revenue is million. the XXXX. of We fiscal result XX.X% anticipate charge positions Belgian final savings be a million a the the legal charges we charge half action. which of XX and XX.X% are

We related fair also impairment asset as million is recorded currently office held-for-sale. a this to $X.X to down an write the estimated charge corporate of value building our

for of other During $X.X from notification full restructuring benefit to quarter, and million million X.X% received the PPP compared quarter. a in Including positive significant impacts fiscal year. was loss million loan for forgiveness, compared of the fiscal the in we quarter $X.X $X.X to the Administration our operating XXX.X% income operating XXXX $X.X fourth resulting the was reported in XXXX. of tax year The prior Business forgiveness income million the negative for Small operating of PPP rate effective

exceeded of fiscal rate resulted increase in and XX.X%. loss In XX.X%. current decrease rate value a to a year tax year, goodwill company was which carrying received million $XX the intangibles its prior effective value to an During and PPP year, the the the forgiveness resulted of certain of fiscal determined fair the prior effective the calculated, full in tax of company the loan, that which impairment the

newly a current XX%. advantage the domestic allowance recognized due able tax company $XX diluted XXX.X%. valuation share $X.XX the in rate was this the company $X.XX high the exception fiscal take to fiscal domestic The fourth federal by loss to GILTI per regulations. the was Due reducing of net rate uncertain the filed the prior no domestic During tax or continued valuation earnings, compared its utilizing and XXXX million the enacted by tax future diluted deferred current full recorded tax in largely per quarter million net exception loss million year to of inclusion losses fourth increasing The and quarter return a company allowance for or share, had to year, historical the the effective $XX.X $X.X of quarter.

in the for share was the For per per diluted $X.XX year of EBITDA quarter. loss of improved fourth compared $X.XX million reported million net $X.X a $XX.X in $XX.X million we quarter the prior million year. or $X.X share from or the diluted to fiscal prior year,

improved as For million EBITDA year. the over of prior the nearly $X.X year, far, so million $XX

sheet. Turning the million to on cash despite to equipment. $X.X the of year-to-date generate With million and been were for flow in $X.X to for and machine the $X.X $X.X tools the a positive spending the translation-driven fiscal $X.X and Capital and flow, focus able Inventory increase. currency year. million free balance and for focused quarter bringing modern testing million Lufkin at quarter, operating in down liquidity million on was million cash the $X.X we million year cash has quarter flow the the new facility $X.X

the any non-essential year, a spending. setbacks. million fiscal focused we expect preserving through invest will while capital some and recovery during spending the result pauses fiscal year, As or all This to catch-up monitoring XXXX, to we for in work on very million in deferred $XX challenging market we where fiscal $XX ongoing liquidity

should encouraged we to past and on fourth Obviously we've on seeing XXXX. fiscal the it are the our improved much quick just in on the before trends, and last that XXXX our XXXX up the call As very this analyzing fiscal by our quarter, getting improvements how compared footprint mentioned we expecting we a global – and We markets the continue outlook been throughout order were in to a business. we questions. are looking numbers moment do we the fiscal open

we to we the quarter fourth outside. more some of those to on our You and outsource us size basically it's what the operations the that versus manufacture rightsizing a saw make actions inside realization profitable, what we in of of took

in solutions data happy are my concludes you are I prepared our optimistic electrification in Finally, And and efforts and both our will security, ability your and Jim, bring we be we very could That questions? to to line now markets. to to in take the remarks. competitive Katie, for Tim invest questions. continuing systems our open

Operator

go to Noah Instructions] Oppenheimer. [Operator Kaye with you. Thank We'll

Noah Kaye

the Hi. Good morning. questions. Thanks for taking

soon. First, Hope back best is well Jeff. he wishes and to

through you wish John, stress] will Although, I great [that efficiency. say with

John Batten

Noah. Hi,

loan PPP realized operating is not question, the script the version I loan. just in that from the of press as you of a I that printed the the – extinguishment wrong and is ask the the in – it up release, income Before income, the forgiveness of its

my was stop hard that reading bad, actually to you're once it. So but it's

Noah Kaye

would $XX what for a maybe clarification. this start little cycles. And just million, pipeline? understand you on meat you're magnitude on love pipeline? headed? Can Is relatively million working of revenue and bit But specifically, product opportunity electric Yes. to we to the this development understand will are just help Thank $XX terms understand million, the think potential and a folks with just long it $XX I of bidding where we on. your these product more the development bone in maybe

John Batten

all And a ask Board ask we it, is I that great So it, question. it. the asked

a on an $XXX,XXX. So A or application, we just sell where drive. you from so a $XXX,XXX just $XX,XXX hybrid to $XX,XXX to to kind can anywhere pump be a give – used industrial of system

piece of of kind one shows – and equipment. the you that that's So for

to not in the everything we're huge. So you a everything. chance multiplier system. the roughly We're might producing the is margin gross bit – little not your less complete have The same, a content is be on because manufacturing

So test market you takes it that VP on pretty the same to the components. And acceptance. have issue NDAs the we we've issue our and we we have of the face applications year year segment won't to then looking Sales it market and at a that it'll is, all margin be and The develop every the much is, a product, operate. takes got

and ninth how ramp-up just the be these are see So is able if acceptance products and inning you hybrid, dramatically. there's of quickly to market for the to revenues the where increased field, would we go could It's everything out us to from the we quickly then in a OEM, first going prove our how those products. meaning inning

figure quicker a – testing a different sound and say, companies markets, so automotive like in but and The and so awhile. record, broken variations. it's happen the it's quickly what many to car many controlling production huge So Everyone let's It's combination just Noah. It'll for opportunity, it's Noah. everything, how much there's going have to – scramble different because off-highway and work. I up, to going is to out in catch been applications trying is you

optimistic I in, question really question. it be the quickly because I'm think the a that So that are how just accepted very in a know it’s will to It's I market. involved going projects we're happen. well And

Noah Kaye

Yes. That's – second very the – John. you use sounds sort want in of maybe I it tier, analogy. if characterization helpful, maybe your fair the the to top baseball mean, of we're

John Batten

Yes.

Noah Kaye

Yes.

Okay.

in setting about could I for and Talk live to bit mean, duct that particularly next over pipeline year? and counts. for inactivity. your the feels the an the oil be uptake market It tables and Let's given your counts on little gas. duct move low just extremely up a the like expectations

John Batten

So I America, markers but for want times. show until the – would had say ordering kind spending, spare first parts been for some the we've the ship for significant request Asia to that demand and aftermarket rebuilds improvement demand, new of we noticeable quotes expect to in don't lead there. and units North has and two I that improvement,

that So to point. gotten we've

of of equipment, right hasn't used that been used deals I American public some they're some much CapEx new big think the some in or market. snapping out equipment. unit actually would equipment idle Noah, some up I there's point next the cautious of some I very – say, they're see much being, the orders more quarters, in there players, And for are So But couple the think independent whether spending at big still on now. for North we'll used

Noah Kaye

within are with demand? just And last At to point and And actually this just whether capacity up sort up that to still general you less then working with portfolio, – a meet where of issue? an one. Okay. of constraint the catch

John Batten

have I'm to going Jim too. answer

that have I are most India, which products one has a been supply chain chains that in we think from constrained. of all produced a the The coming of constrained. supply our the would be industrial still lot was challenging Lufkin

and a longer the they in delays, product, we're product transmissions, has but So relatively times customers, long long the for other time, our but lead times marine a for lead short seeing to general. transmission that time power-shift lead have lead

as impact So answer great. as a a let percentage not too. But I'll little Jim been the has bit

James Feiertag

put seeing John's The We're comments back. are correct. issue rectified. with the been That supply increase. Canal us a Suez has

much at the down. struggled looking we're So fall than a we better Canal Suez went with when

that So regard going with gas. think to oil clear to that's I itself and

is all not We're is as to suppliers. issue the with inventory problem have a from automotive market. Marine, we hand are has the what working closely not go the we everybody on getting we that connectors, with which getting next our else the forward to being support around But have We our we suppliers. With issue need shipments. of thing biggest parts do same our And foresee and months. electrical over is world. The the the we that continue XX the

Noah Kaye

That to extremely Thank you, luck good Okay. all. was and helpful.

John Batten

Noah. Thanks,

Operator

Thank you. [Operator with from next take We'll question Josh Baird. our Instructions] Chan

Josh Chan

Hey, good for hope speedy listening. for and Jeff, if recovery morning, a he's

John Batten

Josh. Thanks,

Josh Chan

on my John is backlog. the first guess I question,

total the backlog backlog I bit, was little went So a months but your six down guess up.

what quickly sound that's some gas, guess that longer it booked that me term coming might oil I to would have had but the that meant back be that like yet. was I get So quarter. that projects thought doesn't as in you and

booked of six months? farther you kind beyond what of out could sort the So you explain

John Batten

Sure.

military some the biggest driver transmissions. be So would

domestic the for Asia, backlog some are gas two ones You window. oil outside of asked big the and six-month drove realization. also for And that there's and then

two don't general, sales the I've in through operation we're is discipline on here as factories, Racine we’ve our capacity Just one primarily scheduling the putting – and mentioned going planning, in and over-commit. that the

business, have capacity. drivers we're of and some realization two and other get out So when XT-XXXX, then when general, But have the just going things to oil inventory transmission gas components been in for China. the and are the to we and scheduled

Josh Chan

sense. Thanks there. then on for That the Okay. color And makes margin… gross

John Batten

just Josh a quarter. of – a a lot that add fourth pushing on the sales also of great for the is I job in would went facilities lot out

everything shipped could. we we So

Josh Chan

That's right. Yes. Definitely.

well and see you On the year, oil into of the could second How as hopefully better half. us mix gross margin do side sort the see? minuses get better gas next get pluses you gross up volume picks margin and give you trending? you and Maybe if that you in

John Batten

up. trending be should margin Gross

XXXX, saw the during at got castings forced gross oil biggest bankrupt, was a product finding new up from actually in remember I find prior couple reduction, fiscal focus go the quarters, to We suppliers forgings. of had pluses improvement on with level, new the cost a to calls and margin that the in gas One run – and last in we’re primarily year suppliers we suppliers. and scramble

we've and some cost to reduction able So been resource recognize that savings.

there's reduction we're Lufkin bringing done we've reduction, during year. the fixed been gross the cost So going been and through including And margins online. have cost improving, these variable

that costs industrial. on that this some take facility in the very we to the sale been Belgium some sale there finalize improvement in this will and gross were the out. we still the gross actions with Once line. costs announced I've So fixed margin was in And see some of still corporate then facility, pleased margin that – and of a

So to fiscal and to nicely Josh, I XXXX volume improve help. will certainly through margins gross continue expect

Josh Chan

plan about and talk the then on on given Yes. for And higher? spend the CapEx, Could guess is CapEx thought then and hear. good flow cash to any I that one CapEx year, you free you what the That's to me. Okay. this last

John Batten

still expecting the So flow free positive we're for year. cash

the machine some Jim For Racine. Texas, there's have big for some grinder and a some we let tools some PTO hydraulic line product CapEx, test on for stands order, add items big for ticket Belgium, I’ll the for – gear other other

James Feiertag

and our test want upgrades few do improve stand time. efficiencies reduce we a to There's test to our

that, going grinding of be equipment of there. in specific to some our and of In improve pieces cells addition and shafts on core our gear products adding to we efficiencies we'll have ancillary our manufacturing –

John Batten

development some development There's of have, noticeable Josh, test about stands also for it, and the that. excited equipment CapEx but We electrification lot and is not free. on hybrid a we're engineering and there

James Feiertag

Correct.

Josh Chan

thanks color the time XXXX. Yes. and for of Absolutely. your and Well, best into luck

John Batten

Okay. Thanks, Josh.

Operator

With questions call no closing the this to our queue at in I'd to back turn for additional remarks. over time, any additional like speakers or

John Batten

wasn't that as Katie, you will All We joining sure get or please to including continuing and today. with quarter. interest answer we've to call and to you, free your I'll Jeff the out hope first because speaking send right. I I turn questions. Jeff, forward Disc Thank an wasn't for appreciate the you you, all If if you not, possible. back email two our get question asked our feel me, and quickly to Twin with a – call conference close of will of reach XXXX we look that it And here, to thank Katie, call your in to answered as you. there are me, but me, fiscal again at me, now I'm

Operator

participation. That appreciate Thank your call. today's We you. conclude will

Twin Disc (TWIN) 13 Aug 212021 Q4 Earnings call transcript