EX-99 2 r8k991004.txt FINANCIAL RESULTS 1 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 2 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, ------------- 2004 2003 ---- ---- 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) ------ ------ Earnings before income taxes and minority interest 2,091 463 Income taxes 914 281 Minority interest 25 11 ----- ----- Net earnings $ 1,152 $ 171 ----- ----- ----- ----- 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 ---- ---- 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 ----- ----- 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 ----- ----- $176,349 $176,637 ------- ------- ------- ------- 3 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 ------ ------ Total current liabilities 47,408 49,128 Long-term debt 20,151 16,813 Accrued retirement benefits 46,210 49,456 ------ ------ 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) -------- -------- 78,413 77,491 Less treasury stock, at cost 16,274 16,760 ------ ------ Total shareholders' equity 62,139 60,731 ------ ------ $176,349 $176,637 -------- -------- -------- --------