Twin Disc Inc. (TWIN, Financial) filed Quarterly Report for the period ended 2009-05-06.
TWIN DISC INC. designs manufactures and sells heavy duty off-highway power transmission equipment. Products offered include: hydraulic torqueconverters; power-shift transmissions; marine transmissions and surfacedrives; universal joints; gas turbine starting drives; power take-offs andreduction gears; industrial clutches; fluid couplings and control systems.Principal markets are: construction equipment industrial equipmentgovernment marine energy and natural resources and agriculture. Twin Disc Inc. has a market cap of $77.8 million; its shares were traded at around $7.06 with a P/E ratio of 5 and P/S ratio of 0.2. The dividend yield of Twin Disc Inc. stocks is 3.9%. Twin Disc Inc. had an annual average earning growth of 17.4% over the past 10 years.
Marketing, engineering, and administrative (ME&A) expenses were 3.0% lower compared to last year s third fiscal quarter. However, due to lower sales volume, ME&A expenses as a percentage of sales were up 3.6 percentage points to 21.0% of sales versus 17.4% of sales in the third quarter of fiscal 2008. For the third quarter of fiscal 2009, stock based compensation expense totaled $0.4 million compared to income of $1.6 million for the third quarter of fiscal 2008, for a net year-over-year increase of $2.0 million. Fiscal 2008 s third quarter included a $2.3 million reversal of stock based compensation expense, which reflected the decline of the Company s stock price during that quarter a year ago. In addition, expenses related to the Company s corporate and domestic incentive programs decreased $1.5 million versus the third quarter of fiscal 2008, due to the overall decline in financial performance year-over-year. This was partially offset by increased IT costs of $0.3 million, primarily depreciation expense, associated with the Company s new ERP system and higher domestic pension expenses of $0.2 million. The net impact of foreign currency translation from overseas operations reduced ME&A expenses by approximately $0.8 million when compared to the same period of the prior fiscal year.
Marketing, engineering, and administrative (ME&A) expenses were 1.7% higher compared to last year s first nine months. ME&A expenses as a percentage of sales were up 1.9 percentage points to 21.4% of sales versus 19.5% of sales in the first nine months of fiscal 2008. On a year-to-date basis, expenses related to the Company s corporate and domestic incentive programs decreased $2.3 million versus the first nine months of fiscal 2008, due to the overall decline in financial performance year-over-year. This was offset by increased IT costs of $1.4 million, primarily depreciation expense, associated with the Company s new ERP system and higher domestic pension expenses of $0.5 million. In addition, there were severance costs of $1.3 million booked in the second fiscal quarter of 2009. For the first nine months of fiscal 2009, stock based compensation expense totaled $0.5 million compared to $0.2 million for the first nine months of fiscal 2008. As noted above, fiscal 2008 s third quarter included a $2.3 million reversal of stock based compensation expense, which reflected the decline of the Company s stock price during that quarter a year ago. The net impact of foreign currency translation from overseas operations reduced ME&A expenses by approximately $0.8 million when compared to the same period of the prior fiscal year.
Net property, plant and equipment (PP&E) decreased $4.3 million versus June 30, 2008. This includes the addition of $6.6 million in capital expenditures, primarily at the Company s domestic and Belgian manufacturing operations, which was offset by depreciation of $6.5 million. The net remaining decrease of $4.4 million is due to the effects of foreign currency translation. As a result of current external business factors, the Company has revised its capital expenditure projection for the year and now expects to invest between $10 and $12 million in capital assets in fiscal 2009, compared to its prior estimate of between $15 and $17 million. The quoted lead times on certain manufacturing equipment purchases may push some of the capital expenditures into the next fiscal year. This compares to $15.0 million in capital expenditures in fiscal 2008, $15.7 million in fiscal 2007 and $8.4 million in fiscal 2006. The Company s capital program is focusing on modernizing key core manufacturing, assembly and testing processes at its facilities around the world as well as the implementation of the global ERP system.
Total borrowings, notes payable and long-term debt, as of March 27, 2009 increased by $8.1 million, or 16%, to $58.0 million versus June 30, 2008. This increase was driven by the increase in working capital, primarily inventory, the payment of annual incentive and bonus awards for fiscal 2008 performance in the first fiscal quarter of 2009 and a $1.8 million stock repurchase in the fiscal second quarter, partially offset by net cash provided by operating activities. In the second fiscal quarter, the Company repurchased 250,000 shares of its outstanding common stock at an average price of $7.25 per share. For the balance of fiscal 2009, the Company is not required to make any additional contributions to its domestic defined benefit plans. However, based on overall financial performance and cash flows, the Company may elect to make further contributions beyond those required. At March 27, 2009, the Company is in compliance with all covenants and other requirements set forth in its revolving loan and note agreements. The first installment of $3.6 million on the Company s unsecured $25 million 6.05% Senior Notes is due in April 2010.
Total shareholders equity decreased by $12.7 million to a total of $117.0 million. Retained earnings increased by $6.4 million. The net increase in retained earnings included $8.7 million in net earnings reported year-to-date, offset by $2.3 million in dividend payments. Net unfavorable foreign currency translation of $19.6 million was reported as the U.S. Dollar strengthened against the Euro and Asian currencies during the first nine months of fiscal 2009. The remaining movement of $1.4 million represents an adjustment for the amortization of net actuarial loss and prior service cost on the Company s pension plans.
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TWIN DISC INC. designs manufactures and sells heavy duty off-highway power transmission equipment. Products offered include: hydraulic torqueconverters; power-shift transmissions; marine transmissions and surfacedrives; universal joints; gas turbine starting drives; power take-offs andreduction gears; industrial clutches; fluid couplings and control systems.Principal markets are: construction equipment industrial equipmentgovernment marine energy and natural resources and agriculture. Twin Disc Inc. has a market cap of $77.8 million; its shares were traded at around $7.06 with a P/E ratio of 5 and P/S ratio of 0.2. The dividend yield of Twin Disc Inc. stocks is 3.9%. Twin Disc Inc. had an annual average earning growth of 17.4% over the past 10 years.
Highlight of Business Operations:
Gross profit as a percentage of sales decreased to 27.6% of sales, compared to 31.0% of sales for the same period last year. This 340 basis point deterioration can be attributed to reduced sales of higher margin products, higher sales of lower margin products, increased warranty costs ($0.9 million), and an increase in domestic pension expense ($0.4 million). In addition, the Company s Belgian operation s gross profit was favorably affected by the continued relative strength of the U.S. Dollar versus the Euro, when compared to the average rate in fiscal 2008. This operation manufactures with Euro-based costs and sells more than a third of its production into the U.S. market at U.S. Dollar prices. It is estimated that the year-over-year effect of the stronger U.S. Dollar was to improve margins at our Belgian subsidiary by over $0.8 million in the third fiscal quarter versus the same period a year ago. Compared to the third quarter of fiscal 2008, the U.S. Dollar strengthened against the Euro and Asian currencies. The translation effect of this strengthening on foreign operations was to decrease gross margin by approximately $0.9 million versus the prior year, before eliminations.Marketing, engineering, and administrative (ME&A) expenses were 3.0% lower compared to last year s third fiscal quarter. However, due to lower sales volume, ME&A expenses as a percentage of sales were up 3.6 percentage points to 21.0% of sales versus 17.4% of sales in the third quarter of fiscal 2008. For the third quarter of fiscal 2009, stock based compensation expense totaled $0.4 million compared to income of $1.6 million for the third quarter of fiscal 2008, for a net year-over-year increase of $2.0 million. Fiscal 2008 s third quarter included a $2.3 million reversal of stock based compensation expense, which reflected the decline of the Company s stock price during that quarter a year ago. In addition, expenses related to the Company s corporate and domestic incentive programs decreased $1.5 million versus the third quarter of fiscal 2008, due to the overall decline in financial performance year-over-year. This was partially offset by increased IT costs of $0.3 million, primarily depreciation expense, associated with the Company s new ERP system and higher domestic pension expenses of $0.2 million. The net impact of foreign currency translation from overseas operations reduced ME&A expenses by approximately $0.8 million when compared to the same period of the prior fiscal year.
Marketing, engineering, and administrative (ME&A) expenses were 1.7% higher compared to last year s first nine months. ME&A expenses as a percentage of sales were up 1.9 percentage points to 21.4% of sales versus 19.5% of sales in the first nine months of fiscal 2008. On a year-to-date basis, expenses related to the Company s corporate and domestic incentive programs decreased $2.3 million versus the first nine months of fiscal 2008, due to the overall decline in financial performance year-over-year. This was offset by increased IT costs of $1.4 million, primarily depreciation expense, associated with the Company s new ERP system and higher domestic pension expenses of $0.5 million. In addition, there were severance costs of $1.3 million booked in the second fiscal quarter of 2009. For the first nine months of fiscal 2009, stock based compensation expense totaled $0.5 million compared to $0.2 million for the first nine months of fiscal 2008. As noted above, fiscal 2008 s third quarter included a $2.3 million reversal of stock based compensation expense, which reflected the decline of the Company s stock price during that quarter a year ago. The net impact of foreign currency translation from overseas operations reduced ME&A expenses by approximately $0.8 million when compared to the same period of the prior fiscal year.
Net property, plant and equipment (PP&E) decreased $4.3 million versus June 30, 2008. This includes the addition of $6.6 million in capital expenditures, primarily at the Company s domestic and Belgian manufacturing operations, which was offset by depreciation of $6.5 million. The net remaining decrease of $4.4 million is due to the effects of foreign currency translation. As a result of current external business factors, the Company has revised its capital expenditure projection for the year and now expects to invest between $10 and $12 million in capital assets in fiscal 2009, compared to its prior estimate of between $15 and $17 million. The quoted lead times on certain manufacturing equipment purchases may push some of the capital expenditures into the next fiscal year. This compares to $15.0 million in capital expenditures in fiscal 2008, $15.7 million in fiscal 2007 and $8.4 million in fiscal 2006. The Company s capital program is focusing on modernizing key core manufacturing, assembly and testing processes at its facilities around the world as well as the implementation of the global ERP system.
Total borrowings, notes payable and long-term debt, as of March 27, 2009 increased by $8.1 million, or 16%, to $58.0 million versus June 30, 2008. This increase was driven by the increase in working capital, primarily inventory, the payment of annual incentive and bonus awards for fiscal 2008 performance in the first fiscal quarter of 2009 and a $1.8 million stock repurchase in the fiscal second quarter, partially offset by net cash provided by operating activities. In the second fiscal quarter, the Company repurchased 250,000 shares of its outstanding common stock at an average price of $7.25 per share. For the balance of fiscal 2009, the Company is not required to make any additional contributions to its domestic defined benefit plans. However, based on overall financial performance and cash flows, the Company may elect to make further contributions beyond those required. At March 27, 2009, the Company is in compliance with all covenants and other requirements set forth in its revolving loan and note agreements. The first installment of $3.6 million on the Company s unsecured $25 million 6.05% Senior Notes is due in April 2010.
Total shareholders equity decreased by $12.7 million to a total of $117.0 million. Retained earnings increased by $6.4 million. The net increase in retained earnings included $8.7 million in net earnings reported year-to-date, offset by $2.3 million in dividend payments. Net unfavorable foreign currency translation of $19.6 million was reported as the U.S. Dollar strengthened against the Euro and Asian currencies during the first nine months of fiscal 2009. The remaining movement of $1.4 million represents an adjustment for the amortization of net actuarial loss and prior service cost on the Company s pension plans.
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