UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended March 31, 2017
Commission File Number 1-7635
TWIN DISC, INCORPORATED
(Exact name of registrant as specified in its charter)
Wisconsin | 39-0667110 |
(State or other jurisdiction of | (I.R.S. Employer |
Incorporation or organization) | Identification No.) |
1328 Racine Street, Racine, Wisconsin 53403
(Address of principal executive offices)
(262) 638-4000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes √ No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes √ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. (Check one):
Large Accelerated Filer | Accelerated Filer √ |
Non-accelerated filer (Do not check if a smaller reporting company) | |
Smaller reporting company __ | Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No √
At May 1, 2017, the registrant had 11,519,133 shares of its common stock outstanding.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
TWIN DISC, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
March 31, 2017 | June 30, 2016 | |||||||
ASSETS | ||||||||
Current assets: | ||||||||
Cash | $ | 14,940 | $ | 18,273 | ||||
Trade accounts receivable, net | 26,915 | 25,363 | ||||||
Inventories | 66,856 | 66,569 | ||||||
Prepaid expenses | 7,987 | 7,353 | ||||||
Other | 8,123 | 7,477 | ||||||
Total current assets | 124,821 | 125,035 | ||||||
Property, plant and equipment, net | 47,679 | 51,665 | ||||||
Deferred income taxes | 28,446 | 25,870 | ||||||
Goodwill, net | 2,442 | 5,120 | ||||||
Intangible assets, net | 1,963 | 2,164 | ||||||
Other assets | 4,385 | 4,068 | ||||||
Total assets | $ | 209,736 | $ | 213,922 | ||||
LIABILITIES AND EQUITY | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 19,747 | $ | 14,716 | ||||
Accrued liabilities | 20,785 | 21,415 | ||||||
Total current liabilities | 40,532 | 36,131 | ||||||
Long-term debt | 8,977 | 8,501 | ||||||
Accrued retirement benefits | 47,393 | 48,705 | ||||||
Deferred income taxes | 765 | 827 | ||||||
Other long-term liabilities | 1,903 | 2,705 | ||||||
Total liabilities | 99,570 | 96,869 | ||||||
Commitments and contingencies (Note D) | ||||||||
Equity: | ||||||||
Twin Disc shareholders' equity: | ||||||||
Preferred shares authorized: 200,000; issued: none; no par value | - | - | ||||||
Common shares authorized: 30,000,000; issued: 13,099,468; no par value | 10,040 | 11,761 | ||||||
Retained earnings | 168,206 | 175,662 | ||||||
Accumulated other comprehensive loss | (44,478 | ) | (44,143 | ) | ||||
| 133,768 | 143,280 | |||||||
Less treasury stock, at cost (1,580,335 and 1,749,294 shares, respectively) | 24,205 | 26,790 | ||||||
Total Twin Disc shareholders' equity | 109,563 | 116,490 | ||||||
Noncontrolling interest | 603 | 563 | ||||||
Total equity | 110,166 | 117,053 | ||||||
Total liabilities and equity | $ | 209,736 | $ | 213,922 | ||||
The notes to condensed consolidated financial statements are an integral part of these statements.
2
TWIN DISC, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
For the Quarter Ended | For the Three Quarters Ended | |||||||||||||||
March 31, 2017 | March 25, 2016 | March 31, 2017 | March 25, 2016 | |||||||||||||
Net sales | $ | 45,084 | $ | 41,434 | $ | 114,591 | $ | 123,635 | ||||||||
Cost of goods sold | 31,790 | 31,816 | 83,175 | 94,222 | ||||||||||||
Gross profit | 13,294 | 9,618 | 31,416 | 29,413 | ||||||||||||
Marketing, engineering and administrative expenses | 13,737 | 14,072 | 38,772 | 43,905 | ||||||||||||
Restructuring expenses | 293 | 272 | 1,367 | 787 | ||||||||||||
Goodwill and other impairment charge | 2,637 | - | 2,637 | - | ||||||||||||
Other operating (income) | - | - | - | (445 | ) | |||||||||||
Loss from operations | (3,373 | ) | (4,726 | ) | (11,360 | ) | (14,834 | ) | ||||||||
Interest expense | 61 | 156 | 236 | 356 | ||||||||||||
Other (income) expense, net | (67 | ) | 187 | (414 | ) | 260 | ||||||||||
| (6 | ) | 343 | (178 | ) | 616 | |||||||||||
Loss before income taxes and noncontrolling interest | (3,367 | ) | (5,069 | ) | (11,182 | ) | (15,450 | ) | ||||||||
Income tax benefit | (1,639 | ) | (4,138 | ) | (3,892 | ) | (7,955 | ) | ||||||||
Net loss | (1,728 | ) | (931 | ) | (7,290 | ) | (7,495 | ) | ||||||||
Less: Net earnings attributable to noncontrolling interest, net of tax | (121 | ) | (32 | ) | (166 | ) | (91 | ) | ||||||||
Net loss attributable to Twin Disc | $ | (1,849 | ) | $ | (963 | ) | $ | (7,456 | ) | $ | (7,586 | ) | ||||
Dividends per share | $ | - | $ | - | $ | - | $ | 0.18 | ||||||||
Loss per share data: | ||||||||||||||||
Basic loss per share attributable to Twin Disc common shareholders | $ | (0.16 | ) | $ | (0.09 | ) | $ | (0.66 | ) | $ | (0.68 | ) | ||||
Diluted loss per share attributable to Twin Disc common shareholders | $ | (0.16 | ) | $ | (0.09 | ) | $ | (0.66 | ) | $ | (0.68 | ) | ||||
Weighted average shares outstanding data: | ||||||||||||||||
Basic shares outstanding | 11,250 | 11,207 | 11,236 | 11,201 | ||||||||||||
Dilutive stock awards | - | - | - | - | ||||||||||||
Diluted shares outstanding | 11,250 | 11,207 | 11,236 | 11,201 | ||||||||||||
Comprehensive income (loss): | ||||||||||||||||
Net loss | $ | (1,728 | ) | $ | (931 | ) | $ | (7,290 | ) | $ | (7,495 | ) | ||||
Benefit plan adjustments, net of income taxes of $398, $243, $1,196 and $1,134, respectively | 682 | 671 | 2,104 | 2,215 | ||||||||||||
Foreign currency translation adjustment | 1,059 | 1,941 | (2,456 | ) | (2,189 | ) | ||||||||||
Comprehensive income (loss) | 13 | 1,681 | (7,642 | ) | (7,469 | ) | ||||||||||
Less: Comprehensive income attributable to noncontrolling interest | (38 | ) | (33 | ) | (149 | ) | (81 | ) | ||||||||
Comprehensive (loss) income attributable to Twin Disc | $ | (25 | ) | $ | 1,648 | $ | (7,791 | ) | $ | (7,550 | ) | |||||
The notes to condensed consolidated financial statements are an integral part of these statements.
3
TWIN DISC, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
For the Three Quarters Ended | ||||||||
March 31, 2017 | March 25, 2016 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (7,290 | ) | $ | (7,495 | ) | ||
Adjustments to reconcile net loss to net cash used by operating activities: | ||||||||
Depreciation and amortization | 5,368 | 6,636 | ||||||
Restructuring expenses | 129 | 276 | ||||||
Impairment charge | 2,637 | - | ||||||
Provision for deferred income taxes | (3,640 | ) | (9,180 | ) | ||||
Stock compensation expense and other non-cash changes, net | 1,163 | 1,049 | ||||||
Net change in operating assets and liabilities | 791 | 3,379 | ||||||
Net cash used by operating activities | (842 | ) | (5,335 | ) | ||||
Cash flows from investing activities: | ||||||||
Proceeds from sale of business | - | 3,500 | ||||||
Proceeds from life insurance policy | - | 2,002 | ||||||
Acquisitions of fixed assets | (1,869 | ) | (3,554 | ) | ||||
Proceeds from sale of fixed assets | 11 | 93 | ||||||
Other, net | (129 | ) | (270 | ) | ||||
Net cash (used) provided by investing activities | (1,987 | ) | 1,771 | |||||
Cash flows from financing activities: | ||||||||
Borrowings under revolving loan agreement | 38,793 | 60,187 | ||||||
Repayments under revolving loan agreement | (38,316 | ) | (62,191 | ) | ||||
Proceeds from exercise of stock options | - | 12 | ||||||
Dividends paid to shareholders | - | (2,041 | ) | |||||
Dividends paid to noncontrolling interest | (109 | ) | (192 | ) | ||||
Tax shortfall from stock compensation | - | (267 | ) | |||||
Payments of withholding taxes on stock compensation | (140 | ) | (190 | ) | ||||
Net cash provided (used) by financing activities | 228 | (4,682 | ) | |||||
Effect of exchange rate changes on cash | (732 | ) | (1,290 | ) | ||||
Net change in cash | (3,333 | ) | (9,536 | ) | ||||
Cash: | ||||||||
Beginning of period | 18,273 | 22,936 | ||||||
End of period | $ | 14,940 | $ | 13,400 | ||||