Marine business buoys Twin Disc

RACINE, Wis. – Twin Disc, Inc. is on its way to a positive fiscal 2008, thanks in large part to its business in the marine sector, according to its third quarter and nine-month financial results, which were released this morning.

“Demand for our commercial and pleasure craft marine products continued to increase,” said Michael Batten, chairman, president and CEO. “Sales and orders of our commercial marine gears into Southeast Asia and the Gulf Coast of the United States remain strong, as do marine propulsion and boat management system sales into the Italian mega yacht market. The increase in marine product sales has helped to insulate the company from the softness that we continued to experience in the third quarter in the oil and gas transmission and industrial product sectors.”

Sales for the quarter ended March 28, 2008, were $85.8 million, down slightly compared to the $86.4 million in sales for the same period a year ago. Year-to-date, sales were $241.3 million, compared to $226.4 million for the fiscal 2007 nine-month period.

The company attributes the sales increase for both the quarter and nine months to favorable foreign currency translation. The company continued to see strength in the commercial marine and mega yacht markets in the quarter, offset by softness in oil and gas transmission, and industrial product markets.

Net earnings for the fiscal 2008 third quarter were $7.9 million, up compared to $7.5 million net for the fiscal 2007 third quarter. Year-to-date, net earnings were $17.2 million, also up compared to $16.9 million for the same period in 2007.

In addition to the items noted previously, net earnings benefited from favorable tax adjustments. In addition, there was a favorable return to provision adjustment, primarily related to foreign tax credits.

Gross profit, as a percentage of fiscal 2008 third-quarter sales, was 31.0 percent, compared to 32.6 percent in the fiscal 2007 third quarter. Year-to-date, gross profit, as a percentage of sales, was 31.4 percent, compared to 32.2 percent for the fiscal 2007 nine-month period.

Profitability for the fiscal 2008 third quarter was hampered by lower volume, reduced sales of higher margin products, higher sales of lower margin products and higher material costs, partially offset by higher pricing, expanded outsourcing and lower pension expense. The continued weakening of the U.S. dollar versus the euro continued to put pressure on products’ U.S. sales for the Belgian manufacturing operation, while also continuing to enhance the global competitiveness of the company’s domestically produced products. This was more than offset with the favorable effect of foreign currency translation.

“Global demand for our products remains good, as evidenced by the fact that we expect foreign sales to exceed domestic sales for the first time in fiscal 2008,” Batten said. “In addition, we remain focused on lowering our operating costs, continuing to develop and enhance our product portfolio, modernizing our manufacturing operations and expanding our global outsourcing program.”

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