RACINE, Wis.-- Twin Disc, Inc. reported this morning that its financial results for the fiscal 2008 fourth quarter and fiscal year ending June 30, 2008, showed an increase in both sales and net earnings.
While sales for the fourth quarter ended June 30, 2008 were flat ($90,349,000 compared to $90,782,000 in the same period a year ago) sales for fiscal 2008 increased 4.6 percent to $331,694,000, compared to $317,200,000 for fiscal 2007. Gross profit, as a percentage of fiscal 2008 fourth quarter sales, was 32.1 percent, compared to 33.1 percent in the fiscal 2007 fourth quarter. And fiscal 2008 gross profit, as a percentage of sales, was 31.6 percent, compared to 32.4 percent for fiscal 2007.
For the fiscal 2008 fourth quarter and fiscal year, foreign currency translation favorably impacted sales by $6,168,000 (for the quarter) and $16,652,000 (for the year-end). Demand from the Company’s customers in the commercial marine and mega yacht markets remained high during the quarter, the company said, which continued to be offset by softness in oil and gas transmission sales.
The net impact of the change in foreign currency exchange rates was to increase gross profit by $1,751,000 in the fiscal 2008 fourth quarter. This represents the net impact of favorable foreign currency translation of $2,364,000 and the unfavorable margin impact of a strengthening Euro on the U.S. dollar sales of the Belgian manufacturing operation of $613,000. The net impact of the change in foreign currency exchange rates was to increase gross profit by $4,885,000 in fiscal 2008 compared to fiscal 2007. This represents the net impact of favorable foreign currency translation of $6,667,000 and the unfavorable margin impact of a strengthening Euro on the U.S. dollar sales of the Belgian manufacturing operation of $1,782,000.
Profitability for fiscal 2008 and the fiscal 2008 fourth quarter continued to be impacted 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 the U.S. sales of products of the company’s Belgian manufacturing operation, while also continuing to enhance the global competitiveness of the company’s domestically produced products. This was more than offset by the favorable effect of foreign currency translation due primarily to the strengthening Euro versus the U.S. Dollar.
Net earnings for the fiscal 2008 fourth quarter were $7,009,000, or $0.62 per diluted share, compared to $5,001,000, or $0.41 per diluted share, for the fiscal 2007 fourth quarter. Net earnings for the 2007 fourth quarter were primarily impacted by an after tax restructuring charge of $1,751,000, or $0.29 per diluted share associated with the company’s Belgian operation.
For fiscal 2008, net earnings were $24,252,000, or $2.13 per diluted share, compared to $21,852,000, or $1.84 per diluted share. In addition to the items noted previously, net earnings for the 2008 fourth quarter were impacted by favorable tax adjustments of approximately $1.3 million, primarily related to foreign and state tax provision adjustments. In the fourth quarter of fiscal 2007, there were approximately $1.5 million of favorable tax adjustments primarily related to research and development tax credits as the result of a project completed by the Company in fiscal 2007. In total, fiscal years 2008 and 2007 included $2.6 million and $2.0 million of favorable tax adjustments, respectively. In addition to the fourth quarter items noted above, there was a $1.2 million favorable tax adjustment booked in the third quarter of fiscal 2008 as a result of a reduction in the Italian corporate tax rate from 37.3 percent to 31.4 percent.
Earnings before interest, taxes, depreciation and amortization were $12,395,000 for the fiscal 2008 fourth quarter, compared to $10,150,000 for the fiscal 2007 fourth quarter. For fiscal 2008, EBITDA was $46,075,000, compared to $44,531,000 for fiscal 2007.
“Fiscal 2008 was the third consecutive year of sales and earnings growth, despite the challenges of inflated raw material prices, softness in demand for our 8500 series transmissions from the oil and gas market, and the implementation of our new ERP system,” said Michael E. Batten, chairman and chief executive officer,
“Fiscal 2008 was a good cash-generating year and our financial position remains healthy,” added Christopher J. Eperjesy, vice president - finance, chief financial officer and treasurer.
“We are proud of the many accomplishments we achieved over the past fiscal year and continue to plan for the future,” Batten concluded. “We are committed to further expand Twin Disc globally, by looking at ways to run our business more efficiently and investing in new products, machines, facilities, systems, and people. For fiscal 2009, we expect demand from the commercial marine and mega yacht, defense, and airport firefighting and rescue markets to continue to be strong. We are seeing signs of a turnaround in demand from customers in the industrial markets and have seen an increase in inquiries related to the oil and gas market. We are cautiously optimistic for the new fiscal year."
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