RACINE, Wis. — Twin Disc Inc. today reported net earnings for its fiscal 2009 fourth quarter were $2,754,000, or $0.25 per diluted share, compared to $7,009,000, or $0.62 per diluted share, for the fiscal 2008 fourth quarter — a drop of more than 60 percent.
According to the company, the decline resulted from a softening of key product markets, including mega yacht marine, oil and gas, and industrial markets, all of which showed significant fall off in both shipment and order volume. The company said that trend was likely to continue into the first half of fiscal 2010 and will make further cuts necessary.
“As a result of these trends, we recently announced initiatives to take $25,000,000 of costs out of the business for fiscal 2010,” CEO Michael E. Batten said. “While difficult, these actions are necessary to manage our cost structure with the slowdown in volumes we are experiencing in certain markets.”
For fiscal 2009 overall, net earnings were $11,502,000, or $1.03 per diluted share, compared to $24,252,000, or $2.13 per diluted share last fiscal year.
Earnings before interest, taxes, depreciation and amortization were $8,488,000 for the fiscal 2009 fourth quarter, compared to $12,395,000 for the fiscal 2008 fourth quarter. For fiscal 2009, EBITDA was $30,020,000, compared to $46,075,000 for fiscal 2008.
Sales for the fiscal 2009 fourth quarter were $72,056,000, compared to $90,349,000 for the fiscal 2008 fourth quarter. Sales for fiscal 2009 were $295,618,000, compared to $331,694,000 for fiscal 2008.
The company said sales declines in mega yacht, oil and gas, and industrial markets were partially offset by higher sales to customers in the commercial marine, land- and marine-based military and ARFF markets. Also, while the North American and European markets experienced year-over-year sales declines, shipments to customers throughout the Pacific Rim continued to grow and were up versus last fiscal year.
Christopher J. Eperjesy, the company’s Chief Financial Officer, said the company’s liquidity remained strong despite the downturn.
“Our balance sheet and overall liquidity remain strong and we are pleased to announce that we have renewed our $35,000,000 revolving credit facility and extended its maturity from October 2010 to May 2012,” he said. “Working capital at June 30, 2009 was $103,669,000, compared to $106,107,000 at June 30, 2008 and $108,620,000 at March 27, 2009. We anticipate further working capital improvements throughout fiscal 2010 as we actively manage and control inventory, receivable and payable levels.”
Gross profit, as a percentage of fiscal 2009 fourth-quarter sales, was 26.7 percent, compared to 32.1 percent in the fiscal 2008 fourth quarter. Gross margin for the quarter continued to be unfavorably impacted by lower volumes, an unfavorable shift in product mix, primarily due to lower shipments of oil and gas transmissions, and an increase in warranty expenses. The net impact of the change in foreign currency exchange rates decreased gross profit by $1,074,000 in the fiscal 2009 fourth quarter. These were partially offset by an $805,000 reduction in pension expenses.
Fiscal 2009 gross profit, as a percentage of sales, was 27.6 percent, compared to 31.6 percent for fiscal 2008. The net impact of the change in foreign currency exchange rates for fiscal 2009 decreased gross profit by $1,891,000. Also impacting fiscal 2009 gross profit margin was a $419,000 increase in pension expenses. These were partially offset by a $709,000 reduction in bonus compensation expense.
For the fiscal 2009 fourth quarter, marketing, engineering and administrative expenses, as a percentage of sales, were 17.5 percent, compared to 21.4 percent for the fiscal 2008 fourth quarter. ME&A expenses decreased $6,681,000 versus the same period last fiscal year.
For fiscal 2009, the company recorded a $1,188,000 charge related to its previously announced restructuring plan, compared to a $373,000 restructuring accrual reversal for fiscal 2008. In addition, the benefit for domestic pension expense shown in the fourth fiscal quarter of 2009 versus fiscal 2008, for both ME&A expenses and cost of goods sold, was primarily due to a $1,700,000 curtailment gain recorded as a result of the freezing of the domestic defined-benefit pension plans.