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| 8-K - TWIN DISC, INC. 8K PRESENTATION - TWIN DISC INC | r8k01272010presen.htm |
Twin Disc, Incorporated
WE PUT HORSEPOWER TO WORK ™
January 27, 2010
2
Twin Disc, Incorporated
Safe Harbor Statement
This presentation contains statements that are forward-looking
within the meaning of Section 21E of the Securities Exchange Act
of 1934, as amended. These statements are based on
management’s current expectations that are based on
assumptions that are subject to risks and uncertainties. Actual
results may vary because of variations between these
assumptions and actual performance. Investors are referred to
Twin Disc’s fiscal year 2009 Annual Report and Form 10-K,
“Management’s Discussion and Analysis of Financial Condition
and Results of Operations - Forward-Looking Information,” which
outlines certain risks regarding the Company’s forward-looking
statements. Copies of the Company’s SEC filings may be
obtained from the SEC, and are available on Twin Disc’s web site
(www.twindisc.com), or by request from the Investor Relations
department at the Company.
within the meaning of Section 21E of the Securities Exchange Act
of 1934, as amended. These statements are based on
management’s current expectations that are based on
assumptions that are subject to risks and uncertainties. Actual
results may vary because of variations between these
assumptions and actual performance. Investors are referred to
Twin Disc’s fiscal year 2009 Annual Report and Form 10-K,
“Management’s Discussion and Analysis of Financial Condition
and Results of Operations - Forward-Looking Information,” which
outlines certain risks regarding the Company’s forward-looking
statements. Copies of the Company’s SEC filings may be
obtained from the SEC, and are available on Twin Disc’s web site
(www.twindisc.com), or by request from the Investor Relations
department at the Company.
January 27, 2010
3
Twin Disc, Incorporated
2
1
1
#
Manufacturing location (# of facilities in each location)
Company owned distribution/service location
Purchasing/sourcing offices
Twin Disc At A Glance
• Founded in 1918
• Headquartered in Racine, WI
• ≈1,000 employees
• FY09 Revenues of $296M
FY08 Revenues of $332M
FY08 Revenues of $332M
• We are a global company
– Well-known customers
around the world
around the world
– Mfg Operations in the U.S.,
Italy, Belgium, Switzerland
and Japan (JV)
Italy, Belgium, Switzerland
and Japan (JV)
– World-wide distributor
network
network
– 61% of fiscal 2009 sales to
international markets
international markets
January 27, 2010
4
Twin Disc, Incorporated
FY 2010 Financial Highlights
• Financial Results Improved Sequentially
– Q2 versus Q1 Sales up 17%
• Year-to-Date Cash Flow From Operations Strong
– Generated $16.1 million thru first 6 months of
fiscal year
• Total Debt Reduced $9.2 million, or 18%, in First Six
Months
Months
• Six Month Backlog Up 16% Year-to-Date
– Driven by higher order activity for 8500 series
transmission
for oil & gas market
for oil & gas market
– Military backlog also increased and remains strong
January 27, 2010
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Twin Disc, Incorporated
$ millions
• Sales down 32% off near record levels
– Experienced continued softness in
certain end markets
certain end markets
– Seasonal and temporary plant
shutdowns impacted Q1 shipments
shutdowns impacted Q1 shipments
– Asian markets continued at record
levels
levels
– Six month backlog grew over 12% in
the quarter
the quarter
• Gross Margin as % of Sales improved
590 basis points to 26.8% in Q2,
compared to 20.7% in Q1
590 basis points to 26.8% in Q2,
compared to 20.7% in Q1
Net Sales & Net Earnings
(Second Fiscal Quarter)
(Second Fiscal Quarter)
January 27, 2010
6
Twin Disc, Incorporated
$ millions
• Sales down 34% off near record levels
– Experienced continued softness
– Seasonal and temporary plant
shutdowns impacted Q1 shipments
shutdowns impacted Q1 shipments
– Asian markets continued at record
levels
levels
• Q2 loss of $0.5 million improved
sequentially from Q1 loss of $2.4
million
sequentially from Q1 loss of $2.4
million
Net Sales & Net Earnings
(First Six Months)
(First Six Months)
January 27, 2010
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Twin Disc, Incorporated
$ millions
• Q2 Sales up 17.2% vs. Q1 Sales
– 6 month backlog increased 12.1% in
the quarter to $70 million
the quarter to $70 million
– Asian markets continued at record
levels
levels
– ARFF & Military transmission
markets holding steady
markets holding steady
– Pleasure craft marine remains weak
• Gross Margin as % of Sales
improved 590 basis points to 26.8%
in Q2, compared to 20.7% in Q1
improved 590 basis points to 26.8%
in Q2, compared to 20.7% in Q1
Net Sales & Net Earnings
(First & Second Fiscal Quarter)
(First & Second Fiscal Quarter)
January 27, 2010
8
Twin Disc, Incorporated
$ millions
16%
of sales
2%
of sales
• Generated $16.1 million of operating
cash flow in first half of Fiscal 2010
cash flow in first half of Fiscal 2010
– Continue to focus on inventory and
receivables management
receivables management
• Debt Reduction & Cash
– Revolver balance has decreased
$14.5 million over the past 3 quarters
$14.5 million over the past 3 quarters
– As of December 25, 2009, over $21
million of available borrowing on
revolver & nearly $17 million of cash
million of available borrowing on
revolver & nearly $17 million of cash
– In compliance with all financial
covenants
covenants
Operating Cash Flows
(First Six Months)
(First Six Months)
January 27, 2010
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Twin Disc, Incorporated
Marine & Propulsion Systems
• Pleasure Craft market soft
worldwide
worldwide
– However, building share of
market with new technology
market with new technology
• Work Boat market steady
– Europe soft
– North America moderating
– Asia-Pacific growing
• Patrol Boat market
experiencing global growth
experiencing global growth
– Asian market experiencing
strong growth
strong growth
January 27, 2010
10
Twin Disc, Incorporated
Land-Based Products
• Industrial markets soft
– Agriculture, irrigation,
recycling and construction
recycling and construction
– No impact from ‘stimulus’
• ARFF and Military holding
steady
steady
– ARFF: Continue
to increase
market share with ‘pump &
roll’ transmissions
market share with ‘pump &
roll’ transmissions
• Oil & Gas markets picking up
– Orders increasing globally
for 8500 & air clutches
for 8500 & air clutches
– New 7500 series
January 27, 2010
11
Twin Disc, Incorporated
2006
2007
2008
48% International Sales
61% International Sales
USA
Italy
Rest of
World
2009
Corporate Profile - Geographic Diversity
January 27, 2010
12
Twin Disc, Incorporated
Global Outsourcing
Lean Manufacturing
$25 million Global Cost
Reduction & Avoidance Program
Reduction & Avoidance Program
• Pension freeze
• Salary & wage reductions
• Temporary layoffs in US
• Government-sponsored programs in Europe
• ME&A cost reductions
• Restructuring
• Voluntary retirement packages
• Suspension of corporate incentive program
Managing Our Cost Structure
January 27, 2010
13
Twin Disc, Incorporated
What Differentiates Us?
• Technology
– Oil & Gas
• 8500 Series
• 7500 Series - new
in Fiscal 2010
– ARFF
• “Pump & Roll”
– Military
• “Legacy” Contracts
• Global Distribution and Service Network
• Product/Market & Geographic Diversity
• Niche Market Focus
• 90+ Years of Proven Application Know-How
• Core Manufacturing Capabilities
– Marine
• Patented QuickShift®
• Joystick Docking - new
in Fiscal 2010
• Dynamic Positioning/DP 2
• Rolla CFD
Twin Disc, Incorporated
Looking Ahead
January 27, 2010
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Twin Disc, Incorporated
FY04
FY05
FY06
FY07
$ millions
FY08
FY09
FY10
• 6 month backlog up 16%
since start of fiscal year
since start of fiscal year
Ø Increased order activity
for 8500 series
transmission for the oil
& gas market
for 8500 series
transmission for the oil
& gas market
Ø Military and ARFF
holding steady
holding steady
Ø Industrial & Marine
continue to be soft
continue to be soft
Corporate Six Month Backlog
(Mfg Orders to be shipped in the next 6 months)
(Mfg Orders to be shipped in the next 6 months)
January 27, 2010
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Twin Disc, Incorporated
Fiscal Year 2010 Outlook
• FY09 softness continued thru 1st half of FY10
• Mega Yacht - weakness expected to continue
• ARFF & Military will remain strong
• Oil & Gas - order activity is increasing
• Patrol Boat market expanding
• Asian market continues at record levels
• New product launches: 7500 & Joystick Docking
• “Cash is King” - continued focus on working capital
management and debt reduction
management and debt reduction
• Expect sequential quarterly improvements
Twin Disc, Incorporated
WE PUT HORSEPOWER TO WORK ™
Twin Disc, Incorporated
Appendices
January 27, 2010
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Twin Disc, Incorporated
Appendix I
FY 2009 Financial Highlights
• Sales were down 10.8% versus FY 2008
– 1st Half:
down less than 1% off record ’08 levels
– 2nd Half:
down nearly 20% off record ’08 levels
• Key Markets
– Mega Yacht, Oil & Gas and Industrial markets
saw
significant fall off as the year progressed
significant fall off as the year progressed
– ARFF, Military and Commercial Marine were steady
– Sales in the Pacific Rim continued at record
pace and
experienced double-digit growth
experienced double-digit growth
• $25 million cost reduction and avoidance program
announced in 4th Fiscal Quarter, including significant
1st Fiscal Quarter 2010 temporary plant shutdowns
announced in 4th Fiscal Quarter, including significant
1st Fiscal Quarter 2010 temporary plant shutdowns
January 27, 2010
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Twin Disc, Incorporated
Appendix II
Corporate Profile - Market Diversity
Pleasure Craft Market:
• Target Markets: High
speed
planing and displacement yachts
from 50’ to 150’, diesel powered
planing and displacement yachts
from 50’ to 150’, diesel powered
• Products: Transmissions,
Surface Drives, Propellers,
Steering/Thruster/Trim Systems,
Water Jets, Controls
Surface Drives, Propellers,
Steering/Thruster/Trim Systems,
Water Jets, Controls
• Channels: Engine
OEMs &
dealers, & boat builders
dealers, & boat builders
• Customers: CAT,
CMD, MAN,
MTU, Volvo / Azimuth, Baia,
Ferretti, Palmer Johnson, Riviera,
Sanlorenzo, Sunseeker
MTU, Volvo / Azimuth, Baia,
Ferretti, Palmer Johnson, Riviera,
Sanlorenzo, Sunseeker
• Competition: ZF/
Kamewa /Side
Power, Ultraflex
Power, Ultraflex
January 27, 2010
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Twin Disc, Incorporated
Appendix III
Corporate Profile - Market Diversity
Work Boat Market:
• Target Markets: planing
and
displacement vessels from 30’ to
250’, diesel powered
displacement vessels from 30’ to
250’, diesel powered
• Products: Transmissions,
Propellers, MCD’s, Water Jets,
Controls
Propellers, MCD’s, Water Jets,
Controls
• Channels: Engine
OEMs &
dealers, boat builders &
distribution
dealers, boat builders &
distribution
• Customers: CAT,
Cummins,
IVECO, Mitsubishi, Volvo /
Damen / Sewart Supply
(operators: Secor, Tidewater,
Groupe Bourbon)
IVECO, Mitsubishi, Volvo /
Damen / Sewart Supply
(operators: Secor, Tidewater,
Groupe Bourbon)
• Competition: ZF,
Reintjes
January 27, 2010
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Twin Disc, Incorporated
Appendix IV
Corporate Profile - Market Diversity
Patrol Boat Market:
• Target Markets: military,
patrol
and coast guard vessels from 30’
to 90’, diesel powered
and coast guard vessels from 30’
to 90’, diesel powered
• Products: Transmissions,
Surface Drives, Propellers,
Steering/Thruster/Trim Systems,
Water Jets, Controls
Surface Drives, Propellers,
Steering/Thruster/Trim Systems,
Water Jets, Controls
• Channels: Engine
OEMs &
dealers, naval authorities & boat
builders
dealers, naval authorities & boat
builders
• Customers: CAT,
CMD, MAN,
MTU, Volvo / Israeli Navy, Turkish
Coast Guard, USCG, US Navy,
RCMP
MTU, Volvo / Israeli Navy, Turkish
Coast Guard, USCG, US Navy,
RCMP
• Competition: ZF
/ Kamewa,
Hamilton
Hamilton
January 27, 2010
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Twin Disc, Incorporated
QuickShift®
Transmissions
Transmissions
Electronic Controls
Bow Thrusters
Anchor Winches
Gangways
Trim Tabs, Stern Thrusters
Power Steering
Marine Transmissions, Propulsion & Boat Management Systems
We have been very successful “bundling” more marine products
• Increasing content and value on each vessel
• Working directly with the shipyards
• Industry expert on vessel performance and handling
Appendix V
Corporate Profile - Market Diversity
January 27, 2010
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Twin Disc, Incorporated
Appendix VI
Corporate Profile - Market Diversity
Industrial Products:
• Target Market: Heavy
duty
industrial disconnect applications
industrial disconnect applications
• Products: Mechanical
& hydraulic
clutches, PTOs & pump mount
drives, 100 - 2,500 HP
clutches, PTOs & pump mount
drives, 100 - 2,500 HP
• Channels: Distribution
& OEMs
• Customers: Bandit,
Morbark,
Peterson Pacific / OEM engine
dealers
Peterson Pacific / OEM engine
dealers
• Competitors: Funk,
NACD, PT
Tech, Stiebel, Transfluid, WPT
Tech, Stiebel, Transfluid, WPT
January 27, 2010
25
Twin Disc, Incorporated
Appendix VII
Corporate Profile - Market Diversity
Industrial Transmissions:
• Target Market: Off-highway
and
all-terrain specialty vehicles,
diesel powered
all-terrain specialty vehicles,
diesel powered
• Products: Powertrain
components - 400 to 3,000 HP
components - 400 to 3,000 HP
• Channel: OEM
vehicle mfrs.
• Customers: BAE,
Rosenbauer,
Oshkosh, Tatra / BJ Services,
Cisco High-Lift, Crown Energy,
Enerflo, Fractec, Trican, Tai’an
Oshkosh, Tatra / BJ Services,
Cisco High-Lift, Crown Energy,
Enerflo, Fractec, Trican, Tai’an
• Competitors: Allison,
ZF
January 27, 2010
26
Twin Disc, Incorporated
$ millions
% sales
* See Appendix XI for reconciliation of TTM figures to reported figures.
Appendix VIII
January 27, 2010
27
Twin Disc, Incorporated
Non-GAAP Financial Disclosures
Financial information excluding the impact of certain significant items in this presentation are not measures that
are defined in U.S. Generally Accepted Accounting Principles (“GAAP”). These items are measures that
management believes are important to adjust for in order to have a meaningful comparison to prior and future
periods and to provide a basis for future projections and for estimating our earnings growth prospects. Non-
GAAP measures are used by management as a performance measure to judge profitability of our business
absent the impact of foreign currency exchange rate changes and acquisitions. Management analyzes the
company’s business performance and trends excluding these amounts. These measures, as well as EBITDA,
provide a more consistent view of performance than the closest GAAP equivalent for management and
investors. Management compensates for this by using these measures in combination with the GAAP
measures. The presentation of the non-GAAP measures in this presentation are made alongside the most
directly comparable GAAP measures.
are defined in U.S. Generally Accepted Accounting Principles (“GAAP”). These items are measures that
management believes are important to adjust for in order to have a meaningful comparison to prior and future
periods and to provide a basis for future projections and for estimating our earnings growth prospects. Non-
GAAP measures are used by management as a performance measure to judge profitability of our business
absent the impact of foreign currency exchange rate changes and acquisitions. Management analyzes the
company’s business performance and trends excluding these amounts. These measures, as well as EBITDA,
provide a more consistent view of performance than the closest GAAP equivalent for management and
investors. Management compensates for this by using these measures in combination with the GAAP
measures. The presentation of the non-GAAP measures in this presentation are made alongside the most
directly comparable GAAP measures.
Definition - Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA)
The sum of, net earnings and adding back provision for income taxes, interest expense, depreciations and
amortization expenses: this is a financial measure of the profit generated excluding the above mentioned
items.
amortization expenses: this is a financial measure of the profit generated excluding the above mentioned
items.
Appendix IX
Non-GAAP Financial Disclosures
January 27, 2010
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Twin Disc, Incorporated
* See Appendix XI for reconciliation of TTM figures to reported figures.
Appendix X
Reconciliation of Net Earnings to EBITDA
January 27, 2010
29
Twin Disc, Incorporated
Appendix XI
Reconciliation of TTM Data to Reported Quarterly Figures
January 27, 2010
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Twin Disc, Incorporated
Appendix XII
Fiscal Year Condensed Consolidated Statements of Operations
January 27, 2010
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Twin Disc, Incorporated
Appendix XIII
2nd Fiscal Qtr Condensed Consolidated Statements of Operations
January 27, 2010
32
Twin Disc, Incorporated
$317
$243
$219
$332
$296
Net Sales by Segment
Appendix XIV
January 27, 2010
33
Twin Disc, Incorporated
Net Earnings by Segment (before Corporate Expense)
Appendix XV
January 27, 2010
34
Twin Disc, Incorporated
$ millions
% sales
Operating Cash Flows - Fiscal Year
Appendix XVI
* See Appendix XI for reconciliation of TTM figures to reported figures.
Twin Disc, Incorporated
WE PUT HORSEPOWER TO WORK ™