Racine-based Twin Disc, Inc. reported second quarter results driven by challenging global oil and gas markets that included a 42 percent drop in revenue and a 160 percent drop in earnings. The company also announced it was temporarily suspending its quarterly cash dividend.
The manufacturer of marine and heavy-duty off-highway power transmission equipment had a net loss of just under $2.3 million for the quarter after having a profit of $3.8 million during the same quarter from the previous year. The earnings were a net loss attributable to Twin Disc of 21 cents per diluted share. The company had earnings of 33 cents per share during the same quarter from the previous year.
The company’s industrial products are sold into agricultural, environmental, energy and natural resource markets, many of which have faced issues with falling prices.
Twin Disc’s revenue was $44.8 million for the quarter, down from $72.7 million during the same quarter from the previous year. The company said the decline was the result of reduced demand for its oil and gas related products in North America and Asia because of falling oil and gas prices. There was also lower demand in Asia for the company’s commercial marine products. Demand in Europe remained weak, while overall demand in North America for commercial marine and non-oil and gas products was relatively stable. The company also reported a negative impact of $2.9 million from the strengthening of the U.S. dollar.
John Batten, Twin Disc president and chief executive officer, said the company had managed through industry cycles before and emerged in a better position.
“Conditions continue to be challenging across many of the company’s end markets and we expect the oil and gas, and pleasure craft marine markets to remain depressed throughout the year,” he said.
Batten said the company is monitoring the markets for further signs of deterioration, but remains committed to investing in its product portfolio.
“We are investing in research and development programs that enhance our product portfolio and expand our market opportunities, and will launch several new industrial and marine products during the second half of the year,” Batten said.
He also noted the company had signed an agreement to distribute Veth Propulsion products in Asia.
Twin Disc recorded a $515,000 restructuring charge during the quarter for actions expected to generate $4.3 million in annual savings. Those previously announced actions included reduced base salaries and wages for corporate officers and salaried and hourly employees. Fifteen salaried positions were eliminated and there were temporary layoffs at the Racine facilities. The company also sold its distribution entity in the southeastern U.S. for $4.1 million.
Jeffrey Knutson, Twin Disc chief financial officer, said the company’s lower sales volumes reduced profitability to the point that the company was no longer compliant with the terms of the credit agreement it has with Wells Fargo. That agreement and another were amended in Securities and Exchange Commission filings made today.
“Our lenders remain supportive of the company,” Knutson said. “We anticipate finalizing a long-term financing solution by the end of fiscal 2016.”
Knutson also said the company was working to reduce inventory levels and they have declined 19.3 percent from the previous year.
