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As Of Filer Filing For·On·As Docs:Size Issuer Filing Agent 2/04/20 Twin Disc Inc 10-Q 12/27/19 79:7.5M RDG Filings/FA |
Document/Exhibit Description Pages Size
1: 10-Q Quarterly Report HTML 632K
2: EX-31.A Certification -- §302 - SOA'02 HTML 29K
3: EX-31.B Certification -- §302 - SOA'02 HTML 29K
4: EX-32.A Certification -- §906 - SOA'02 HTML 24K
5: EX-32.B Certification -- §906 - SOA'02 HTML 24K
48: R1 Document And Entity Information HTML 56K
23: R2 Condensed Consolidated Balance Sheets (Current HTML 125K
Period Unaudited)
29: R3 Condensed Consolidated Balance Sheets (Current HTML 39K
Period Unaudited) (Parentheticals)
75: R4 Condensed Consolidated Statements of Operations HTML 111K
and Comprehensive (Loss) Income (Unaudited)
47: R5 Condensed Consolidated Statements of Operations HTML 27K
and Comprehensive (Loss) Income (Unaudited)
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21: R6 Condensed Consolidated Statements of Cash Flows HTML 95K
(Unaudited)
28: R7 Note A - Basis of Presentation HTML 37K
74: R8 Note B - Inventories HTML 34K
50: R9 Note C - Warranty HTML 47K
39: R10 Note D - Contingencies HTML 27K
14: R11 Note E - Business Segments HTML 147K
54: R12 Note F - Stock-based Compensation HTML 44K
62: R13 Note G - Pension and Other Postretirement Benefit HTML 69K
Plans
40: R14 Note H - Income Taxes HTML 33K
15: R15 Note I - Goodwill and Other Intangibles HTML 88K
55: R16 Note J - Long-term Debt HTML 51K
63: R17 Note K - Shareholders' Equity HTML 250K
38: R18 Note L - Restructuring of Operations HTML 36K
16: R19 Note M - Earnings Per Share HTML 85K
51: R20 Note N - Lease Liabilities HTML 118K
78: R21 Note O - Derivative Financial Instruments HTML 55K
34: R22 Significant Accounting Policies (Policies) HTML 34K
26: R23 Note B - Inventories (Tables) HTML 35K
52: R24 Note C - Warranty (Tables) HTML 43K
79: R25 Note E - Business Segments (Tables) HTML 145K
35: R26 Note G - Pension and Other Postretirement Benefit HTML 64K
Plans (Tables)
27: R27 Note I - Goodwill and Other Intangibles (Tables) HTML 84K
53: R28 Note J - Long-term Debt (Tables) HTML 36K
77: R29 Note K - Shareholders' Equity (Tables) HTML 248K
65: R30 Note L - Restructuring of Operations (Tables) HTML 31K
58: R31 Note M - Earnings Per Share (Tables) HTML 80K
13: R32 Note N - Lease Liabilities (Tables) HTML 119K
37: R33 Note O - Derivative Financial Instruments (Tables) HTML 47K
64: R34 Note B - Inventories - Inventories (Details) HTML 33K
57: R35 Note C - Warranty (Details Textual) HTML 31K
12: R36 Note C - Warranty - Warranty (Details) HTML 33K
36: R37 Note E - Business Segments (Details Textual) HTML 23K
66: R38 Note E - Business Segments - Revenues by Segment HTML 41K
(Details)
56: R39 Note E - Business Segments - Assets by Segment HTML 31K
(Details)
71: R40 Note E - Business Segments - Net Sales by Product HTML 51K
Group (Details)
46: R41 Note F - Stock-based Compensation (Details HTML 66K
Textual)
25: R42 Note G - Pension and Other Postretirement Benefit HTML 37K
Plans (Details Textual)
33: R43 Note G - Pension and Other Postretirement Benefit HTML 49K
Plans - Net Funded Status of Pension and
Postretirement Plans (Details)
70: R44 Note H - Income Taxes (Details Textual) HTML 38K
44: R45 Note I - Goodwill and Other Intangibles (Details HTML 37K
Textual)
24: R46 Note I - Goodwill and Other Intangibles - Goodwill HTML 38K
Rollforward (Details)
32: R47 Note I - Goodwill and Other Intangibles - HTML 60K
Intangible Assets (Details)
72: R48 Note I - Goodwill and Other Intangibles - HTML 35K
Estimated Intangibles Amortization Expense
(Details)
43: R49 Note J - Long-term Debt (Details Textual) HTML 76K
59: R50 Note J - Long-term Debt - Long-term Debt (Details) HTML 35K
68: R51 Note K - Shareholders' Equity (Details Textual) HTML 27K
41: R52 Note K - Shareholders' Equity - Shareholders' HTML 104K
Equity Reconciliation (Details)
17: R53 Note K - Stockholders' Equity - Accumulated Other HTML 53K
Comprehensive Income (Loss), Net of Tax (Details)
60: R54 Note K - Shareholders' Equity - Reconciliation for HTML 45K
the Reclassifications Out of Accumulated Other
Comprehensive Income (Loss), Net of Tax (Details)
69: R55 Note L - Restructuring of Operations (Details HTML 40K
Textual)
42: R56 Note L - Restructuring of Operations - HTML 36K
Roll-forward of Restructuring Activity (Details)
18: R57 Note M - Earnings Per Share (Details Textual) HTML 33K
61: R58 Note M - Earnings Per Share - Components of Basic HTML 69K
and Diluted Earnings Per Share (Details)
67: R59 Note N - Lease Liabilities - Components of Lease HTML 41K
Expense (Details)
30: R60 Note N - Lease Liabilities - Other Information HTML 46K
Related to Leases (Details)
19: R61 Note N - Lease Liabilities - Future Minimum Rental HTML 61K
Commitments Under Noncancellable Leases (Details)
49: R62 Note N - Lease Liabilities - Consolidated Balance HTML 39K
Sheet (Details)
73: R63 Note O - Derivative Financial Instruments (Details HTML 38K
Textual)
31: R64 Note O - Derivative Financial Instruments - Fair HTML 32K
Value of Derivative Instruments (Details)
20: R65 Note O - Derivative Financial Instruments - Impact HTML 32K
of the Company’s Derivative Instruments on the
Consolidated Statement of Operations and
Comprehensive Income (Details)
22: XML IDEA XML File -- Filing Summary XML 146K
76: EXCEL IDEA Workbook of Financial Reports XLSX 69K
6: EX-101.INS XBRL Instance -- twin-20191227 XML 2.64M
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended December 27, 2019
Commission File Number 1-7635
TWIN DISC, INCORPORATED
(Exact name of registrant as specified in its charter)
|
Wisconsin |
39-0667110 |
|
(State or other jurisdiction of |
(I.R.S. Employer |
|
Incorporation or organization) |
Identification No.) |
1328 Racine Street, Racine, Wisconsin 53403
(Address of principal executive offices)
(262) 638-4000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Exchange Act:
|
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
|
Common Stock (No Par Value) |
TWIN |
The NASDAQ Stock Market LLC |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.
| Yes ☑ No ☐ |
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large Accelerated Filer ☐ | Accelerated Filer ☑ |
| Non-accelerated filer ☐ | Smaller reporting company ☑ |
| Emerging growth company ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
| Yes ☐ No ☑ |
At January 30, 2020, the registrant had 13,405,993 shares of its common stock outstanding.
|
Part I. |
FINANCIAL INFORMATION |
Item 1. Financial Statements
TWIN DISC, INCORPORATED
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
(UNAUDITED)
The notes to condensed consolidated financial statements are an integral part of these statements.
TWIN DISC, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE (LOSS) INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
The notes to condensed consolidated financial statements are an integral part of these statements.
TWIN DISC, INCORPORATED
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
The notes to condensed consolidated financial statements are an integral part of these statements
TWIN DISC, INCORPORATED
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
|
A. |
Basis of Presentation |
The unaudited condensed consolidated financial statements have been prepared by Twin Disc, Incorporated (the “Company”) pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and, in the opinion of the Company, include adjustments, consisting primarily of normal recurring items, necessary for a fair statement of results for each period. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such SEC rules and regulations. The Company believes that the disclosures made are adequate to make the information presented not misleading. It is suggested that these financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company’s Annual Report filed on Form 10-K for June 30, 2019. The year-end condensed balance sheet data was derived from audited financial statements, but does not include all disclosures required by accounting principles generally accepted in the United States.
The consolidated financial statements and information presented herein include the financial results of Veth Propulsion Holding BV (“Veth Propulsion”), the acquisition of which was completed on July 2, 2018. The financial results included in this Form 10-Q related to the acquisition method of accounting for the Veth Propulsion acquisition have been finalized and completed.
Recently Adopted Accounting Standards
In June 2018, the FASB issued guidance (ASU 2018-07) intended to simplify the accounting for share based payments granted to nonemployees. Under the amendments in this guidance, payments to nonemployees would be aligned with the requirements for share-based payments granted to employees. The Company adopted this guidance effective July 1, 2019. The adoption of this guidance did not have a material impact on the Company’s financial statements and disclosures.
New Accounting Releases
In August 2018, the FASB issued updated guidance (ASU 2018-13) as part of the disclosure framework project, which focuses on improving the effectiveness of disclosures in the notes to the financial statements. The amendments in this update modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement. The amendments in this guidance are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019 (the Company’s fiscal 2021), with early adoption permitted. The Company is currently evaluating the potential impact of this guidance on the Company’s disclosures.
In August 2018, the FASB issued updated guidance (ASU 2018-14) intended to modify the disclosure requirements for employers that sponsor defined benefit pension or postretirement plans. The amendments in this guidance are effective for fiscal years ending after December 15, 2020 (the Company’s fiscal 2021), with early adoption permitted. The Company is currently evaluating the potential impact of this guidance on the Company’s disclosures.
In December 2019, the FASB issued guidance (ASU 2019-12) intended to simplify the accounting for income taxes. The amendments in this guidance are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020 (the Company’s fiscal 2022), with early adoption permitted. The Company is currently evaluating the potential impact of this guidance on the Company’s disclosures.
Special Note Regarding Smaller Reporting Company Status
Under SEC Release 33-10513; 34-83550, Amendments to Smaller Reporting Company Definition, the Company qualifies as a smaller reporting company and accordingly, it has scaled some of its disclosures of financial and non-financial information in this quarterly report. The Company will continue to determine whether to provide additional scaled disclosures of financial or non-financial information in future quarterly reports, annual reports and/or proxy statements if it remains a smaller reporting company under SEC rules.
|
B. |
Inventories |
The major classes of inventories were as follows:
|
Inventories: |
||||||||
|
Finished parts |
$ | 68,315 | $ | 57,682 | ||||
|
Work in process |
22,222 | 23,812 | ||||||
|
Raw materials |
44,121 | 44,399 | ||||||
| $ | 134,658 | $ | 125,893 | |||||
|
C. |
Warranty |
The Company engages in extensive product quality programs and processes, including actively monitoring and evaluating the quality of its suppliers. However, its warranty obligation is affected by product failure rates, the number of units affected by the failure and the expense involved in satisfactorily addressing the situation. The warranty reserve is established based on our best estimate of the amounts necessary to settle future and existing claims on products sold as of the balance sheet date. When evaluating the adequacy of the reserve for warranty costs, management takes into consideration the term of the warranty coverage, historical claim rates and costs of repair, knowledge of the type and volume of new products and economic trends. While we believe the warranty reserve is adequate and that the judgment applied is appropriate, such amounts estimated to be due and payable in the future could differ materially from what actually transpires. The following is a listing of the activity in the warranty reserve for the quarters ended December 27, 2019 and December 28, 2018:
Included in the current fiscal half expense is a non-recurring warranty charge in the amount of $3,889, to accrue for estimated costs to resolve a unique product performance issue at certain installations.
The current portion of the warranty accrual ($4,856 and $3,309 as of December 27, 2019 and December 28, 2018, respectively) is reflected in accrued liabilities, while the long-term portion ($919 and $534 as of December 27, 2019 and December 28, 2018, respectively) is included in other long-term liabilities on the consolidated balance sheets.
|
D. |
Contingencies |
The Company is involved in litigation of which the ultimate outcome and liability to the Company, if any, is not presently determinable. Management believes that final disposition of such litigation will not have a material impact on the Company’s results of operations, financial position or cash flows.
|
E. |
Business Segments |
The Company and its subsidiaries are engaged in the manufacture and sale of marine and heavy-duty off-highway power transmission equipment. Principal products include marine transmissions, azimuth drives, surface drives, propellers and boat management systems, as well as power-shift transmissions, hydraulic torque converters, power take-offs, industrial clutches and controls systems. The Company sells to both domestic and foreign customers in a variety of market areas, principally pleasure craft, commercial and military marine markets, as well as in the energy and natural resources, government and industrial markets. The Company's worldwide sales to both domestic and foreign customers are transacted through a direct sales force and a distributor network.
The Company has two reportable segments: manufacturing and distribution. Its segment structure reflects the way management makes operating decisions and manages the growth and profitability of the business. It also corresponds with management’s approach of allocating resources and assessing the performance of its segments. The accounting practices of the segments are the same as those described in the summary of significant accounting policies. Transfers among segments are at established inter-company selling prices. Management evaluates the performance of its segments based on net income.
Information about the Company’s segments is summarized as follows:
| Assets | |||||||||
|
Manufacturing segment assets |
$ | 380,275 | $ | 384,612 | |||||
|
Distribution segment assets |
51,277 | 46,076 | |||||||
|
Corporate assets and elimination of intercompany assets |
(88,271 | ) | (83,818 | ) | |||||
| $ | 343,281 | $ | 346,870 | ||||||
Disaggregated revenue:
The following table presents details deemed most relevant to the users of the financial statements for the quarters and two quarters ended December 27, 2019 and December 28, 2018.
Net sales by product group for the quarter ended December 27, 2019 is summarized as follows:
Net sales by product group for the quarter ended December 28, 2018 is summarized as follows:
Net sales by product group for the two quarters ended December 27, 2019 is summarized as follows:
Net sales by product group for the two quarters ended December 28, 2018 is summarized as follows:
|
F. |
Stock-Based Compensation |
Performance Stock Awards (“PSA”)
During the first half of fiscal 2020 and 2019, the Company granted a target number of 131.7 and 42.3 PSAs, respectively, to various employees of the Company, including executive officers. The fiscal 2020 PSAs will vest if the Company achieves performance-based target objectives relating to average return on invested capital, average annual sales and average annual Earnings Per Share (“EPS”) (as defined in the PSA Grant Agreement), in the cumulative three fiscal year period ending June 30, 2022. These PSAs are subject to adjustment if the Company’s return on invested capital, net sales, and EPS for the period falls below or exceeds the specified target objective, and the maximum number of performance shares that can be awarded if the target objective is exceeded is 184.8. Based upon actual results to date, the Company is currently accruing compensation expense for these PSAs.
The fiscal 2019 PSAs will vest if the Company achieves performance-based target objectives relating to average return on invested capital, average annual sales and average annual EPS (as defined in the PSA Grant Agreement), in the cumulative three fiscal year period ending June 30, 2021. These PSAs are subject to adjustment if the Company’s return on invested capital, net sales, and EPS for the period falls below or exceeds the specified target objective, and the maximum number of performance shares that can be awarded if the target objective is exceeded is 67.0. Based upon actual results to date, the Company is currently accruing compensation expense for the average annual sales component for these PSAs. The Company is not accruing compensation expense for the average return on invested capital and average annual EPS components for these PSAs.
There were 214.0 and 188.0 unvested PSAs outstanding at December 27, 2019 and December 28, 2018, respectively. The fair value of the PSAs (on the date of grant) is expensed over the performance period for the shares that are expected to ultimately vest. Compensation expense of ($52) and $242 was recognized for the quarters ended December 27, 2019 and December 28, 2018, respectively, related to PSAs. Compensation expense of $20 and $788 was recognized for the two quarters ended December 27, 2019 and December 28, 2018, respectively, related to PSAs. The weighted average grant date fair value of the unvested awards at December 27, 2019 was $15.24. At December 27, 2019, the Company had $2,355 of unrecognized compensation expense related to the unvested shares that would vest if the specified target objective was achieved for the fiscal 2020, 2019 and 2018 awards. The total fair value of PSAs vested as of December 27, 2019 and December 28, 2018 was $0.
Restricted Stock Awards (“RS”)
The Company has unvested RS awards outstanding that will vest if certain service conditions are fulfilled. The fair value of the RS grants is recorded as compensation expense over the vesting period, which is generally 1 to 3 years. During the first half of fiscal 2020 and 2019, the Company granted 180.4 and 35.6 service based restricted shares, respectively, to employees and non-employee directors. There were 231.4 and 185.3 unvested shares outstanding at December 27, 2019 and December 28, 2018, respectively. A total of 20.5 and 2.8 shares of restricted stock were forfeited during the two quarters ended December 27, 2019 and December 28, 2018, respectively. Compensation expense of $218 and $266 was recognized for the quarters ended December 27, 2019 and December 28, 2018, respectively. Compensation expense of $524 and $516 was recognized for the two quarters ended December 27, 2019 and December 28, 2018, respectively. The total fair value of restricted stock grants vested as of December 27, 2019 and December 28, 2018 was $1,241 and $2,102, respectively. As of December 27, 2019, the Company had $1,982 of unrecognized compensation expense related to restricted stock which will be recognized over the next three years.
Restricted Stock Unit Awards (“RSU”)
Under the 2018 Long Term Incentive Plan, the Company has been authorized to issue RSUs. The RSUs entitle the employee to shares of common stock of the Company if the employee remains employed by the Company through a specified date, generally three years from the date of grant. During the first half of fiscal 2019, the Company granted 38.0 RSUs to various employees of the Company, including executive officers. The fair value of the RSUs (on the date of grant) is recorded as compensation expense over the vesting period. There were 38.0 unvested RSUs outstanding at December 27, 2019 and at December 28, 2018. Compensation expense of $81 and $82 was recognized for the quarters ended December 27, 2019 and December 28, 2018, respectively. Compensation expense of $163 and $136 was recognized for the two quarters ended December 27, 2019 and December 28, 2018, respectively. The weighted average grant date fair value of the unvested awards at December 27, 2019 was $25.77. As of December 27, 2019, the Company had $516 of unrecognized compensation expense related to restricted stock which will be recognized over the next two years.
|
G. |
Pension and Other Postretirement Benefit Plans |
The Company has non-contributory, qualified defined benefit plans covering substantially all domestic employees hired prior to October 1, 2003 and certain foreign employees. Additionally, the Company provides health care and life insurance benefits for certain domestic retirees. The components of the net periodic benefit cost for the defined benefit pension plans and the other postretirement benefit plan are as follows:
|
For the Quarter Ended |
For the Two Quarters Ended |
|||||||||||||||
| December 28, 2018 | December 27, 2019 | December 28, 2018 | ||||||||||||||
|
Pension Benefits: |
||||||||||||||||
|
Service cost |
$ | 194 | $ | 251 | $ | 406 | $ | 497 | ||||||||
|
Interest cost |
889 | 1,083 | 1,794 | 2,175 | ||||||||||||
|
Expected return on plan assets |
(1,240 | ) | (1,333 | ) | (2,488 | ) | (2,664 | ) | ||||||||
|
Amortization of transition obligation |
9 | 9 | 17 | 17 | ||||||||||||
|
Amortization of prior service cost |
(4 | ) | 1 | (7 | ) | 2 | ||||||||||
|
Amortization of actuarial net loss |
784 | 678 | 1,568 | 1,355 | ||||||||||||
|
Net periodic benefit cost |
$ | 632 | $ | 689 | $ | 1,290 | $ | 1,382 | ||||||||
|
Postretirement Benefits: |
||||||||||||||||
|
Service cost |
$ | 4 | $ | 5 | $ | 9 | $ | 9 | ||||||||
|
Interest cost |
55 | 76 | 110 | 152 | ||||||||||||
|
Amortization of prior service cost |
(69 | ) | - | (138 | ) | - | ||||||||||
|
Amortization of actuarial net loss |
- | (69 | ) | - | (137 | ) | ||||||||||
|
Net periodic benefit (gain) cost |
$ | (10 | ) | $ | 12 | $ | (19 | ) | $ | 24 | ||||||
The Company expects to contribute approximately $1,936 to its pension plans in fiscal 2020. As of December 27, 2019, the amount of $785 in contributions has been made.
The Company has reclassified $548 (net of $169 in taxes) of benefit plan adjustments from accumulated other comprehensive loss during the quarter ended December 27, 2019, and $478 (net of $146 in taxes) during the quarter ended December 28, 2018. The Company has reclassified $1,105 (net of $338 in taxes) of benefit plan adjustments from accumulated other comprehensive loss during the two quarters ended December 27, 2019, and $949 (net of $292 in taxes) during the two quarters ended December 28, 2018. These reclassifications are included in the computation of net periodic benefit cost.
|
H. |
Income Taxes |
For the two quarters ended December 27, 2019 and December 28, 2018, the Company’s effective income tax rate was 4.3% and 25.1% respectively. Under the Tax Cuts and Jobs Act, a company is prohibited from recognizing certain foreign global intangible low taxed income (“GILTI”) deductions and credits when in a domestic loss position, but is required to include the foreign GILTI income inclusions. In the prior year, the Company recognized domestic income and recognized a net benefit of GILTI income inclusions and deductions which resulted in a net benefit of 0.67%. In the current year, the benefit generated from domestic losses was reduced by the required GILTI foreign income inclusions and no GILTI deductions. The $9,385 GILTI inclusion decreased the rate by 18.55%. Income generated in foreign jurisdictions and other tax preference items also impacted the rate.
The Company maintains valuation allowances when it is more likely than not that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in the tax provision in the period of change. In determining whether a valuation allowance is required, the Company takes into account such factors as prior earnings history, expected future earnings, carry-back and carry-forward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. In addition, all other available positive and negative evidence is taken into consideration, including all new impacts of tax reform. The Company has evaluated the realizability of the net deferred tax assets related to its operations and based on this evaluation management has concluded that no valuation allowances are required.
Accounting policies for interim reporting require the Company to adjust its effective tax rate each quarter to be consistent with the estimated annual effective tax rate. Under this effective tax rate methodology, the Company applies an estimated annual income tax rate to its year-to-date ordinary earnings to derive its income tax provision each quarter.
The Company has approximately $1,158 of unrecognized tax benefits, including related interest and penalties, as of December 27, 2019, which, if recognized, would favorably impact the effective tax rate. There was no significant change in the total unrecognized tax benefits due to the settlement of audits, the expiration of statutes of limitations or for other items during the quarter ended December 27, 2019. It appears possible that the amount of unrecognized tax benefits could change in the next twelve months due to on-going audit activity.
Annually, the Company files income tax returns in various taxing jurisdictions inside and outside the United States. In general, the tax years that remain subject to examination in foreign jurisdictions are 2013 through 2019. The tax year open to exam in the Netherlands is 2019. The tax years open to examination in the U.S. are for years subsequent to fiscal 2015. The state of Wisconsin income tax audit remains ongoing for the fiscal years 2011 through 2013. It is reasonably possible that other audit cycles will be completed during fiscal 2020.
|
I. |
Goodwill and Other Intangibles |
Goodwill represents the amount of the consideration transferred in excess of the net of the acquisition-date fair values of the identifiable assets acquired and the liabilities assumed.
The Company reviews goodwill for impairment on a reporting unit basis annually as of the first day of the Company’s fourth fiscal quarter, and whenever events or changes in circumstances (“triggering events”) indicate that the carrying value of goodwill may not be recoverable.
The fair value of reporting units is primarily driven by projected growth rates and operating results under the income approach using a discounted cash flow model, which applies an appropriate market-participant discount rate, and consideration of other market approach data from guideline public companies. If declining actual operating results or future operating results become indicative that the fair value of the Company’s reporting units has declined below their carrying values, an interim goodwill impairment test may need to be performed and may result in a non-cash goodwill impairment charge.
During the first half of fiscal 2020, the Company determined that there were no triggering events to warrant an interim goodwill impairment test. As of December 27, 2019, goodwill in the amounts of $23,013 and $2,548 is carried in the European Propulsion and European Industrial reporting units, respectively.
As of December 27, 2019, changes in the carrying amount of goodwill is summarized as follows:
|
Net Book Value Rollforward |
By Reporting Unit |
|||||||||||||||||||
|
Gross Carrying Amount |
Accumulated Amortization / Impairment |
Net Book Value |
European Propulsion |
European Industrial |
||||||||||||||||
|
Balance at June 30, 2019 |
$ | 39,776 | $ | (13,822 | ) | $ | 25,954 | $ | 23,371 | $ | 2,583 | |||||||||
|
Translation adjustment |
(393 | ) | - | (393 | ) | (358 | ) | (35 | ) | |||||||||||
|
Balance at December 27, 2019 |
$ | 39,383 | $ | (13,822 | ) | $ | 25,561 | $ | 23,013 | $ | 2,548 | |||||||||
As of December 27, 2019, the following acquired intangible assets have definite useful lives and are subject to amortization:
|
Net Book Value Rollforward |
Net Book Value By Asset Type |
|||||||||||||||||||||||||||
|
Gross Carrying Amount |
Accumulated Amortization / Impairment |
Net Book Value |
Customer Relationships |
Technology Know-how |
Trade Name |
Other |
||||||||||||||||||||||
|
Balance at June 30, 2019 |
$ | 39,587 | $ | (14,434 | ) | $ | 25,153 | $ | 14,843 | $ | 7,025 | $ | 2,733 | $ | 552 | |||||||||||||
|
Additions |
53 | - | 53 | - | - | - | 53 | |||||||||||||||||||||
|
Amortization |
- | (2,272 | ) | (2,272 | ) | (1,500 | ) | (569 | ) | (126 | ) | (77 | ) | |||||||||||||||
|
Translation adjustment |
(509 | ) | - | (509 | ) | (334 | ) | (127 | ) | (44 | ) | (4 | ) | |||||||||||||||
|
Balance at December 27, 2019 |
$ | 39,131 | $ | (16,706 | ) | $ | 22,425 | $ | 13,009 | $ | 6,329 | $ | 2,563 | $ | 524 | |||||||||||||
Other intangibles consist of certain proprietary technology, computer software, patents and licensing agreements. Amortization is recorded on the basis of straight-line or accelerated, as appropriate, over the estimated useful lives of the assets.
The weighted average remaining useful life of the intangible assets included in the table above is approximately 9 years.
Intangible amortization expense was $1,143 and $583 for the quarters ended December 27, 2019, and December 28, 2018, respectively. Intangible amortization expense was $2,272 and $1,249 for the two quarters ended December 27, 2019, and December 28, 2018, respectively. Estimated intangible amortization expense for the remainder of fiscal 2020 and each of the next five fiscal years is as follows:
The gross carrying amount of the Company’s intangible assets that have indefinite lives and are not subject to amortization as of December 27, 2019 and June 30, 2019 was $200 and $200, respectively. These assets are comprised of acquired trade names.
|
J. |
Long-term Debt |
The Company’s long-term debt represents borrowings made under the credit agreement, as amended, which it entered into with BMO Harris Bank N.A, on June 29, 2018 (“Credit Agreement”). The borrowings consist of a term loan component (“Term Loan”) with an interest rate based on LIBOR plus an applicable margin, requiring quarterly principal payments of $500 and maturing on March 4, 2026, and a revolving loan component (“Revolving Loans”) with a maximum facility of $50,000. The borrowings are subject to financial covenants, such as maintaining a maximum allowable ratio of total funded debt to earnings before interest, taxes, depreciation and amortization (“EBITDA”), as defined in the Credit Agreement, and are secured by substantially all of the Company’s personal property, including accounts receivable, inventory, machinery and equipment and intellectual property.
On January 28, 2020, an amendment to the Credit Agreement was finalized to increase such maximum allowable ratio from 3.00 to 1.00 to 4.00 to 1.00 for the quarter ended December 27, 2019, 5.00 to 1.00 for the quarter ending March 27, 2020, 4.00 to 1.00 for the quarter ending June 30, 2020, 3.50 to 1.00 for the quarter ending September 25, 2020 and 3.00 to 1.00 for quarters ending on or after December 25, 2020. The amendment also increased interest rate margins at the higher debt ratio levels. All other terms of the Credit Agreement were substantially unchanged. Prior to the amendment, as of the December 27, 2019 balance sheet date, the Company’s total funded debt to EBITDA ratio was greater than 3.00 to 1.00. The classification of the debt on the condensed consolidated balance sheet for the quarter ended December 27, 2019 reflects this subsequent amendment.
The Credit Agreement, including its amendments, is more fully described in the Company’s Annual Report filed on Form 10-K for June 30, 2019, as well as in Item 2 of this quarterly report.
Long-term debt at December 27, 2019 and June 30, 2019 consisted of the following:
During the two quarters ended December 27, 2019, the average interest rate was 3.58% on the Term Loan, and 2.48% on the Revolving Loans.
Other long-term debt pertains mainly to a financing arrangement in Europe. These liabilities carry terms of three to five years and implied interest rates ranging from 7% to 25%. A total amount of $36 in principal was paid on these liabilities during the current fiscal year.
As of December 27, 2019, the Company’s borrowing capacity on the Revolving Loans under the terms of the Credit Agreement was $41,699, and the Company had approximately $8,470 of available borrowings. In addition to the Credit Agreement, the Company has established unsecured lines of credit that are used from time to time to secure certain performance obligations by the Company.
The Company’s borrowings described above approximate fair value at December 27, 2019 and June 30, 2019. If measured at fair value in the financial statements, long-term debt (including the current portion) would be classified as Level 2 in the fair value hierarchy.
On April 22, 2019, the Company entered into an interest rate swap arrangement with Bank of Montreal, with an initial notional amount of $20,000 and a maturity date of March 4, 2026 to hedge the Term Loan. The notional amount decreases as the Term Loan balance decreases due to repayments of principal. As of December 27, 2019, the notional amount was $19,000. This swap has been designated as a cash flow hedge under ASC 815, Derivatives and Hedging. This swap is included in the disclosures in Note O, Derivative Financial Instruments.
|
K. |
Shareholders’ Equity |
The Company, from time to time, makes open market purchases of its common stock under authorizations given to it by the Board of Directors, of which 315.0 shares as of December 27, 2019 remain authorized for purchase. The Company did not make any open market purchases of its shares during the quarters ended December 27, 2019 and December 28, 2018.
The following is a reconciliation of the Company’s equity balances for the first two fiscal quarters of 2020 and 2019:
|
Twin Disc, Inc. Shareholders’ Equity |
||||||||||||||||||||||||
|
Accumulated |
||||||||||||||||||||||||
|
Other |
Non- |
|||||||||||||||||||||||
|
Common |
Retained |
Comprehensive |
Treasury |
Controlling |
Total |
|||||||||||||||||||
|
Stock |
Earnings |
Income (Loss) |
Stock |
Interest |
Equity |
|||||||||||||||||||
|
Balance, June 30, 2019 |
$ | 45,047 | $ | 196,472 | $ | (37,971 | ) | $ | (21,332 | ) | $ | 602 | $ | 182,818 | ||||||||||
|
Net (loss) income |
(6,311 | ) | 18 | (6,293 | ) | |||||||||||||||||||
|
Translation adjustments |
(3,014 | ) | 18 | (2,996 | ) | |||||||||||||||||||
|
Benefit plan adjustments, net of tax |
557 | 557 | ||||||||||||||||||||||
|
Unrealized loss on cash flow hedge, net of tax |
(143 | ) | (143 | ) | ||||||||||||||||||||
|
Cash dividends |
(127 | ) | (127 | ) | ||||||||||||||||||||
|
Compensation expense |
459 | 459 | ||||||||||||||||||||||
|
Shares (acquired) issued, net |
(2,324 | ) | 1,412 | (912 | ) | |||||||||||||||||||
|
Balance, September 27, 2019 |
43,182 | 190,161 | (40,571 | ) | (19,920 | ) | 511 | 173,363 | ||||||||||||||||
|
Net (loss) income |
(6,516 | ) | 50 | (6,466 | ) | |||||||||||||||||||
|
Translation adjustments |
1,647 | - | 1,647 | |||||||||||||||||||||
|
Benefit plan adjustments, net of tax |
548 | 548 | ||||||||||||||||||||||
|
Unrealized income on cash flow hedge, net of tax |
146 | 146 | ||||||||||||||||||||||
|
Cash dividends |
- | |||||||||||||||||||||||
|
Compensation expense |
248 | 248 | ||||||||||||||||||||||
|
Shares (acquired) issued, net |
(1,125 | ) | 1,124 | (1 | ) | |||||||||||||||||||
|
Balance, December 27, 2019 |
$ | 42,305 | $ | 183,645 | $ | (38,230 | ) | $ | (18,796 | ) | $ | 561 | $ | 169,485 | ||||||||||
|
Twin Disc, Inc. Shareholders’ Equity |
||||||||||||||||||||||||
|
Accumulated |
||||||||||||||||||||||||
|
Other |
Non- |
|||||||||||||||||||||||
|
Common |
Retained |
Comprehensive |
Treasury |
Controlling |
Total |
|||||||||||||||||||
|
Stock |
Earnings |
Income (Loss) |
Stock |
Interest |
Equity |
|||||||||||||||||||
|
Balance, June 30, 2018 |
$ | 11,570 | $ | 178,896 | $ | (23,792 | ) | $ | (23,677 | ) | $ | 619 | $ | 143,616 | ||||||||||
|
Net income |
2,862 | 41 | 2,903 | |||||||||||||||||||||
|
Translation adjustments |
(536 | ) | (25 | ) | (561 | ) | ||||||||||||||||||
|
Benefit plan adjustments, net of tax |
471 | 471 | ||||||||||||||||||||||
|
Release stranded tax effects |
6,903 | (6,903 | ) | - | ||||||||||||||||||||
|
Cash dividends |
(115 | ) | (115 | ) | ||||||||||||||||||||
|
Compensation expense |
850 | 850 | ||||||||||||||||||||||
|
Common stock issued, net |
32,210 | 32,210 | ||||||||||||||||||||||
|
Shares acquired, net |
(586 | ) | (328 | ) | (914 | ) | ||||||||||||||||||
|
Balance, September 28, 2018 |
44,044 | 188,661 | (30,760 | ) | (24,005 | ) | 520 | 178,460 | ||||||||||||||||
|
Net income |
4,073 | 6 | 4,079 | |||||||||||||||||||||
|
Translation adjustments |
(1,773 | ) | (13 | ) | (1,786 | ) | ||||||||||||||||||
|
Benefit plan adjustments, net of tax |
478 | 478 | ||||||||||||||||||||||
|
Cash dividends |
- | |||||||||||||||||||||||
|
Compensation expense |
590 | 590 | ||||||||||||||||||||||
|
Shares (acquired) issued, net |
(497 | ) | 520 | 23 | ||||||||||||||||||||
|
Balance, December 28, 2018 |
$ | 44,137 | $ | 192,734 | $ | (32,055 | ) | $ | (23,485 | ) | $ | 513 | $ | 181,844 | ||||||||||
Reconciliations for the changes in accumulated other comprehensive income (loss), net of tax, by component for the quarters ended September 27, and December 27, 2019, and September 28, and December 28, 2018 are as follows:
|
Translation |
Benefit Plan |
Cash Flow |
||||||||||
|
Adjustment |
Adjustment |
Hedges |
||||||||||
|
Balance at June 30, 2019 |
$ | 4,439 | $ | (41,901 | ) | $ | (509 | ) | ||||
|
Translation adjustment during the quarter |
(3,014 | ) | - | - | ||||||||
|
Amounts reclassified from accumulated other comprehensive income |
- | 557 | (143 | ) | ||||||||
|
Net current period other comprehensive (loss) income |
(3,014 | ) | 557 | (143 | ) | |||||||
|
Balance at September 27, 2019 |
1,425 | (41,344 | ) | (652 | ) | |||||||
|
Translation adjustment during the quarter |
1,647 | - | - | |||||||||
|
Amounts reclassified from accumulated other comprehensive income |
- | 548 | 146 | |||||||||
|
Net current period other comprehensive income |
1,647 | 548 | 146 | |||||||||
|
Balance at December 27, 2019 |
$ | 3,072 | $ | (40,796 | ) | $ | (506 | ) | ||||
|
Translation |
Benefit Plan |
|||||||
|
Adjustment |
Adjustment |
|||||||
|
Balance at June 30, 2018 |
$ | 7,085 | $ | (30,877 | ) | |||
|
Translation adjustment during the quarter |
(536 | ) | - | |||||
|
Release stranded tax effects |
- | (6,903 | ) | |||||
|
Amounts reclassified from accumulated other comprehensive income |
- | 471 | ||||||
|
Net current period other comprehensive loss |
(536 | ) | (6,432 | ) | ||||
|
Balance at September 28, 2018 |
6,549 | (37,309 | ) | |||||
|
Translation adjustment during the quarter |
(1,773 | ) | - | |||||
|
Amounts reclassified from accumulated other comprehensive income |
- | 478 | ||||||
|
Net current period other comprehensive (loss) income |
(1,773 | ) | 478 | |||||
|
Balance at December 28, 2018 |
$ | 4,776 | $ | (36,831 | ) | |||
Reconciliation for the changes in benefit plan adjustments, net of tax for the quarter and two quarters ended December 27, 2019 are as follows:
Reconciliation for the changes in benefit plan adjustments, net of tax for the quarter and two quarters ended December 28, 2018 is as follows:
|
(a) |
These accumulated other comprehensive income components are included in the computation of net periodic pension cost (see Note G, "Pension and Other Postretirement Benefit Plans" for further details). |
|
L. |
Restructuring of Operations |
The Company has implemented various restructuring programs in response to unfavorable macroeconomic trends in certain of the Company’s markets since the fourth quarter of fiscal 2015. These programs primarily involved the reduction of workforce in several of the Company’s manufacturing locations, under a combination of voluntary and involuntary programs. In its European operations, the Company also implemented actions to reorganize for productivity.
These actions resulted in restructuring charges of $1,063 and $1,184 in the quarter and two quarters ended December 27, 2019, respectively, and restructuring charges of $434 and $607 for the quarter and two quarters ended December 28, 2018, respectively.
Restructuring activities since June 2015 have resulted in the elimination of 203 full-time employees in the manufacturing segment. Accumulated costs to date under these programs within the manufacturing segment through December 27, 2019 were $11,636.
During the second quarter of fiscal 2020, a marine propulsion development program, for which the Company had provided development and production services, was terminated. The cost of exiting the contract consisted of a noncash write-off of assets and liabilities relating to the program amounting to $2,185, and a cash settlement to satisfy supplier commitments associated with the program amounting to $1,000. The Company has classified the total contract exit cost of $3,185 as a restructuring charge, within the manufacturing segment, in the quarter ended December 27, 2019.
The following is a roll-forward of restructuring activity:
|
Accrued restructuring liability, June 30, 2019 |
$ | - | ||
| Additions related to workforce reduction | 1,184 | |||
|
Additions related to program termination |
3,185 | |||
|
Payments, adjustments and write-offs during the year |
(2,710 | ) | ||
|
Accrued restructuring liability, December 27, 2019 |
$ | 1,659 |
|
M. |
Earnings Per Share |
The Company calculates basic earnings per share based upon the weighted average number of common shares outstanding during the period, while the calculation of diluted earnings per share includes the dilutive effect of potential common shares outstanding during the period. The calculation of diluted earnings per share excludes all potential common shares if their inclusion would have an anti-dilutive effect. Certain restricted stock award recipients have a non-forfeitable right to receive dividends declared by the Company, and are therefore included in computing earnings per share pursuant to the two-class method.
The components of basic and diluted earnings per share were as follows:
The following potential common shares were excluded from diluted EPS for the quarter and two quarters ended December 27, 2019 as the Company reported a net loss: 214.0 related to the Company’s unvested PSAs, 231.4 related to the Company’s unvested RS awards, and 38.0 related to the Company’s unvested RSUs.
The following potential common shares were excluded from diluted EPS for the quarter and two quarters ended December 28, 2018 because they were anti-dilutive: 134.4 related to the Company’s unvested PSAs, 185.3 related to the Company’s unvested RS awards, 33.6 and 16.6, respectively, related to the Company’s unvested RSUs, and 3.4 related to outstanding stock options.
|
N. |
Lease Liabilities |
The Company leases certain office and warehouse space, as well as production and office equipment.
The Company determines if an arrangement is a lease at contract inception. The lease term begins upon lease commencement, which is when the Company takes possession of the asset, and may include options to extend or terminate the lease when it is reasonably certain that such options will be exercised. As its lease agreements typically do not provide an implicit rate, the Company primarily uses an incremental borrowing rate based upon the information available at lease commencement. In determining the incremental borrowing rate, the Company considers its current borrowing rate, the term of the lease, and the economic environments where the lease activity is concentrated.
The components of lease expense were as follows:
Other information related to leases was as follows:
Approximate future minimum rental commitments under non-cancellable leases as of December 27, 2019 were as follows:
The following table provides a summary of leases recorded on the condensed consolidated balance sheet.
|
O. |
Derivative Financial Instruments |
From time to time, the Company enters into derivative instruments to manage volatility arising from risks relating to interest rates and foreign exchange. The Company does not purchase, hold or sell derivative financial instruments for trading purposes. The Company’s practice is to terminate derivative transactions if the underlying asset or liability matures or is sold or terminated, or if it determines the underlying forecasted transaction is no longer probable of occurring.
The Company reports all derivative instruments on its consolidated balance sheets at fair value and establishes criteria for designation and effectiveness of transactions entered into for hedging purposes.
Interest Rate Swap Contracts
The Company has one outstanding interest rate swap contract as of December 27, 2019, which it entered into on April 22, 2019. It has been designated as a cash flow hedge in accordance with ASC 815, Derivatives and Hedging.
The primary purpose of the Company’s cash flow hedging activities is to manage the potential changes in value associated with interest payments on the Company’s LIBOR-based indebtedness. The Company records gains and losses on interest rate swap contracts qualifying as cash flow hedges in accumulated other comprehensive loss to the extent that these hedges are effective and until the Company recognizes the underlying transactions in net earnings, at which time these gains and losses are recognized in interest expense on its consolidated statements of operations and comprehensive (loss) income. Cash flows from derivative financial instruments are classified as cash flows from financing activities on the consolidated statements of cash flows. These contracts generally have original maturities of greater than 12 months.
Net unrealized after-tax losses related to cash flow hedging activities that were included in accumulated other comprehensive loss were $506 and $509 as of December 27, 2019 and June 30, 2019, respectively. The unrealized amounts in accumulated other comprehensive loss will fluctuate based on changes in the fair value of open contracts during each reporting period.
The Company estimates that $144 of net unrealized losses related to cash flow hedging activities included in accumulated other comprehensive loss will be reclassified into earnings within the next twelve months.
Foreign Currency Forward Contracts
The Company has no outstanding foreign currency forward exchange contracts at December 27, 2019 or at June 30, 2019.
Fair Value of Derivative Instruments
The fair value of derivative instruments included in the condensed consolidated balance sheets were as follows:
|
Balance Sheet Location |
|||||||||
|
Derivative designated as hedge: |
|||||||||
|
Interest rate swap |
Accrued liabilities |
$ | 144 | $ | 122 | ||||
|
Interest rate swap |
Other long-term liabilities |
518 | 544 | ||||||
The impact of the Company’s derivative instruments on the consolidated statement of operations and comprehensive (loss) income for the quarter and two quarters ended December 27, 2019 and December 28, 2018, respectively, was as follows:
Item 2. Management Discussion and Analysis
In the financial review that follows, we discuss our results of operations, financial condition and certain other information. This discussion should be read in conjunction with our consolidated financial statements as of December 27, 2019, and related notes, as reported in Item 1 of this Quarterly Report.
Some of the statements in this Quarterly Report on Form 10-Q are “forward-looking statements” as defined in the Private Securities Litigation Reform Act of 1995. Forward-looking statements include the Company’s description of plans and objectives for future operations and assumptions behind those plans. The words “anticipates,” “believes,” “intends,” “estimates,” and “expects,” or similar anticipatory expressions, usually identify forward-looking statements. In addition, goals established by the Company should not be viewed as guarantees or promises of future performance. There can be no assurance the Company will be successful in achieving its goals.
In addition to the assumptions and information referred to specifically in the forward-looking statements, other factors, including but not limited to those factors discussed under Item 1A, Risk Factors, of the Company’s Annual Report filed on Form 10-K for June 30, 2019 could cause actual results to be materially different from what is expressed or implied in any forward-looking statement.
Results of Operations
Comparison of the Second Quarter of Fiscal 2020 with the Second Quarter of Fiscal 2019
Net sales for the second quarter decreased 23.8%, or $18.6 million, to $59.5 million from $78.1 million in the same period a year ago. The Company experienced a continued softening in demand in North America for the Company’s oil and gas related products, with a decline of approximately $16.5 million compared to the prior year. Global demand for industrial products softened in the quarter, decreasing $2.5 million (27.3%) from the prior year. The Company also experienced a slight softening in demand in the global commercial marine market, with sales of marine and propulsion products declining $1.2 million (3.1%) from the prior fiscal year second quarter. The North American region suffered the most significant sales decline ($17.0 million or 42.3%) due to weakness in the North American energy market. The North American region declined from 51% of total sales in the prior year second quarter to 39% in the fiscal 2020 second quarter. The European region saw solid growth, with an increase of $1.8 million (9.1%), raising the percentage of sales to the European region to 37% compared to 26% in the prior fiscal year second quarter. Although sales into Asia Pacific increased as a percentage of total sales (from 16% to 18%), net sales into this region actually decreased by $1.5 million (12.1%) on slight softening in the commercial marine markets and late deliveries of oil and gas transmissions from the factory. Currency translation had an unfavorable impact on fiscal 2020 sales compared to the prior year totaling $1.1 million primarily due to the weakening of the euro and Australian dollar against the U.S. dollar.
Sales at our manufacturing segment decreased 19.5%, or $13.8 million, versus the same period last year. The U.S. manufacturing operation experienced a 27.5%, or $11.9 million, decrease in sales versus the second fiscal quarter of 2019. The primary driver for this decrease was weaker demand for the Company’s oil and gas related products, along with softening demand for industrial and global marine products. The Company’s operation in the Netherlands was down slightly (0.9%) compared to the same quarter prior year, primarily due to timing of project shipments. This entity continues to see strong and growing global demand for its propulsion products. The Company’s Belgian operation saw a significant decrease compared to the same quarter prior year (20.4% or $1.4 million), largely due to a change in transaction flow. The service and aftermarket volume formerly included in the Belgian operation is now being transacted through the Company’s new European distribution operation included in the distribution segment, as noted below. Excluding the impact of this change, the Belgian operation was up approximately 11.5% compared to the second quarter prior year, on stronger North American demand for its marine transmissions. The Company’s Italian manufacturing operations, experiencing some strength in the European marine markets offset by weaker industrial markets, were essentially flat with the prior year. The Company’s Swiss manufacturing operation, which supplies customized propellers for the global mega yacht and patrol boat markets, experienced a decline ($0.4 million or 25.8%), primarily due to softer demand in the global pleasure craft and patrol boat markets.
Our distribution segment experienced an 18.7%, or $5.1 million, decrease in sales compared to the second quarter of fiscal 2019. The Company’s Asian distribution operations in Singapore, China and Japan were down slightly ($0.4 million or 4.5%) compared with the prior year on relatively stable demand for the Company’s commercial marine, oil and gas, and patrol craft products in the region. The decline is a function of delayed deliveries from the manufacturing plants. The Company’s distribution operation in the Northwest of the United States and Southwest of Canada experienced a decrease in sales of $5.2 million due to the sale of the Mill Log entity in the third quarter of fiscal 2019. The sales for this region are now passing through a third party distributor. The Company’s distribution operation in Australia, which provides boat accessories, propulsion and marine transmission systems for the pleasure craft market, was down $1.2 million (33.7%). This reduction is primarily due to shipping delays as this entity changed locations during the quarter. The Company’s European distribution operation saw an increase of $2.3 million as this is a new entity created during fiscal 2019 to distribute the Company’s products in the European market.
Gross profit as a percentage of sales for the second quarter of fiscal 2020 decreased to 26.4%, compared to 33.4% for the same period last year. This reduction is primarily due to the combination of a continuation of an unfavorable product mix profile ($5.1 million) and the impact of reduced volume ($6.2 million). With a similar product mix, the gross profit percent for the quarter is improved from the previous two quarters on the strength of targeted cost reduction actions on key products and overall focus on cost containment and production efficiencies.
For the fiscal 2020 second quarter, marketing, engineering and administrative (“ME&A”) expenses, as a percentage of sales, were 27.6%, compared to 24.2% for the fiscal 2019 second quarter. ME&A expenses decreased $2.5 million versus the same period last fiscal year. The decrease in ME&A spending for the quarter was comprised of decreases to bonus expense ($0.7 million), stock based compensation ($0.2 million), professional fees ($0.7 million), the impact of the Mill Log divestiture ($0.7 million) and general cost containment actions ($0.8 million). These decreases were partially offset by an increase to amortization expense due to a change in assumptions ($0.6 million).
The Company incurred $4.2 million in restructuring charges during the second quarter of fiscal 2020. Included in this amount is $3.2 million related the termination of a marine propulsion program, for which the Company had provided development and production services. The $3.2 million includes a $2.2 million non-cash write-off of assets and liabilities associated with the program and $1.0 million of cash payments to satisfy supplier commitments related to the program. The remaining $1.0 million of restructuring charges relates to cost reduction actions at the Company’s domestic and European operations. The Company continues to focus on actively managing its cost structure and reducing fixed costs in light of the ongoing market challenges.
Interest expense remained consistent at $0.4 million in the second quarter of fiscal 2020, with a similar borrowing level and average interest rate compared to the fiscal 2019 second quarter.
The favorable movement in other expense (income) compared to the prior year is primarily due to the impact of currency movements related to the euro and Australian dollar.
The fiscal 2020 second quarter tax rate of 19.2% reflects a year-to-date adjustment driven by a decline in domestic earnings projections for the fiscal year and related impact of the global intangible low-taxed income ("GILTI") provisions of the Tax Cut and Jobs Act. GILTI provisions require the inclusion of foreign income but prohibit certain foreign deductions and credits when in a domestic loss position.
Comparison of the First Two Quarters of Fiscal 2020 with the First Two Quarters of Fiscal 2019
Net sales for the first two quarters decreased 22.2%, or $34.0 million, to $118.8 million from $152.8 million in the first two quarters of fiscal 2019. The Company experienced a softening in demand in North America for the Company’s oil and gas related products, with a decline of approximately $31.3 million compared to the prior year. Global demand for industrial products moderated in the first half, decreasing $2.1 million (12.8%) from the prior year. The Company also experienced a slight softening in demand in the global commercial marine market, with sales of marine and propulsion products declining $2.4 million (3.3%) from the prior fiscal year first half. The North American region suffered the most significant sales decline ($34.7 million or 43.5%) due to weakness in the North American energy market. The North American region declined from 52% of total sales in the prior fiscal year first half to 38% in the fiscal 2020 first half. The European region saw solid growth, with an increase of $5.9 million (15.6%), raising the percentage of sales to the European region to 37% compared to 25% in the prior fiscal year first half. Although sales into Asia Pacific increased as a percentage of total sales (from 17% to 20%), net sales into this region actually decreased by $2.4 million (9.2%) on slight softening in the commercial marine markets and later deliveries of oil and gas transmissions from the factory. Currency translation had an unfavorable impact on fiscal 2020 first half sales compared to the prior year totaling $2.6 million primarily due to the weakening of the euro and Australian dollar against the U.S. dollar.
Sales at our manufacturing segment decreased 20.1%, or $28.2 million, versus the same period last year. The U.S. manufacturing operation experienced a 25.4%, or $21.5 million, decrease in sales versus the first fiscal half of 2019. The primary driver for this decrease was weaker demand for the Company’s oil and gas related products, along with softening demand in the industrial and global marine markets. The Company’s operation in the Netherlands was down slightly (1.8%) compared to the prior year first half, primarily due to timing of project shipments. This entity continues to see strong and growing global demand for its propulsion products. The Company’s Belgian operation saw a significant decrease compared to the prior year (32.6% or $4.8 million), largely due to a change in transaction flow. The service and aftermarket volume formerly included in the Belgian operation is now being transacted through the Company’s new European distribution operation included in the distribution segment, as noted below. Excluding the impact of this change, the Belgian operation was actually up slightly (3.5%) on stronger North American demand for its marine transmission. The Company’s Italian manufacturing operations, experiencing some strength in the European marine markets offset by weaker industrial markets, were essentially flat with the prior year. The Company’s Swiss manufacturing operation, which supplies customized propellers for the global mega yacht and patrol boat markets, experienced a significant decline ($1.4 million or 41.3%), primarily due to softening demand in the global pleasure craft and patrol boat markets.
Our distribution segment experienced an 11.1%, or $5.6 million, decrease in sales compared to the first half of fiscal 2019. The Company’s Asian distribution operations in Singapore, China and Japan were down $0.4 million (2.3%) compared to the prior year on relatively stable demand for the Company’s commercial marine, oil and gas, and patrol craft products in the region. The decrease in sales was primarily a function of delayed deliveries from the manufacturing operations. The Company’s distribution operation in the Northwest of the United States and Southwest of Canada experienced a decrease in sales of $9.9 million due to the sale of the Mill Log entity in the third quarter of fiscal 2019. The sales for this region are now passing through a third party distributor. The Company’s distribution operation in Australia, which provides boat accessories, propulsion and marine transmission systems for the pleasure craft market, was down $1.2 million (17.7%) compared to the fiscal 2019 first half. This reduction is primarily due to shipping delays as this entity changed locations during the quarter. The Company’s European distribution operation saw an increase of $5.0 million as this is a new entity created during fiscal 2019 to distribute the Company’s products in the European market.
Gross profit as a percentage of sales for the first half of fiscal 2020 decreased to 21.3%, compared to 32.8% for the same period last year. This reduction is due to the combination of a $3.9 million expense recorded in the first fiscal quarter for an isolated product performance issue related to one of the Company’s oil and gas transmission models, the continuation of an unfavorable product mix profile ($10.6 million) and the impact of reduced volume ($11.1 million). Excluding the isolated $3.9 million product performance charge in the first fiscal quarter, the gross profit percent would have been 24.6%. The Company has seen an improving trend in gross profit performance over the past few quarters with positive results from targeted cost reduction actions.
For the fiscal 2020 first fiscal half, marketing, engineering and administrative (“ME&A”) expenses, as a percentage of sales, were 27.6%, compared to 24.8% for the fiscal 2019 first half. ME&A expenses decreased $5.1 million versus the same period last fiscal year. The decrease in ME&A spending for the period was comprised of decreases to bonus expense ($1.3 million), stock based compensation ($0.2 million), professional fees ($1.1 million), the impact of the Mill Log divestiture ($1.5 million), marketing activities related to the prior year centennial celebration ($0.6 million) and general cost containment actions ($1.4 million). These decreases were partially offset by an increase to amortization expense due to a change in assumptions ($1.0 million).
The Company incurred $4.4 million in restructuring charges during the first two quarters of fiscal 2020. Included in this amount is $3.2 million related to the termination of a marine propulsion program, for which the Company had provided development and production services. The $3.2 million includes a $2.2 million non-cash write-off of assets and liabilities associated with the program and $1.0 million of cash payments to satisfy supplier commitments related to the program. The remaining $1.2 million of restructuring charges relates to cost reduction actions at the Company’s domestic and European operations. The Company continues to focus on actively managing its cost structure and reducing fixed costs in light of the ongoing market challenges.
Interest expense declined by $0.3 million to $0.8 million in the first two quarters of fiscal 2020 compared to $1.1 million in the comparable period of fiscal 2019. The reduction is the result of a lower average balance and a slightly lower average interest rate.
The favorable movement in other expense (income) compared to the prior year is primarily due to the impact of currency movements related to the euro and Australian dollar.
The fiscal 2020 first half tax rate of 4.3% was significantly lower than the fiscal 2019 first half rate of 25.1%. The current year rate was significantly impacted by the GILTI provisions of the Tax Cut and Jobs Act. GILTI provisions require the inclusion of foreign income but prohibit certain foreign deductions and credits when in a domestic loss position. The GILTI inclusion decreased the current year rate by 18.55%. Income generated in foreign jurisdictions and other tax preference items also impacted the current year rate.
Financial Condition, Liquidity and Capital Resources
Comparison between December 27, 2019 and June 30, 2019
As of December 27, 2019, the Company had net working capital of $119.9 million, which represents a decrease of $7.4 million, or 5.8%, from the net working capital of $127.3 million as of June 30, 2019.
Cash increased $2.5 million to $14.8 million as of December 27, 2019, versus $12.4 million as of June 30, 2019. The majority of the cash as of December 27, 2019 is at the Company’s overseas operations in Europe ($7.8 million) and Asia-Pacific ($6.8 million).
Trade receivables of $33.3 million were down $10.7 million, or approximately 24.3%, when compared to last fiscal year-end. The impact of foreign currency translation was to decrease accounts receivable by $0.3 million versus June 30, 2019. The net remaining decrease was driven by volume and the timing of sales within the quarter. As a percent of sales, trade receivables finished at 55.9% in the second quarter of fiscal 2020 compared to 62.2% for the first quarter of fiscal 2020 and 60.8% for the fourth quarter of fiscal 2019.
Inventories increased by $8.8 million, or 7.0%, versus June 30, 2019 to $134.7 million. The impact of foreign currency translation was to decrease inventories by $0.8 million versus June 30, 2019. The write-off related to the termination of a marine propulsion program created a $2.3 million increase to inventory as the revenue recognition over time accounting method resulted in a $2.3 million cumulative credit balance in inventory at the time the program was cancelled. A temporary increase was seen at the Company’s Asian distribution operations ($3.6 million), driven primarily by the receipt of oil and gas units for delivery to customers in the third fiscal quarter. The North American distribution operation also saw a temporary increase of $0.8 million, primarily due to the timing of delivery of products to be delivered to North American customers. The Veth Propulsion operation saw an increase of $0.8 million, partially due to the receipt of engines at the end of the second quarter of fiscal 2020. On a consolidated basis, as of December 27, 2019, the Company’s backlog of orders to be shipped over the next six months approximates $94.7 million, compared to $99.6 million at June 30, 2019 and $137.8 million at December 28, 2018. As a percentage of six-month backlog, inventory has increased from 126% at June 30, 2019 to 142% at December 27, 2019.
Net property, plant and equipment was up $2.5 million from June 30,2019. The increase is the result of significant capital spending ($6.8 million) being partially offset by depreciation ($3.7 million) and an unfavorable exchange impact ($0.4 million). The capital spending in the quarter reflects a continuation of the Company’s strategy to modernize machine tools and improve manufacturing efficiency through improved technology. In total, the Company expects to invest between $11 and $13 million in capital assets in fiscal 2020. The Company continues to review its capital plans based on overall market conditions and availability of capital, and may make changes to its capital plans accordingly. The Company’s capital program is focused on modernizing key core manufacturing, assembly and testing processes and improving efficiencies at its facilities around the world.
Accounts payable as of December 27, 2019 of $26.3 million was down $5.2 million, or 16.6%, from June 30, 2019. The impact of foreign currency translation was to decrease accounts payable by $0.2 million versus June 30, 2019. The remaining decrease is primarily related to the reduced purchasing activities in light of reduced volume in the quarter and a focus on inventory reduction.
Total borrowings and long-term debt as of December 27, 2019 increased by $10.0 million to $52.5 million versus $42.5 million at June 30, 2019. The primary reason for the increase is the operating loss and capital spending in the first two quarters, partially offset by a favorable working capital movement. During the first two quarters, the Company incurred negative free cash flow (defined as operating cash flow less acquisitions of fixed assets) of $6.7 million and ended the quarter with total debt, net of cash, of $37.7 million, compared to $30.1 million at June 30, 2019, for a net change of $7.6 million.
Total equity decreased $13.3 million, or 7.3%, to $169.5 million as of December 27, 2019. The net loss during the first two quarters decreased equity by $12.8 million and net unfavorable foreign currency translation of $1.3 million was reported. The net change in common stock and treasury stock resulting from the accounting for stock based compensation reduced equity by $0.2 million. The net remaining increase in equity of $1.0 million primarily represents the amortization of net actuarial loss and prior service cost on the Company’s defined benefit pension plans.
On June 29, 2018, the Company entered into the Credit Agreement with BMO Harris Bank N.A. (“BMO”) that provided for the assignment and assumption of the previously existing loans between the Company and Bank of Montreal (the “2016 Credit Agreement”) and subsequent amendments into a term loan (the “Term Loan”) and revolving credit loans (each a “Revolving Loan” and, collectively, the “Revolving Loans,” and, together with the Term Loan, the “Loans”). Pursuant to the Credit Agreement, BMO agreed to make the Term Loan to the Company in a principal amount not to exceed $35.0 million and the Company may, from time to time prior to the maturity date, enter into Revolving Loans in amounts not to exceed, in the aggregate, $50.0 million (the “Revolving Credit Commitment”). The Credit Agreement also allows the Company to obtain Letters of Credit from BMO, which if drawn upon by the beneficiary thereof and paid by BMO, would become Revolving Loans. Under the Credit Agreement, the Company may not pay cash dividends on its common stock in excess of $3.0 million in any fiscal year.
The Credit Agreement provides that the Company may elect that the Term Loan and each Revolving Loan to be either “LIBOR Loans” or “Eurodollar Loans”, as defined, and bear interest at the applicable rate per the Credit Agreement. This rate as of December 27, 2019 was 3.45%. In addition to the monthly interest payments and any mandatory principal payments required by the Credit Agreement (if applicable), the Company is responsible for paying a quarterly Revolving Credit Commitment Fee and quarterly Letter of Credit Fees. The Company may prepay the Loans (or any one of the Loans), subject to certain limitations.
On March 4, 2019, the Company entered into a second amendment (the “Second Amendment”) to the June 29, 2018 Credit Agreement. The Second Amendment reduces the principal amount of the term loan commitment under the Credit Agreement from $35.0 million to $20.0 million. In connection with the Second Amendment, the Company issued an amended and restated term note in the amount of $20.0 million to the Bank, which amended the original $35.0 million note provided under the Credit Agreement.
Prior to entering into the Second Amendment, the outstanding principal amount of the term loan (the “Term Loan”) under the Credit Agreement was $10.8 million. On the date of the Second Amendment, the Bank made an additional advance on the Term Loan to the Company in the amount of $9.2 million. The Second Amendment also extended the maturity date of the Term Loan from January 2, 2020 to March 4, 2026, and added a requirement that the Company make principal installments of $0.5 million per quarter starting with the quarter ending June 30, 2019.
The Second Amendment also reduced the applicable margin for purposes of determining the interest rate applicable to the Term Loan. Previously, the applicable margin was 3.00%, which was added to the Monthly Reset LIBOR Rate or the Adjusted LIBOR, as applicable. Under the Second Amendment, the applicable margin was between 1.375% and 2.375%, depending on the Company’s total funded debt to EBITDA ratio.
The Second Amendment also adjusted certain financial covenants made by the Company under the Credit Agreement. Specifically, the Company covenanted (i) not to allow its total funded debt to EBITDA ratio to be greater than 3.00 to 1.00 (the cap had previously been 3.50 to 1.00 for quarters ending on or before September 30, 2019 and 3.25 to 1.00 for quarters ending on or about December 31, 2019 through September 30, 2020), and (ii) that its tangible net worth will not be less than $100.0 million plus 50% of net income for each fiscal year ending on and after June 30, 2019 for which net income is a positive number (the $100.0 million figure had previously been $70.0 million).
As of December 27, 2019, the Company’s total funded debt to EBITDA ratio was greater than 3.00 to 1.00.
On January 28, 2020, the Company entered into a third amendment (the “Third Amendment”) to the June 29, 2018 Credit Agreement. The Third Amendment restates the financial covenant provisions related to the maximum allowable ratio of total funded debt to EBITDA from 3.00 to 1.00 to 4.00 to 1.00 for the quarter ended December 27, 2019, 5.00 to 1.00 for the quarter ending March 27, 2020, 4.00 to 1.00 for the quarter ending June 30, 2020, 3.50 to 1.00 for the quarter ending September 25, 2020 and 3.00 to 1.00 for quarters ending on or after December 25, 2020. For purposes of determining EBITDA, the Third Amendment adds back extraordinary expenses (not to exceed $3.9 million) related to the previously reported isolated product performance issue on one of the Company’s oil and gas transmission models at certain installations. Under the Third Amendment, the applicable margin for revolving loans, letters of credit, and term loans is between 1.25% and 3.375%, depending on the Company’s total funded debt to EBITDA ratio.
Borrowings under the Credit Agreement are secured by substantially all of the Company’s personal property, including accounts receivable, inventory, machinery and equipment, and intellectual property. The Company has also pledged 100% of its equity interests in certain domestic subsidiaries and 65% of its equity interests in certain foreign subsidiaries. The Company also entered into a Collateral Assignment of Rights under Purchase Agreement for its acquisition of Veth Propulsion. To effect these security interests, the Company entered into various amendment and assignment agreements that consent to the assignment of certain agreements previously entered into between the Company and the Bank of Montreal in connection with the 2016 Credit Agreement. The Company also amended and assigned to BMO a Negative Pledge Agreement that it has previously entered into with Bank of Montreal, pursuant to which it agreed not to sell, lease or otherwise encumber real estate that it owns except as permitted by the Credit Agreement and the Negative Pledge Agreement.
Upon the occurrence of an Event of Default, BMO may take the following actions upon written notice to the Company: (1) terminate its remaining obligations under the Credit Agreement; (2) declare all amounts outstanding under the Credit Agreement to be immediately due and payable; and (3) demand the Company to immediately Cash Collateralize L/C Obligations in an amount equal to 105% of the aggregate L/C Obligations or a greater amount if BMO determines a greater amount is necessary. If such Event of Default is due to the Company’s bankruptcy, BMO may take the three actions listed above without notice to the Company.
There are no material off-balance-sheet arrangements, and the Company continues to have sufficient liquidity for near-term needs. The Company had approximately $8.5 million of available borrowings under the Credit Agreement as of December 27, 2019. The Company expects to continue to generate enough cash from operations, as well as its credit facilities, to meet its operating and investing needs. As of December 27, 2019, the Company also had cash of $14.8 million, primarily at its overseas operations. These funds, with some restrictions and tax implications, are available for repatriation as deemed necessary by the Company. In fiscal 2020, the Company expects to contribute $1.9 million to its defined benefit pension plans, the minimum contribution required.
Net working capital decreased $7.4 million, or 5.8%, during the first half of fiscal 2020, and the current ratio decreased slightly to 2.6 at December 27, 2019 from 2.7 at June 30, 2019. The decrease in net working capital was primarily driven by a volume related reduction in trade accounts receivable and an increase in accrued expenses, partially offset by reduced accounts payable resulting from lower purchasing activity on reduced sales volume.
The Company expects capital expenditures to be approximately $11 million - $13 million in fiscal 2020. These anticipated expenditures reflect the Company’s plans to invest in modern equipment and facilities, its global sourcing program and new products.
Management believes that available cash, the BMO credit facility, and potential access to debt markets will be adequate to fund the Company’s capital requirements for the foreseeable future.
The Company has approximately $1.2 million of unrecognized tax benefits, including related interest and penalties, as of December 27, 2019, which, if recognized, would favorably impact the effective tax rate. See Note H of the Condensed Consolidated Financial Statements for disclosures surrounding uncertain income tax positions.
The Company maintains defined benefit pension plans for some of its operations in the United States and Europe. The Company has established the Benefits Committee (a non-Board management committee) to oversee the operations and administration of the defined benefit plans. The Company estimates that fiscal 2020 contributions to all defined benefit plans will total $1.9 million. As of December 27, 2019, $0.8 million in contributions have been made.
New Accounting Releases
See Note A, Basis of Presentation, to the condensed consolidated financial statements for a discussion of recently issued accounting standards.
Critical Accounting Policies
The preparation of this Quarterly Report requires management’s judgment to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses during the reporting period. There can be no assurance that actual results will not differ from those estimates.
The Company’s critical accounting policies are described in Item 7 of the Company’s Annual Report filed on Form 10-K for June 30, 2019. There have been no significant changes to those accounting policies subsequent to June 30, 2019.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
The Company is electing not to provide this disclosure due to its status as a Smaller Reporting Company.
Item 4. Controls and Procedures
(a) Evaluation of Disclosure Controls and Procedures
The Company’s management, with the participation of the Company’s Chief Executive Officer and Chief Financial Officer, have evaluated the effectiveness of the Company’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (“the Exchange Act”) as of the end of the period covered by this report. Based on such evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of such period, the Company’s disclosure controls and procedures are effective in recording, processing, summarizing, and reporting, on a timely basis, information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act, and that such information is accumulated and communicated to the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely discussions regarding required disclosure.
(b) Changes in Internal Control Over Financial Reporting
Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). During the most recent fiscal quarter, no changes were made which have materially affected, or which are reasonably likely to materially affect, our internal control over financial reporting.
Part II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is a defendant in several product liability or related claims which are considered either adequately covered by appropriate liability insurance or involving amounts not deemed material to the business or financial condition of the Company.
Item 1A. Risk Factors
There have been no material changes to the risk factors previously disclosed in response to Item 1A to Part I of our 2019 Annual Report on Form 10-K.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
|
(a) |
Unregistered Sales of Equity Securities |
There were no securities of the Company sold by the Company during the quarter ended December 27, 2019, which were not registered under the Securities Act of 1933, in reliance upon an exemption from registration provided by Section 4 (2) of the Act.
|
(b) |
Use of Proceeds |
Not applicable.
|
(c) |
Issuer Purchases of Equity Securities |
Issuer Purchases of Equity Securities
|
Period |
(a) Total Number of Shares Purchased |
(b) Average Price Paid per Share |
(c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
(d) Maximum Number of Shares that May Yet Be Purchased Under the Plans or Programs |
|
|
|
|
|
|
|
September 28 – October 25, 2019 |
0 |
NA |
0 |
315,000 |
|
|
||||
|
October 26 – November 29, 2019 |
0 |
NA |
0 |
315,000 |
|
|
||||
|
November 30 – December 27, 2019 |
0 |
NA |
0 |
315,000 |
|
|
||||
|
Total |
0 |
NA |
0 |
315,000 |
Under authorizations granted by the Board of Directors on February 1, 2008 and July 27, 2012, the Company was authorized to purchase 500,000 shares of its common stock. This authorization has no expiration, and as of December 27, 2019, 315,000 may yet be purchased under these authorizations. The Company did not purchase any shares of its common stock pursuant to these authorizations during the quarter ended December 27, 2019.
The discussion of limitations upon the payment of dividends as a result of the Credit Agreement between the Company and BMO Harris Bank, N.A., as discussed in Part I, Item 2, "Management's Discussion and Analysis " under the heading "Financial Condition, Liquidity and Capital Resources," is incorporated herein by reference.
Item 3. Defaults Upon Senior Securities
None.
Item 5. Other Information
None.
Item 6. Exhibits
|
31a |
Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
31b |
Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. |
|
32a |
Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
32b |
Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
|
101.INS |
XBRL Instance Document |
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101.SCH |
XBRL Schema |
|
101.CAL |
XBRL Calculation Linkbase |
|
101.DEF |
XBRL Definition Linkbase |
|
101.LAB |
XBRL Label Linkbase |
|
101.PRE |
XBRL Presentation Linkbase |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
TWIN DISC, INCORPORATED |
|
|
(Registrant) |
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|
Date: February 4, 2020 |
/s/ DEBBIE A. LANGE |
|
Corporate Controller |
|
|
Chief Accounting Officer |
| 27 |
| This ‘10-Q’ Filing | Date | Other Filings | ||
|---|---|---|---|---|
 | ||||
| 3/4/26 | ||||
| 6/30/22 | ||||
| 6/30/21 | ||||
| 12/25/20 | ||||
| 12/15/20 | ||||
| 9/30/20 | ||||
| 9/25/20 | ||||
| 6/30/20 | 10-K | |||
| 3/27/20 | 10-Q | |||
| Filed on: | 2/4/20 | |||
| 1/30/20 | 8-K | |||
| 1/28/20 | 8-K | |||
| 1/2/20 | ||||
| 12/31/19 | SD | |||
| For Period end: | 12/27/19 | |||
| 12/15/19 | ||||
| 11/29/19 | ||||
| 10/25/19 | ||||
| 9/30/19 | ||||
| 9/27/19 | 10-Q | |||
| 7/1/19 | ||||
| 6/30/19 | 10-K | |||
| 4/22/19 | 8-K | |||
| 3/4/19 | 8-K | |||
| 12/28/18 | 10-Q | |||
| 9/28/18 | 10-Q | |||
| 7/2/18 | 3, 8-K, 8-K/A, SC 13D/A | |||
| 6/30/18 | 10-K, 10-K/A | |||
| 6/29/18 | 8-K | |||
| 7/27/12 | ||||
| 2/1/08 | ||||
| 10/1/03 | ||||
| List all Filings | ||||