Twin Disc(TWIN)2025-02-05 13:31Financial Performance - Net sales for the second quarter increased 23.2%, or $16.9 million, to $89.9 million compared to $73.0 million in the same quarter last year[89] - For the first half of fiscal 2025, net sales increased 19.2%, or $26.3 million, to $162.8 million from $136.5 million in the same period a year ago[96] - The European region saw a significant revenue increase of $19.5 million or 41.6% due to the acquisition of Katsa[96] Expenses and Profitability - Gross profit as a percentage of sales for the second quarter declined to 24.1%, down from 28.3% in the same period last year, primarily due to a non-cash inventory write-down of $1.6 million[92] - Marketing, engineering, and administrative expenses increased by $1.7 million (9.9%) over the same period last fiscal year, with ME&A expenses as a percentage of sales at 21.0% compared to 23.6% last year[93] - Interest expense increased by $0.1 million to $0.5 million in the second quarter due to a higher average outstanding revolver balance following the Katsa acquisition[94] - The effective tax rate for the fiscal 2025 second quarter was 58.5%, down from 64.0% in the prior fiscal year[95] Cash Flow and Liquidity - Cash decreased by $4.2 million to $15.9 million as of December 27, 2024, compared to $20.1 million as of June 30, 2024[105] - The Company remains in compliance with its liquidity and other covenants, with available cash and credit expected to meet future capital requirements[118] Assets and Liabilities - Trade receivables decreased by $1.5 million, or 2.8%, compared to last fiscal year-end, with trade receivables as a percentage of sales at 59.7% in the second quarter[106] - Inventories decreased by $2.2 million, or 1.7%, to $128.3 million, with a backlog of orders approximating $124.0 million, down from $133.7 million at June 30, 2024[107] - Accounts payable decreased by $4.0 million, or 12.3%, to $28.6 million, primarily due to inventory reduction during the second quarter[109] - Total borrowings and long-term debt decreased by $0.9 million to $24.9 million, with a net debt of $9.0 million, compared to $5.7 million at June 30, 2024[110] - Total equity decreased by $7.4 million, or 4.8%, to $147.6 million, impacted by a net loss of $1.7 million and dividends paid of $1.1 million[111] Capital Expenditures and Investments - Net property, plant and equipment increased by $0.4 million (0.7%) to $58.5 million, with capital spending of $5.1 million in the first half and an expected total investment of $12 to $15 million in fiscal 2025[108] - The Company is focused on modernizing manufacturing processes and improving efficiencies globally as part of its capital program[108] Debt and Financial Stability - The Credit Agreement allows for a Term Loan of up to $20.0 million and Revolving Loans of up to $45.0 million, with a maturity date extended to April 1, 2027[112] - The Company’s Total Funded Debt to EBITDA ratio may not exceed 3.50 to 1.00, ensuring financial stability[114] - The Company expects to contribute $0.5 million to postretirement benefits and defined benefit pension plans in fiscal 2025[119]