Twin Disc, Incorporated · NASDAQ:TWIN
Twin Disc — Investor Presentation (November 2017)
39 slides from Twin Disc's investor presentation, November 2017
Slide 1: Twin Disc Incorporated Investor Presentation
Twin Disc, Incorporated Twin Disc Incorporated Investor Presentation November 2017 1
Slide 2: Safe Harbor Statement
Twin Disc, Incorporated Safe Harbor Statement This presentation contains statements that are forward-looking within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on management’s current expectations that are based on assumptions that are su
Slide 3: Twin Disc At A Glance
Twin Disc, Incorporated Twin Disc At A Glance • Founded in 1918 • Headquartered in Racine, WI • ≈ 700 employees • We are a global company – Mfg Operations in the U.S., Belgium, Italy, Switzerland and Japan (JV) – World-wide distributor network – Global: 50% of fiscal 2017 sales to international mark
Slide 4: FY 2017 – Highlights
Twin Disc, Incorporated FY 2017 – Highlights $ millions • Sales up 1% from FY ‘16 Sales $300 $264 – Weak first half, followed by signs of $266 $250 $166 recovery in 2nd half. $200 $168 – NA O&G driving second half improvement. $150 $100 – Continued softening in Asian demand for $50 commercial marine
Slide 5: FY18 - 1st Quarter Highlights
Twin Disc, Incorporated FY18 - 1st Quarter Highlights $ millions Sales $75 $65 • Sales up 26% from Q1 of FY ‘17 $60 – Significant NA O&G volume in Q1 $45 $45 $37 $36 FY18. $30 – Aftermarket demand recovery $15 continued in Q1. $0 FY15 FY16 FY17 FY18 – Stability in industrial and marine markets. $ mi
Slide 6: Product/Market Diversity
Twin Disc, Incorporated Product/Market Diversity Twin Disc benefits from a Land-Based Transmission broad product offering with •Pressure pumping (O&G) diverse market applications. •Airport rescue & fire fighting •Military FY17 Product Mix Other Marine & Propulsion 6.1% •Commercial marine Industrial
Slide 7: Land-Based Transmission Systems
Twin Disc, Incorporated Land-Based Transmission Systems • Pressure Pumping: – Achieved record units sales in fiscal ’12 – Asian market, driven by China, has become a key source of demand and future growth. – Severe decline in global oil prices in ’15 caused significant drop in demand into FY17. – St
Slide 8: Marine & Propulsion Systems
Twin Disc, Incorporated Marine & Propulsion Systems • Commercial Marine: – Fiscal ’15 softening in Asia following record years. – Fiscal ’16 – ’17 further decline in Asia demand, primarily due to China economy – European market remains stable but uncertain – Long term growth in Asia, Latin and North
Slide 9: Industrial Products
Twin Disc, Incorporated Industrial Products • North America Energy Related: – After a strong fiscal 2012, shipments and orders were impacted by oversupply in oil & gas markets. – Slight rebound in early FY15, followed by crash of oil prices. – Demand will grow as North American oil & gas market stre
Slide 10: Geographic Diversity
Twin Disc, Incorporated Geographic Diversity • Sales to Asia Pacific peaked at 29% in Rest of Q1 FY18 World FY14, declining through FY17 with reduced 4.2% O&G and economic downturn in China. Europe 18.7% • European segment relatively stable, following pleasure craft downturn in Asia FY10/FY11. Pacif
Slide 11: Managing Our Cost Structure
Twin Disc, Incorporated Managing Our Cost Structure Actions • Announced $6M annual savings ($3.3M charge) in Q4 FY15. • Announced additional $4M annual savings in Q2 FY16 • Ongoing focus on global cost reduction. • Revamped operational approach in Racine driving productivity gains. Results • Q1 GP%
Slide 12: Managing our Balance Sheet
Twin Disc, Incorporated Managing our Balance Sheet Improving Net Cash Position $20,000 $10,000 $0 ($10,000) ($20,000) ($30,000) ($40,000) ($50,000) •$46 million improvement in net cash since fiscal 2008. •Balance sheet strength for extended downturn or M&A opportunities. 12
Slide 13: Strategic Focus
Twin Disc, Incorporated Strategic Focus • Renewed focus on product development activities to drive Industrial product growth. • Ongoing efforts to acquire new products/technologies to diversify from O&G. • Remain poised with assets and production capability to benefit from O&G recovery and grow mark
Slide 14: What Differentiates Us? Technology
Twin Disc, Incorporated What Differentiates Us? Technology – Oil & Gas • 8500 Series – Marine • 7500 Series • Patented QuickShift® • Express Joystick System® – ARFF • “Pump & Roll” • Dynamic Positioning/DPII – Military • Rolla CFD • “Legacy” Contracts 14
Slide 15: What Differentiates Us?
Twin Disc, Incorporated What Differentiates Us? • 98+ Years of Proven Application Know-How • Niche Market Focus # • Global Distribution and Service Network • Product, Market & Geographic Diversity • Core Manufacturing Capabilities 15
Slide 16: Looking Ahead
Twin Disc, Incorporated Looking Ahead 16
Slide 17: Corporate Six Month Backlog
Twin Disc, Incorporated Corporate Six Month Backlog $ millions $180 $160 Volatility driven $140 by O&G cycles $120 $100 $80 $60 $40 $20 $0 S D M J S D M J S D M J S D M J S D M J S D M J S D M J S FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 17
Slide 18: Fiscal 2018 & Beyond Outlook
Twin Disc, Incorporated Fiscal 2018 & Beyond Outlook • North American Oil & Gas landscape key variable in near term outlook. – Recent order activity drives consistent volume through Q3 FY18. – Sustained aftermarket activity signals broader recovery. – Longer term sustainability of recovery unpredict
Slide 19: Fiscal 2017 & Beyond Outlook
Twin Disc, Incorporated Fiscal 2017 & Beyond Outlook • ARFF, Military and North American industrial markets are expected to remain stable. • Global industrial/transmission markets will remain mixed – European markets showing signs of improvement. – Asia continues to offer significant opportunities f
Slide 20: Appendices
Twin Disc, Incorporated Appendices 20
Slide 21: Corporate Profile – Market Diversity: Pleasure Craft
Twin Disc, Incorporated Appendix I Corporate Profile – Market Diversity Pleasure Craft Market: • Target Markets: High speed planing and displacement yachts from 50’ to 150’, diesel-powered • Products: Transmissions, Arneson Surface Drives, Propellers, Steering/Thruster/Trim Systems, Controls, EJS •
Slide 22: Corporate Profile – Market Diversity: Work Boat
Twin Disc, Incorporated Appendix II Corporate Profile – Market Diversity Work Boat Market: • Target Markets: planing and displacement vessels from 30’ to 250’, diesel-powered • Products: Transmissions, Propellers, MCD’s, Controls • Channels: Engine OEMs & dealers, boat builders & distribution • Cust
Slide 23: Corporate Profile – Market Diversity: Patrol Boat
Twin Disc, Incorporated Appendix III Corporate Profile – Market Diversity Patrol Boat Market: • Target Markets: military, patrol and coast guard vessels from 30’ to 90’, diesel-powered • Products: Transmissions, Arneson Surface Drives, Propellers, Steering/Thruster/Trim Systems, Controls, EJS • Chan
Slide 24: Marine Transmissions, Propulsion & Boat Management Systems
Twin Disc, Incorporated Appendix IV Corporate Profile – Market Diversity Marine Transmissions, Propulsion & Boat Management Systems EJS®/Electronic Controls Anchor Winches Power Steering QuickShift® Transmissions Gangways Bow Thrusters Trim Tabs, Stern Thrusters Arneson Surface Drives, Rolla Propell
Slide 25: Corporate Profile – Market Diversity: Industrial Products
Twin Disc, Incorporated Appendix V Corporate Profile – Market Diversity Industrial Products: • Target Market: Heavy duty industrial disconnect applications • Products: Mechanical & hydraulic clutches, PTOs, reduction gearboxes & pump mount drives, 100 - 2,500 HP • Channels: Distribution & OEMs • Cus
Slide 26: Corporate Profile – Market Diversity: Industrial Transmissions
Twin Disc, Incorporated Appendix V Corporate Profile – Market Diversity Industrial Transmissions: • Target Market: Off-highway and all-terrain specialty vehicles, diesel powered • Products: Powertrain components - 400 to 3,000 HP • Channel: OEM vehicle mfrs. & Distribution • Customers: BAE, Rosenbau
Slide 27: Marine Products - Appendix VI
Twin Disc, Incorporated Marine Products - Appendix VI Marine Transmission Marine Transmission Marine Control Drive MGX 5065 MGX 5600 (MCD) 270hp – 570hp 1300hp – 2100hp 5 Models 215hp – 6035hp 27
Slide 28: Marine Products - Appendix VI
Twin Disc, Incorporated Marine Products - Appendix VI Surface Drive Controls EC 300 Express Joystick 28
Slide 29: Transmissions - Appendix VI
Twin Disc, Incorporated Transmissions - Appendix VI TA90-8501 TA90-7500 TD61-1180 Fracing Transmission Fracing Transmission ARFF Transmission 3000hp (2300kW) 2600hp (1939kW) 705hp (526kW) 29
Slide 30: Industrial Products - Appendix VI
Twin Disc, Incorporated Industrial Products - Appendix VI Power Take-Off Pump Drive HP1200 AM370 Power Take-Off Released 3/16 SP314 Clutch Gear Box Universal Control Drive 30
Slide 31: Land-Based Products
Twin Disc, Incorporated Land-Based Products U.S. domestic crude oil production by source, 1990-2040 (million barrels per day) Pressure Pumping Source: EIA, Annual Energy Outlook 2013 (Early Release Overview). U.S. dry natural gas production by source,1990-2040 (trillion cubic feet) Source: EIA, Annu
Slide 32: Frac Rig Diagram
Twin Disc, Incorporated Appendix VII Frac Rig Diagram Engine Transmission Pump 32
Slide 33: EBITDA
Twin Disc, Incorporated Appendix VIII EBITDA (See Appendices IX & X for note on non-GAAP Financial Disclosures and a reconciliation of net $ millions earnings to EBITDA) % sales $70 20% $60 16.0% 15% 14.0% 10.0% $50 $56.8 7.4% 7.4% 10% $40 $43.5 $30 5% -1.4% $20 -0.1%0% $21.1 $26.5 $19.5 $10 -9.7% -
Slide 34: Non-GAAP Financial Disclosures
Twin Disc, Incorporated Appendix IX Non-GAAP Financial Disclosures Non-GAAP Financial Disclosures Financial information excluding the impact of certain significant items in this presentation are not measures that are defined in U.S. Generally Accepted Accounting Principles (“GAAP”). These items are
Slide 35: Reconciliation of Net Earnings to EBITDA
Twin Disc, Incorporated Appendix X Reconciliation of Net Earnings to EBITDA in $ thousands, except % data TTM 2017 2016 2015 2014 2013 2012 2011 Net Earnings $ (207) $ (6,295) $ (13,104) $ 11,173 $ 3,644 $ 3,882 $ 26,743 $ 17,997 Income Taxes (7,020) (3,414) (12,282) 4,515 4,226 4,986 17,815 13,897
Slide 36: Reconciliation of TTM Data to Reported Quarterly Figures
Twin Disc, Incorporated Appendix XI Reconciliation of TTM Data to Reported Quarterly Figures FY 11** FY 12** FY 13** FY 14** FY15** FY16 Q1 '17* Q2 '17* Q3 '17* Q4 '17* FY17 Q1 '18* TTM Sales $ 310,393 $ 355,870 $ 285,282 $ 263,909 $ 265,790 $ 166,282 $ 35,835 $ 33,672 $ 45,084 $ 53,592 $ 168,183 $
Slide 37: Fiscal Year Condensed Consolidated Statements of Operations
Twin Disc, Incorporated Appendix XII Fiscal Year Condensed Consolidated Statements of Operations ($ thousands, per Form 10-K) 2017 2016 2015 2014 2013 2012 Sales $ 168,182 $ 166,282 $ 265,790 $ 263,909 $ 285,282 $ 355,870 Gross Profit 48,232 40,595 83,032 77,254 80,025 121,632 28.7% 24.4% 31.2% 29.3
Slide 38: 1st Fiscal Quarter: Condensed Consolidated Statements of Operations
Twin Disc, Incorporated Appendix XIII 1st Fiscal Quarter: Condensed Consolidated Statements of Operations ($ thousands, unaudited) 2018 2017 2016 2015 2014 2013 Sales $ 45,064 $ 35,835 $ 37,373 $ 64,824 $ 66,426 $ 68,793 Gross Profit 13,895 9,173 8,190 22,389 20,667 19,416 30.8% 25.6% 21.9% 34.5% 31
Slide 39: Operating Cash Flows – Fiscal Year
Twin Disc, Incorporated Appendix XIV Operating Cash Flows – Fiscal Year $ millions % sales $30 16% 14% $25 12% $20 9.8% 8.5% 10% $15 6.4% 8% $25.7 $24.5 4.5% 6% $10 4.0% $17.1 $13.9 $14.4 4% 1.9% 2.5% $5 2.0% 2% $3.4 $4.4 $3.2 $0 0% FY11 FY12 FY13 FY14 FY15 FY16 FY17 TTM* Cash Flows from Operations