Twin Disc, Incorporated · NASDAQ:TWIN
Twin Disc — Investor Presentation (October 2018)
24 slides from Twin Disc's investor presentation, Oct 16, 2018
Slide 1: Juniper Investor Meeting
Confidential (6 (em fem TWIN DISC. Bee JUNIPER INVESTOR MEETING October 16, 2018
Slide 2: Safe Harbor Statement
SAFE HARBOR STATEMENT This presentation contains statements that are forward-looking within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. These statements are based on management's current expectations that are based on assumptions that are subject to risks and uncer
Slide 3: Twin Disc Overview
Confidential (6 (em Sem TWIN DISC. Bae YEARS TWIN DISC OVERVIEW
Slide 4: Twin Disc Strategic Priorities
TWIN DISC STRATEGIC PRIORITIES = Continued growth in land-based transmission business ™ Increased focus on controls and system integration rather than individual components @ Integration of Veth Propulsion acquisition m= Development of hybrid technologies for diesel applications m@ North American fo
Slide 5: Twin Disc at a Glance
TWIN DISC AT A GLANCE ™ = Foundedin 1918 = Headquartered in Racine, WI — “900 employees (incl. Veth) = Designer and manufacturer of heavy duty power transmission equipment = Aglobal company — Manufacturing operations in the U.S., Belgium, Netherlands, Italy, Switzerland and Japan (JV) — World-wide d
Slide 6: Geographic Diversity
GEOGRAPHIC DIVERSITY 4 Manufacturing location ox = North American oil and gas markets driving increase in FY18 = European segment has been relatively stable in recent years ™ Asia Pacific sales have experienced strong recovery in FY18 © Company owned distribution / service location oe Rest of World
Slide 7: Marine & Propulsion — Work Boat / Commercial Marine
MARINE & PROPULSION — work BOAT / COMMERCIAL MARINE NEleetaEluCcicgm Diesel powered planning & displacement vessels 30’- 250’. Products Bi Azimuth - transmissions % Thrusters - propellers Transmissions - MCD’s - controls Propellers — European market remains stable 3} — Recent softness in China econo
Slide 8: Marine & Propulsion — Pleasure Craft
MARINE & PROPULSION — PLEASURE CRAFT BEVelialirincicge High speed diesel powered planing & displacement yachts 50’- 150”. ‘oducts \oeae ‘ - propellers Transmissions esi Propellers - controls - Ameson surface drives -EJS LES = trim systems < - steering ones 1m Drives Systems ETSES a — Market remains
Slide 9: Marine & Propulsion — Patrol Craft
MARINE & PROPULSION — PATROL CRAFT SEletaeluCcic@s High speed diesel powered planing & displacement yachts 50’- 150”. Products vay - transmissions = propellers Transmissions Propellers steerin - controls : = Ameson surface drives me As - trim systems =S surface Trim Drives ‘Systems Cones Zs oe — Exp
Slide 10: Recent Acquisition: Veth Propulsion Overview
RECENT ACQUISITION: VETH PROPULSION OVERVIEW TRANSACTION OVERVIEW & BUSINESS DESCRIPTION = Acquired Veth Propulsion for €49.7 million; additional consideration of up to €3.3 million payable in Twin Disc common stock if certain earn-out provisions are met m= Financed with existing cash / new debt fac
Slide 11: Veth Propulsion Product Overview
VETH PROPULSION PRODUCT OVERVIEW Azimuth Thrusters Tunnel Thrusters Diesel Engines / Generator Sets Electronics / Other " Rudder propeller with 360° maneuverability Allows for greater flexibility in design of marine engine room Mountable without dry-docking L rive Electric / Diesel-Electric Customiz
Slide 12: Strategic Rationale for Veth Propulsion Acquisition
STRATEGIC RATIONALE FOR VETH PROPULSION ACQUISITION 12 N NANA Complementary product offering with exposure to new technologies Additive engineering talent and product development capabilities Acceleration of hybrid technology strategy End market diversification away from land-based energy markets an
Slide 13: Land Based Transmission Products
LAND BASED TRANSMISSION PRODUCTS sel powered off-highway and all- Target Markets Products TA90-8501 Fracking _TA90-7500 FrackingTD61-1180 ARFF Transmission Transmission Transmission = Pressure Pumping: = Decline in global oil prices in 2015 caused drop in demand into FY17 — Started to ship units to
Slide 14: Industrial Products
INDUSTRIAL PRODUCTS Beles eicicms Heavy duty industrial disconnect applications. Products Mechanical & Power Take-Off hydraulicclutches P34 ‘pe —‘Clutch Reduction eparboxe:: Pump Drive Pump mount drives North American Energy Relate = _ Impacted by fall of oil prices beginningin FY15 = Demand recover
Slide 15: Growth Overview
Confidential (6 (em Sem TWIN DISC. Bae YEARS GROWTH OVERVIEW
Slide 16: FY19 Growth Outlook
FY19 GROWTH OUTLOOK 16 Marine markets are beginning to accelerate — Asian commercial marine markets experienced softening from FY15 through FY17, but experienced significant recovery in FY18 © Longer term, this remains a potential high growth market for the Company's products — North American commer
Slide 17: Backlog Summary
BACKLOG SUMMARY SIX MONTH BACKLOG () (Sinmitons) $120 $100 $80 $60 $40 : | I | ; I I $0 at a2 a3 aa at a2 a3 aa at a2 a3 aa FYIS FYI7 FYig (i) Beck cefned stories schedue or shipment dsng the nxt sxmonths Piri TWIN DISC. 7 Confidential =
Slide 18: Financial Overview
Confidential (6 (em Sem TWIN DISC. Bae YEARS FINANCIAL OVERVIEW
Slide 19: Net Sales Diversity
NET SALES DIVERSITY NET SALES BY CATEGORY (Sin itlons) mMarine = Land-Based Transmission Ml industrial = Other 1 Marine segment includes marine transmissions, controls, surface drives, propellers and boat management systems $240.7 1 Land-Based Transmission products include applications for oilfield
Slide 20: Leverage Profile
LEVERAGE PROFILE $0 TOTAL DEBT (Sinmillions) $80 {Offering proceeds will reduce net leverage, which has increased $60 ' significantly following the Veth Propulsion acquisition, allowing Twin 1 to remain flexible to capitalize on market conditions and be 1 opportunistic with attractive future M&A opp
Slide 21: Historical Financial Performance
HISTORICAL FINANCIAL PERFORMANCE GROSS MARGIN 33.3% 1 FY18 gross margins were favorably 287% pacted by higher sales volume and a 24.4% favorable product mix, primarily related to creased demand from North American fracking customers for transmission and aftermarket products 1 FY17 gross margins were
Slide 22: Appendix
Confidential (6 (em Sem TWIN DISC. Ba YEARS APPENDIX
Slide 23: Reconciliation of Net Income to EBITDA
RECONCILIATION OF NET INCOME TO EBITDA (Sin thousands) FY16 FY17 FY18 Net income ($13,104) ($6,294) $9,528 Income Taxes (12,282) (14) 4773 Interest Expense 426 303 282 Depreciation & Amortization 3,847 7,017 Aca ion (EBITDA) Net sales $166,282 $168,182 $240,733 [Rae peng line 30. Shen Vth Proton 23
Slide 24: Income Statement Summary
INCOME STATEMENT SUMMARY (Sin thousands) FY16 $166,282 Gross Profit 40,595 56 Margin 24.4% MEA Expense 57,113 Restructuring Impairment 8523 Interest Expense 426 Misc. Exp / (Inc) (172) Pretax Earnings ($25,295) Income Taxes (12,282) Minority interest (91) Netincome ($13,104) EBITDA ($16,113) ($9,529