Twin Disc(US:TWIN)2021-10-29 18:57Financial Data and Key Metrics Changes - The first quarter revenue was $47.8 million, a significant increase from the prior year [14] - The gross profit margin improved to 28.2% from 21.0% in the previous year, benefiting from employee retention credits and a favorable sales mix [22] - Net profit for the first quarter was $1.9 million or $0.14 per diluted share, compared to a loss of $4 million or $0.30 per diluted share in the prior year [26] - EBITDA improved to $5.4 million from a loss of $1.6 million in the previous year [26] - Operating income was $3.2 million compared to an operating loss of $3.1 million in the prior year [25] Business Line Data and Key Metrics Changes - Industrial sales increased by 13.1%, while marine and propulsion sales rose by 1.8%, with transmission sales remaining flat [20] - The backlog has increased across all markets, particularly in oil and gas and aftermarket spare parts for North America [64] Market Data and Key Metrics Changes - Sales into North America were up 18%, while sales into Europe increased by 2%, and sales into Asia Pacific decreased by 9% [21] - The company experienced a net positive impact of $0.5 million from foreign currency exchange in the first quarter [21] Company Strategy and Development Direction - The company is focusing on restructuring operations to improve efficiency, including outsourcing machining operations not related to gear manufacturing [11] - Investments will be made in hybrid and electrification areas, as well as in testing and safety equipment [59] - The company aims to preserve liquidity and has deferred nonessential capital spending, expecting to invest $9 million to $11 million in fiscal 2022 [28] Management's Comments on Operating Environment and Future Outlook - Management noted that supply chain issues are stabilizing, with improvements expected in the second half of the year [40] - The company anticipates continued demand improvement across markets for several quarters [29] - Concerns remain regarding labor shortages and supply chain constraints, but management is optimistic about future performance [30] Other Important Information - The company completed a sale leaseback of its Swiss production facility for net proceeds of $9.1 million, resulting in a gain of $2.9 million [25] - Restructuring charges of approximately $1 million are expected in the second fiscal quarter, bringing the total charge to $3.3 million [24] Q&A Session Summary Question: How is the company managing through supply chain pressures? - Management indicated that supply chain issues are labor-related and have stabilized, with dual sourcing strategies being employed [36][38] Question: What is the current inventory balance and its implications? - A significant portion of the inventory increase is work-in-process, with improvements expected as supply chain issues ease [41][42] Question: What is the outlook for the marine business? - Management expressed confidence in growth due to repowering activity and improving demand in the marine sector [53][56] Question: How is the company addressing labor shortages? - The company is facing challenges in attracting labor, particularly in the U.S., and is considering increasing wages and investing in technology to improve efficiency [67][80] Question: What is the competitive position in the oil and gas sector? - Management believes the company is better positioned than in previous years due to maintained inventory levels and readiness to respond to market demands [92][93]