Twin Disc, Inc., Announces Fiscal 2008 Second-Quarter Financial Results

-- Quarterly Sales Were A Second Quarter Record

-- Second Best Second-Quarter Earnings in Company's History

-- Six-Month Backlog Up 7.9 Percent Over Last Year
RACINE, Wis.--(Business Wire)--Twin Disc, Inc. (NASDAQ: TWIN), today reported financial results
for the fiscal 2008 second quarter.

Sales for the quarter ended December 28, 2007 improved 10.3
percent to $81,894,000 from $74,239,000 in the same period a year ago.
Year-to-date, sales increased 11.1 percent to $155,507,000 from
$140,013,000 in the fiscal 2007 first half. For the fiscal 2008 second
quarter, favorable foreign currency translation represented $5,137,000
of the $7,655,000 increase in sales. For the fiscal 2008 first half,
favorable foreign currency translation represented $7,494,000 of the
$15,494,000 increase in sales. The remainder of the increase for both
the fiscal 2008 second quarter and first half was mainly the result of
strong sales of marine and propulsion products to the commercial
marine and mega yacht markets, as well as continued demand for land
based transmission products for the Airport Rescue and Fire Fighting
(ARFF) and military markets.

Gross profit, as a percentage of fiscal 2008 second-quarter sales,
decreased 2.0 percentage points to 30.9 percent from 32.9 percent in
the fiscal 2007 second quarter. Year-to-date, gross profit, as a
percentage of sales, decreased modestly, 0.3 percentage points to 31.6
percent from 31.9 percent for the fiscal 2007 first half.
Profitability for the fiscal 2008 second quarter was negatively
impacted by reduced sales of higher margin products, higher sales of
lower margin products and higher material costs, partially offset by
higher pricing, expanded outsourcing and lower pension expense. The
fiscal 2007 second quarter and first six months included the impact of
an unfavorable purchase accounting adjustment to inventory related to
the BCS acquisition in the amount of $489,000 and $1,223,000 before
tax, respectively. These adjustments were non-cash and no further
adjustments were made.

For the 2008 second quarter, marketing, engineering and
administrative (ME&A) expenses, as a percentage of sales, were 21.2
percent, compared to 19.6 percent in the fiscal 2007 second quarter.
The higher ME&A expenses were due to an approximate $1,000,000
increase in stock-based compensation primarily due to the increase in
the Company's stock price as of the end of the second fiscal quarter,
the impact of foreign currency translation from overseas operations
and expenditures related to a new global ERP system.

Year-to-date, ME&A expenses, as a percentage of sales, were 20.6
percent, compared to 20.1 percent in the fiscal 2007 first half.
Year-to-date, the impact of foreign currency translation on foreign
operations increased ME&A by roughly $1,100,000. In addition, the
increase in ME&A expenses related to the global ERP implementation
approximated $1,000,000, compared to the fiscal 2007 first half.

Net earnings for the fiscal 2008 second quarter declined to
$4,209,000, or $0.37 per diluted share, compared with $5,670,000, or
$0.48 per diluted share, for the fiscal 2007 second quarter. (All
earnings per share figures have been adjusted for the December, 2007
two-for-one stock split). Year-to-date, earnings of $9,314,000 were
relatively equal to the same period last year, although earnings per
diluted share improved to $0.81, compared to $0.79 primarily due to
the repurchase of shares in the 2008 fiscal first quarter.

Earnings before interest, taxes, depreciation and amortization
(EBITDA)(a) decreased to $9,568,000 for the fiscal 2008 second quarter
from $11,991,000 for the fiscal 2007 second quarter. For the fiscal
2008 first half, EBITDA increased to $20,409,000, compared to
$20,127,000 for the fiscal 2007 comparable period.

Commenting on the results, Michael E. Batten, Chairman, President
and Chief Executive Officer, said, "Demand for our products across
most of our product lines continues to be historically high; however,
we have begun to experience a shift in our sales mix. Most noticeably,
we have begun to experience a slow down in demand for our oil and gas
transmissions, which has affected profitability. In addition, our
industrial markets continue to experience a cyclical softening.
However, despite a slowdown in these sectors, our commercial and mega
yacht segments of the marine market and our Airport Rescue and Fire
Fighting and military markets continue to grow. We continue to focus
our efforts on expanding into new geographic markets, lowering our
manufacturing costs through productivity improvements and global
outsourcing initiatives in order to offset some of the margin
pressures caused by an unfavorable change in sales mix and higher
materials costs.

"Looking ahead, we continue to expect that fiscal 2008 will be
another good year for Twin Disc. Our backlog of orders to be shipped
over the next six months, which reflects this changing business mix,
was $121,281,000, an increase of 7.9 percent from $112,426,000 in the
same period a year ago and up 9.9 percent from $110,357,000 at fiscal
2007 year end."

Christopher J. Eperjesy, Vice President - Finance, Chief Financial
Officer and Treasurer, stated, "During the quarter, our capital
investments included $4,318,000 for upgrading our manufacturing
processes and the implementation of a global ERP system. We expect
capital expenditures to be between $15,000,000 and $17,000,000 in
fiscal 2008. These expenditures reflect the Company's plans to
continue investing in modern equipment and facilities, our global ERP
system, and new products.

"At December 28, 2007, total debt was $55,546,000, compared to
$43,920,000 at June 30, 2007 and $55,156,000 at the end of the 2008
first quarter. The increase from the prior fiscal year end can be
primarily attributed to the stock repurchases made in fiscal 2008's
first quarter. Our total debt to total capitalization now stands at
32.0 percent compared to 27.6 percent at June 30, 2007. We continue to
be comfortable with our capital structure and have the financial
flexibility to continue to look at ways to further expand our
businesses, including acquisitions. Working capital at December 28,
2007 increased 9.0 percent to $101,721,000, compared to $93,322,000 at
June 30, 2007."

Twin Disc will be hosting a conference call today (January 22,
2008) to discuss these results and to answer questions at 2:00 p.m.
EST. To participate in the conference call, please dial 800-762-9441
five to 10 minutes before the call is scheduled to begin. A replay
will be available from 5:00 p.m. EST January 22, 2008 until midnight
on January 29, 2008. The number to hear the teleconference replay is
800-406-7325. The access code for the replay is 3829987.

The conference call will also be broadcast live over the Internet.
To listen to the call via the Internet, access Twin Disc's website at
http://www.twindisc.com/companyinvestor.aspx and follow the
instructions at the web cast link. The archived web cast will be
available shortly after the call on the Company's website.

About Twin Disc, Inc.

Twin Disc, Inc. designs, manufactures and sells marine and
heavy-duty off-highway power transmission equipment. Products offered
include: marine transmissions, surface drives, propellers and boat
management systems, as well as power-shift transmissions, hydraulic
torque converters, power take-offs, industrial clutches and control
systems. The Company sells its products to customers primarily in the
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.

Forward-Looking Statements

This press release may contain statements that are forward looking
as defined by the Securities and Exchange Commission in its rules,
regulations and releases. The Company intends that such
forward-looking statements be subject to the safe harbors created
thereby. All forward-looking statements are based on current
expectations regarding important risk factors including those
identified in the Company's most recent periodic report and other
filings with the Securities and Exchange Commission. Accordingly,
actual results may differ materially from those expressed in the
forward-looking statements, and the making of such statements should
not be regarded as a representation by the Company or any other person
that the results expressed therein will be achieved.

(a)Non-GAAP Financial Disclosures (EBITDA)

EBITDA represents net earnings before interest expense, income
taxes, depreciation and amortization. EBITDA is not a calculation
based upon generally accepted accounting principles (GAAP). The
amounts included in the EBITDA calculation, however, are derived from
amounts included in the Consolidated Statements of Operations and
Consolidated Statements of Cash Flows data. EBITDA should not be
considered as an alternative to net earnings or operating profit as an
indicator of the Company's operating performance, or as an alternative
to operating cash flows as a measure of liquidity. Twin Disc has
presented EBITDA because it regularly reviews this as a measure of the
Company's ability to incur and service debt. In addition, EBITDA is
used by many of our investors and lenders, and is presented as a
convenience to them. However, the EBITDA measure presented may not
always be comparable to similarly titled measures reported by other
companies due to differences in the components of the calculation.

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--Financial Results Follow--
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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per-share data; unaudited)

Three Months Ended Six Months Ended
December 28, December 31, December 28, December 31,
2007 2006 2007 2006
------------ ------------ ------------ ------------
Net sales $ 81,894 $ 74,239 $ 155,507 $ 140,013
Cost of goods sold 56,548 49,850 106,311 95,311
------------ ------------ ------------ ------------
Gross profit 25,346 24,389 49,196 44,702
Marketing,
engineering and
administrative
expenses 17,378 14,528 32,072 28,180
Interest expense 825 824 1,568 1,467
Other expense
(income), net 179 (248) 174 (328)
------------ ------------ ------------ ------------
Earnings before
income taxes and
minority interest 6,964 9,285 15,382 15,383
Income taxes 2,729 3,573 5,967 5,950
Minority interest (26) (42) (101) (91)
------------ ------------ ------------ ------------
Net earnings $ 4,209 $ 5,670 $ 9,314 $ 9,342
============ ============ ============ ============

Earnings per share:
Basic $ 0.37 $ 0.49 $ 0.82 $ 0.80
Diluted $ 0.37 $ 0.48 $ 0.81 $ 0.79

Average shares
outstanding:
Basic 11,261 11,618 11,378 11,610
Diluted 11,399 11,812 11,515 11,802
Dividends per share$ 0.0700 $ 0.0475 $ 0.1250 $ 0.0950
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RECONCILIATION OF CONSOLIDATED NET EARNINGS TO EBITDA
(In thousands; unaudited)

Three Months Ended Six Months Ended
December 28, December 31, December 28, December 31,
2007 2006 2007 2006
------------ ------------ ------------ ------------
Net earnings $4,209 $5,670 $9,314 $9,342
Income taxes 2,729 3,573 5,967 5,950
Interest expense 825 824 1,568 1,467
Depreciation and
amortization 1,805 1,924 3,560 3,368
------------ ------------ ------------ ------------
Earnings before
interest, taxes,
depreciation and
amortization $9,568 $11,991 $20,409 $20,127
============ ============ ============ ============
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CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)

December 28, June 30,
2007 2007
------------ --------
ASSETS
Current assets:
Cash and cash equivalents $22,117 $19,508
Trade accounts receivable, net 59,797 63,277
Inventories, net 87,615 76,253
Deferred income taxes 6,360 6,046
Other 10,245 8,156
------------ --------

Total current assets 186,134 173,240

Property, plant and equipment, net 61,858 56,810
Goodwill 17,889 17,171
Deferred income taxes 2,322 3,956
Intangible assets, net 9,567 9,352
Other assets 6,928 6,655
------------ --------

$284,698 $267,184
============ ========

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current maturities on long-term debt $1,933 $1,768
Accounts payable 35,133 28,896
Accrued liabilities 47,347 49,254
------------ --------

Total current liabilities 84,413 79,918

Long-term debt 53,613 42,152
Accrued retirement benefits 23,861 26,392
Other long-term liabilities 3,890 2,640
------------ --------

165,777 151,102

Minority interest 655 645

Shareholders' equity:
Common stock 14,204 13,304
Retained earnings 128,986 121,109
Accumulated other comprehensive income (loss) 3,055 ( 4,493)
------------ --------

146,245 129,920
Less treasury stock, at cost 27,979 14,483
------------ --------

Total shareholders' equity 118,266 115,437
------------ --------

$284,698 $267,184
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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands, unaudited)

Six Months Ended
December 28, December 31,
2007 2006
------------ ------------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $9,314 $9,342
Adjustments to reconcile net earnings to
cash provided (used) by operating
activities:
Depreciation and amortization 3,560 3,368
Other non-cash changes 1,967 869
Net change in working capital (3,813) (19,987)
------------ ------------
11,028 (6,408)
------------ ------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions of fixed assets (6,820) (8,011)
Proceeds from sale of fixed assets 200 101
------------ ------------
(6,620) (7,910)
------------ ------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Bank overdraft - (3,194)
Increase (decrease) in notes payable, net 12 (396)
Proceeds from long-term debt 11,393 16,255
Proceeds from exercise of stock options 100 56
Purchase of treasury stock (13,367) (51)
Dividends paid (1,437) (1,109)
Other 18 (47)
------------ ------------
(3,281) 11,514
------------ ------------

Effect of exchange rate changes on cash 1,482 1,118
------------ ------------

Net change in cash and cash equivalents 2,609 (1,686)

Cash and cash equivalents:
Beginning of period 19,508 16,427
------------ ------------

End of period $22,117 $14,741
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Twin Disc, Inc.
Christopher J. Eperjesy, 262-638-4343

Copyright Business Wire 2008