Twin Disc reported fiscal second-quarter sales of about $44.8 million, compared with nearly $72.7 million in the quarter last year.
The company posted a loss for the quarter that ended Dec. 25 of $2.3 million, or 21 cents a diluted share, compared with a profit of $3.75 million, or 33 cents a share, in the quarter last year.
Sales for the first half of the company’s fiscal year totaled $82.2 million, compared with $137.5 million a year earlier.
The company said the “significant decline” in sales was the result of reduced demand for the company's oil- and gas-related products in North America and Asia, driven by a global decline in oil and natural gas prices, along with softening demand in Asia for the company's commercial marine products.
Demand from customers in Europe also remained weak, but overall demand in North America remains relatively stable for the company's commercial marine and non-oil and gas industrial products.
The company said currency has had an unfavorable impact on fiscal 2016 sales, compared with the prior year, totaling $2.86 million and $6.82 million for the second quarter and first half, respectively, because of a strengthening of the U.S. dollar against the euro and Asian currencies.
Gross profit for the second quarter was 25.9 percent, compared with 30.4 percent in the quarter last year.
“Despite this difficult cycle we remain dedicated to our markets and will continue to invest in our leading product portfolio and service organization,” Twin Disc president and CEO John Batten said in a statement.“We are investing in research and development programs that enhance our product portfolio and expand our market opportunities and will launch several new industrial and marine products during the second half of the year. In addition, we recently announced that we signed a distribution agreement with Veth Propulsion to sell its wide range of workboat and shipping products in the Asia marine market. While we cannot control our end markets, we are taking decisive and strategic actions to improve the company's long-term competitiveness."
The company previously announced restructuring actions that are expected to generate $4.3 million in annualized savings through reductions in the base salaries of its corporate officers, the elimination of 15 salaried positions, reductions in base salaries and wages of salaried and hourly employees at the company's headquarters and domestic manufacturing facilities, temporary layoffs at its Racine, Wis., operation and headcount reductions at certain foreign subsidiaries.
The company sold the assets and distribution rights of its distribution entity covering the southeast United States for about $4.1 million, resulting in a net operating gain of $445,000 after a second-quarter post-closing adjustment of $56,000.
"We are committed to maintaining a strong balance sheet,” said Jeffrey S. Knutson, the company’s vice president-finance, chief financial officer, treasurer and secretary. “At Dec. 25, 2015, the company had cash of $20,631,000, compared to $22,936,000 at June 30, 2015, while total debt at Dec. 25, 2015, was $17,359,000, compared to $13,802,000 at June 30, 2015.
“We continue to take actions to be more efficient in our capital management and reduce the amount of capital required to manage our business. As part of this initiative, during fiscal 2015 and 2016 we made the strategic decision to sell selected non-core North American distribution entities, which eliminated five locations and generated approximately $5,000,000 of capital for reinvestment. In addition, we are making progress to reduce inventory levels, which have declined 19.3 percent from the year ago period and 8.8 percent year-to-date.
"Conditions continue to be challenging across many of the company's end markets, and we expect the oil and gas, and pleasure craft marine markets to remain depressed throughout the year,” Knutson added. “We have adjusted our business to meet these expectations, and the third quarter will fully reflect the changes we have made to our cost structure.”