1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 OR 15(d) of The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 19, 2005
--------------------------------------------------------------------------
Twin Disc, Incorporated
--------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Wisconsin 1-7635 39-0667110
--------------------------------------------------------------------------
(State or other jurisdiction (Commission file (IRS Employer
of incorporation) number) Identification No.)
1328 Racine Street, Racine, Wisconsin 53403
--------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (262) 638-4000
--------------------------------------------------------------------------
--------------------------------------------------------------------------
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of
the following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 24014d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
--------------------------------------------------------------------------
Item 4.02 Non-Reliance on Previously Issued Financial Statements
Historically, the Company did not eliminate intercompany profit in inventory
transferred or sold within the entities of the consolidated company; however,
to the extent that the intercompany profit increased, the Company would record
a quarterly charge to cost of sales. Given this historical method of
accounting, the Company believed that its earnings were never materially
overstated.
On July 19, 2005, the Company and its Audit Committee reevaluated the Company's
accounting for intercompany profit in inventory and concluded that the Company
should eliminate the intercompany profit within inventory at the end of each
period. Consequently, the Company has decided to restate its financial
statements for the prior three fiscal years and quarters as the impact of this
adjustment could be considered material. For this reason only, the Company
advises that its previously issued annual and interim quarterly financial
statements for each of the years ended June 30, 2004, 2003 and 2002 and the
quarterly financial statements for each of the years ended September 30, 2004,
December 31, 2004 and March 31, 2005 should no longer be relied on to evaluate
the Company without consideration of the restatements detailed in this Form
8-K.
The Company and its Audit Committee discussed this matter with the Company's
independent registered public accounting firm, PricewaterhouseCoopers LLP.
The following table shows the impact of the restatement on the elimination of
intercompany profit in inventory:
2
As As
Reported Restated Change
----------- ----------- ----------
Balance Sheet:
June 30, 2003
Inventories $ 47,247 $ 43,289 $ (3,958)
Deferred income taxes 20,164 21,708 1,544
Retained Earnings $ 83,191 $ 80,777 $ (2,414)
June 30, 2004
Inventories $ 52,079 $ 48,777 $ (3,302)
Deferred income taxes 15,668 16,955 1,287
Retained earnings $ 86,443 $ 84,428 $ (2,015)
Statement of Operations:
June 30, 2002
Cost of goods sold $ 139,146 $ 138,788 $ (358)
Income taxes 2,950 3,090 140
Net earnings (loss) $ 2,058 $ 2,276 $ 218
Basic earnings per share $ 0.73 $ 0.81 $ 0.08
June 30, 2003
Cost of goods sold $ 144,575 $ 144,618 $ 43
Income taxes (283) (300) (17)
Net earnings (loss) $ (2,368) $ (2,394) $ (26)
Basic earnings per share $ (0.84) $ (0.85) $ (0.01)
June 30, 2004
Cost of goods sold $ 138,459 $ 137,804 $ (655)
Income taxes 4,709 4,964 255
Net earnings (loss) $ 5,243 $ 5,643 $ 400
Basic earnings per share $ 1.86 $ 2.00 $ 0.14
*In thousands except where per share
The following table shows the impact of the restatement on the affected
components of the consolidated statements of operations for the quarters ended
in fiscal 2005 and 2004:
September 30, 2004
Cost of goods sold $ 33,607 $ 33,730 $ 123
Income taxes 914 866 (48)
Net earnings (loss) $ 1,152 $ 1,077 $ (75)
Basic earnings per share $ 0.41 $ 0.38 $(0.03)
December 31, 2004
Cost of goods sold $ 40,693 $ 40,793 $ 100 $ 74,300 $ 74,523 $ 223
Income taxes 1,084 1,045 (39) 1,998 1,911 (87)
Net earnings (loss) $ 1,174 $ 1,113 $ (61) $ 2,326 $ 2,190 $(136)
Basic earnings per share $ 0.41 $ 0.39 $(0.02) $ 0.82 $ 0.77 $(0.05)
March 31, 2005
Cost of goods sold $ 42,352 $ 41,761 $ (591) $116,652 $116,284 $(368)
Income taxes 1,158 1,388 230 3,156 3,299 143
Net earnings (loss) $ 1,218 $ 1,579 $ 361 $ 3,544 $ 3,769 $ 225
Basic earnings per share $ 0.42 $ 0.55 $ 0.13 $ 1.24 $ 1.32 $0.08
*In thousands except where per share
3
Fiscal 2004
Quarter Year to date
------- ------------
As As As As
Reported Restated Change Reported Restated Change
-------- -------- ------ -------- -------- ------
September 30, 2003
Cost of goods sold $ 29,070 $ 28,425 $(645)
Income taxes 281 533 252
Net earnings (loss) $ 171 $ 564 $ 393
Basic earnings per share $ 0.06 $ 0.20 $ .14
December 31, 2003
Cost of goods sold $ 31,650 $ 31,926 $ 276 $ 60,720 $ 60,351 $ (369)
Income taxes 624 516 (108) 905 1,049 144
Net earnings (loss) $ 508 $ 340 $(168) $ 679 $ 904 $ 225
Basic earnings per share $ 0.18 $ 0.12 (0.06) $ 0.24 $ 0.32 $ .08
March 31, 2004
Cost of goods sold $ 35,689 $ 35,532 $(157) $ 96,409 $ 95,883 $ (526)
Income taxes 1,393 1,454 61 2,298 2,503 205
Net earnings (loss) $ 1,776 $ 1,872 $ 96 $ 2,455 $ 2,776 $ 321
Basic earnings per share $ 0.63 $ 0.66 $0.03 $ .87 $ .98 $ 0.11
June 30, 2004
Cost of goods sold $ 42,050 $ 41,921 $(129) $138,459 $137,804 $ (655)
Income taxes 2,411 2,461 50 4,709 4,964 255
Net earnings (loss) $ 2,788 $ 2,867 $ 79 $ 5,243 $ 5,643 $ 400
Basic earnings per share $ 0.99 $ 1.02 $0.03 $ 1.86 $ 2.00 $ 0.14
*In thousands except where per share
The Company will restate its financial statements for the three fiscal years
ended June 30, 2004 and the previously reported quarterly periods during the
years ended June 30, 2005 and 2004, which will be reflected in the Company's
amended filings of its Annual Report on Form 10-K for the year ended June 30,
2004 and quarterly reports on Form 10Q for the periods ending September 30,
2004, December 31, 2004 and March 31, 2005.
These amended filings will be made at the same time or before the filing of the
Company's Annual Report on Form 10-K for the year ended June 30, 2005.
In view of this restatement, we determined that, as of June 30, 2004, September
30, 2004, December 31, 2004 and March 31, 2005, a material weakness existed in
our internal control over financial reporting with respect to our accounting
for intercompany profit in inventory. The Company has now improved its
procedures in calculating and recording this intercompany profit elimination
and related reserve. These corrective actions have been taken and the Company's
management believes the identified deficiency in our disclosure controls and
procedures have been remediated.
-------------------------------------------------------------------------------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
July 19, 2005 Twin Disc, Inc.
/s/ Fred H. Timm
-------------------------
Chief Accounting Officer