TWIN DISC, INCORPORATED

is an international manufacturer and distributor of heavy-duty off-highway power transmission equipment. Company engineers work hand-in-hand with customers and engine manufacturers to design products with characteristics unique to their specific applications. Twin Disc supplies the commercial, pleasure craft and military segments of the marine market with transmissions, surface and waterjet drives, electronic controls and propellers. Its off-highway transmission products are used in agricultural, all-terrain specialty vehicle and military applications. Twin Disc also sells industrial products such as power take-offs, mechanical, hydraulic, and modulating clutches and control systems to the agricultural, environmental and energy and natural resources markets. The Corporation, which is a multinational organization headquartered in Racine, Wisconsin, currently has a diverse shareholder base with approximately one-third of the outstanding shares held by management, active and retired employees and other long-term investors.

Product Activity

TRANSMISSION PRODUCTS

Continued strength in global demand for gas and oil provided the impetus for increased sales of the market-leading 3,000 horsepower 8500 Series Transmission. New customers and expanding geographic coverage of existing well-servicing customers resulted from market realization that the 8500 Series Transmisson is the single most practical solution for high horsepower well fracturing jobs.

Military businesws maintained its strength with the completion of the first option of the IDF 6x6 vehicle and new prototype programs underway with the Marine LVSR vehicle and IDF HETT Program.

The Aircraft Rescue and Fire Fighting (ARFF) vehical market repeated its mainstay demand for our all-wheel-drive automatic transmission systems. Strong shipments to major players domestically and internationally centered around the unique "pump and roll" technology of Twin Disc transimission systems.

INDUSTRIAL PRODUCTS

Globalization and product integration were the focus for Twin Disc's industrial product line in fiscal year 2005. Hydraulic Power Take-Offs led the way with increased sales into the recycling market. Concurrently, actions were taken to combine the Hydraulic Power Take-Off offerings of out three manufacturing locations into a single cohesive product line. Sale of our Technolodrive subsidiary Pump Drives met expectations with year-over-year growth increases through both the OEM and distribution channels. Overall strong global economic activity propelled total industrial product sales, driven promarily by well servicing, irrigation and recycling markets.

 

MARINE TRANSMISSION

WORK BOAT MARKET

Twin Disc marine transmission sales in North America ranged from moderate to very strong during the past fiscal year. Throughout the first half of the year, the work boat market was soft, due to the decline in new fishing boat construction and a slow period for offshore oilfield related work boats. However, inland river work boat and military applications were steady during this period. The second half of our fiscal year saw a dramatic upturn in construction contracts for offshore oilfield vessels and in river work boat applications. We ended the year with good sales and a much stronger backlog of orders for our work boat marine transmission models. This improved domestic backlog carries us well into the next fiscal year with solid demand. International commercial marine transmission sales reflected strong demand from the energy sector, and a favorable U.S. dollar helped us gain significant market share. But new construction of fishing vessels remains soft, due to high fuel-related operation costs.

PROPULSION PRODUCTS

Twin Disc Arneson Surface Drives posted excellent sales results for the fiscal year. The product line's performance was enhanced by its sustained leading position in advanced propulsion for the luxury yacht and military markets. As many governments around the world continued their focus on coastal protection, spending levels increased for vessels designed to safeguard the coastlines of many different countries. Twin Disc propulsion systems are ideal for the fast craft applications desired by many military agencies, due to the speed, agility and durability of the systems.

Domestic sales continued to show improvement in the high performance boat market. This trend was stimulated by the American Power Boat Association's approval of the Arneson Surface Drive for its offshore racing division.

 

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