Twin Disc, Incorporated (TWIN) Earnings Call Transcript & Summary

Hello, and welcome to the Annual Meeting of Shareholders of Twin Disc, Incorporated. Please note that today's meeting is being recorded. [Operator Instructions] It is now my pleasure to turn today's meeting over to David Rayburn, Chairman of the Board of Twin Disc, Incorporated. Mr. Rayburn, the floor is yours.

Thank you. I would like to convene the 2020 Annual Shareholders Meeting. I am Dave Rayburn, the Chairman of the Board. Also speaking today will be John Batten, Chief Executive Officer; Jeff Knutson, Vice President, Finance, Chief Financial Officer, Treasurer and Secretary. This is certainly an extraordinary time and thus our first virtual meeting. I refer you to the minutes of last year's Annual Meeting that are available on the website. The agenda for today's meeting is to elect 2 directors to serve until the Annual Meeting 2023; to consider an advisory vote to approve the compensation of the corporate's named executive officers; to ratify the appointment of RSM, an independent registered public accounting firm, as our independent auditor for the fiscal year ending in June 30, 2021; to approve the Twin Disc 2020 stock incentive plan for nonemployee directors; and approve the amendment to the corporate Articles of Incorporation regarding the minimum number of directors; and transact any other business that may be properly come before the meeting. We will also hear from our CEO about the state of the business. I would like to ask the Secretary, Mr. Knutson, to confirm the notice of the annual meeting and the report to shareholders proxy to management.

Thanks, Dave. The notice of the annual meeting of shareholders and the proxy statement were distributed on or about September 10, 2020, to shareholders of record as of August 20, 2020. Proxy appointments of the directors as solicited on the proxy appointment card have been received for a majority of the 13,552,100 shares outstanding.

Thanks, Jeff. I declare a quorum present for the meeting ready to proceed with the business at hand. Today's meeting will be conducted in accordance with the bylaws of the corporation. Also on the call today are your directors. I refer to your proxy in regards to their backgrounds. Up for election, Michael Doar and Michael Smiley. Also on the call, Janet Giesselman; Dave Johnson; John Batten; Harold Stratton; and myself, Dave Rayburn; and finally, Dave Zimmer. This is David's last meeting. He has served on the Board since 1995 and was Chairman of the Audit Committee for 15 years. Dave will certainly be missed as he's made a great contribution to your corporation. David is a man of integrity and great fellowship. Your officers are also on the call. I refer you to the annual report for their backgrounds. But I would also like to commend -- or comment on Denise Wilcox, who is retiring. Denise has been with the company since 1998 and Vice President of Human Resources since 2004. She has provided great leadership and guidance and has been very involved in the community, representing the corporation. At this time, I would like to solicit a motion to approve the minutes of the 2019 Annual Meeting.

I'll move that.

Is there a second?

Second.

Now we'll proceed to the business of the meeting. If you have not voted or would like to change your vote, you may do so now via the link labeled Cast Your Vote. We have 5 motions. The election of directors, Mike Doar and Mike Smiley. I would call for a motion.

I'll move it.

Second?

Second.

Advisory vote on compensation. Call for a motion.

I'll move for that.

Second?

Second.

Appointment of the independent accounting director of -- firm, RSM.

I'll make a motion.

Second.

To approve the 2020 directors' stock incentive plan.

I'll make a motion.

Second.

Approve the amendment of the Articles of Incorporation.

I will move that.

Second.

Thank you. We are ready to proceed with the voting. I will ask Jeff to announce the results of the proxy -- by proxy.

Based on the number of shares proxy to the directors, a majority of the shares have been voted electing the 2 directors nominated until 2023, advising approval of the named executive officers' compensation, ratifying the appointment of RSM US LLP as independent auditors for fiscal year 2021, approving the 2020 stock incentive plan for nonemployee directors and approving the amendment to the Articles of Incorporation regarding the minimum number of directors.

Thank you. As you've heard, all items on the agenda have been approved by the shareholders. Thank you for your continued support. That concludes the business portion of the annual meeting, and I'd like to call for a motion for adjournment.

So moved.

Second.

Now John Batten will make some comments about your company.

Thank you, Dave. And just a reminder, everyone on the call, that we are having our fiscal '21 first quarter conference call tomorrow morning. So really won't talk about the first quarter, just focus on fiscal '20 and what it was like. I'm sure you've listened in on the fourth quarter call, the third quarter call. Fiscal '20 was an extraordinary year, not just for Twin Disc but for our markets. When COVID-19 struck in March as a pandemic, it really was the third part of the storm that Twin Disc had been facing: one, the trade wars with -- in particular with China had limited some of our sales opportunities there, but also the Russians-OPEC oil war had severely hampered our North American sales into oil and gas. So about in January, our management team was already in battle mode, in restructuring mode, cost containment mode. But I cannot say enough about our team, how we responded to COVID, kept our employees safe, kept our suppliers safe, our customers safe. Our IT team, led by Robin Schilz, did a fantastic job making sure that everyone who could work from home was able to do that and do it efficiently and effective. Our finance team, led by Jeff Knutson and Debbie Lange, did not miss a beat and, coupled with RSM, getting months closed, quarters audited from that third quarter fiscal '20 on through to today, done a fantastic job in a virtual environment, keeping everything up to speed and on time. Again, our HR department, led by Denise Wilcox and the team here in Racine, keeping our plant open throughout the pandemic, keeping people safe. Globally, we had operations that shut down for part of the year, I mean, part of -- a couple of weeks here, 3 weeks there in Belgium, Switzerland and Italy. Our operation in the Netherlands, Veth Propulsion, was also able to stay open as were our operations in Singapore and Australia. But around the world, Twin Disc employees acted very diligently, safely. We had minimal COVID cases within our 4 walls in our operations. Our worksite transmission was very low, very isolated, just a couple of cases and turned out one of those, they were related. But I cannot say enough about how our team responded and certainly a very uncertain time on how to operate. There were weeks and months there in the third and fourth quarter where you didn't know what suppliers were going to be able to deliver or what customers were going to be open to receive products. And our operations and sales team kept us in the know on what was coming in, what we could assemble and who was able to receive product on the backside. And lastly, the engineering team working by and large remotely, keeping projects on time for the future and answering -- being on-site to answer questions from the operations people. So all in all, cannot say enough about our team and how we handled kind of the third head of the 3-headed dragon that we were facing. While the results of fiscal '20 certainly suffered from all 3 of those, the last being COVID, we did keep focus on some of our strategic objectives. One, we continued on in the Lufkin facility, we are in. We are starting pilot production soon and moving inventory from here down to Lufkin. Getting Veth Propulsion out to the rest of the world in hybrid and electrification efforts has continued, and it spilled over. Every day, we see more and more opportunities and applications for us in the electrification and hybrid space. So our engineering and sales people kept us moving forward. So when we look back, fiscal '20 is -- will have been a very challenging year in market conditions both for Twin Disc and everyone else participating in our markets. But it will be a transitional year as we see more and more of our day-to-day application and engineering work towards the future, which is more and more hybrid and more and more electrification. Any comments you want that I'll save for tomorrow morning based on the first quarter results, but it's -- we have a very bright future ahead of us. And hopefully, fiscal '21 will be the first step away from the bottom that we saw in fiscal '20. So with that, Dave Rayburn is still on the line and Jeff Knutson. So we open it up to any questions. Okay.

There's no questions.

Okay. No questions. So thank you.

So Chris, we'll turn the call back over to you.

Thank you, sir. Ladies and gentlemen, this concludes the meeting. You may now disconnect, and have a pleasant day.