TWIN - Earnings call transcript Q4 2020

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Operator

Good day, and welcome to the Twin Disc Inc Fiscal First Quarter 2021 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Stan Berger. Please go ahead, sir.

Stan Berger

[Indiscernible]. you, Thank discuss the pleased of in Twin we business us Disc, call quarter XXXX On results financial you management taken extremely and to joining for that thank participate company's the are fiscal and first behalf outlook. you of the time our to

in forward-looking hopes, of like to Form the market Before conference that materially news the actual that those projected call, would you the everyone It release, Information beliefs, which the or statements. may certain for those which copy to statements. the intentions, predictions expectations results Annual the issued concerning are to cause such received could morning now, in By the could Report introducing or obtained the I should the XX-K, statements Company important differ that future have before either opened. especially on a actual this by are state remind factors forward-looking SEC. Company's those management, contacting differ copies remember made from in this is Company's management's be during contained from forward-looking materially that was results statements of

Executive will Chief a of received this turn and you President have At Chief John Annette Treasurer copy XXX-XXX-XXXX Mianecki Jeff I at she Vice please If not Knutson, Officer, over Company's Finance, will you. the Officer; the Batten. copy, Batten, to and call Disc's John John. time, Twin call Hosting and the to the send Financial Secretary. call today are

John Batten

XXXX morning our good and to Stan, fiscal you, first call. quarter conference Welcome Thank everyone.

and questions. a and with Jeff happy will begin I'll to I then take usual, summary be short statement your As

the Jeff on I'll of quarter quarter. the some of Before touch the operational highlights over just goes results,

of year-over-year sales release the with exception the all and really in across down were saw you Australia. geographical regions significantly market As

exceed commercial for pleasure in see product We market market and one down marine our either to market continue very to area craft there, and geography one the expectation. strong the one continues in for demand that

During in in at vacation and the plants, the had we and had then U.S. normal shut we down quarter Europe our in operationally extended Europe. the

impact very in all and hampered on fiscal around quarter our quarter, our an extended keeping is in little around flow cash again shut cost bit world control, had of a this first few to infections it very and be should our historically think And our which COVID keeping We've slowest safe. year. and the So job the the a been We've at we've down. is team managers I office all management employees minimum. world the all, transmission. was done focusing by at doing plant outstanding in What

taken why speak. particularly that we and has think square the of sales will up for implementing partners and coming have at conference be paradigm to selling been are currently seeing getting and month With lot environment as well our then the and home, I been as office doing be in we they're done as in back and facility. coming that, call this the inventory of last a customers. at obviously We've in We in travel financials also projects up have probably paradigm, are of new planning, hard We've been in operations from possession inventory Lufkin our also things Lufkin And feet electrification industrial is taking on facility now had production Western in much and I'll IT as look a obviously getting with today, we some here comments been and are looking corporate for team it's ramped very lot full products people Racine on of as we footprint. work office the and been in in a questions. virtual of re-imagining rest to new release, with we projects running. the I It SIOP with had result, the in in come. facility have meetings the XX,XXX finance, been have loading of we're now, Lufkin up over been working lot see clutches we've and work it's ready at that to mentioned starting and amazed then number XXXX. having marine, this differently everyone and three lot plan work to and that, all. three of pilot Christmas lot with November. type coming and of we've a for on we the market, has a And a it out facilities analyzing different process, Eastern we and re-looking of on rolling things also we're I that plant you'll in years holding the we our again it's lot our to We've only And been hydraulic the extremely in and can't County mechanical clutches not in online here into We move later through doing of that is it's even next two, be it's the down seems the functions and Jeff We've this the will line room one inventory a turn been a and our need Jeff these at doing the have and under over the pre-production those moving conference clutch that gone and this our PTOs in Lufkin been January. should of months. start that been hybrid taking the RF are across shutdown work at industrial people the the and also space from inventory

Jeff Knutson

Thanks, region, or prior the John. million the XXXX a global sales pandemic. slightly briefly down Asia year market through products industrial Pacific The or mentioned the of improving year the run marine on sales generally first the of fiscal COVID-XX first quarter. Europe down our decline numbers. sales quarter, from down the for down for $XX.X transmission North effects as sales were XX%, XX.X% based are sales Sales ongoing weak Australian Compared sales were due XX.X% John market. demand. economy prior propulsion first in quarter quarter of into XX.X%, XX.X% XX.X%, while a down America result across to to and prior up were into was decline broad so quarter I'll slightly down in By the $XX.X a were million the year and

Foreign net a exchange million currency $X.X impact positive to was quarter. in sales first the

prior $XXX,XXX bonus million proactive and and corporate prior North reduced on Spending we for on a percent to with XXXX marketing, COVID-XX mix, XXXX XX% the in travel partially from First European of quarter quarter. administrative compared the offset improved XXXX. This productivity expense $X.X quarter. would XX.X% the in actions been result first remember continue from cost the reduction announced if first The reduction The the ongoing reduction that foreign expense, was fiscal margin to charge weighted, quarter efficiencies, opportunities engineering to in was costs in management is structure to cost, the this and have volume payroll our release volume. of was reduced level one-time aggressively in for XXXX to to this impact recorded primarily slightly year The domestic first first the profitable the and positive compared million a decreased decline relate first XX.X, marketing fiscal compensate XX.X% compared included or fiscal you actions at charge. Along our programs due quarter. this cost and benefited restructuring year. and adjust year, fiscal we charge activity. to XX.X less $X.X slight operations. cost for pursue by performance fiscal operation Adjusting at American A decline XX% the decrease percent a quarter of the margin product the again to

first $X.XX a or the for we reported in $X.X fiscal in product the an loss diluted quarter. first the reduced XX.X% last from the $X per of to a first jurisdiction. is the of improvement of is mix, a by prior charge offset quarter of Net the quarter. fiscal operating function was million XXXX of year $X.X The the decline of loss million XX.X% consistent product volume million quarter $X.XX period the year. result in tax was The challenging in rate mix compared performance compared $X.X $X.X prior With by share loss volume prior earnings first share of year million for effective million reduction, and slight was year the quarter. cost negative the million EBITDA quarter quarter XXXX year the $X.X prior first net in improved of loss the for with quarter same a or first to partially The for fiscal decline. per diluted successful negative the

quarter with minimum fiscal we provides covenant XXXX relief leverage remove As that at covenant. and amendment in XXXX favor the XXXX. Vivo to This quarter our we EBITDA of fiscal last finalized our beginning cumulative agreement quarter, a through covenant communicated the liquidity fiscal [ph] covenant ratio minimum fourth through fourth of of the

in Our continued compliance these first of both numbers covenant. quarter resulted with

cash balance delivery operations a $X in since cash a primarily below resulted just partially offset requested domestic of first Turning sheet at the driven the million $X.X million flow due in reduced to year-end. quarter primarily operation negative of the the just out. flow quarter delivered for year. million on capital $XXX,XXX customer Dutch free push inventory increase despite an slightly by spending down the was $X.X for currency focused million operating This our Despite to volume entry was Lufkin $X.X reduction was breakeven, facility

defer anticipate XXXX be spending to invest during for comments. continue and $X a what year. to challenging the enter As environment, expect to non-essential we turn million And $X to final it capital we now market will between John will we million it fiscal continue I'll to all

John Batten

Jeff. Thanks

are we prepare know a make As wave track to struck improvement I'd finally, slightly Orders could is know that at who the work know do just strategic markets we and particularly and they improving customers. to ahead. hard work down working on track we operational continued product as is were flow bottom reduced had second XXXX. the objectives doing leading leading things still door of used. that liquidity to and lot we're employees feel it fiscal predict our a is most the indicators world U.S. electrification. how Jeff towards it to hybridization keeping what delay equipment to that of focus to improving. at indicators most the coming on ,the coming impacted the cash employees had quarters for of and jobs our impact being execute going is in of quarter we first inventory that keep are are things stay our inventory it's What in were do tracking We the the much down. out half up we different U.S. our to And going excellent are here and Having the different is of all the diversification and home, these don't at We and the mentioned, better safe, pointing that, channel the we from around like in that and COVID-XX thank said but can of COVID-XX restructuring situation we to to and most since job, the -- salary where an happen, second are to

remarks prepared open be to and and your will questions. I our Jeff line take concludes the Please Cody now that up. So happy

Operator

with Please [Operator you. question Thank Oppenheimer. go ahead from Instructions] We sir. will Absolutely. Noah Kaye first take our

Noah Kaye

Good to Jeff. with you here. and John morning Good be Thanks.

towards get at you look spending environment rate is I And my you really structure ME&A kind or and a sets level full cost -- basis run kind rate. we back hold on the here? any low really a new normal. I run is recovery way I and line we of revenue Do were of that? forward. this XXXX if at question think mean as managing any can current quantify rate doing that's First year current lower to comparable sort not qualify some you as this you talked to going should revenues ME&A the guess run a the it's for revenue the think ME&A comparable in way the on the about on in to of If the optimization different And question a adjusting you planning planning way up come comparable all of is revenue so if might that do revenue

John Batten

to we say try of answer I'll can that Okay. Noah. maintain spending at volume. level would this one I current

think are but about places forward I maybe cut, going we're there or we've cut be. So, still can can where plus minus we we

I think bit out of discretionary spending a travel that of action sort we'll reduction that get more a mid-quarter our the bare cost of is is all without little minimum a of sort Corporate savings minimum. in a QX. bare actions

other to allow a as structure back, we'll and spending the there spending, wage little so that no travel -- is changed successful for the comes certainly additional comes on volume bit, have to of drive recovery activity back, us we will of As instance, will hand, but a sale there likely facility the this reduce be additional the reduction.

think at levels, I comparable are volume minuses, going but say would have ME&A pluses we'll lower forward. So, I there and

that to a we'll that's fair think statement on. I focus

Noah Kaye

feel is can are is bottom might picking you're anything where up? translate that us. how a if you you're margins head, the including about things you you where could for make that and orders That think little we're in Where And some to mid-quarter. then Thanks. back about the of helpful direction seeing life seeing the helpful. of Okay. at signs here kind John of talk --

John Batten

Sure.

So, the say inventory much of have having distribution I And think in in it's first. again a improving not the general, been would I Europe function orders network as there.

something, to our in North project here more typically their counterparts. global than So, a hold to order America, Everyone needs up. inventory come whereas lot distributors

primarily Mississippi. the seen well more market talking of and given So, in remarkably down we've were down the In marine and the the river pushboats some U.S. Australian of world. some bit the earlier industrial. we and activity -- up Industrial, has the again good been it doing as work up little in a U.S., in to Australia, and where here on is Europe those rest

oil yet What been in we've gas, and orders their really although we've that's hasn’t and we anything strong. American So, project what orders North have discussed been had -- is seen haven't yet calls in distribution needed inventories part a again, the Those scrapped. already and but of are is pretty coming quiet, much distributors very our down horsepower, lot any have that's older been the at level. been rigs

operating. fewer and they're out fleet. rigs So there fewer are in the But

So a in and other lot summer. COVID that sell ARFF slowed was there bit the less again, or then we see the over a bit activity hit slowed right and would down has And then kind expect slowdown military new be seeing to a away it the hangover. little business three down what of would stable as of COVID orders to our There in markets March in months. government what's been for we next more -- some then

say that the slow summer rescue, -- product have good over weeks, the to that in Europe shipment primarily, weeks then airport But we market markets. us to and in the going December coming be the other improving to be a more quarters secondarily, improvement not be the here firefighting lot than and seems So fact up is I the on and bad of January. point that's more so in in overall, would and it's improving in to trend but marine going

Noah Kaye

for we -- margin favorable say there you so -- just to to That's be think extent for or improvement sequentially mix Thank revenue you that on gross is hang… about from would that expansion potential best helpful. should over the sequential condition And potential clear here you.

John Batten

equivalent a push just would gas, something little just if oil say its going upward the a there we out, -- going margin trying significant but I margin as but bit say days board. margin the significant not there's than really some that's at be a first is is be obviously there more have to bit gross be to and structure But it's industrial right is get we so across activity pointed cost I the the would in improved I mix the of be going pressure. about same know, or marine doesn't there to it to to aftermarket -- going to be going because you say, would It’s lower would -- now, little more on more Jeff did quarter.

Noah Kaye

Yeah. to And you're real and too mentioned to you because talk driving A, upswing interest reaching you talk offering? mentioned design one talk work. to more hybrid and seeing I'm Maybe product I about will broad-based – of but could and fairly you just is did in going materially your electric terms electrical sneak evolving way questions, believe my many in that you new B, terms was do to and colleagues towards apologize want hybrid information? in and after a here your mix its think what about in impact of you start more -- portfolio and And

John Batten

everyone's I'm you like definitely a or industrial question try Case to it's and solution a apply not they highway solution that. XX year cranes can XX on one one hybrid sell may a point design to and doing of one or million solution discuss. It that it Yeah, number good our all vehicles. a where going you're in is hybrid automotive Unfortunately, electric customer to of of question. to to talk one -- to answer all really geographies. is is This list there no a markets our of number of is there two short things on give about

it. there So in work lot is of a it's going into --

torque you an will ramp-up then and to be patrol seeing see boat activity could lot equipment, it. a where now building to ARFF we're it's markets what an what mean going huge a and us for vehicle. for converter. and of being in does to their sell customers seeing a what it of it I But off-highway $XX,XXX in it it shift our going market I whether them could is its potential bear hybrid -- huge could could industrial space a it's sell $XXX,XXX couple think and the it able a content a in will sell see application we're again But to be be marine, going we're hybrid construction think you're system. a be tugboat, in first in So be pushboat, maybe It could then

there the a increase -- is up. both. So And vehicles don't us chance companies where number Twin ARFF you sales for like of can crane, to have go Disc or our

our margin the will more going average the that control is are not see technology what's more are we're down system. to components produce Now to because to because to that of entire the in that all looking probably solution. customers us But great go of the and provide

manage output we motor, shaft So going a competencies motor, power work axle. is into you propeller and boat can expect a we being a is throw into able can't work. or one and our core buy can it manage controls of into that or inputs an to that dual or diesel There's electrical it engine to lot electric electric just whether manage into of one

some lot bit more achieve. the lot their going applications to system going what is and before just But upfront there will this little take the to their out with the in a we're do be and other think I there. a Volvo will while years. of going application their other going big if of own you [Indiscernible] are So but a work of see going it players than time, think initial revolution these where a there own to more will equipment. space couple trying of swamped It's applications it's to we for take CAT guys. -- but to system. off-highway Sell do are do a to be of iteration that I there are systems. next

that momentum it's question So there the there's -- and is future. no but the

Noah Kaye

Thank color. you. I appreciate that

Operator

We'll you. with Chan now Josh question Baird. next from take Thank the

Josh Chan

Hey, good morning, John and Jeff.

John Batten

Good Josh. morning. Hey,

Josh Chan

there now ago wondering the I guess, Good I a the of what guess, you oil morning. John, a of gave months I little kind you maybe and gas -- and improvement was better feel if if bit then has market there? become positive, that about more couple driven

John Batten

I'll guess months now $XX few Josh. take futures to -- Yeah. the ago negative a for I sure.

Josh Chan

Right.

John Batten

our available equipment What and is spread. scrap the talking heavily feel entire being come customers down is know to customers’ being used continues some equipment good to horsepower used. and as We

there better much believe -- I an opportunity in that think is for market So truly fiscal I XXXX. some

that travel, general one could just needs business think that we're -- change I of bit travel, second wave it's down. of and the COVID travel a thing is air only little is travel the delay whether just

-- And has But so how for and isn't is more oil that more that there will you come available there down. gas. think I limited much demand the very be horsepower surprised

will think -- oil So gas an much price it's in higher an on but help North American in to I increase the huge have could a next definitely and demand don't year. impact going market increased take whether just demand

I So throughout it calendar XXXX. expect improving start to would

Josh Chan

over putting Europe have I of And government been increasingly Poland, in over you of Europe, guess investment Okay. the on think kind then I restriction. some done to mentioned more

there So Europe over in seeing potential operations? what any disruption for and you your are chance

John Batten

travel. far so So our hearing -- France employees at in home, stay in are restricted Europe from yes, -- been particularly they we've that

are of facilities all remain far to our open. So going

a manufacturing -- I be managing did job are this a great I spring. Belgium operations think through to very we keep team open. Netherlands, do going are there is our shutdown we'll Italy I that If think Switzerland to think we they and facilities everything large by where -- did -- a and can

well I yes to and is think do again. So disruptions through not there from it we the a it managed for suppliers being open can potential I know spring. But manage product. we -- very customers receive we But

time ever this suppliers. everyone better because had and to of with call our job and customers a how practice do do just knows -- all we'll think I we've

So big it as was quarter. don't an but could be potentially would it have it as fourth the I think impact, in

Josh Chan

And guess That and about if the talked then just one trying market. that, think gas am I the then the that's wondering factor? at sort bit aim you less I a I have in how oil little of makes sense. last reliant to I that is make are thinking about Okay. you've on the and still past that this company

John Batten

– oil for we've construction marine grow gas research, with as or outside our hard, our of market, developing we we want it's Josh absolutely away the faster can diversification other business space. oil – the and good to emphasize has relationships we market, hybrid don't why our parts very want the we're doing up and providers is give gas the grow from and player, so been without reason want the whatever market. because to much think industrial partners, We we to much of as system but been that whether pushing and

those tied So a to time oil just markets from continue away a growing lot long focused lot and development of demand for than for our gas markets strong we'll particularly electricity, on other product our and see is focused oil generating be. of and electrification gas a hybrid this to is still a but We gas.

Josh Chan

thanks for the That's call the and for great. time. Thanks

John Batten

Josh. Thanks

Operator

Haimes Barry from next hear We’ll Instructions]. Sage Management. Asset with [Operator

Barry Haimes

I much of couple taking Thanks so had my the questions a cost for questions. on structure.

running much question. and facility? either say expense it to the operating sort same expenses a and then will, a you How up had going is first Lufkin if as quarter extra you you in baseline because the cost to where That’s produce and the products take the the run normally. and first of when up versus if first we the get rate and quarter new So quarter fully the Thanks. first lower

John Batten

the and increase have own to asked up the We I get a You to the of first there to say equipment certainly building didn't in a significant down and question. running. We've real quarter We've people in our get things. some cost would move used capitalized – cost good up. get it

quantification year So product. line of hesitate I until and improved which also industrial production when competitive and shorter margin see on good lead the to up of But time, They're sort benefit running a you new things impact margin more product all -- to that's to it's additional new I in what of manufacturing and not of our should think pricing probably that that. put volume. fiscal we'll have more efficiencies give we see drive definitely or next growth. better a the approach of the that in on available the expect so the to those a product hitting that down there we're

Barry Haimes

of Okay terms great. the sticking of for of the range cost structure estate reduction you Thanks. sort the And cost might real then of terms feel other -- cost from proceeds talk in any sale of And the is on side what in of you about question again expect could in that? Racine, that? then again

John Batten

obviously just on mean the Sure. building. I -- we're the market hitting

pretty a it's now. wide So range open right

million and cost the is, is facility. see expect what range year of to we roughly what could mentioned the something to think is $X been we've But us as next cost we at saving, for facility. the to told I operate $X the $X important this million maybe million you a that right in now

that's contributing any of So chunk business. way meaningful to that costs really the huge a isn't

process. big a internal big So, it’s

Barry Haimes

I cost sorry, What didn't Sorry. number? catch number. the I'm was that

John Batten

year. million a Roughly $X

Barry Haimes

Okay thanks.

John Batten

Yeah.

haven't any the building is was and in or original So which Barry, here about is corporate eight this -- years. plant, done that about our assembly manufacturing headquarters, talking we're that the

town. the lot corporate So, the is sales plants inventory it's across hold just industrial. slow-moving A offices of offices excess that we here, for and inventory

of is down here to XXXX lot shipping what up. having Lufkin Texas. much we opened an eight a miles easier shipping up to to online, instead out of be aftermarket coming So, I-XX going with to headed east in pick building facility in be And come just was I-XX of regularly this to

other So two hold location, of and to happening everything rest imagine going it has was inventory. to or that plant can which office either here at facilities, of which the work-from-home was aftermarket space COVID, in Texas the with the and this easy one the

what So, than pays payment Lufkin. Jeff million, $X what's nice the basically is expense on mentioned, lease for say annual in we here would more

So if you definitely combine margin this the two a on together gross it's bringing eliminating online Lufkin facility, improvement. and

Barry Haimes

and then, Got question. last it,

Just work evaluating number for and from that different sort a actually mentioned how worked asking of since of that's you functions. home,

take just will forward how going to If think you home of percent what Thanks. at employees were that at kind versus we're go do and take work you a how as into what you to curious look the shot will works. percent office non-manufacturing an from

John Batten

to we That in had There into But of XX%. I can is has amazed the here at question. to with the going a the come tried of where That's employees work finance we're here. the a be exceptionally continually the downtown a address. this how where But being if I many pick How we bank It's located, be in. on assumption cheques of just up we're demonstrated with want spike, be we well, can to incredibly I it many slowed office. fit we so country to XX% in this XX% think get we will from thing. They is down people They where commute think hotspot able good two Wisconsin, saw home, XX%. one people of of But back forward to I'm -- potentially that that's going come than get and not start going deal into to with the to not our lot many done customers. are that's -- from see to well, group, going the of from of headquarters, customers. can’t and in are how we in very deposited things why one engineering, to to have to have facilities HR, to the good made don't the of and other decision and to they that it's led model that companies we that the know do our things home that sales and coming to We’ve with corporate for market IT about a the a had XXX% it's planning and going and say other all we almost in that, from time. question. done to we're space. kind to home, would it's want to this have work in work traffic can if going the get want home, in We --

wouldn't are I numbers home, working be our higher surprised people So from from Barry. if

Barry Haimes

much. so Great, Good thanks that. luck. Appreciate

John Batten

you. Thank

Operator

like remarks. there conference the to you. management time, in any it appears I'd are Thank additional back this questions for turn or queue. the additional closing to At over no

John Batten

you, Jeff And Disc, us look email or with quarter. call you. And please XXXX now forward back not, or you the We Thank to I'll second free feel we following our Cody, fiscal myself. you again turn Twin today. hope thank close Cody. everyone to answered and our that to speaking continuing of If questions. interest in joining call your we've on appreciate your all for conference of it

Operator

much. you so does Thank That conference. conclude today's for all participation. your Thank you

may now disconnect. You

Twin Disc (TWIN) 1 Nov 202020 Q4 Earnings call transcript