With close attention being paid to which companies receive loans under the Paycheck Protection Program, Twin Disc president and chief executive officer John Batten defended the $8.2 million loan his company got from BMO Harris.
“Do we think that other small businesses should have gotten the PPP funding? Yes. Did we follow the rules laid out in the CARES Act? Yes, and we acted absolutely in good faith. Are we prepared for the audit afterwards? Absolutely. Do we think that this process could be vastly improved? Definitely,” Batten said during the Racine-based company’s earnings call on Friday.
Batten said the company reviewed its application with legal and financial advisors and its board and looked into other available funding options.
The PPP loan is intended to help small businesses cover payrolls, utilities and rent or mortgage payments. It can be forgivable depending on the extent to which the funds are used to cover those items.
In addition to the economic slowdown brought on by the social distancing response to COVID-19, Twin Disc has been hit hard by the decline of the oil and gas market. In the company’s third quarter, which ended in March, revenues dropped 14% to $68.6 million and last year’s $4.6 million profit swung to a $25.2 million loss.
In an early April interview with BizTimes, Batten said the company – which had 873 employees globally as of June 30 – wouldn’t qualify for the PPP, which has a 500-employee threshold. He also felt Twin Disc didn’t qualify for other programs targeted at larger companies because while the majority of its manufacturing is in the U.S., the majority of employees are not.
Ultimately, Batten said additional guidance from the U.S. Small Business Administration suggested the company qualified because only around 400 of its employees are in the U.S.
On the company’s earnings call, Batten said the PPP loan allowed Twin Disc to bring employees back to its Racine operations, although he did not specify how many. The company has experienced performance issues with a line of its transmissions used in fracking operations and the employees will be working on those repairs.
“More of this work is going to be done internally with people that are not necessarily needed for production and in other areas,” Batten said.
“We also recognize that this loan is temporary and that we fully understand that we need to have the cost-structure in place once this loan funding ends in late June,” he added.
Twin Disc has already taken some actions to reduce costs, including laying off some salaried employees, cutting hours for others and reducing salaries. Batten and chief operating office James Feiertag took 20% salary reductions.
Those cuts amount to $4.1 million in annualized savings, the company said.
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