Racine-based Twin Disc Inc. has received a nearly $8.2 million loan from BMO Harris Bank under the U.S. Small Business Administration Paycheck Protection Program, according to securities filings.
The maker of marine propulsion and heavy-duty off-highway power transmission equipment entered into the two-year loan April 17. It carries a 1% annual interest rate and monthly principal and interest payments are deferred for six months.
Through April 16, lenders had approved nearly $8.32 billion in loans for 43,395 Wisconsin companies, an average of around $192,000. The program offers company a forgivable loan if proceeds are used towards payrolls, mortgage and rent payments and utilities.
In an April 9 interview with BizTimes, Twin Disc chief executive officer said the company initially was not sure which government support programs it would qualify under the $2 trillion CARES Act.
As of June 30, Twin Disc had 873 employees globally and Batten thought would make the company ineligible for PPP, which sets a limit at 500 employees. But he also didn’t think Twin Disc qualified for other programs targeted at larger companies because even though the majority of its manufacturing is in the U.S., the majority of employees are not.
“We felt sorry for ourselves for about 15 minutes until we realized there were a lot of other companies like us,”
After the SBA additional guidance, Batten felt Twin Disc would qualify for PPP since it only has around 400 employees in the U.S.
Twin Disc has already taken steps to control costs, including a temporary layoff for 10 salaried employees, reduction of paid hours of certain salaried positions by 25%, cutting salaries for remaining full-time employees by 15% and a 20% salary cut for Batten and chief operating officer James Feiertag.
Those cuts add up to an estimated annualized savings of $4.1 million, the company said. Twin Disc is also deferring all non-essential spending and capital expenditure projects.
Twin Disc has been able to continue to production as a defense contractor. The outlook for the next few months, however, is challenged by coronavirus uncertainty and a declining oil and gas market.
Taking stock of the change brought on by the coronavirus, Baird analysts estimated organic revenues would be down 28% compared to a previous estimate of a 16% decline. Twin Disc had net sales of $302.7 million in fiscal 2019.
The estimate includes an 8% second half decline in Twin Disc’s marine business, a 55% decline in land-based transmissions sales, which serves oil and gas, and a 24% decline in industrial.
Baird is now forecasting a $1.28 per share loss for the fiscal year, which ends in June, down from a 72-cent loss. In fiscal 2021, analysts now expect a 65-cent loss compared to a 34-cent per share profit previously.
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