Parker Hannifin Corporation (NYSE:PH)
Analyst Day Call
October 26, 2011 9:00 AM ET
Donald Washkewicz – President and CEO
Lang Johnston – President, Corporate Election Services
Pam Huggins – Shareholder
Lee Banks – Shareholder
John Marten – Shareholder
Catherine Suever – Shareholder
Daniel Serbin – Shareholder
Thomas Williams – Shareholder
Robert Bond – Shareholder
Robert Parker – Shareholder
Natalie (ph) – Norges Bank Investment Management
Okay, good morning. How’s everybody doing this morning? Good? Everybody looks happy. Should be happy today right? Okay, while we go ahead and start the 2011 annual meeting of the shareholders of Parker Hannifin Corporation will please come to order. I am Donald E. Washkewicz, Chairman of the Board, Chief Executive Officer and President. At my left is Thomas A. Piraino, Vice President, General Counsel and Secretary of the company who acts as Secretary of this meeting. I would like to welcome all of our shareholders who are here as well as those participating in this meeting via the webcast.
I would also like to introduce the persons present who are nominees for election as directors for a one year term and they are, Robert G. Bond, retired Chief Executive Officer and Chairman of the Board of Washkewicz Corporation; Linda S. Harty, Treasurer of Medtronic Inc.; William E. Kassling, Chairman of Board of Wabtec Corporation, Robert J. Kohlhepp, Chairman and Director of Cintas Corporation; Klaus-Peter Müller, Chairman of the Supervisory Board of Commerzbank AG; Candy M. Obourn, President of Isoflux Incorporated; Joseph M. Scaminace, Director, Chief Executive Officer and Chairman of the Board of OM Group Inc.; Wolfgang R. Schmitt, Chief Executive Officer of Trends 2 Innovation; Åke Svensson; Director General of the Association of Swedish Engineering Industries and James L. Wainscott, Chief Executive Officer, President and Chairman of the Board of AK Steel Holding Corporation and myself.
Other company executives present today are now hang in there with me here because this is a long list; we’ve got a lot of Vice Presidents coming up. John P. Marten, Executive Vice President, Finance and Administration, by the way when I name you or call your name, if you just put your hand up so that the guest can see who you are, John P. Marten, Executive Vice President, Finance and Administration and Chief Financial Officer; Lee C. Banks, Executive Vice President and Operating Officer; Thomas L. Williams, Executive Vice President and Operating Officer; Robert P. Barker, Executive Vice President, Operating Officer and President of Aerospace Group; Daniel S. Serbin, Executive Vice President in Human Resources; Robert W. Bond, Vice President and President of the Fluid Connectors Group; Michael Chung, Vice President and President of Asia Pacific Group; Jeffery A. Cullman, Vice President and President of the Hydraulics Group; John R. Greco, Vice President and President of the Instrumentation Group; Thomas F. Healy, Vice President and President of the Climate Controls Group; Kurt Keller, Vice President and President of the Seal Group; Peter Popoff, Vice President and President of the Filtration Group; A. Ricardo Machado, Vice President and President of Latin America Group; Charly Saulnier, Vice President and President of Europe, Middle East and Africa Group; Roger S. Sherrard, Vice President and President of the Automation Group; John G Dedinsky Jr., Vice President, Global Supply Chain and Procurement; William G. Eline, Vice President – Chief Information Officer, William R. Hoelting, Vice President in Tax; Pam J. Huggins, Vice President in Treasurer; M. Craig Maxwell, Vice President – Technology and Innovation and Catherine A. Suever, Vice President and Controller and representing Deloitte & Touche LLP is Jack Robinson, a partner of that firm and also Gene is here too, I’m not sure why you’re not in the script, but anyway Jack this is your recognition so.
Will the Secretary please present the affidavit as to giving any notice of this meeting as of the record date, August 31st, 2011. Mr. Chairman I present the affidavit as the mailing I’ve noticed to shareholders as of such date.
The affidavit together with the attached copies of the notice and related documents mailed to the shareholders will be filed with the minutes of this meeting. I ask the Secretary to present the list of shareholders as of August 31st, 2011. Mr. Chairman I present a list of the company’s shareholders as of such date, certified by Wells Fargo, share owners services, the transfer agent.
I appoint, corporate election services as the inspector of election of this meeting. Representing corporate election services is Lang Johnston. All persons holding proxies are requested to give their proxies to the inspector. All shareholders present who wish to vote in person on any matter to come before this meeting and who have not already advised the inspector or our receptionist and received their voting balance and instructions, please do so at this time. How many shares are present, Mr. Johnston?
Mr. Chairman, they are present in person or by proxy at this meeting at least a 134 million shares, a quorum for the transaction of the business representing over 88% of the shares issued in outstanding.
I request the Secretary to present to the meeting and the minutes of the last meeting of shareholders which was the annual meeting held in Mayfield Heights, Ohio on October 27th 2010. Mr. Chairman, I present the minutes to which you refer.
I present the financial statements of the company for the fiscal year ended June 30th, 2011 certified by Deloitte & Touche LLP. The company’s annual report containing these audited financial statements has been mailed to shareholders.
I’ll now take a few minutes to comment on the company’s financial results for the 2011 fiscal year and for the first quarter of 2012 fiscal year.
Well good morning again, I’d just like to maybe start before I go through some slides here and just take this opportunity to thank my team and my team includes all the people in this room certainly the board and my senior management team, all those Vice Presidents that you heard me talking about earlier are announcing earlier. Certainly I want to thank my team and also the 60,000 of the teams that aren't here today that are out working somewhere around the world in Parker Hannifin and our several 100 facilities for just what I would call, just an outstanding spectacular year for the company.
We went through a very difficult downturn for two years. We didn’t know how bad that was going to get. We stayed profitable through those two years of downturn, we came out of that stronger than ever and we’re really now at a point where we’re setting some really wonderful records for the company. So this was what I would call a spectacular year. We set a lot of records, I’ll show you some of those here as we go through the presentation. And hopefully this coming year, we started the first quarter now and you’ll see the results of the first quarter, we’re off to some more records this first quarter as well.
So once again, thanks to all of you, congratulations for an outstanding year, thanks to the extended team that isn't here, that’s out there. By the way, we had a nice balance too, the success we had this year, really didn’t come from any one region of the world or any one segment of the business. It was really broad-based and really pretty much worldwide. So once again, thank you and congratulations.
Some disclosure statements, here upfront in this presentation. Again, I’ll give you a little review of 2011 and that will give you a little bit of a business update as to how things are going in 2012. So just starting off with the ’11 results, again outstanding year for the company, setting a lot of new records. Just as you’ll see here I’m not going to highlight every one of these records but suffice to say that we’ve really broke some new ground here in the company. You can see the item down here in the center. Earnings per share $6.37. I think our last high was $5.50. So we had quite a bit there. We’re trying to hit 15% on our operating margin that we came with then just a couple tense of hitting 15%. So this has been one of our long-term goals of the company. So great, great performance overall in the business and again, I just want to congratulate the entire global team for an outstanding job.
Some of the market trends, as I mentioned, we got a pretty much broad response here from around the world as far as recovery. You can see that every region really contributed to our success. Regions were up 20-30% as far as sales growth this last year and here is just a couple countries that we can highlight for you. You can see Sweden kind of was at the top of the list with growing about 39% in sales and then you can look down through there pretty broad based recovery everywhere around the world down to the UK at plus 19%.
So when we looked at the specific results, then you can see that sales were up 23%. So a great year on recovery of sales and that diluted earnings per share was up almost double, it’s about 87% up, on a fairly modest increase on sales on a relative basis. So great, great results for the year.
You can see on the sales trend again, looking over the longer period of time, we peaked in 2008 before the downturn, so we peaked at 12.1 billion. We dropped off to 10 billion over that two year period. That’s a very, very tough period for us. And now we’re just marginally above that 12.1 but setting new records nevertheless. And likewise on operating income you can see that we are pushing almost $2 billion now income from operations which is a new record for the company. Operating margin trend is a new record, you can see we hit 14.1 before the drop off read 14.8. Hopefully this year we’re going to push this over the bar and get above that 15% number and as you will see in the first quarter we are heading in that direction. So pretty excited about that.
Cash flow was a big year for cash flow, well a little bit over actually a $1.5 in cash flow. And you can see even in the downturn we did pretty well from a cash generation standpoint. We generated a lot of cash flow even in those two lean years that we had.
And then how are we doing against the peer group. This is really what counts at the end of the day, having all these great numbers is nice when you compare against yourself, but how do they look when you compare against the peer group. So the beauty here is that on a cash flow basis you can see that we’re right at that top quartile break. This is the top quartile which is 12.9% and we’re at 12.6 or 12.7% right here. We’re right at that top quartile from a performance standpoint on cash flow.
Some other accomplishments for ’11, you can see the returns that we generated during the year and again the shareholders returns would be the share price appreciation in addition the dividends that were paid. So the combination of those compared to the couple of broader industries, the S&P 500 and the 500 industrials you can see that we outpaced those industries for the last three, five and 10 year periods pretty handedly. So pretty nice returns there for the shareholders. Because of the higher performance and cash generation that we had during the year and the net income that we generated, we’ve felt that it was only appropriate to increase that dividend and we did increase the dividend several times last year. We increased it about 42%. So I think hopefully our shareholders are pleased with that as well.
Our debt levels are still very modest in the company, we’re at about 24-25% debt. So we’re in pretty good shape there.
Talk a little bit innovation. I think most of you are aware that we targeted on these areas of opportunity going forward, these are eight different market opportunities that we see in technology opportunities, we see for the company. We call them the challenges of mankind and we highlighted one of these last year was an energy recovery application, we are going to highlight a different one from the space for this meeting I’ll show you a little video later in this presentation. So we’ll continue to highlight those as we go forward from year-to-year. In the pipeline, in this innovation pipeline that we have, we have about 2.8% of sales that’s coming through this pipeline every year of products that we can consider either new to the world or new to the industry.
See what we’ve been able to accomplish. I thought since we have featured the win strategy and the annual report this year, I’d give you a little flash back and kind of show you what we’ve been able to accomplish by executing what’s on this piece of paper here.
I’ll start with the sales. We more than doubled the sales. Sales are up from about 6 billion 10 years ago to 12 billion, we are up 106% on sales. Operating margin, up 31%, almost at that 15% bar that we set for ourselves and it’s been a long, hard road but we’re getting there and we are going to push it over that bar here in the very near future.
Looking at net income. This is after tax net income for the company. ROS has a net ROS. You can see that’s up 49%. We’re at 8.5%. Only the best companies in the world generate a net income of 8% plus. The best companies in the world, okay. So we’re right up there with the best of them.
Look at the cash flow. We doubled our cash flow, more than doubled our cash flow from 2001 by executing this strategy. Look at their earnings per share. Triple earnings per share, triple the earnings per share in 10 years. Pretty exciting, pretty awesome.
A return on total capital up 44%. We’re over the north by northwest, our goal there was 21, and we’re at 23. Pretty exciting and pretty major achievement here.
And then a couple other ones, inventory, we wanted inventory to go down, if you recall that's the whole idea behind lean and we drove inventory down a third. Freed up $600 or $700 million worth of capital that we then used to help grow the business in other areas. So great accomplishment on inventory. You can see the productivity. We’re stuck at about 130,000 for our employee back 10 years ago and that's now $218,000 in sales per employee up 68%. We decided to really kick start this Parker store concept and many of you are familiar with our Parker stores retail outlets that we have grown on. We have 300 back in 2001. We kick started that. We put together a team, said hey, we want to spread this concept, we want to spread it around the world and we’re at many, many countries down, we’ve added 1,500 stores in the last 10 years. So that's at a rate of about 150 a year, pretty exciting accomplishment.
And then, last but not least, since we’re at a shareholders meeting, we better talk about the share price. So, the share price you can see what happened there. We went from $28, this has all been adjusted now to apples-to-apples, to $89 this past year. It’s up 217%. So pretty spectacular accomplishments I think by executing that win strategy, the entire team rallying behind that strategy for the last 10 years and just staying focused on it so that we could drive some of these results and generate some of these wonderful results.
Financial performance is the center segment of our win strategy and of course the objective there is to really drive return on total capital, I showed you those numbers. You can see a little differently, we call this our north-by-northwest chart, you can see now that we’re over the line, we’re at that 23% level. When we get to this line we’re generating about 4 percentage points of EVA for our shareholders, return for our shareholders. So we’re well over that line. We’re probably more like 5 or 6% now, EVA for the shareholders that puts us in the top quartile by the way of our peer group when we’re at that level.
A little couple of comments on lean, we’re making a lot of progress. I showed you a little bit of this. We started at $0.19 per dollar, sales were down at ’11, we’re want to get that to 10 and continue to work that and our lean initiative is going to drive it down to those levels.
We hit a record. As far as productivity you can see the evolution. Like I said we’re stuck down here around 130-135 back in the early, turn of the century if you will and as you can see as we launched the win strategy, those numbers just went vertical for us going forward.
So how are we doing productivity wise against our peer companies, where again up into that second quartile from the top we’re just a few tenths from that top quartile break year at 5.3%, that's the compound growth rate in productivity.
A little bit about global growth which is the right hand pillar of the win strategy. We’re in the number one market position as the company today and motioning control we want to maintain that market position. It’s about a $100 billion market as we define it and we have the largest slice, again it’s 12%, we like to get that number to 20% over time.
We made some acquisitions last year, added to our sales numbers here. Some very fine companies, smaller companies but very synergistic of what we had growing on about $65 million in sales. We like to do about half a billion a year so we have a lot more companies that we’re looking at, that we would like to add to the family here, hopefully that's coming fiscal year.
We built a new headquarters in Switzerland, we now have the entire management team in Europe under one roof. It’s the first time ever really we’ve been able to get them all corralled into one space and acting like a European leadership team. So this is working out extremely well for us in Switzerland.
And we added some stores in first time areas around the world, we like to do this every year, here’s a couple of countries here where we just put the first Parker store in and like I said, we’ve got Parker stores in probably 80 different countries around the world. So pretty exciting.
Asia has really recovered very nicely from the 2008 drop off; you can see in 2008, we did a 1.4. In Asia, we of course dropped off and last year we’re up to a 1.6. And this year we’re in right now, we’re going to be heading closer to 2 billion hopefully in Asia. So pretty exciting. Of course Asia is a little softer right now. We think that after the beginning of the calendar year Asia is going to pick a little bit for us going forward. So pretty exciting growth rates there. You can see compound growth 17% over the last 5 years in Asia.
We’ve got a lot of investment going in. There is a lot of opportunity there, it’s a high growth area for the company, so we’ve got a lot of investment going in. just some examples to add in, in India, in Mumbai, we’ve expanded this facility that’s planned. We’re going to be expanding the offices now to enable them to take on more business in India. Here is incubator, we have going in Chennai in India and we’re going to be localizing some products from the company in that facility from various groups in the company. You can see a couple of these facilities in the Shanghai and China area, this is one filtration project that's been going on. This is a hydraulics project in the Shanghai as well and then automation project going on, moving in some time around March of 2012. So lot of activity going on in Asia, lot of growth opportunities there and we are going to capitalize on that growth for that company.
And then going through strong distribution, we talked a little bit about this. I wanted to show you the distribution of the Parker stores around the world. You can see that every region, we’ve got a pretty nice representation of Parker stores. We hit 1900 this year and we added 220 stores just in this fiscal 2011, the year that we just finished. Hopefully we’ll add another couple 100 this fiscal year and push our number over 2000.
Aerospace is a great story. We won about $20 billion now in new contracts for a lot of new programs, platforms. And about 18 million of those involve total systems solutions for the customers as opposed to just selling components. So that's a great, great win scenario for aerospace group’s going to be paying dividends for many years to come.
So shifting, that was the year. I mean we’d love to talk about that for hours on end here because it’s just a fantastic year for the company but let’s shift then forward and talk a little bit about our first quarter for this fiscal year which we just finished and the beat goes on. We’ve got a record first quarter for fiscal ’12. We’re pretty excited about that. Looking at just some of the highlights here.
Sales for the quarter up 14%, again this is on top of last year, remember the sales for the year were up 23%. Diluted earnings per share were a record here at $1.91. We set a couple of more records for the company, in this first quarter of fiscal ’12. And remember I shown you the best companies in the world are 8% or better ROS net after tax. Well for the quarter we’re at a 9.2. So I don't know where this number can go to but we like these kind of numbers and again I mentioned to you the operating margin that we’re targeting for the last 10 years, trying to get to 15% from where we started at ’11 and for the quarter at 16.1. So pretty exciting. I think our shareholders are pretty excited about our performance in this quarter as well.
The outlook, well we see growth normalizing going forward. I kind of see those 23% growth rates coming out of the recession, we’re out of the recession, so we’re going to be more normalizing as far as growth going forward. This is the US GDP which pretty much mimics the global world GDP, 1 to 2% kind of GDP numbers we’re looking at. We’d like to see more like 2-3-4% but it’s not in the cards right now. 1-2% is kind of what we’re going to be faced with. It’s going to be an election year economy, so I think things are going to be continue to be okay throughout at least calendar 2012 hopefully and we’re also seeing in Europe, we’re seeing Europe in to recovery, we’re here because of the Greece situation, there could be some problems on the horizon, we don't see it in our orders yet necessarily, but we’re keeping an eye on that but so far Europe is looking good. Japan because of the Fukijima problem that they had over there, the meltdown, they are going through reconstruction, there is going to be opportunities there.
And as I mentioned earlier, China has softened, we hopefully will see some pickup in that in the second half of our fiscal year, first half of next calendar year.
This is the order rates, we have orders coming up on 9% ahead of last year. So orders are still looking pretty good for the quarter and for the year then, for the plan, these are the numbers that we’ve given the street now that if we hit our plan we’ll do 13.2 billion in sales that will be up from 12.3 which we did this past year. That will be a 7.6% increase. This does not have any acquisitions in here either. Acquisitions would be added to this number. And we would be able to build on that record that we had last year of earnings per share of 637, we’ll be able to build that with 755 per share up 18%, pretty exciting numbers if we can continue the track record we have going here.
And now would put us on a return on net asset basis at 25% delivering probably 8 or 9% EVA economic value added for our shareholders. Pretty exciting numbers. We haven't been, I think this is an all-time record obviously for the company if we can do this as well.
So what does good look like then. I have showed you this in the past. 10% growth is kind of what we’re targeting over the cycle. We like to grow our 10%, try to get to a 20% market share and then we would like to be recognized as the premier diversified industrials generating top quartile returns on capital for our shareholders and return for that hopefully get a comparable price earnings multiple for our shareholders. So that's what good looks like.
Now, I did mention to you that last year, we showcased energy recovery. We showed you a refuge of vehicles that program has launched and it’s moving, we’re actually building a division to house that technology and so that's moving forward, we’ll update you further on that. We selected a little different program that's coming out of our renovation pipeline to showcase this year and we’re going to show you just a short video clip here and then we’ll get back into the rest of the meetings. So I’ll see if I can start this up. It’ll just be a couple minute video.
I found that interesting. That’s Parker’s version of the iPad right there. So, didn’t look like an iPad but it’s our version of the iPad. Okay, why don't I continue on. The next order of business is the election of Directors for a one year term. May I have a motion on this matter?
Mr. Chairman, I am Pamela Huggins, a shareholder of the company. I move for the option of the following resolution. Resolved that Robert G. Bond, Linda S. Harty, William E. Kassling, Robert J. Kohlhepp, Klaus-Peter Müller, Candy M. Obourn, Joseph M. Scaminace, Wolfgang R. Schmitt, Åke Svensson; James L. Wainscott and Donald E. Washkewicz be elected as Directors for term expiring at the annual meeting of shareholders in 2012.
Is there a second to the motion?
Mr. Chairman, I am Lee Banks, the shareholder of the company. I second the motion.
The resolution has been duly moved and seconded, is there any discussion? We’ll now proceed to vote on the resolution and I am casting the votes present by proxy, shareholders voting in person should complete their ballots for collection by the inspector. Voting on this item is closed. The inspector will report the results of the voting.
Unidentified Company Representative
Mr. Chairman, the inspector reports that at least a 113 million of common shares are voted for the resolution. As such, it is well over the number of shares required to elect the directors.
The resolution has been duly adopted. Robert G. Bond, Linda S. Harty, William E. Kassling, Robert J. Kohlhepp, Klaus-Peter Müller, Candy M. Obourn, Joseph M. Scaminace, Wolfgang R. Schmitt, Åke Svensson; James L. Wainscott and I have been elected as Directors to serve for a term expiring at the annual meeting of shareholders in 2012.
The next matter for consideration is the ratification of the appointment of Deloitte & Touche LLP as our independent registered public accounting firm for the fiscal year ending June 30th, 2012. The board of directors recommends such deployment. Mr. Robinson, a representative of Deloitte & Touche LLP is present to respond to appropriate questions. May I have a motion on this matter?
Mr. Chairman, I am John Marten, a shareholder of the company and I move for the adoption of the following resolution, resolved that the appointment of Deloitte & Touche LLP as the company’s independent registered public accounting firm for the fiscal year ending June 30, 2012 is hereby ratified, confirmed and approved.
Is there a second to the motion?
Mr. Chairman, I am Catherine Suever, a shareholder of the company. I second the motion.
The resolution has been duly moved and seconded. Is there any discussion? No discussion today, I noticed. So the appointment of Deloitte & Touche LLP as our independent registered public accounting firm will now be put to a vote and I am casting the votes represented by proxies, shareholders voting in person should complete their ballets for collection by the inspector. Voting on this item is closed. The inspector will report the results of the vote.
Unidentified Company Representative
Mr. Chairman, the inspector reports at least 131 million common shares were voted for the resolution and such vote is well over the majority votes required for the adoption of the resolution.
The resolution has been approved and adopted. The next matter for consideration is the proposal to approve on a non-binding advisory basis the compensation of our name, executive officers. The Board of Directors recommend such approval. May I have a motion on this matter?
Mr. Chairman, I am Daniel Serbin, a shareholder of the company and I move for the adoption of the following resolution, resolved that the compensation paid to our named executive officers as disclosed pursuant to the rules of the securities and exchange commission including the compensation discussion and analysis, compensation tables and narratives discussions is approved on a non-binding advisory basis.
Is there a second to the motion?
Mr. Chairman, I am Thomas Williams a shareholder of the company. I second the motion.
The resolution has been duly moved and seconded. Is there any discussion? The proposal to approve the competition of our named executive officers on a non-binding advisory basis will now be put to a vote and I am casting the votes represented by proxy. Shareholders voting in person should complete their ballots for collection by the inspector. Voting on these items is now closed. The inspector will report the results of the vote.
Unidentified Company Representative
Mr. Chairman, the inspector reports at least 100 million common shares were voted for the resolution and such vote is well over the majority votes required for the adoption of the resolution.
The resolution has been approved and adopted. The next matter for consideration is the proposal to determine on a non-binding advisory basis whether on advisory shareholder vote on a compensation of our named executive officers will occur every year, every two years or every three years. The Board of Directors recommends that the vote occur every year. May I have a motion on this matter?
Mr. Chairman, I am Robert Bond, the shareholder of the company and I move for a vote on this matter.
Is there a second to the motion?
Mr. Chairman, I am Robert Parker, a shareholder of the company, I second the motion.
The motion has been duly moved and seconded. Is there any discussion? The proposal to determine on a non-binding advisory basis whether on an advisory shareholder vote on the compensation of our named executive officers will occur every one, two or three years will now be put to a vote and I am casting the votes represented by proxy. Shareholders voting in person should complete their belts for collection by the inspector. Voting on this item is now closed. The inspector will report the results of the vote.
Unidentified Company Representative
Mr. Chairman, the inspector reports that 109 million common shares were voted for every year. 1 million common shares were voted for every two years and 13 million common shares were voted for every three years, with every year receiving the greatest number of votes.
The frequency of every year is approved on a non-binding advisory basis. The next matter for consideration is a shareholder proposal from Norges Bank investment management, requesting that our code of regulations be amended to separate the roles of Chairman of the board and Chief Executive Officer. I understand that a representative of Norges Bank investment management is in attendance and I ask that he or she please present the proposal at this time and I believe its Natalie right? Natalie is here.
Mr. Chairman, my name is Natalie (inaudible) and I am here today on behalf of Norges Bank Investment Management for the purpose of introducing for consideration proposal number five which would require the company to spate the position of Chairman of the Board and Chief Executive Officer. Norges Bank investment management believes the role of Chairman of the Board and Chief Executive Officer are fundamentally different and should not be held by the same person.
The Board should be led by independent Chairman and be in a position to make independent valuations and decisions, higher management, decide remuneration policy that encourages performance, provides strategic direction and has the support to take long-term views in the development of business strategy. And independent chairman is better able to oversee and give guidance to company executives and help prevent conflicts with the perception of conflict and in turn effectively strengthen the systems of checks and balances within the corporate structure and protect shareholder value.
In our current challenging market, we believe the need for an independent chairman is imperative. An independent chairman will be strength for the company when the Board must make the necessary strategic decisions and prioritizations ahead to sustain a sound business that creates shareholder value overtime. We therefore are to shareholders to vote for this proposal.
Thanks Natalie. The shareholder proposal will now be put to a vote and I am casting the votes represented by proxy. Shareholders voting in person should complete their ballets for collection by the inspector. Voting on these items is now closed. The inspector will report the results of the vote.
Unidentified Company Representative
Mr. Chairman, the inspector reports that approximately 28 million common shares were voted for the resolution and 95 million common shares were voted against the resolution. As such votes does not constitute the majority of votes required for adoption of the resolution.
The resolution has not been adopted and I guess I get to keep to my job, right for at least another year. At this time I will answer any questions shareholders might have. Is there any further business to come before the meeting? If not, I’ll entertain a motion to adjourn the meeting.
Unidentified Company Representative
I move that the meeting be adjourned.
Is there a second to the motion.
Unidentified Company Representative
I second the motion.
It has been moved and seconded that the meeting be adjourned. All in favor say aye. Against? The meeting is now adjourned and just one final comment that the management will remain in the room for just a few more minutes. If there are any questions from any of the shareholders. I want to also thank the shareholders that they did come for joining us here today and look forward to maybe speaking with you a little bit after the meeting for a few moments. Okay. So great, thanks for coming and have a great day.