TWIN 10-K & 10-Q changes, risk factors and insider trading
Twin Disc Inc. · Nasdaq · General Industrial Machinery & Equipment · CIK 100378 · All filings on SEC.gov
At a glance
What changed in the latest 10-K
Risk Factors
Largest changes
“Security breaches and other disruptions could compromise the Company’s information system and expose the Company to liabilities, which would cause its business and reputation to suffer. In the ordinary course of business, the Company collects and stores sensitive data, including its proprietary business information and that of its customers, suppliers and business partners, as well as personally identifiable information of its customers and employees, in its internal and external data centers, cloud services and on its networks. …”see in full comparison
“Security breaches and other disruptions could compromise the Company’s information system and expose the Company to liabilities, which would cause its business and reputation to suffer. In the ordinary course of its business, the Company collects and stores sensitive data, including its proprietary business information and that of its customers, suppliers and business partners, as well as personally identifiable information of its customers and employees, in its internal and external data centers, cloud services and on its networks. …”see in full comparison
“Amortizable intangible assets are periodically reviewed for possible impairment whenever there is evidence that events or changes in circumstances indicate that the carrying value may not be recoverable. …”see in full comparison
“Amortizable intangible assets are periodically reviewed for possible impairment whenever there is evidence that events or changes in circumstances indicate that the carrying value may not be recoverable. …”see in full comparison
“The Company could be affected by tariffs, trade restrictions, changes in trade policy, or retaliatory actions by foreign governments could increase its cost of sales, reduce the availability of raw materials or components, disrupt supply chains, and adversely affect demand for its products. The Company procures many raw materials and components directly or indirectly from outside the United States, including materials and products that may be affected by tariffs or other import restrictions. …”see in full comparison
“The Company anticipates that additional tariffs or trade restrictions resulting from “trade wars” could result in an increase in its cost of sales and there can be no assurance that the Company would be able to pass any of the increases in raw material costs directly resulting from additional tariffs to its customers. Given that it procures many of the raw materials that it uses to create its products directly or indirectly from outside of the U.S., the imposition of tariffs and other potential changes in U.S. …”see in full comparison
Full comparison: every changed paragraph (22)
Certain of the Company’s products are directly or indirectly used in oil exploration and oil drilling and are thus dependent upon the strength of those markets and oil prices. In recent years, the Company has seen significant variations in the sales of its products that are used in oil and energy relatedenergy-related markets. The variability in these markets has been defined by the change in oil prices and the global demand for oil. Significant decreases in oil prices and reduced demand for oil and capital investment in the oil and energy markets adversely affect the sales of these products and the Company’s profitability. The cyclical nature of the global oil and gas market presents the ongoing possibility of a severe cutback in demand, which would create a significant adverse effect on the sales of these products and ultimately on the Company’s profitability.
Many of the Company’s product markets are cyclical in nature or are otherwise sensitive to volatile or unpredictable factors. A downturn or weakness in overall economic activity or fluctuations in those other factors could have a material adverse effect on the Company’s overall financial performance. Historically, sales of many of the products that the Company manufactures and sells have been subject to cyclical variations caused by changes in general economic conditions and other factors. In particular, the Company sells its products to customers primarily in the pleasure craft, commercialcommercial, and military marine markets, as well as in the energy and natural resources, government, militarymilitary, and industrial markets. The demand for the products may be impacted by the strength of the economy generally, governmental spending and appropriations, including security and defense outlays, fuel prices, interest rates, as well as many other factors. Adverse economic and other conditions may cause the Company's customers to forego or otherwise postpone purchases in favor of repairing existing equipment.
In the event of an increase in the global demand for steel, the Company could be adversely affected if it experiences shortages of raw castings and forgings used in the manufacturing of its products. With the continued advancement of certain developing economies, in particular China and India, the global demand for steel has risen significantly in recent years. The Company selects its suppliers based on a number of criteria, and the Company expects that they will be able to support its needs.needs; However,however, there can be no assurance that a significant increase in demand, capacity constraints or other issues experienced by the Company’s suppliers will not result in shortages or delays in their supply of raw materials to the Company. If the Company were to experience a significant or prolonged shortage of critical components from any of its suppliers, particularly those who are sole sources, and could not procure the components from other sources, the Company would be unable to meet its production schedules for some of its key products and would miss product delivery dates which would adversely affect its sales, profitability and relationships with its customers.
The Company continues to face the prospect of increasing commodity costs, including steel, other raw materials and energy that could have an adverse effect on future profitability. In addition, developments in tariff regulations in the U.S. and foreign jurisdictions have resulted in uncertainty regarding international trade policies and future commodity prices, contributing to an increased risk of higher commodity costs that could have an adverse impact on the Company’s profitability, financial condition and results of operations. The Company’s profitability is dependent, in part, on commodity costs. To date, the Company has been successful with offsetting the effects of increased commodity costs through cost reduction programs and pricing actions.actions; However,however, if material prices were to continue to increase at a rate that could not be recouped through product pricing or cost reductions, it could potentially have an adverse effect on the Company’s future profitability.
The Company could be affected by tariffs, trade restrictions, changes in trade policy, or retaliatory actions by foreign governments could increase its cost of sales, reduce the availability of raw materials or components, disrupt supply chains, and adversely affect demand for its products. The Company procures many raw materials and components directly or indirectly from outside the United States, including materials and products that may be affected by tariffs or other import restrictions. There can be no assurance that the Company would be able to offset increased costs through pricing actions, supplier changes, sourcing adjustments, or cost reductions. In addition, because the Company sells a significant proportion of its products to customers outside the United States, retaliatory tariffs, trade barriers, or changes in foreign trade policy could increase the price of its products in foreign markets, reduce demand, impair its competitive position, or otherwise adversely affect its business, financial condition and results of operations.
The Company anticipates that additional tariffs or trade restrictions resulting from “trade wars” could result in an increase in its cost of sales and there can be no assurance that the Company would be able to pass any of the increases in raw material costs directly resulting from additional tariffs to its customers. Given that it procures many of the raw materials that it uses to create its products directly or indirectly from outside of the U.S., the imposition of tariffs and other potential changes in U.S. trade policy could increase the cost or limit the availability of such raw materials, which could hurt its competitive position and adversely impact its business, financial condition and results of operations. In addition, the Company sells a significant proportion of its products to customers outside of the U.S. Retaliatory actions by other countries could result in increases in the price of its products, which could limit demand for such products, hurt its global competitive position and have a material adverse effect on the Company’s business, financial condition and results of operations.
To date, our operations have not been materially adversely affected by global conflicts including Russia’s invasion of Ukraine.Ukraine and the ongoing conflict involving Iran, Israel, and other reginal actors. However, further escalation of thisthese or other conflicts could result in, among other negative consequences, a disruption to the global economy and supply chain leading to a shortage of parts, materials and services needed to manufacture and timely deliver our products. Any such shortages could negatively impact our suppliers’ ability to meet our demand requirements and, in turn, our ability to satisfy our customer demand. These challenges, together with other challenges associated with operating an international business, may adversely affect our ability to recognize revenue and our other operating results.
A material disruption at one of the Company’s largest manufacturing facilities could adversely affect its ability to generate sales and meet customer demand. If operations at one of the Company’s largest facilities were to be disrupted as a result of significant equipment failures, natural disasters, power outages, fires, explosions, adverse weather conditions, labor force disruptions or other reasons, the Company’s business and results of operations could be adversely affected. Interruptions in production would increase costs and reduce sales. Any interruption in production capability could require the Company to make substantial capital expenditures to remedy the situation, which could negatively affect its profitability and financial condition. The Company maintains property damage insurance, which it believes is adequate to reconstruct its facilities and equipment, as well as business interruption insurance to mitigate losses resulting from any production interruption or shutdown caused by an insured loss.loss; However,however, any recovery under this insurance policy may not offset the lost sales or increased costs that may be experienced during the disruption of operations. Lost sales may not be recoverable under the policy and long-term business disruptions could result in a loss of customers. If this were to occur, future sales levels and costs of doing business, and therefore profitability, could be adversely affected.
The ability to service the requirements of debt depends on the ability to generate cash and/or refinance its indebtedness as it becomes due, and depends on many factors, some of which are beyond the Company’s control. TheOn June 30, 2026, the Company entered into an amendedrefinanced and restatedreplaced its credit agreement ondated February 14, 2025. The Company’s ability to make payments on its indebtedness, including those under the credit agreement, and to fund planned capital expenditures, research and development efforts and other corporate expenses depends on the Company’s future operating performance and on economic, financial, competitive, legislative, regulatory and other factors. Many of these factors are beyond its control. The Company cannot be certain that its business will generate sufficient cash flow from operations, or operating improvements will be realized or that future borrowings will be available to it in an amount sufficient to enable it to repay its indebtedness or to fund its other operating requirements. Significant delays in its planned capital expenditures may materially and adversely affect the Company’s future revenue prospects.
Any failure to meet debt obligations and financial covenants, and maintain adequate asset-based borrowing capacity could adversely affect the Company’s business and financial condition. The Company’s revolving credit facility expiring AprilJune 20272031 is secured by certainsubstantially all of the Company’s and Kobelt’s personal property assets(i.e., suchnone of the other subsidiaries of the Company have pledged their personal property as collateral for the bank debt), including accounts receivable, inventory, and machinery and equipment.equipment, Underand thisintellectual agreement,property. theThe Company’sCompany borrowinghas capacityalso ispledged based on the eligible balances65% of these assets and it is required to maintain sufficient asset levels at all times to secure its outstandingequity borrowings.interests in certain foreign subsidiaries. The Company is also required to comply with a total funded debt to earnings before interest, taxes, depreciation, and amortization (“EBITDA”) ratio,ratio and a minimum fixed charge coverage ratio, and a minimum tangible net worth.ratio. If the Company does not meet these financial covenants as specified under the agreement, the Company may require forbearance or relief from its financial covenant violations from its senior lender or be required to arrange alternative financing. Failure to obtain relief from financial covenant violations or to obtain alternative financing, if necessary, would have a material adverse impact on the Company.
As a result of the acquisition of Kobelt, the Company carries a significant amount of intangible assets, but it may never fully realize the total value of these assets. The Company recorded intangible assets, including customer relationships, technology know-how, trade name, and computer software for Kobelt.
Amortizable intangible assets are periodically reviewed for possible impairment whenever there is evidence that events or changes in circumstances indicate that the carrying value may not be recoverable. Impairment may result from, among other things, (i) a decrease in the Company’s expected net earnings; (ii) adverse equity market conditions; (iii) a decline in current market multiples; (iv) a decline in its common stock price; (v) a significant adverse change in legal factors or business climates; (vi) an adverse action or assessment by a regulator; (vii) heightened competition; (viii) strategic decisions made in response to economic or competitive conditions; or (ix) a more-likely-than-not expectation that a reporting unit or a significant portion of a reporting unit will be sold or disposed of. In the event that the Company determines that events or circumstances exist that indicate that the carrying value of identifiable intangible assets may no longer be recoverable, the Company might have to recognize a non-cash impairment of identifiable intangible assets, which could have a material adverse effect on the Company’s consolidated financial condition or results of operations.
The Company may experience negative or unforeseen tax consequences. The Company reviews the probability of the realization of its net deferred tax assets each period based on forecasts of taxable income in both the U.S. and foreign jurisdictions. This review uses historical results, projected future operating results based upon approved business plans, eligible carryforward periods, tax planning opportunities and other relevant considerations. Adverse changes in the profitability and financial outlook in the U.S. or foreign jurisdictions may require the creation of a valuation allowance to reduce the Company’s net deferred tax assets. Such changes could result in material non-cash expenses in the period in which the changes are made and could have a material adverse impact on the Company’s results of operations and financial condition. The Company has evaluated the realizability of deferred tax assets and concluded that the U.S. and state valuation allowance is no longer required and was released December 26, 2025. The Company's valuation allowance was $0.1 million and $16.5 million (as adjusted) as of June 30, 2026 and 2025, respectively, with prior-year amounts adjusted to reflect the change in inventory valuation method.
Future changes in tax law in the United States or the various jurisdictions in which the Company operates could have a material impact on the Company’s effective tax rate, foreign rate differential, future income tax expense and cash flows.
Security breaches and other disruptions could compromise the Company’s information system and expose the Company to liabilities, which would cause its business and reputation to suffer. In the ordinary course of business, the Company collects and stores sensitive data, including its proprietary business information and that of its customers, suppliers and business partners, as well as personally identifiable information of its customers and employees, in its internal and external data centers, cloud services and on its networks. The secure processing, maintenance and transmission of this information is critical to the Company’s operations and business strategy. Despite the Company’s security measures, its information technology and infrastructure, and that of its partners, may be vulnerable to malicious attacks or breaches due to employee error, malfeasance or other disruptions, including as a result of rollouts of new systems. Any such breach or operational failure would compromise the Company’s networks and/or that of its partners and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings and/or regulatory fines or penalties, including, among others, under the European Union’s General Data Protection Regulation, disruption of the Company’s operations, damage to the Company’s reputation and/or cause a loss of confidence in the Company’s products and services, which could adversely affect business, financial condition and results of operations of the Company.
As of June 30, 2025, the Company had a borrowing capacity that exceeded its outstanding loan balance (see Note H, Debt, of the notes to the consolidated financial statements). Based on its annual financial plan, the Company believes that it will generate sufficient cash flow levels throughout fiscal 2026 to meet the required financial covenants under the agreements. However, as with all forward-looking information, there can be no assurance that the Company will achieve the planned results in future periods.
The Company has made certain assumptions relating to the acquisition of Katsa and Kobelt in its forecasts that may prove to be materially inaccurate. The integration of Katsa and Kobelt into the Company’s business processes is ongoing. While the integration is currently proceeding as planned, the Company has made certain longer term assumptions relating to the forecast level of synergies and associated costs of the acquisition of Katsa and Kobelt that may be inaccurate based on the information that was available to the Company or as a result of the failure to realize the expected benefits of the acquisition, higher than expected integration costs, unknown liabilities and global economic and business conditions that may adversely affect the combined Company following the completion of the acquisition. The combination of the businesses will require significant management attention, and the Company may incur significant additional integration costs because of integration difficulties and other challenges.
As a result of the acquisition of Katsa and Kobelt, the Company carries a significant amount of intangible assets, but it may never fully realize the full value of these assets. The full accounting for the Kobelt acquisition, including the purchase price allocation, is pending final review by the Company. The Company recorded intangible assets, including customer relationships, technology know-how, trade name, and computer software for both Katsa and Kobelt.
Amortizable intangible assets are periodically reviewed for possible impairment whenever there is evidence that events or changes in circumstances indicate that the carrying value may not be recoverable. Impairment may result from, among other things, (i) a decrease in its expected net earnings; (ii) adverse equity market conditions; (iii) a decline in current market multiples; (iv) a decline in its common stock price; (v) a significant adverse change in legal factors or business climates; (vi) an adverse action or assessment by a regulator; (vii) heightened competition; (viii) strategic decisions made in response to economic or competitive conditions; or (ix) a more-likely-than-not expectation that a reporting unit or a significant portion of a reporting unit will be sold or disposed of. In the event that it determines that events or circumstances exist that indicate that the carrying value of identifiable intangible assets may no longer be recoverable, it might have to recognize a non-cash impairment of identifiable intangible assets, which could have a material adverse effect on the Company’s consolidated financial condition or results of operations.
The Company may experience negative or unforeseen tax consequences. The Company reviews the probability of the realization of its net deferred tax assets each period based on forecasts of taxable income in both the U.S. and foreign jurisdictions. This review uses historical results, projected future operating results based upon approved business plans, eligible carryforward periods, tax planning opportunities and other relevant considerations. Adverse changes in the profitability and financial outlook in the U.S. or foreign jurisdictions may require the creation of a valuation allowance to reduce the Company’s net deferred tax assets. Such changes could result in material non-cash expenses in the period in which the changes are made and could have a material adverse impact on the Company’s results of operations and financial condition. At June 30, 2025 and 2024, the allowance totaled $24.0 million and $24.0 million, respectively.
Future changes in tax law in the United States or the various jurisdictions in which the Company operates and income tax holidays could have a material impact on the Company’s effective tax rate, foreign rate differential, future income tax expense and cash flows.
Security breaches and other disruptions could compromise the Company’s information system and expose the Company to liabilities, which would cause its business and reputation to suffer. In the ordinary course of its business, the Company collects and stores sensitive data, including its proprietary business information and that of its customers, suppliers and business partners, as well as personally identifiable information of its customers and employees, in its internal and external data centers, cloud services and on its networks. The secure processing, maintenance and transmission of this information is critical to the Company’s operations and business strategy. Despite the Company’s security measures, its information technology and infrastructure, and that of its partners, may be vulnerable to malicious attacks or breaches due to employee error, malfeasance or other disruptions, including as a result of rollouts of new systems. Any such breach or operational failure would compromise the Company’s networks and/or that of its partners and the information stored there could be accessed, publicly disclosed, lost or stolen. Any such access, disclosure or other loss of information could result in legal claims or proceedings and/or regulatory fines or penalties, including, among others, under the European Union’s General Data Privacy Regulation, disrupt the Company’s operations, damage its reputation and/or cause a loss of confidence in the Company’s products and services, which could adversely affect its business, financial condition and results of operations.
Management's Discussion & Analysis (MD&A)
New heading “Current Credit Agreement”
Largest changes
see in full comparisonExcluding the impact of the Katsa and Kobelt acquisitions, salesSales for our manufacturing segmentdecreasedincreased2.5%,15.2%, or$7.5$44.9 million, versus the same period last year. Thelargest improvement was seen at theCompany’s Veth propulsion operation in theNetherlands, whichNetherlands experiencedaan12.3%16.4% increase in sales compared to fiscal2024.2025. The primary driver for this increasewasremains growing demand through market and geographic penetration for the Company’s innovative propulsion solutions around the globe, along with improving supply chain and operational performance. The Company’s Katsa operation in Finland experienced an increase of 30.8%, with acceleration in demand from European military applications. The Company’s domestic manufacturing operation experienced a1.8%3.8%decreaseincrease in sales in fiscal2025,2026, driven in part by somesofteningimprovementdemand forin oil and gastransmissions in China.demand. The Company’s Italian manufacturing operations reported a29.7%29.9%decreaseincrease in sales from fiscal2024,2025,primarilywithdueatopositivethecurrencysaleimpactofcombiningthewithBCSanbusinessimprovedduringEuropeanfiscalindustrial2024.demand. The Company’s Belgian manufacturing operation sawana18.4%7.7% decrease in sales from fiscal20242025 with softer demandinfrom domestic customers due to theEuropeanimpactmarineofmarkets.tariffs. The Company’s Swiss manufacturing operation, which supplies customized propellers for the global mega yacht and patrol boat markets, experienced a3.9%45.9% increase in sales compared to fiscal2024,2025, primarily due toathestrengtheningcollaborationEuropeanwithpropulsionVethmarket.driving improved pleasure craft demand.
“The Credit Agreement requires the Company to meet certain financial covenants. Specifically, the Company’s Total Funded Debt to EBITDA ratio may not exceed 3.50 to 1.00, and the Company’s Fixed Charge Coverage Ratio may not be less than 1.10 to 1.00. In determining whether the Company is in compliance with its Total Funded Debt/EBITDA Ratio, the Company’s EBITDA will include transaction expenses of up to $0.6 million for each of the Company’s Kobelt Acquisition and the Company’s prior Katsa acquisition, as well as pro-forma EBITDA of Katsa and Kobelt as permitted by the Bank. …”see in full comparison
“On June 30, 2026, Twin Disc, Incorporated (the “Company”) entered into a Credit Agreement (the “Credit Agreement”) among the Company, as Borrower; Kobelt Manufacturing Co. Ltd. ("Kobelt"), as Guarantor; Bank of Montreal, as a Lender, Administrative Agent, Swing Line Lender, and L/C Issuer; and JPMorgan Chase Bank, N.A. ("Chase"), as a Lender. The Credit Agreement refinanced and replaced the credit agreement dated February 14, 2025 among the Company, Kobelt, and Bank of Montreal. Capitalized terms in this Annual Report that are not otherwise defined herein are defined in the Credit Agreement.”see in full comparison
see in full comparisonThereInwereadditionatonumberthe impact of the accounting method change from LIFO to FIFO discussed above, several other factorsthat impactedaffected the Company’s overall gross profit rate in fiscal2025.2026. Gross profit for the year was primarily impacted by improved volumes (approximately$12.9$11.0 million). This was offset by a less favorable product mix (approximately$3.1$1.2 million), primarily related toweakerreduced aftermarket demandfor oilandgasgrowthrelatedin lower margin products. ThecompanyCompany’salsomarginrecordedpercentagepurchasewasaccountingdilutedamortizationby approximately 50 basis points incostthe year due to the invoicing ofgoodstariffssoldwithtotalingno$0.9margin ($1.9 millionin fiscal 2025.). The remaining increase ($0.5$1.9 million) is the result of price realization, cost reductionefforts andefforts, improved productivity and other adjustments at our operating facilities.
Sales for our distribution segment were downsee in full comparison8.6%,11.6%, or$12.4$15.2 million, compared to fiscal2024.2025. The Company’s Asian distribution operations in Singapore, China and Japan experienced a6.7%7.8% decrease in sales onsofteningsomewhat softer demand for energy related products in China. The Company’s North American distribution operation saw a26.9%32.0% decrease on weaker domestic demand for marine products from the Europeanoperations.operations due primarily to the impact of tariffs. The Company’s European distribution operation wasessentiallydownflat19.0%withfrom the prioryear.year, driven by weaker European demand. The Company’s distribution operation inAustralia,Australia and New Zealand, which provides boat accessories, propulsion and marine transmission systems for the pleasure craft market, saw a slightdecreaseincrease in revenue (0.7%2.3%) on consistent demand for pleasure craft products in the region.
Full comparison: every changed paragraph (37)
This report contains statements (including but not limited to certain statements in Items 1, 3, and 7) that are forward-looking as defined by the Securities and Exchange Commission in its rules, regulations and releases. Forward-looking statements include the Company’s description of plans and objectives for future operations and assumptions behind those plans. The words “anticipates,” “believes,” “intends,” “estimates,” and “expects,” or similar anticipatory expressions, usually identify forward-looking statements. These statements are based on management’s current expectations that are based on assumptions that are subject to risks and uncertainties. Actual results may vary because of variations between these assumptions and actual performance. In addition, goals established by the Company should not be viewed as guarantees or promises of future performance. There can be no assurance the Company will be successful in achieving its goals.
Net sales for fiscal 20252026 increased 15.5%,11.9%, or $45.6$40.5 million, to $340.7$381.3 million from $295.1$340.7 million in fiscal 2024.2025. The Company’s acquisition of Katsa at the beginning of fiscal 2025 contributed $39.1 million of incremental revenue, while the acquisition of Kobelt in the Company’s third fiscal quarter of fiscal 2025 contributed $4.9approximately $7.6 million of incremental revenue. Excluding the impact of thesethis acquisitions,acquisition, the Company’s revenue wasgrew relativelyby flat9.7% within thefiscal prior year,2026, as strong growth in the Veth product wascombined offsetwith bygrowing weakerglobal oilmilitary demand for both marine and gas transmission shipments into China and some weakness in the European industrial andproducts, commercialalong marinewith markets.generally strong market conditions. Currency translation had a favorable impact on fiscal 20252026 sales compared to the prior year totaling $1.5$17.2 million, primarily due to the strengthening of the euro against the U.S. dollar.
Excluding the impact of the Katsa and Kobelt acquisitions, salesSales for our manufacturing segment decreasedincreased 2.5%,15.2%, or $7.5$44.9 million, versus the same period last year. The largest improvement was seen at the Company’s Veth propulsion operation in the Netherlands, whichNetherlands experienced aan 12.3%16.4% increase in sales compared to fiscal 2024.2025. The primary driver for this increase wasremains growing demand through market and geographic penetration for the Company’s innovative propulsion solutions around the globe, along with improving supply chain and operational performance. The Company’s Katsa operation in Finland experienced an increase of 30.8%, with acceleration in demand from European military applications. The Company’s domestic manufacturing operation experienced a 1.8%3.8% decreaseincrease in sales in fiscal 2025,2026, driven in part by some softeningimprovement demand forin oil and gas transmissions in China.demand. The Company’s Italian manufacturing operations reported a 29.7%29.9% decreaseincrease in sales from fiscal 2024,2025, primarilywith duea topositive thecurrency saleimpact ofcombining thewith BCSan businessimproved duringEuropean fiscalindustrial 2024.demand. The Company’s Belgian manufacturing operation saw ana 18.4%7.7% decrease in sales from fiscal 20242025 with softer demand infrom domestic customers due to the Europeanimpact marineof markets.tariffs. The Company’s Swiss manufacturing operation, which supplies customized propellers for the global mega yacht and patrol boat markets, experienced a 3.9%45.9% increase in sales compared to fiscal 2024,2025, primarily due to athe strengtheningcollaboration Europeanwith propulsionVeth market.driving improved pleasure craft demand.
Sales for our distribution segment were down 8.6%,11.6%, or $12.4$15.2 million, compared to fiscal 2024.2025. The Company’s Asian distribution operations in Singapore, China and Japan experienced a 6.7%7.8% decrease in sales on softeningsomewhat softer demand for energy related products in China. The Company’s North American distribution operation saw a 26.9%32.0% decrease on weaker domestic demand for marine products from the European operations.operations due primarily to the impact of tariffs. The Company’s European distribution operation was essentiallydown flat19.0% withfrom the prior year.year, driven by weaker European demand. The Company’s distribution operation in Australia,Australia and New Zealand, which provides boat accessories, propulsion and marine transmission systems for the pleasure craft market, saw a slight decreaseincrease in revenue (0.7%2.3%) on consistent demand for pleasure craft products in the region.
Net sales for the Company’s marine transmission and propulsion systems were up 17.1%13.2% in fiscal 20252026 compared to the prior fiscal year. This increase reflects generally strong market conditions, continued global growth of the Veth product, the addition of the Katsa and Kobelt product linesline for the full fiscal year and aimproved generalmilitary easingdemand offor supplymarine chain constraints during the fiscal year.transmissions. In the off-highway transmission market, the year-over-year increase of 2.1%11.9% can be attributed primarily to thean historicallyincrease highin global demand for theenergy Company’srelated ARFF (airport rescue and firefighting) transmissions.products. The increase experienced in the Company’s industrial products of 61.8%11.0% was a function of stronger demand in the North American construction and recycling markets, along with the addition of the Katsa and Kobelt product lines.line for the full fiscal year.
Geographically, sales to the U.S. and Canada improved 10%23% in fiscal 20252026 compared to fiscal 2024,2025, representing 27%29.7% of consolidated sales for fiscal 20252026 compared to 28%27.0% in fiscal 2024.2025. The increase is primarily due to the addition of Kobelt, improving Veth demand in the regionregion, improved industrial sales and recoveringstrong industrialoil sales.and gas related shipments in the fourth quarter. Sales into the Asia Pacific market decreased 20%3.1% compared to fiscal 20242025 and represented approximately 22%19.2% of sales in fiscal 2025,2026, compared to 32%22.2% in fiscal 2024.2025. The decrease in fiscal 20252026 reflects softening demand for the Company’s oil and gas transmissions in the Chinese market. Sales into the European market improved approximately 40%16% from fiscal 20242025 levels while accounting for 41%42% of consolidated net sales in fiscal 20252026 compared to 33%41% of net sales in fiscal 2024.2025. The additiongrowth is primarily the result of Katsa revenue in fiscal 2025, along with strong demand for the Company’s Veth propulsionand products,Katsa drove much of the fiscal 2025 growth.products. See Note K,J, Business Segments and Foreign Operations, of the notes to the consolidated financial statements for more information on the Company’s business segments and foreign operations.
InConsidering fiscalthe 2025,impact of the inventory valuation accounting method change from LIFO to FIFO, which increased prior-year gross profit improvedby $9.4approximately $1.2 million, fiscal 2026 gross profit increased $8.6 million, or 11.3%,9.2%, to $92.7$102.6 million on a sales increase of $45.6$40.5 million. Gross profit as a percentage of sales decreased 10070 basis points in fiscal 20252026 to 27.2%,26.9%, compared to 28.2%27.6% in fiscal 2024.2025.
ThereIn wereaddition ato numberthe impact of the accounting method change from LIFO to FIFO discussed above, several other factors that impactedaffected the Company’s overall gross profit rate in fiscal 2025.2026. Gross profit for the year was primarily impacted by improved volumes (approximately $12.9$11.0 million). This was offset by a less favorable product mix (approximately $3.1$1.2 million), primarily related to weakerreduced aftermarket demand for oil and gasgrowth relatedin lower margin products. The companyCompany’s alsomargin recordedpercentage purchasewas accountingdiluted amortizationby approximately 50 basis points in costthe year due to the invoicing of goodstariffs soldwith totalingno $0.9margin ($1.9 million in fiscal 2025.). The remaining increase ($0.5$1.9 million) is the result of price realization, cost reduction efforts andefforts, improved productivity and other adjustments at our operating facilities.
Marketing, engineering, and administrative (ME&A) expenses of $82.4$84.5 million were up $10.8$2.1 million, or 15.1%,2.5%, in fiscal 20252026 compared to the prior fiscal year. As a percentage of sales, ME&A expenses decreased to 24.2%22.2% of sales versus 24.3%24.2% of sales in fiscal 2024.2025. The increase in ME&A spending in fiscal 20252026 compared to the prior year was primarily driven by the addition of the Katsa and Kobelt operations for a full year ($8.6$1.4 million). The remaining increase was driven by, an inflationary increase to salaries and benefits ($1.5$1.0 million), stock compensation expense ($0.7 million), professional fees ($1.3 million), and a legalcurrency settlementtranslation effect ($0.4$2.5 million). These increases were partially offset by reductions to the global bonus expense ($1.0$1.1 million), badlower debtdepreciation expenseand amortization ($0.3$1.0 million) and other cost savings ($0.4$0.8 million).
Interest expense of $2.6$3.1 million for fiscal 20252026 was $1.2$0.4 million higher than fiscal 20242025 due to an increased average balance following the two recently completed acquisitions.
In fiscal 2025,2026, other expense, net, of $5.5$1.3 million increaseddecreased by $10.8$4.0 million from the prior fiscal year other income,expense, net, of $5.3$5.5 million. This change is primarily due to ana increasedecrease in currency translation losses ($5.2$6.5 million), offset by an increase in defined benefit pension amortization ($2.0 million) and theother priormiscellaneous year impact of a bargain purchase gain related to the acquisition of Katsaitems ($3.7$0.3 million).
The effective tax rate for fiscal 20252026 is 190.4%(102.8%) compared to 26.8%113.6% for fiscal 2024.2025.
The Company maintains valuation allowances when it is more likely than not that all or a portion of a deferred tax asset will not be realized. Changes in valuation allowances from period to period are included in the tax provision in the period of change. In determining whether a valuation allowance is required, the Company takes into account such factors as prior earnings history, expected future earnings, carry-back and carry-forward periods, and tax strategies that could potentially enhance the likelihood of realization of a deferred tax asset. ManagementDuring believesfiscal that it is more likely than not that2026, the resultsCompany reassessed the realizability of future operations will not generate sufficient taxable income and foreign source income to realize all the domesticits deferred tax assets,assets therefore,and concluded that substantially all of its U.S. valuation allowance was no longer required. As a result, the companyCompany recorded in fiscal year 2025 and 2024,released the valuation allowance ofand $24.0recognized a corresponding income tax benefit. The Company's valuation allowance was $0.1 million and $24.0$16.5 million,million respectively.as of June 30, 2026 and 2025, respectively, with prior-year amounts adjusted to reflect the change in inventory valuation method.
The net cash provided by operating activities in fiscal 20252026 totaled $24.0$22.9 million, a decrease of $9.7$1.1 million from the prior fiscal year cash provided by operating activities of $33.7$24.0 million. The slight reduction in operating cash flow from the prior year was primarily due to an increase in trade receivables, offset by improved operating results and reduced inventory levels. The increase to trade receivables was volume driven, with the Company reporting a record revenue in fiscal 2025. This increase was driven by some shipping delays at the endfourth quarter of fiscal 2025, along with operational increases to support a growing backlog.2026. The Company expects trade receivables to drivecontinue to move with revenue and will continue to focus on driving inventory reductions through fiscal 2026. The unfavorable movement in inventory was partially offset by favorable movements in trade payables and accrued liabilities.2027.
The net cash used by investing activities for fiscal 20252026 primarily represents the acquisition of Kobeltcapital expenditures ($17.2 million) and the acquisition of property, plant and equipment ($15.2$13.7 million). The capital spending amount reflects a significant increasedecrease from the prior year, driven by thesome additionalextended lead times on capital needs of Katsa and the timing of machine tool deliveries.equipment.
The net cash usedprovided by financing activities relates primarily to additional borrowings to finance growth ($0.9 million). This was partially offset by payments for dividends ($2.6$2.7 million), payments on finance lease obligations ($1.1$1.2 million) and payments on stock compensation withholding taxes ($1.3$1.7 million). These uses were partially offset by incremental borrowings of $4.0 million. During fiscal 2025,2026, the Company did not purchase any shares as part of its Board-authorized stock repurchase program. The Company has 315,000 shares remaining under its authorized stock repurchase plan.
Current Credit Agreement
On June 30, 2026, Twin Disc, Incorporated (the “Company”) entered into a Credit Agreement (the “Credit Agreement”) among the Company, as Borrower; Kobelt Manufacturing Co. Ltd. ("Kobelt"), as Guarantor; Bank of Montreal, as a Lender, Administrative Agent, Swing Line Lender, and L/C Issuer; and JPMorgan Chase Bank, N.A. ("Chase"), as a Lender. The Credit Agreement refinanced and replaced the credit agreement dated February 14, 2025 among the Company, Kobelt, and Bank of Montreal. Capitalized terms in this Annual Report that are not otherwise defined herein are defined in the Credit Agreement.
On February 14, 2025, the Company entered into an amended and restated Credit Agreement (the “Credit Agreement”) with Bank of Montreal (the “Bank”) that refinances and replaces the credit agreement dated as of June 29, 2018, as amended, between the Company and BMO Harris Bank, N.A. (the “Prior Credit Agreement”).
Pursuant to the Credit Agreement, Bank of Montreal and Chase (the Bank“Lenders”) made a Term LoanLoans to the Company in thean aggregate principal amount of $15.0 million, consisting of an assignment of a term loan under the Prior Credit Agreement from BMO to the Bank with a remaining principal of $8.5 million and an additional advance of $6.5 million.$30,000,000. The maturity date of the Term LoanLoans is AprilJune 1,30, 2027,2031, and the Company is required to make principal installments on the Term LoanLoans of at least $0.75 million$375,000, per quarter.quarter Under(increasing to $562,500 per quarter for the Creditquarter Agreement,ending on or about September 30, 2028, and $750,000 per quarter for the Companyquarter isending restrictedon inor makingabout dividendSeptember payments30, beyond $5 million in any fiscal year.2030).
The Credit Agreement also allows the Company to enter into Revolving Loans with the Lenders from time to time prior to June 30, 2031 (the “Revolving Credit Termination Date”) in amounts not to exceed $60,000,000 (the “Revolving Credit Commitment”). The Revolving Credit Commitment includes a $5,000,000 sublimit for Swing Loans and a $4,000,000 sublimit for Letters of Credit that may be requested by the Company from time to time until the Revolving Credit Termination Date. Each Swing Loan or Letter of Credit provided pursuant to the terms of the Credit Agreement shall be a Revolving Loan provided under the Revolving Credit Commitment.
In addition, the Company may, from time to time prior to the maturity date, enter into Revolving Loans in amounts not to exceed, in the aggregate and subject to a Borrowing Base, $50.0 million (the “Revolving Credit Commitment”). The Borrowing Base is the sum of (a) 85% of outstanding unpaid Eligible Receivables and (b) the lesser of $40.0 million for each fiscal month ending on or prior to August 31, 2025 (reduced to $35.0 million for each fiscal month ending on or prior to August 31, 2026, and further reduced to $32.5 million for each fiscal month ending thereafter) and 60% of Eligible Inventory for each fiscal month ending on or prior to August 31, 2025 (reduced to 55% of Eligible Inventory for each fiscal month ending on or prior to February 28, 2026, and 50% of Eligible Inventory for each fiscal month ending thereafter). The Credit Agreement also allows the Company to obtain Letters of Credit from the Bank, which if drawn upon by the beneficiary thereof and paid by the Bank, would become Revolving Loans. Under the Credit Agreement, the Company may not pay cash dividends on its common stock in excess of $5.0 million in any fiscal year. The term of the Revolving Loans under the Credit Agreement runs through April 1, 2027.
The Company used the increased borrowing capacity under the Credit Agreement to help finance its acquisition of Kobelt. Kobelt is included as a Borrower under the Credit Agreement, and may borrow directly under the Credit Agreement up to the lesser of the Revolving Credit Commitment or $25.0 million. For purposes of determining the Borrowing Base under the Credit Agreement, Eligible Receivables and Eligible Inventory of Kobelt are included.
Interest rates under the Credit Agreement are based on the secured overnight financing rate (“SOFR”), the euro interbank offered rate (the “EURIBO Rate”), or the Canadian Overnight Repo Rate Average (the “CORRA”)., or a Base Rate based on the highest of the prime rate, federal funds rate, or Term SOFR. Loans under the Credit Agreement are designated as either as “SOFR Loans,” which accrue interest at an Adjusteda Term SOFR plus an Applicable Margin; “Base Rate Loans, which accrue interest at the Base Rate plus an Applicable Margin; Eurodollar Loans,” which accrue interest at the EURIBO Rate plus an Applicable Margin; “Term CORRA Loans,” which accrue interest at an Adjusted Term CORRA plus an Applicable Margin; “Daily Compounded CORRA Loans,” which accrue interest at a Daily Compounded CORRA plus an Applicable Margin; or Canadian Prime Rate Loans,” which accrue interest at the Canadian Prime Rate plus an Applicable Margin. The Applicable MarginsMargin arefor Loans is between 2%1.50% and 3.5% for Revolving Loans3.00%, and Lettersthe ofApplicable Credit; 2.125% and 3.625% for Term Loans; and .15% and .3%Margin for the Unused Revolving Credit Commitment is between 0.15% and 0.30% (each depending on the Company’s Total Funded Debt to EBITDA ratio). The Term Loan has been designated as a SOFR Loan.
The Credit Agreement requires the Company to meet certain financial covenants. Specifically, the Company’s Total Funded Debt to EBITDA ratio may not exceed 3.50 to 1.00, and the Company’s Fixed Charge Coverage Ratio may not be less than 1.10 to 1.00. In determining whether the Company is in compliance with its Total Funded Debt/EBITDA Ratio, the Company’s EBITDA will include transaction expenses of up to $0.6 million for each of the Company’s Kobelt Acquisition and the Company’s prior Katsa acquisition, as well as pro-forma EBITDA of Katsa and Kobelt as permitted by the Bank. The Company’s Tangible Net Worth may not be less than $100.0 million plus 50% of positive Net Income for each fiscal year ending on or after June 30, 2024.
Borrowings under the Credit Agreement are secured by substantially all of the Company’s and Kobelt’s personal property, including accounts receivable, inventory, machinery and equipment, and intellectual property. The Company has also pledged 65% of its equity interests in certain foreign subsidiaries. To effect these security interests, the Company entered into variousan amendmentAmended and assignment agreements that consent to the assignment to the Bank of certain agreements previously entered into between the Company and the Bank in connection with an April 22, 2016 credit agreement between the Company and the Bank, and further amended such agreements pursuant to the terms of the Credit Agreement. Specifically, the Company amended and agreed to the assignment to the Bank of aRestated Security Agreement, Amended and Restated IP Security Agreement, Amended and Restated Pledge Agreement, Perfectionand Certificate,Amended and AssignmentRestated Perfection Certificate with the Administrative Agent, and the Company has entered into an Amended Restated Agreement as to Liens and Encumbrances. The Company also amendedEncumbrances and assignedan Amended and Restated Negative Pledge Agreement with the Administrative Agent with regard to the Bank a Negative Pledge Agreement, pursuant to which it agreed not to sell, lease or otherwise encumberCompany’s real estate that it owns except as permitted by the Credit Agreement and the Negative Pledge Agreement. The Company also entered into a Collateral Assignment of Rights under Purchase Agreement for its acquisition of Kobelt. Borrowings under the Credit Agreement are also required to be guaranteed by each U.S. subsidiary of the Company.property.
Upon the occurrence of an Event of Default, the BankAdministrative Agent may take the following actions upon written notice to the Company: (1) terminate itsthe remaining Commitments and all obligations of the Lenders under the Credit Agreement; (2) declare the principal and accrued interest of all amountsLoans outstanding under the Credit Agreement to be immediately due and payable; and (3) demand the Company to immediately Cash Collateralize the outstanding L/C Obligations in an amount equal to 105% of the aggregate L/C Obligations or a greater amount if the Bank determines a greater amount is necessary.Obligations. If such Event of Default is due to the Company’s bankruptcy, the Bankactions mayand take the three actionsobligations listed above shall occur without notice to the Company.
Considering the impact of the inventory valuation accounting method change from LIFO to FIFO on the prior year adjusted numbers (an increase in inventory of approximately $32 million), in fiscal 2026, net working capital increased $6.4 million, or 4.2%, during fiscal 2026 and the current ratio (calculated as total current assets divided by total current liabilities) increased to 2.3 at June 30, 2026 compared to 2.2 for June 30, 2025.
Increases in trade receivables ($7.8 million), decrease in other current assets ($2.5 million) and decreases in trade accounts payable ($7.9 million) increased net working capital. These increases were partially offset by decreases in inventories, net ($6.1 million).
Net working capital increased $1.0 million, or 0.8%, during fiscal 2025 and the current ratio (calculated as total current assets divided by total current liabilities) decreased to 2.0 at June 30, 2025 compared to 2.2 for June 30, 2024. The increase in net working capital was primarily the result of an increase to inventory ($21.5 million) and trade receivables ($6.7 million). These increases were partially offset by increases in trade payables ($6.2 million) and accrued liabilities ($18.2 million).
The Company's significant contractual obligations as of June 30, 20252026 are discussed in Note IH, “Lease Obligations” in the Notesnotes to Consolidatedthe Financialconsolidated Statementsfinancial statements in Part II, Item 8 of this 20252026 Annual Report on Form 10-K. There are no material undisclosed guarantees. As of June 30, 2025,2026, the Company had no additional material purchase obligations other than those created in the ordinary course of business related to inventory and property, plantplant, and equipment, which generally have terms of less than 90 days. The Company also has long-term obligations related to its postretirement plans which are discussed in detail in Note NM, “Pension and Other Postretirement Benefit Plans” in the Notesnotes to Consolidatedconsolidated Financialfinancial Statementsstatements in Part II, Item 8 of this 20252026 Annual Report on Form 10-K. Postretirement medical claims are paid by the Company as they are submitted, and they are anticipated to be $0.5$0.6 million in fiscal 20262027 based on actuarial estimates; however, these amounts can vary significantly from year to year because the Company is self-insured. In fiscal 2026,2027, the Company expects to contribute $0.7$2.0 million to its defined benefit pension plans, the minimum contribution required.
The Company’s significant accounting policies are described in Note A, Description of Business and Summary of Significant Accounting Policies, of the notes to the consolidated financial statements. Not all of these significant accounting policies require management to make difficult, subjective, or complex judgments or estimates. However, the policies management considers most critical to understanding and evaluating its reported financial results are the following:
The Company provides a wide range of benefits to employees and retired employees, including pensions and postretirement health care coverage. Plan assets and obligations are recorded annually based on the Company’s measurement date utilizing discount rates as the significant assumption in determining the obligation as of that date. The approach used to determine the discount rates is based on theFTSE WillisAbove TowersMedian WatsonPension BOND:LinkDiscount Curve model at June 30, 20252026, as applied to the expected payouts from the pension plans. This yield curve is made up of Corporate Bonds rated AA or better.
Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The Company maintains valuation allowances when it is more likely than not that all or a portion of a deferred tax asset will not be realized. In determining whether a valuation allowance is required, severalthe Company takes into account such factors are considered (e.g.,as prior earnings history, expected future earnings, carry-back and carry-forward periods, etc.)and buttax the most significant factors are expected future earningsstrategies that could potentially enhance the likelihood of realization of a deferred tax assetasset. In addition, all other available positive and taxnegative strategies. Based on the above criteria the Company has determined that a full valuation allowanceevidence is appropriatetaken asinto relatesconsideration, toincluding its domestic operations. A full domestic valuation allowanceimpacts of $24.0 million has been recognized at June 30, 2025. The recognition of a valuation allowance does not affect the availability of the tax credits as the Company realizes earnings.reform.
During fiscal 2026, the Company reassessed the realizability of its deferred tax assets and concluded that substantially all of its U.S. and state valuation allowance was no longer required. As a result, the Company released the valuation allowance and recognized a corresponding income tax benefit. The release was supported by the Company's sustained profitability, including a three-year cumulative income position, as well as tax planning strategies available to support the realization of deferred tax assets. The Company released $23.9 million of valuation allowance during fiscal 2026, of which $16.4 million was recognized as an income tax benefit in the Consolidated Statement of Operations and Comprehensive Income (Loss), and $7.4 million was recorded directly to retained earnings in connection with the change in inventory valuation method from LIFO to FIFO. The Company's valuation allowance was $0.1 million and $16.5 million as of June 30, 2026 and 2025, respectively, with prior-year amounts adjusted to reflect the change in inventory valuation method.
As of June 30, 2026, the identified tax planning strategies had been fully implemented. The Company's determination that substantially all of the valuation allowance was no longer required as of December 26, 2025 involved significant judgment and consideration of all available positive and negative evidence, including the prudence, feasibility, and expected implementation of the tax planning strategies.
See Note A, Description of Business and Summary of Significant Accounting Policies, of the notes to the consolidated financial statements for a discussion of recently issued accounting standards.
What changed in the latest 10-Q
Risk Factors
There have been no material changes to the risk factors previously disclosed in response to Item 1A to Part I of our 2025 Annual Report on Form 10-K.
No wording changes found in this section.
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Management's Discussion & Analysis (MD&A)
Largest changes
Comparison of thesee in full comparisonSecondThird Quarter of Fiscal 2026 with theSecondThird Quarter of Fiscal 2025 Net sales for thesecondthird quarter increased0.3%,19.0%, or$0.3$15.5 million, to$90.2$96.7 million from$89.9$81.2 million in the same quarter a year ago.TheCurrencyacquisitiontranslationofhadKobelt,acompletedfavorableinimpact on third quarter fiscal 2026 sales compared to the third quarter offiscalthe2025,priorcontributedyear$3.2totaling $7.5 millionofprimarilyadditionalduerevenue into thequarter.strengthening of the euro against the U.S. dollar. The remainingdecreaseorganic increase of$2.9$8.0 millionprimarily(9.8%) reflectstemporarystrengthweaknessacrossin commercial marine demand, impacted by the existing tariff structure, along with continued soft demand for oil and gas transmissions into China. These decreases were partially offset by continued growth in demand for the Company’s Veth propulsion systems, along with improved shipmentsmost of the Company’sKatsamarketsproductsincludingacquiredcommercialinmarine,fiscalglobal2024.defense and land-based transmission. Global sales of marine and propulsion products wereflatup 20.0% compared with the prior year, asweakness inimproved commercial marine demandwasinoffsetAsiabycombined with continued strength in global demand fortheVethproduct.propulsion products. Shipments of off-highway transmission productsdecreasedincreased by8.1%,22.2%, withweaknessimproved ARFF shipments indemandtheforquarteroilfollowingandsomegasdelaystransmissionsinintotheChinasecondandfiscaldelayed airport rescue and firefighting transmissions (“ARFF”) shipments resulting from ongoing tariff concerns.quarter. Shipments of industrial products improvednearlyby22%15.2% as demand for the Katsa product continues to grow, along with the favorable impact from the Kobelt acquisition. The European region saw a significant increase in revenue ($3.1$7.4 million or8.4%21.3%) thanks primarily to strong regional demand for the Veth and Katsa products. Sales into North America increased9.6%,33.7%, or$2.2$7.3 million, driven by improved commercial marine and transmission shipments, along with the addition of Kobelt. The Asia Pacific regiondecreasedincreased24.5%,9.0%, or$5.0$1.6 million, onweakerimproved demand for commercial marineand oilfieldtransmissions in the region.Currency translation had a favorable impact on second quarter fiscal 2026 sales compared to the second quarter of the prior year totaling $4.1 million primarily due to the strengthening of the euro against the U.S. dollar.
Comparison of the Firstsee in full comparisonSixNine Months of Fiscal 2026 with the FirstSixNine Months of Fiscal 2025 Net sales for the firstsixnine months increased4.5%,9.3%, or$7.4$22.8 million, to$170.2$266.9 million from$162.8$244.1 million in the same period a year ago. The acquisition of Kobelt, completed in the third quarter of fiscal 2025, contributed$6.3$8.7 million of additional revenue in the firsthalf.nine months. Currency translation had a favorable impact of $14.9 million on revenue for the first nine months of fiscal 2026 sales compared to the same period of the prior year due to the strengthening of the euro against the U.S. dollar. The remainingincreasedecrease of$1.1$0.8 million reflects continued growth in demand for theCompany’scompany’s Veth propulsion systems,alongoffsetwithbyimprovedweaknessshipmentsin global demand for commercial marine products through the first half of theCompany’s Katsa products acquired infiscal2024. These increases were partially offset by temporary weakness in commercial marine demand, impacted by the existing tariff structure, along with continued soft demand for oil and gas transmissions into China.year. Global sales of marine and propulsion products improved5.9%10.8% from the prior year, driven by strong demand for the Veth productoffsetandbyasomethirdweaknessquarter recovery in commercial marine demand. Shipments of industrial products improved by17.7%,16.8%, driven by the addition of Katsa and Kobelt. Shipments of off-highway transmission productsdeclinedimproved by3.5%,4.9%, withdelayedrecovery in ARFFshipments.shipments that were delayed in the previous quarter. The European region saw a significant increase in revenue ($5.1$12.5 million or7.7%12.4%) thanks primarily to growing demand for the Veth and Katsa products in the region. Sales into North America increased26.7%,29.1%, or$10.9$18.2 million, on improved industrial and commercial marine shipments in the secondquarter.and third quarters. The Asia Pacific region decreased20.0%,10.70%, or$7.4$5.8 million, on weaker demand for commercial marine and oil and gas transmissions in theregion.regionCurrency translation had a favorable impact on first half fiscal 2026 sales compared toduring the first half of thepriorfiscalyear totaling $4.1 million primarily due to the strengthening of the euro against the U.S. dollar.year.
Gross profit as a percentage of sales for thesee in full comparisonsecondthird quarter of fiscal 2026 improved to24.8%,28.1%, compared to24.1%26.7% for the same period last year. Theprior year quarter includes the impact of a non-cash inventory write-down of $1.6 million. This write-down reflected the results of a product rationalization exercise of the Company’s industrial product line following the acquisition of Katsa. Thecurrent quarter was impacted by a positive volume impact and the positive impact of cost initiatives, offsetting a less favorable productmix,mixdilutionand the impact of marginduedilutiontoresulting from the invoicing oftariffs and isolated operational/quality issues within the quarter.tariffs..
Sales at our manufacturing segment increasedsee in full comparison3.3%,15.5%, or$2.4$11.0 million, versus the same quarter last year. The Company’s new acquisition, Kobelt, in Canada contributed$3.2$2.2 million of incremental revenue. The U.S. manufacturing operations experiencedaan10.6%,8.0%, or$3.3$2.3 million,decreaseincrease in sales versus thesecondthird fiscal quarter of 2025, withshipmentadelaysrecoveryforin shipments of ARFF productsandimpactedweakerbydemandtarifffordrivenoil and gas transmissionsdelays inChina.the second quarter. The Company’s operation in the Netherlands sawincreaseda slight decrease in revenue of$1.6$1.1 million (6.4%4.7%) compared to thesecondthird fiscal quarter of 2025,asprimarilythis operation continuesdue toexperiencetimingrecordofdemandshipmentsforofits propulsion systems.projects. The Company’s Belgian operation saw a decrease compared to the prior yearsecondthird quarter (16.6%10.7% or$0.9$0.6 million), with weaker demand for its marine transmission products due in part to the domestic tariff structure. The Company’s Italian manufacturing operation was up$2.5$0.7 million (77.7%16.0%) compared to thesecondthird quarter of fiscal 2025, due primarily to stronger European demand for industrial and commercial marine products. The Company’s operation in Finland saw revenue increase21.2%86.2% ($2.1$6.1 million), with strong demand for defense related products in the region. The Company’s Swiss manufacturing operation, which supplies customized propellers for the global mega yacht and patrol boat markets, was up$0.4$1.3 million (23.7%94.0%) compared to the prior yearsecondthird quarter.
Inventories increased bysee in full comparison$11.2$8.4 million, or7.4%,5.5%, versus June 30, 2025 to$163.2$160.3 million. The impact of foreign currency translation wasessentiallytoneutralreduce inventory by $1.9 million versus June 30, 2025. The largest increase came at our operations in theUnited StatesNetherlands ($6.0 million), unfavorably impacted by tariff related shipment delays. Our operation in the Netherlands saw an increase ($2.9$5.4 million) in support of growing backlog for the Veth product. The Singapore distribution entity experienced a$2.3$1.4 million increase primarily related to customer delays of deliveries on oilfield transmissions into China. Our operation in Finland also experienced an increase ($1.2$1.8 million or8.4%12.8%) on strong demand for industrial productsincludeincluding defense applications. The global operations team is focused on driving inventory improvementsinas we close out thesecondfiscalhalf and beyond.year. On a consolidated basis, as ofDecemberMarch26,27,2025,2026, the Company’s backlog of orders to be shipped over the next six months grew to$175.3$179.5 million, compared to $150.5 million at June 30, 2025 and$124.0$133.7 million atDecemberMarch27,28,2024.2025. The increase in backlog since June 30, 2025 ($24.8$29.0 million) is largely reflective of strong market conditions for the Veth product and increasing global defense spending. As a percentage of six-month backlog, inventory has decreased from 99% at June 30, 2025 to93%89% atDecemberMarch26,28, 2025.
Gross profit as a percentage of sales for the firstsee in full comparisonhalfnine months of fiscal 2026 improved to26.6%,27.1%, compared to25.2%25.7% for the same period last year. The prior year includes the impact of a non-cash inventory write-down of $1.6 million. This write-down reflected the results of a product rationalization exercise of the Company’s industrial product line following the acquisition of Katsa. Excluding this adjustment, the fiscal 2025first halfgross profit percentage was26.2%.26.3%. The improvement in gross profit percentage versus the prior year firsthalfnine months is attributed toimprovedthe increased volume, operational execution at our Veth operation and successful margin improvement initiatives, partially offset byisolatedmarginqualitydilutionandresultingfacilityfrom the invoicing of tariff charges.
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In the financial review that follows, we discuss our results of operations, financial condition and certain other information. This discussion should be read in conjunction with our condensed consolidated financial statements as of DecemberMarch 26,27, 2025,2026, and related notes, as reported in Item 1 of this Quarterly Report.
Comparison of the SecondThird Quarter of Fiscal 2026 with the SecondThird Quarter of Fiscal 2025 Net sales for the secondthird quarter increased 0.3%,19.0%, or $0.3$15.5 million, to $90.2$96.7 million from $89.9$81.2 million in the same quarter a year ago. TheCurrency acquisitiontranslation ofhad Kobelt,a completedfavorable inimpact on third quarter fiscal 2026 sales compared to the third quarter of fiscalthe 2025,prior contributedyear $3.2totaling $7.5 million ofprimarily additionaldue revenue into the quarter.strengthening of the euro against the U.S. dollar. The remaining decreaseorganic increase of $2.9$8.0 million primarily(9.8%) reflects temporarystrength weaknessacross in commercial marine demand, impacted by the existing tariff structure, along with continued soft demand for oil and gas transmissions into China. These decreases were partially offset by continued growth in demand for the Company’s Veth propulsion systems, along with improved shipmentsmost of the Company’s Katsamarkets productsincluding acquiredcommercial inmarine, fiscalglobal 2024.defense and land-based transmission. Global sales of marine and propulsion products were flatup 20.0% compared with the prior year, as weakness inimproved commercial marine demand wasin offsetAsia bycombined with continued strength in global demand for the Veth product.propulsion products. Shipments of off-highway transmission products decreasedincreased by 8.1%,22.2%, with weaknessimproved ARFF shipments in demandthe forquarter oilfollowing andsome gasdelays transmissionsin intothe Chinasecond andfiscal delayed airport rescue and firefighting transmissions (“ARFF”) shipments resulting from ongoing tariff concerns.quarter. Shipments of industrial products improved nearlyby 22%15.2% as demand for the Katsa product continues to grow, along with the favorable impact from the Kobelt acquisition. The European region saw a significant increase in revenue ($3.1$7.4 million or 8.4%21.3%) thanks primarily to strong regional demand for the Veth and Katsa products. Sales into North America increased 9.6%,33.7%, or $2.2$7.3 million, driven by improved commercial marine and transmission shipments, along with the addition of Kobelt. The Asia Pacific region decreasedincreased 24.5%,9.0%, or $5.0$1.6 million, on weakerimproved demand for commercial marine and oilfield transmissions in the region. Currency translation had a favorable impact on second quarter fiscal 2026 sales compared to the second quarter of the prior year totaling $4.1 million primarily due to the strengthening of the euro against the U.S. dollar.
Sales at our manufacturing segment increased 3.3%,15.5%, or $2.4$11.0 million, versus the same quarter last year. The Company’s new acquisition, Kobelt, in Canada contributed $3.2$2.2 million of incremental revenue. The U.S. manufacturing operations experienced aan 10.6%,8.0%, or $3.3$2.3 million, decreaseincrease in sales versus the secondthird fiscal quarter of 2025, with shipmenta delaysrecovery forin shipments of ARFF products andimpacted weakerby demandtariff fordriven oil and gas transmissionsdelays in China.the second quarter. The Company’s operation in the Netherlands saw increaseda slight decrease in revenue of $1.6$1.1 million (6.4%4.7%) compared to the secondthird fiscal quarter of 2025, asprimarily this operation continuesdue to experiencetiming recordof demandshipments forof its propulsion systems.projects. The Company’s Belgian operation saw a decrease compared to the prior year secondthird quarter (16.6%10.7% or $0.9$0.6 million), with weaker demand for its marine transmission products due in part to the domestic tariff structure. The Company’s Italian manufacturing operation was up $2.5$0.7 million (77.7%16.0%) compared to the secondthird quarter of fiscal 2025, due primarily to stronger European demand for industrial and commercial marine products. The Company’s operation in Finland saw revenue increase 21.2%86.2% ($2.1$6.1 million), with strong demand for defense related products in the region. The Company’s Swiss manufacturing operation, which supplies customized propellers for the global mega yacht and patrol boat markets, was up $0.4$1.3 million (23.7%94.0%) compared to the prior year secondthird quarter.
Our distribution segment experienced aan decreaseincrease in sales of $10.4$2.5 million (29.0%8.3%) in the secondthird quarter of fiscal 2026 compared to the secondthird quarter of fiscal 2025. The Company’s Asian distribution operations in Singapore, China and Japan were downup 37.2%,22.2% or $6.0$2.7 million,million from the prior year on reducedimproved demand for commercial marine transmissions and oil and gas transmissions for China. The Company’s North America distribution operation saw a decrease ($1.9$0.3 million or 32.7%6.0%), negatively impacted by the existing tariff structure and related impact on goods coming from European manufacturing operations. Similarly, theThe Company’s European distribution operation saw a decline ($1.9$1.0 million or 30.9%16.4%) on weaker shipments of commercial marine projects. The Company’s distribution operation in Australia and New Zealand, which provides boat accessories, propulsion and marine transmission systems for the pleasure craft market, saw aan decreaseincrease in revenue of 6.9%16.7% from the prior year secondthird fiscal quarter, primarily due to weakerimproved pleasure craft demand.
Gross profit as a percentage of sales for the secondthird quarter of fiscal 2026 improved to 24.8%,28.1%, compared to 24.1%26.7% for the same period last year. The prior year quarter includes the impact of a non-cash inventory write-down of $1.6 million. This write-down reflected the results of a product rationalization exercise of the Company’s industrial product line following the acquisition of Katsa. The current quarter was impacted by a positive volume impact and the positive impact of cost initiatives, offsetting a less favorable product mix,mix dilutionand the impact of margin duedilution toresulting from the invoicing of tariffs and isolated operational/quality issues within the quarter.tariffs..
For the fiscal 2026 secondthird quarter, marketing, engineering and administrative (“ME&A”) expenses, as a percentage of sales, were 22.9%,21.7%, compared to 21.0%24.0% for the fiscal 2025 secondthird quarter. ME&A expenses increased $1.7$1.5 million (9.2%7.6%) over the same period last fiscal year. The increase in ME&A spending for the quarter was comprised of the addition of Kobelt ($0.5$0.3 million), and a foreign currency impact ($0.5$1.0 million), increasedalong commission expense ($0.5 million) andwith a small netgeneral inflationary impact ofoffset $0.3by million.cost savings initiatives.
Interest expense was up $0.3$0.1 million to $0.8 million in the secondthird quarter of fiscal 2026, with a higher average outstanding revolver balance following the Katsa and Kobelt acquisitions.
Other incomeexpense (expensebenefit) of $0.6$(0.3) million for the secondthird fiscal quarter was primarily attributable to a currency gain ($0.1$1.0 million), partially offset by pension amortization expense ($0.7 million).
The fiscal 2026 secondthird quarter effective tax rate was -3,120.4%34.1% compared to 58.5%(407.9%) in the prior fiscal year secondthird quarter. The changefull domestic valuation allowance in theplace effectiveduring taxfiscal rate2025 foris the quarterprimary resulted from a full reversalcause of the domesticprior valuationyear allowance.rate. The current year rate was primarily impacted by the mix of foreign earnings by jurisdiction.
Comparison of the First SixNine Months of Fiscal 2026 with the First SixNine Months of Fiscal 2025 Net sales for the first sixnine months increased 4.5%,9.3%, or $7.4$22.8 million, to $170.2$266.9 million from $162.8$244.1 million in the same period a year ago. The acquisition of Kobelt, completed in the third quarter of fiscal 2025, contributed $6.3$8.7 million of additional revenue in the first half.nine months. Currency translation had a favorable impact of $14.9 million on revenue for the first nine months of fiscal 2026 sales compared to the same period of the prior year due to the strengthening of the euro against the U.S. dollar. The remaining increasedecrease of $1.1$0.8 million reflects continued growth in demand for the Company’scompany’s Veth propulsion systems, alongoffset withby improvedweakness shipmentsin global demand for commercial marine products through the first half of the Company’s Katsa products acquired in fiscal 2024. These increases were partially offset by temporary weakness in commercial marine demand, impacted by the existing tariff structure, along with continued soft demand for oil and gas transmissions into China.year. Global sales of marine and propulsion products improved 5.9%10.8% from the prior year, driven by strong demand for the Veth product offsetand bya somethird weaknessquarter recovery in commercial marine demand. Shipments of industrial products improved by 17.7%,16.8%, driven by the addition of Katsa and Kobelt. Shipments of off-highway transmission products declinedimproved by 3.5%,4.9%, with delayedrecovery in ARFF shipments.shipments that were delayed in the previous quarter. The European region saw a significant increase in revenue ($5.1$12.5 million or 7.7%12.4%) thanks primarily to growing demand for the Veth and Katsa products in the region. Sales into North America increased 26.7%,29.1%, or $10.9$18.2 million, on improved industrial and commercial marine shipments in the second quarter.and third quarters. The Asia Pacific region decreased 20.0%,10.70%, or $7.4$5.8 million, on weaker demand for commercial marine and oil and gas transmissions in the region.region Currency translation had a favorable impact on first half fiscal 2026 sales compared toduring the first half of the priorfiscal year totaling $4.1 million primarily due to the strengthening of the euro against the U.S. dollar.year.
Sales at our manufacturing segment increased 11.7%,12.9%, versus the same period last year. The Company’s new acquisition, Kobelt, in Canada contributed $6.3$8.5 million of incremental revenue. The U.S. manufacturing operations experienced a 6.2%,1.5%, or $3.7$1.3 million, decline in sales versus the first halfnine months of fiscal 2025, with tariff concerns creating a drag on shipments. The Company’s operation in the Netherlands saw increased revenue of $8.4$7.4 million (20.7%11.5%) compared to the first halfnine months of fiscal 2025, which includes a favorable currency impact, as this operation continues to experience record demand for its propulsion systems and has begun to increase capacity to satisfy the growing demand. The Company’s Belgian operation saw a decrease compared to the prior year first halfnine months (16.4%14.4% or $1.7$2.3 million), with weaker US demand for its marine transmission products, impacted by tariffs. The Company’s Italian manufacturing operation was up $3.1$3.9 million (45.4%33.6%) compared to the first halfnine months of fiscal 2025, due primarily to stronger European demand for industrial and commercial marine products. The Company’s operation in Finland saw revenue increase 14.7%34.1% ($2.8$9.0 million), with improving demand for defense related products in the region. The Company’s Swiss manufacturing operation, which supplies customized propellers for the global mega yacht and patrol boat markets, was up $1.1$2.3 million (33.7%51.9%) compared to the prior year first half.nine months.
Our distribution segment experienced a decrease in sales of $18.2$15.7 million (27.8%16.4%) in the first halfnine months of fiscal 2026 compared to the first halfnine months of fiscal 2025. The Company’s Asian distribution operations in Singapore, China and Japan were down 31.9%15.6% or $9.0$6.3 million from the prior year on weaker commercial marine activity in the region, along with reduced demand for oilfield transmissions into China. The Company’s North America distribution operation saw a decrease ($4.0$4.4 million or 36.9%27.1%) on softening in North American demand for European manufactured product, impacted by the current tariff structure. The Company’s European distribution operation saw a decrease ($4.4$5.4 million or 37.8%30.4%) on soft demand for commercial marine projects in the region. The Company’s distribution operation in Australia and New Zealand, which provides boat accessories, propulsion and marine transmission systems for the pleasure craft market, saw aan decreaseincrease in revenue of 5.0%1.9% from the prior year first fiscalnine half,months, primarily due to weakerimproving pleasure craft demand partiallyalong offset bywith a favorable currency impact.
Gross profit as a percentage of sales for the first halfnine months of fiscal 2026 improved to 26.6%,27.1%, compared to 25.2%25.7% for the same period last year. The prior year includes the impact of a non-cash inventory write-down of $1.6 million. This write-down reflected the results of a product rationalization exercise of the Company’s industrial product line following the acquisition of Katsa. Excluding this adjustment, the fiscal 2025 first half gross profit percentage was 26.2%.26.3%. The improvement in gross profit percentage versus the prior year first halfnine months is attributed to improvedthe increased volume, operational execution at our Veth operation and successful margin improvement initiatives, partially offset by isolatedmargin qualitydilution andresulting facilityfrom the invoicing of tariff charges.
For the fiscal 2026 first half,nine months, marketing, engineering and administrative (“ME&Aexpenses,A”) expenses, as a percentage of sales, were 24.3%,23.3%, compared to 23.6%23.7% for the firstsame halfperiod of fiscal 2025. ME&A expenses increased $3.0$4.5 million (7.7%7.8%) over the same period last fiscal year. The increase in ME&A spending for the first halfnine months was comprised of the addition of Kobelt ($1.1$1.4 million), a foreign currency translation impact ($1.0$2.0 million), anand increasegeneral ininflationary professionalincreases feespartially ($0.7offset million) andby the netfavorable impact of savings initiatives offset by inflation related increases ($0.2 million).initiatives.
Interest expense was up $0.4$0.6 million to $1.6$2.4 million in the first halfnine months of fiscal 2026, with a higher average outstanding revolver balance following the Katsa and Kobelt acquisitions.
Other expense of $1.5$1.2 million for the first halfnine months was primarily attributable to pension amortization expense ($1.4$2.1 million), alongpartially withoffset by a small currency lossgain ($0.1$0.9 million).
The fiscal 2026 first halfnine-month effective tax rate was -1,638.9%(284.5%) compared to 430.6%1,469.0% in the prior fiscal year first half.nine months. The changereversal of the full domestic valuation allowance in the current year explains the significant fluctuation in the effective tax rate for the first half resulted from a full reversal of the domestic valuation allowance.rate.
Comparison between DecemberMarch 26,27, 20252026 and June 30, 2025
As of DecemberMarch 26,27, 2025,2026, the Company had net working capital of $133.3$136.1 million, which represents an increase of $12.2$14.3 million, or 10.1%,11.7%, from the net working capital of $121.1$121.8 million as of June 30, 2025.
Cash decreased by $1.2 million to $14.9 million as of December 26, 2025, versus $16.1 million as of March 27, 2026 was unchanged from June 30, 2025. As of DecemberMarch 26,27, 2025,2026, the majority of the cash iswas at the Company’s overseas operations in Europe ($5.8$4.6 million) and Asia-Pacific ($8.1$10.6 million).
Trade receivables of $53.6$64.1 million were downup $5.3$5.1 million, or 9.0%,8.7%, when compared to last fiscal year-end. The impact of foreign currency translation was essentiallya neutralreduction of $1.0 million versus June 30, 2025. As a percent of sales, trade receivables finished at 59.5%66.3% in the secondthird quarter of fiscal 2026 compared to 59.7%70.5% for the comparable period in fiscal 2025 and 61.0% for the fourth quarter of fiscal 2025.
Inventories increased by $11.2$8.4 million, or 7.4%,5.5%, versus June 30, 2025 to $163.2$160.3 million. The impact of foreign currency translation was essentiallyto neutralreduce inventory by $1.9 million versus June 30, 2025. The largest increase came at our operations in the United StatesNetherlands ($6.0 million), unfavorably impacted by tariff related shipment delays. Our operation in the Netherlands saw an increase ($2.9$5.4 million) in support of growing backlog for the Veth product. The Singapore distribution entity experienced a $2.3$1.4 million increase primarily related to customer delays of deliveries on oilfield transmissions into China. Our operation in Finland also experienced an increase ($1.2$1.8 million or 8.4%12.8%) on strong demand for industrial products includeincluding defense applications. The global operations team is focused on driving inventory improvements inas we close out the secondfiscal half and beyond.year. On a consolidated basis, as of DecemberMarch 26,27, 2025,2026, the Company’s backlog of orders to be shipped over the next six months grew to $175.3$179.5 million, compared to $150.5 million at June 30, 2025 and $124.0$133.7 million at DecemberMarch 27,28, 2024.2025. The increase in backlog since June 30, 2025 ($24.8$29.0 million) is largely reflective of strong market conditions for the Veth product and increasing global defense spending. As a percentage of six-month backlog, inventory has decreased from 99% at June 30, 2025 to 93%89% at DecemberMarch 26,28, 2025.
Net property, plant and equipment increased $1.8$0.4 million (2.6%1.4%) to $71.4$70.0 million versus $69.6 million at June 30, 2025. The Company had capital spending of $6.8$10.2 million in the first half,nine and a relatively neutral exchange impact.months. This increase was partially offset by depreciation of $4.5$8.5 million and a currency driven decrease of $0.7 million. Capital spending occurring in the first halfnine months was primarily related to replacement capital, along with capital to drive growth and operating efficiencies. In total, the Company expects to invest between $12$13 and $15$16 million in capital assets in fiscal 2026. The Company continues to review its capital plans based on overall market conditions and availability of capital and may make changes to its capital plans accordingly. The Company’s capital program is focused on modernizing key core manufacturing, assembly and testing processes and improving efficiencies at its facilities around the world.
Accounts payable as of DecemberMarch 26,27, 20252026 of $36.7$36.5 million was down $2.1$2.2 million, or 5.4%,5.7%, from June 30, 2025. The impact of foreign currency translation was to decrease accounts payable by $0.2$0.7 million versus June 30, 2025. The remaining decrease is related to the normal timing of purchasing activity and related payments.
Total borrowings and long-term debt as of DecemberMarch 26,27, 20252026 increased $13.1$13.6 million to $44.5$45.0 million versus $31.4 million at June 30, 2025. During the first half,nine months, the Company reported negative free cash flow of $9.6$8.0 million (defined as operating cash flow less acquisitions of fixed assets), driven by an increase to inventory and capital spending. The Company ended the quarter with total debt, net of cash, of $29.7$29.0 million, compared to $15.3 million at June 30, 2025, for a net degradation of $14.3$13.7 million.
Total equity increased $20.8$22.1 million, or 12.6%,13.5%, to $185.2$186.5 million as of DecemberMarch 26,27, 2025.2026. The net earnings during the first halfnine months increased equity by $21.9$25.2 million, while other decreases related to a favorable foreign currency translation of $1.4$4.6 million and dividends paid to shareholders of $1.1$1.7 million. The net change in common stock and treasury stock resulting from the accounting for stock-based compensation increased equity by $0.6$0.8 million. The net remaining increase in equity of $1.4$2.4 million primarily represents the amortization of benefit plan adjustments on the Company’s defined benefit pension plans, along with thean unrealized loss on cash flow hedges.hedges and an increase to a noncontrolling interest.
Pursuant to the Credit Agreement, the Bank made a Term Loan to the Company in the principal amount of $15.0 million, consisting of an assignment of a term loan under the Prior Credit Agreement from BMO to the Bank with a remaining principal of $8.5 million and an additional advance of $6.5 million. The maturity date of the Term Loan is April 1, 2027, and the Company is required to make principal installments on the Term Loan of at least $0.75 million per quarter. Under the Credit Agreement, the Company is restricted in making dividend payments beyond $5 million in any fiscal year.
Other significant contractual obligations as of DecemberMarch 26,27, 20252026 are disclosed in Note N "Lease Liabilities" in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1 of this Quarterly Report on Form 10-Q. There are no material undisclosed guarantees. As of DecemberMarch 26,27, 2025,2026, the Company had no additional material purchase obligations other than those created in the ordinary course of business related to inventory and property, plant, and equipment, which generally have terms of less than 90 days. The Company has long-term obligations related to its postretirement plans which are discussed in detail in Note H "Pension and Other Postretirement Benefit Plans” in the Notes to Condensed Consolidated Financial Statements in Part I, Item 1of this Quarterly Report on Form 10-Q. Postretirement medical claims are paid by the Company as they are submitted. In fiscal 2026, the Company expects to contribute $0.5 million to postretirement benefits based on actuarial estimates; however, these amounts can vary significantly from year to year because the Company is self-insured. In fiscal 2026, the Company expects to contribute $0.7 million to its defined benefit pension plans. The Company does not have any material off-balance sheet arrangements.
TWIN insider buying and selling (Form 4)
Since 2026-04-11, insiders reported open-market purchases in 0 Form 4 filings and open-market sales in 2 filings (1 insider, 3 trade dates, 17,686 shares, about $417.6K). Net open-market shares: -17,686 (purchases minus sales); net value about -$417.6K.Totals add up every open-market (code P and S) line in those filings, using the prices reported in the filings. Awards, option exercises, tax withholding and gifts are listed below but not counted.
| Trade date | Insider | Transaction | Shares | Price | Value |
|---|---|---|---|---|---|
| 2026-09-08 | Knutson Jeffrey Scott |
Open-market sale | 7,482 | $24.25 | $181.4K |
| 2026-09-04 | Knutson Jeffrey Scott |
Open-market sale | 5,902 | $23.25 | $137.2K |
| 2026-09-03 | Knutson Jeffrey Scott |
Open-market sale | 4,302 | $23.00 | $98.9K |
| 2026-08-05 | Batten John H |
Shares withheld for tax | 36,986 | $24.01 | $888.0K |
| 2026-08-05 | Batten John H |
Grant/award | 78,693 | $24.01 | $1.9M |
| 2026-08-05 | Batten John H |
Shares withheld for tax | 15,479 | $23.34 | $361.3K |
| 2026-08-05 | Batten John H |
Grant/award | 18,756 | $24.01 | $450.3K |
| 2026-08-05 | Knutson Jeffrey Scott |
Shares withheld for tax | 18,158 | $24.01 | $436.0K |
| 2026-08-05 | Knutson Jeffrey Scott |
Grant/award | 38,638 | $24.01 | $927.7K |
| 2026-08-05 | Knutson Jeffrey Scott |
Shares withheld for tax | 7,600 | $23.34 | $177.4K |
| 2026-08-05 | Knutson Jeffrey Scott |
Grant/award | 8,734 | $24.01 | $209.7K |
| 2026-08-03 | Doar Michael |
Grant/award | 357 | $22.74 | $8.1K |
| 2026-08-03 | Johnson David W |
Grant/award | 179 | $22.74 | $4.1K |
| 2026-06-05 | Knutson Jeffrey Scott |
Grant/award | 7,044 | $19.06 | $134.3K |
| 2026-05-01 | Johnson David W |
Grant/award | 237 | $17.12 | $4.1K |
| 2026-05-01 | Doar Michael |
Grant/award | 475 | $17.12 | $8.1K |
Well-known investors holding TWIN (13F)
| Investor | Quarter | Shares | Reported value | % of their 13F | Change vs prior quarter |
|---|---|---|---|---|---|
| Millennium Management (Israel Englander) | 2026-06-30 | 193,345 | $2.9M | — | Sold out |
| Renaissance Technologies | 2026-06-30 | 117,093 | $2.7M | 0.0% | Added 9% |
| Citadel Advisors (Ken Griffin) | 2026-06-30 | 57,188 | $1.3M | 0.0% | Added 39% |
| Two Sigma Investments | 2026-06-30 | 19,585 | $454.4K | 0.0% | Reduced 29% |
| Point72 Asset Management (Steve Cohen) | 2026-06-30 | 23,537 | $354.7K | — | Sold out |